Legal Blogs and Updates

On April 24, 2018, Governor Murphy signed an equal pay amendment to the New Jersey Law Against Discrimination (LAD) that will provide the broadest equal pay protection in the country. The new law prohibits employers in New Jersey from paying employees in a “protected class” a lower rate of compensation (including benefits) than the rate paid to employees outside the class who perform substantially similar work based on a composite of skill, effort and responsibility. “Protected classes” under the Act include sex, race, creed, color, national origin, nationality, ancestry, age, marital status, sexual orientation, pregnancy, gender identity or expression, and disability.

Different rates of compensation are permitted only if the employer can demonstrate that the differential is based on a seniority system, a merit system, or on legitimate, bona fide factors other than the protected characteristic, such as training, education, experience, or the quantity or quality of production. In order for the “legitimate, bona fide factors” exception to apply, the factors: (1) cannot be based on a protected characteristic or perpetuate a pay differential based on the protected characteristic; (2) must be applied reasonably; (3) must account for the entire wage differential; and (4) must be job-related and based on legitimate business necessity. If, however, there are alternative business practices that would address the business necessity without producing a pay differential, then the “business necessity” exception would not be available.  

The Act provides sweeping remedies. First, any pay disparities cannot be “cured” by reducing the compensation of the employees in the non-protected class. Second, the Act provides that an unlawful employment practice occurs each time an employee is impacted by a discriminatory compensation decision or practice (e.g., each pay cycle the alleged discriminatory wage rate was paid). Third, an employee who has suffered pay discrimination may recover up to six years of back pay. Finally, the employee may recover treble damages, which means triple the actual/compensatory damages awarded to a prevailing plaintiff by a jury.

The LAD equal pay amendments become effective on July 1, 2018.  Employers are strongly encouraged to take proactive steps now to ensure compliance:

• Promptly review compensation and benefits policies and practices to ensure that they are in-line with the Act and are applied in a fair and equitable manner. If the employer maintains a seniority or merit system of compensation, the employer should be sure the specific criteria that are utilized (such as training, education, experience, or the quantity or quality of production) are documented and understood by management personnel.
• Review all job descriptions to assess which employees perform “substantially similar work.”
• Review employee pay and benefit levels to determine if those that perform “substantially similar work” receive the same pay and benefit levels, to the extent there is not a legitimate, bona fide business necessity warranting a differential. Wage rate comparisons must be made among all employer operations and facilities.
• If a legitimate, bona fide business necessity warranting a wage or benefit differential exists, the employer is well-served to document the factors justifying that determination.

Connell Foley’s team of employment attorneys is available to assist employers with their compliance efforts.