Plan Ahead for New Jersey’s Equal Pay Act, Effective July 1, 2018

New Jersey has enacted the strongest equal pay legislation in the country, the Diane B. Allen Equal Pay Act (“Allen Act”). The Allen Act expands New Jersey’s equal pay protections not only based on gender, but for all protected classes, and goes into effect on July 1, 2018.

Equal Pay for Substantially Similar Work Is Required

The Allen Act prohibits employers from paying members of a protected class[1] “at a rate of compensation, including benefits, which is less than the rate paid by the employer to employees who are not member of the protected class for substantially similar work.” “Substantially similar” work is determined based on a “composite of skill, effort and responsibility.”

Employers may not reduce an employee’s rate of pay to comply with this requirement. Nor may employers take into consideration the employee’s geographic location when determining compensation rates, as the Allen Act requires that the comparison of wage rates be “based on the wage rates at all of the employers’ operations or facilities.”

There Are Limited Exceptions

Limited exceptions may be used to justify a different rate of compensation. The exceptions include if the differential is made pursuant to a seniority or merit system, or if the employer can demonstrate that bona fide factors other than the characteristics of the protected class account for the entire wage differential, such as education, training, experience, or the quantity or quality of production, among other requirements[2].

Damages and Limitations Period

Damages available to employees include an award of three times the amount of any monetary damages suffered by the employee. Liability will accrue each time an employee receives a paycheck that is subject to an illegal wage differential. Employees may be able to obtain backpay for up to six years for continuous violations.

No Retaliation or Waivers

Employers are prohibited from retaliating against employees and prospective employees for, among other things, requesting, discussing or disclosing to another employee or former employee, an attorney from whom the employee seeks legal advice or a government agency, information regarding the job title, occupational category and rate of compensation of the employer’s employees or former employees, or the race, gender, ethnicity, military stats or national origin of the employees or former employees.

Employees may not be required to sign a waiver of this as a condition of employment or otherwise be required to agree not to make or respond to such requests. Nor may employees sign waivers agreeing to shorten the statute of limitations or waive any of their rights under the New Jersey Law Against Discrimination.

Reporting Requirements for Contractors

Employers who contract with the State of New Jersey or any agency or instrumentality of the State, regardless of the employer’s location, will be subject to reporting requirements. If the contract is for the provision of qualifying services[3], the required data includes compensation and hours in the form of pay bands for each establishment of the employer. If the contract is to perform any public work, similar information must be provided through certified payroll records.

Plan Now for July 1, 2018

Below are some things employers should think about doing in advance of the Allen Act’s July 1, 2018 effective date:

  • Conduct a compensation audit, with the assistance of counsel, to determine whether adjustments to compensation and/or job descriptions need to be made.
  • Train human resources personnel, managers and recruiters on the Allen Act.
  • Review and amend your employee polices to notify employees of the Allen Act’s protections and ensure your policies comply with the Allen Act’s requirements.
  • Identify your contracts with New Jersey public bodies that will be subject to the Allen Act’s reporting requirements and make sure there is a system in place to gather the data that must be provided.

For more information on the Allen Act, please contact the Kent Franchise Law Group attorney with whom you regularly work.

[1] Protected class member status includes “race, creed, color, national origin, nationality, ancestry, age, marital status, civil union status, domestic partnership status, affectional or sexual orientation, genetic information, pregnancy, sex, gender identity or expression, disability or atypical hereditary cellular or blood trait of any individual, or liability for service in the armed forces.”

[2] To take advantage of the “bona fide factors” exception, employers must also show that:  (a) the bona fide factors do not perpetuate and are not based on a compensation differential founded on any characteristic of members of a protected class;  (b) each factor  is reasonably applied; (c) one or more of the factors account for the whole wage differential; and (d) the factors are job-related with respect to the position and based on a legitimate business necessity. If it is demonstrated that there are alternative business practices that would serve the same business purpose without producing the wage differential, a factor based on business necessity does not apply.

[3] “Qualifying services” are the “provision of any service to the State or any other public body except for public work.” See N.J. Rev. Stat. C.34:11-56.26 for the definition of “public work.”