New Jersey Enacts Expansive Equal Pay Law

On April 24, 2018, newly-elected Governor Phil Murphy signed into law the Diane B. Allen Equal Pay Act, which amends the New Jersey Law Against Discrimination (NJLAD) by significantly expanding existing pay equity protections for New Jersey employees, imposing difficult defense burdens on New Jersey employers, and creating a six-year statute of limitations for pay equity claims under the NJLAD. The key provisions of the Act, which takes effect on July 1, 2018, are below.

Equal Pay for “Substantially Similar” Work

Though touted primarily as gender pay equity legislation, the new Act’s provisions apply to all protected classes under the NJLAD. The Act makes it an unlawful employment practice for an employer to pay an employee of one protected class at a rate of compensation, including benefits, which is less than the rate paid to an employee who is not a member of that protected class for “substantially similar work.” The phrase “substantially similar work” is a departure from current law which uses the more employer-friendly phrase “substantially equal work.” Under the Act, the determination of whether employees are performing “substantially similar work” will be based on a number of factors, which the Act identifies as “skill, effort, and responsibility.”

Justifications for Differential Rates of Pay

The Act provides that a differential in rate of pay for substantially similar work will be lawful if the employer can demonstrate that it results from:

1. a seniority system;
2. a merit system; or
3. one or more bona fide, legitimate factors—including, but not limited to, training, education or experience, or the quality or quantity of production, provided, however, that each of the following requirements are satisfied as well:
   1. “the factor or factors are not based on, and do not perpetuate, a differential in compensation based on sex or any other characteristic of members of a protected class”;
   2. “each of the factors is applied reasonably”;
   3. “one or more of the factors account for the entire wage differential”; and
   4. “the factors are job-related with respect to the position in question and based on a legitimate business necessity,” and there are no “alternative business practices that would serve the same business purpose without producing the wage differential.”

Notably, the Act also provides that a comparison of wage rates of employees performing substantially similar work “shall be based on wage rates in all of an employer’s operations or facilities,” regardless of whether they are located in New Jersey or not. [Emphasis added.] In addition, the Act prohibits employers from reducing rates of compensation to higher paid employees in order to comply with the Act.

Retaliation Prohibited

The Act also significantly broadens the anti-retaliation provisions of the NJLAD with respect to employees’ inquiries regarding pay equity. Under existing law, an employer was prohibited from retaliating against an employee for “requesting from any other employee” certain wage information “if the purpose of the request for the information was to assist in investigating . . . potential discriminatory treatment concerning pay.” Under the Act, however, employers are now prohibited from retaliating against employees for “discussing with” or “disclosing to” (1) “any other employee or former employee of the employer,” (2) an employee’s attorney, or (3) any government agency, a wide range of wage-related information (specifically, the job title, occupational category, and rate of compensation, including benefits, of the employee or any other employee or former employee of the employer, along with the gender, race, ethnicity, military status, or national origin of any other employee or former employee of the employer) regardless of the employee’s purpose in doing so.

6-Year Statute of Limitations and Triple Damages

Perhaps most significant from a potential liability standpoint, the Act expands the NJLAD’s current two-year statute of limitations for a pay equity claim to six years, and provides that the statute of limitations restarts with each discriminatory paycheck the employee receives (this paycheck rule is a codification of existing case law in New Jersey). Without further explanation, the Act also states that it shall not “prohibit the application of the doctrine of ‘continuing violation’ or the ‘discovery rule’ to any appropriate claim as those doctrines currently exist in New Jersey common law.” Under current New Jersey law, and specifically the New Jersey Supreme Court’s decision in Alexander v. Seton Hall University, 204 N.J. 219 (2010), the continuing violation doctrine does not apply to wage discrimination claims and does not allow a plaintiff-employee to “sweep-in” and recover damages for all prior allegedly discriminatory paychecks beyond the six-year limitation period, and thus this language does not appear to have any applicability to wage discrimination claims.

The Act also prohibits employers from shortening the statute of limitations or requiring employees to waive the protections of the NJLAD. Finally, if a jury determines that an employer has violated the Act, the employee is entitled to three times the amount of damages for his or her pay equity claim.