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By: John P. McAvoy
On March 26, 2018, the New Jersey Legislature passed Senate Bill 104, an all-encompassing pay equity bill. Senate Bill 104, entitled the “Diana B. Allen Equal Pay Act,” expands the New Jersey Law Against Discrimination (“LAD”) beyond gender and race/ethnicity pay equality and endeavors to promote equal pay for all protected classes under the LAD. Governor Phil Murphy is widely expected to sign the measure into law effective July 1, 2018.
Substantial Changes to Pay Equity Law
Senate Bill 104 makes four particularly noteworthy changes to the State’s pay equity law, all of which substantially affect New Jersey employers.
First, and most importantly, the bill prohibits pay disparities based upon any ‘protected characteristic’ protected by the LAD. ‘Protected characteristics’ under the LAD include, but are not necessarily limited to, gender, race, creed, color, national origin, nationality, ancestry, age, marital status, civil union status, domestic partnership status, affectional or sexual orientation, genetic information, pregnancy or breastfeeding, sex, gender identity or expression, and disability. Employers are prohibited from paying protected class employees a lower rate for wages, benefits, and/or other compensation than employees who are not members of the protected class “for substantially similar work, when viewed as a composite of skill, effort and responsibility.”
Second, it expands the LAD’s non-retaliation provision to protect employees who seek legal advice, share relevant information with legal counsel, or information with a governmental entity, for any reason, and not solely limited to pursuing legal action or an investigation regarding equal pay.
Third, the bill extends the statute of limitations for pay equity violations to six years. It further provides that liability continues to accrue and back pay is available for the entire period during which the violation has been continuous, subject to the now six-year statute of limitations. The statute of limitations may be tolled by the continuing violation doctrine and/or the discovery rule.
Fourth, it significantly increases the damages that are potentially recoverable for an unlawful employment practice. Under the new bill, an unlawful employment practice occurs each occasion that an individual is affected by a discriminatory compensation decision or other practice. This includes each occasion that wages, benefits, or other compensation are paid by virtue of the decision or practice, thereby increasing damages significantly. In addition to back pay and liquidated and common law tort damages which the LAD already provided, the bill provides that a jury or the New Jersey Civil Rights Commission must award treble damages (i.e., 3x damages) when an employer violates the equal pay or expanded non-retaliation provisions of this bill. As a result, employers deemed to have committed an unlawful employment practice will be required to pay a hefty amount.
Recommendations to Employers
Employers should take steps to justify any differential in the rate of compensation paid to similarly situated employees. Under the new bill, employers may justify a differential in the rate of compensation by implementing a seniority system, merit system, or a bona fide factor other than a protected characteristic. Such factors include education, experience, training, or the quantity or quality of production so long as it is job-related, and based on a legitimate business necessity, and if the employer demonstrates that the factor is not based on, and does not perpetuate, a differential in compensation based on any protected characteristic. Employers should document any justification that warrants a differential in the rate of compensation paid.
Employers should consider engaging in attorney-client privileged equal pay studies to ensure that compensation differentials can be explained based on legitimate, non-discriminatory reasons. Such studies should also be considered at the time that bonuses, merit increases, and other benefits are being finalized to ensure that potentially violative salary differentials are not unwittingly triggered.
Want to learn more about equal pay studies? We can help you decide whether an equal pay study is right for your company.
Please call or email John McAvoy (215.789.4919 [email protected]).