NJ Passes Diane B. Allen Equal Pay Act

On March 27, 2018, the New Jersey Legislature passed the Diane B. Allen Equal Pay Act (the “Act”), which amends the New Jersey Law Against Discrimination (“LAD”), to strengthen protections against employment discrimination and promote equal pay for women. Governor Phil Murphy, who campaigned vigorously on a platform of women’s rights and equal pay for equal work leading into last year’s election, has indicated he will sign the legislation when it is presented to him, giving New Jersey one of the nation’s most comprehensive equal pay initiatives.  The Act takes effect on July 1, 2018.

The Act amends the LAD by making it an unlawful employment practice for an employer to pay any employee who is a member of a protected class less than the rate paid to other employees who are not members of that protected class for “substantially similar work when viewed as a composite of skill, effort and responsibility.”  The Act is thus much broader than just advocating gender pay equity.  Instead, the Act expands equal pay on the basis of membership in the protected class which includes, inter alia, race, creed, color, national origin, ancestry, age, marital status, civil union status, domestic partnership status, affectional or sexual orientation, genetic information, pregnancy or breastfeeding, sex, gender identity or expression, disability or atypical hereditary cellular or blood trait of any individual, or liability for service in the armed forces.  With the passage of the Act, the LAD, which was already one of the broadest anti-discrimination laws in the country, only intensifies and strengths the protections afforded to members of protected classes who work and/or live in New Jersey.

The Act does, however, carve out limited exceptions concerning when an employer may pay a different rate of compensation to members of the protected class, including if the pay differential is due to a seniority or merit based system.  An employer may also pay different rates to individuals if they can demonstrate each of the following:

1. That the differential is based on one or more legitimate, bona fide factors other than the characteristics of members of the protected class, such as training, education or experience, or the quantity or quality of production;
2. That the factor or factors are not based on, and do not perpetuate differential in compensation based on sex or any other characteristic of members of a protected class;
3. That each of the factors is applied reasonably;
4. That one or more of the factors account for the entire wage differential; and
5. That the factors are job-related with respect to the position in question and based on a legitimate business necessity.

Under the Act, an unlawful employment practice can occur each time an employer’s pay practices discriminate against an employee, and the employee can seek back pay for a six (6) year period.  Thus, the Act lengthens the statute of limitations for claims based on pay equity to a period of six (6) years in contrast to the LAD’s two (2) year statute of limitations.

Lastly, in terms of damages, if an employer is found guilty of violating the pay practices in the Act described above, a judge or jury can award treble damages for the violation.  Treble damages are also available to an employee who can successfully prove that her employer retaliated against her for requesting, discussing, or disclosing to (i) any other employee or former employee of the employer, (ii)  a lawyer from whom the employee seeks legal advice, or (iii) any government agency, information regarding employee compensation/pay practices.  Likewise, treble damages are available to an employee or prospective employee who is asked by the employer to sign a waiver regarding discussing or disclosing pay practices or rates.

Employers should be aware of the July 1, 2018 effective date for the Act.  In the meantime, businesses should carefully review their employee handbooks as well as hiring and compensation practices to insure pay equity for employees who perform “substantially similar work”.