New Jersey Equal Pay Act to Take Effect on July 1

All New Jersey employers need to be aware of the recent passage of the Diane B. Allen Equal Pay Act, which has been described as one of the strongest “equal pay” laws in the country. The Act, signed into law by Gov. Phil Murphy in April, takes effect on July 1 and requires employers to take certain steps to ensure they are not paying similarly situated employees differently based on sex, race, or other protected employee characteristics.

Who Is Protected by the Equal Pay Act?

New Jersey legislators passed the Act in response to academic studies that suggest women are paid significantly less than men for performing the same jobs. Regardless of whether or not that may be true for your particular business or industry, the fact remains there is a widespread perception of a “gender pay gap” that the new law is designed to remedy. However, the Act itself covers more than sex discrimination. Instead it broadly defines discrimination against any “protected class” which includes paying someone less due to any of the following characteristics:

• sex, gender identity, gender expression, or affectional or sexual orientation;
• race, creed, or color;
• nationality;
• ancestry;
• age;
• marital, civil union, or domestic partnership status;
• genetic information;
• disability or atypical hereditary cellular or blood trait; and
• service in the armed forces.

The Act states an employer cannot pay any employee in any of the above protected classes “at a rate of compensation, including benefits,” that is lower than the rate paid to employees outside of the protected class, provided they perform “substantially similar work, when viewed as a composite of skill, effort and responsibility.”

How Can an Employer Justify Its Compensation System?

Despite the expansive language, the Act does not require an employer to pay every employee the same in all situations. An employer may differentiate pay according to a “seniority system” or “merit system” or if it can demonstrate there is a “one or more legitimate factors”–other than the protected characteristic–that justifies lower pay, such as “training, education or experience” or failure to meet a particular production quota.

The legal burden is on the employer to demonstrate any such differential pay system meets a “legitimate business necessity” and that there is no “alternative business practice” that would accomplish the same ends. The Act also forbids an employer from achieving pay equity by reducing the compensation of employees outside of the protected class. In plain terms, you cannot avoid paying female employees more by paying the men less.

In addition, the Act prohibits any acts of retaliation against an employee who complains about an equal pay violation. This prohibition extends to employer efforts to prevent employees from discussing and comparing their salaries with one another. Among other things, this means that New Jersey employers may no longer require as a “condition of employment” that an employee agree to keep his or her salary or compensation information confidential.

Is Your New Jersey Business in Compliance? We Can Help

New Jersey's Equal Pay Act contains serious penalty provisions for any business found in violation. Employees may seek compensation for violations that occurred up to six years earlier. And if a judge or jury determines the employer violated the Act, it can award triple the amount owed as damages.

Given these potential sanctions, it is critical for all New Jersey businesses to immediately review their own pay and employment policies to ensure they are in compliance with the Equal Pay Act. If you need assistance from a qualified New Jersey labor and employment law attorney, please don’t hesitate to contact Nicole M. Grzeskowiak or call 732.545.4717.