—Overview—
On April 24, 2018, Governor Phil Murphy signed P.L. 2018, c.9 which makes a series of changes to the New Jersey Law Against Discrimination (NJLAD) including requiring employers to actively justify differences in salaries. This Fast Facts will help businesses understand the changes.
—Background—
Enacted in 1945, NJLAD (N.J.S.A. 10:5-1 et seq.) prohibits employment discrimination on the basis of race, nationality, creed, color, national origin, ancestry, age, marital status, civil union status, domestic partnership status, affectional or sexual orientation, genetic information, sex, pregnancy or breastfeeding, gender identity or expression, disability or atypical hereditary cellular or blood trait, service in the Armed Forces, or for refusing to submit to a genetic test or make the results available to an employer.
New Jersey’s Pay Equity Law (P.L. 2018, c. 9) expands the NJLAD to: prohibit unequal pay for “substantially similar” work; require that employers justify differences in pay among protected classes (like sex, race, etc.); restart the clock for filing a wage discrimination claim to each time a discriminatory paycheck is issued; add additional provisions to prohibit retaliation against an employee for discussing compensation; and require greater transparency in state contracting. These changes are discussed below.
—General Compliance Information—
When is the law in effect?
As of July 1, 2018.
Are all employers covered by the new Pay Equity Law?
Yes. The law makes changes to the NJLAD which applies to all New Jersey public and private employers (except federal employers) regardless of size, making it broader than many other state and federal laws.
Does the law cover more than just wage discrimination claims on the basis of sex?
Yes. At one point the legislation just addressed pay differentials on the basis of sex, but it now protects other traits including: 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 military service, and mental or physical disability, perceived disability, and AIDS and HIV status. Experts say most employees fit into at least three of these categories, meaning that they are protected from discrimination – and thus covered by equal pay protections.
—Pay Equity Components—
Before the law passed, wasn’t it already illegal to pay someone less because of their gender, race, religion, etc.?
Yes. Pay discrimination has been illegal since the 1960s. The new law, however, is much broader than the federal Equal Pay Act (Pub. L. 88-38) and puts a greater burden of proof on the employer to explain differences in wages. Specifically, the new law says that an employer cannot pay an employee of a protected class (like those discussed above) less than an employee who is not a member of that class and does “substantially similar work.” Taking that a step further, in the event that an employee who is part of a protected class brings a lawsuit against an employer, the employee would only have to show that they performed similar work and worked in similar working conditions, but were paid less (including benefits). In other words, it is up to the employer to show they have not violated the law.
What is meant by the term “substantially similar?”
The law does not specifically define the term “substantially similar” and only states that it is a composite of skill, effort, and responsibility required for that work. It does, however, explicitly allow differences in pay when they are based on a seniority system or a merit system, or, the employer can demonstrate that:
- the difference can be accounted for based on some legitimate factor (like training, education, experience, or productivity) other than the protected trait;
- the factor is not based on, nor does it perpetuate, a compensation difference as a result of a protected trait (for instance, an employer who pays workers who have master’s degrees more would need to ensure that the policy doesn’t adversely affect minorities);
- each factor is applied reasonably;
- one or more of the factors accounts for the entire wage differential; and,
- the factors are job-related with respect to the position and based upon business-necessity.
The law specifically states that employers may not reduce the salaries of better paid workers to comply.
How long do employees have to bring an action against an employer?
The statute of limitations for filing a discriminatory compensation claim is two years from the date of the alleged violation. Under the new law, however, a violation occurs each time there is a discriminatory paycheck issued, which essentially restarts the clock for an employee to file a claim against an employer. This is consistent with a New Jersey Supreme Court decision and federal law.
Can employers require employees to keep their salary information confidential from each other?
No. This has not been allowed for some time. However, previously New Jersey’s law only addressed an employee requesting information from another employee to investigate or take legal action regarding discriminatory compensation.
This language has been expanded by the new law to explicitly prohibit employers from retaliating against employees who disclose their salaries and other information about their job titles, occupational categories, etc. Additionally, employers can’t require employees or prospective employees to waive their rights to make, discuss, or request those disclosures. Last, employees who seek legal advice, share relevant information with an attorney, or provide information to a government entity are likewise protected from retaliation.
In addition to the recent New Jersey law, federal law has also prohibited the practice for quite some time. Specifically, section 7 of the National Labor Relations Act (NLRA), 29 U.S.C. §§ 151-169, gives all employees the right to “engage in concerted activities,” including the right to discuss the terms and conditions of their employment with each other. For decades, the National Labor Relations Board (NLRB) – the board that enforces the law – has taken the position that employers may not prohibit employees from discussing their pay and benefits, and that any attempts to do so are illegal.
As a best practice, and to avoid liability, policies like the one below now need to be eliminated or revised:
Employees are prohibited from discussing their salary or wage levels and company benefits with other employees. Such information is confidential and may not be discussed in the workplace. Any employee violating this policy will be considered to have committed a breach of confidentiality and will be subject to disciplinary action, up to and possibly including termination of employment.
Employers should also be wary about disciplining employees for sharing compensation information outside of work or through social media. When employees discuss compensation in a virtual forum such as online message boards or personal blogs, the NJLAD and NLRA still protect them. That said, neither Section 7 nor the amendments to the NJLAD, however, permit employees to publicly disparage a company’s products or services. Therefore, in certain circumstances, employees who combine compensation discussions with substantial criticism of their employer’s business or products may still legally face disciplinary action by their employer.
Does the new law require employers to provide pay data to employees if it’s requested? For instance, if one employee wants to compare their salary to another employee?
While the new law provides greater protections to employees who discuss their salary information with each other, it does not require employers to disclose the salaries of specific employees if asked by another employee.
Are employees able to compare pay across multiple locations and divisions in bringing an action against an employer?
Yes. The law specifically allows for comparisons of pay across all of the employer’s operations or facilities, not just the location where the employee is assigned. It’s unclear if these comparisons are only limited to job sites within New Jersey or if locations in other states could be in play as well. Although the law may apply to various regions, it should be noted that it does not expressly allow employers to use cost of living data across different geographic regions to justify pay differentials.
—Public Contractor Reporting Requirements—
What changes does the law make for employers with public contracts?
Companies who are public contractors (excluding those who sell goods or products) have new reporting requirements, including reporting compensation and hours worked, categorized by gender, race, ethnicity, and job category, for each of their establishments. The New Jersey Department of Labor and Workforce Development will provide a form for non-public works (not construction-related) employers to submit this information. Public works contractors would be required to provide the same information, but through certified payroll records as opposed to a form.
What will be done with the information submitted?
Employees of both public works and non-public works contractors will be able to access the reports their employers submit for at least five years following the expiration of the public contract by filing a request with the New Jersey Division of Civil Rights. In other words, employees would be able to see how their compensation compares to other company employees who worked on the same public contract.
Is there a threshold amount a contract must reach in order to be covered?
The law does not include a threshold amount, so any employer who enters into a contract with a public body (exclusive of those providing goods or services) regardless of the amount would be covered.
—Penalties for Not Complying with the Law—
If a jury determines that an employer has discriminated on the basis of pay, the judge would be required to award three times the amount of the pay differential (also known as treble damages). Treble damages would also be available if an employee succeeds on a claim that they were retaliated against for exercising their right to discuss compensation in the workplace, or, that they were forced to waive their rights to discuss compensation.
This is in addition to up to six years of back pay and other penalties which the NJLAD imposes. These could include: requiring that the employee in question be promoted or reinstated into a position; employer reimbursement for the loss of fringe benefits and other types of lost income; restoring health benefits, pension benefits, and/or seniority rights; employer reimbursement of attorney fees; and, penalties imposed on an employer of up to $10,000 for a first offense, $25,000 for a second offense, and $50,000 for a third offense.
—Recommended Next Steps for Employers—
Employers may wish to consider these best practices:
- Review any merit-based compensation systems and performance review forms, ratings, and procedures;
- Determine if uniform pay scales are appropriate for the business;
- Where two employees have the same title, compare compensation to actual job descriptions to determine discrepancies and if they can be justified;
- Begin documenting how compensation decisions are made in terms of bonuses and salary increases; and,
- Review employee handbooks and other policies to ensure anti-discrimination text is current and to make it clear that employees who discuss compensation and benefits will not be retaliated against.
—For More Information—
If you need additional information, please contact NJBIA’s Member Action Center at 1-800-499-4419, ext. 3 or member411@njbia.org.
This information should not be construed as constituting specific legal advice. It is intended to provide general information about this subject and general compliance strategies. For specific legal advice, NJBIA strongly recommends members consult with their attorney.
