On March 2, 2020, the New Jersey Division on Civil Rights (“DCR”) issued a Guidance Memorandum on the Diane B. Allen Equal Pay Act (“the Act”), which took effect in July 2018 and is widely considered to be one of the most employee-protective equal pay laws in the nation. In a statement made on the day of the Guidance Memorandum’s (“guidelines”) release, New Jersey Governor Phil Murphy reaffirmed his administration’s intention to eliminate discriminatory pay practices throughout the State that have historically prevented women and other minority groups from earning equal pay. The guidelines include a legal overview, with specific attention paid to the Act’s changes to the New Jersey Law Against Discrimination (“LAD”), and provide answers to Frequently Asked Questions (“FAQs”).
The first section of the guidelines offer an overview of the Act’s main provisions and provide details on how the Act modifies the LAD. As a refresher, the overview outlines the DCR’s position as to the five most important provisions of the Act:
- Expanded Remedies for Pay Discrimination: The Act amended the LAD to implement a six-year “lookback” period which allows employees who prove pay discrimination to recover up to six years of back pay if the discrimination was continuous and a violation occurred within the LAD’s two-year statute of limitations. The Act also codified the Supreme Court’s holding in Alexander v. Seton Hall University, 204 N.J. 219 (2010), that a violation of the LAD occurs each time an employee is affected by the application of a discrimination compensation decision or pratice, which includes each time an employee receives a paycheck.
- Equal Pay for Substantially Similar Work: The Act prohibits an employer from paying an employee who is a member of a protected class (broadly defined and not limited to gender) compensation, which is less than that paid by the employer to employees outside of the protected class for substantially similar work when viewed as a composite of skill, effort, and responsibility. If a member of a protected class can demonstrate that he or she is paid less for substantially similar work than a person outside of the protected class, the employer is liable under the Act unless it can demonstrate that the pay differential results from a seniority system or a merit system, or it can show that each of five factors set forth in the Act (and justifying the differential) is true.
- Anti-Retaliation Provisions: The Act broadened the LAD’s anti-retaliation protection by prohibiting retaliation against anyone who seeks legal advice with respect to their rights under the LAD or shares information with legal counsel or a government entity. Notably, the retaliation provision applies to information shared about any rights under the LAD, not just those related to equal pay. Moreover, the Act expanded the type of protected conduct to prohibit retaliation against an employee for requesting from, discussing with, or disclosing to any other employee or former employee of the employer, a lawyer from whom the employee seeks legal advice, or any government agency, information related to job title or compensation of employees or former employees, as well as information related to the protected status of those employees. This protection applies even if the employee’s action is unrelated to a claim for equal pay.
- Remedies: In addition to already-existing LAD remedies, the Act provides for treble damages for violations of the prohibition on unequal pay for substantially similar work, as well as for violations of the anti-retaliation provisions of the Act. Under the law, if a jury finds that there has been a violation of either of those provisions, a judge must award treble damages. The Director of the DCR may award treble damages in proceedings before the DCR, but is not required to do so.
- Reporting Requirements: The Act requires that employers that enter into contracts with the State of New Jersey or its instrumentality for “public works” provide the Department of Labor and Workforce Development (“Department”) with wage and demographic data for all employees who are employed in connection with the contract. With respect to contracts with the State of New Jersey or its instrumentality for “qualifying services,” employers must provide the Department with similar data with respect to all of its employees.
The second section of the Guidelines aims to answer the most frequently asked questions about the Act. Noteworthy takeaways from the DCR’s Answers to the FAQs include:
- Covered Employers and Employees: DCR clarifies that the Act covers almost all employers in New Jersey, including those with only one employee. Further, employees who live out of state but have a primary place of work in New Jersey are covered by the Act. The Act applies to full-time, part-time, seasonal, per-diem, and temporary employees, but does not apply to persons employed in the domestic service of any person, or federal employees.
- The Requirement of Equal Pay for Substantially Similar Work and Permissible Variations in Pay: The FAQs lays out how the DCR interprets many of the Act’s terms and answers a number of other questions about the Act. Highlights include:
- Compensation means not only the employee’s base wages, overtime pay, bonus pay, merit pay, and stock options, but also includes cash and non-cash benefits like insurance, vacation time, and retirement funding.
- “Substantially similar” work is “evaluated as a combination of the skill, effort, and responsibility required to perform an employee’s job duties.” All three factors should be considered together. “Skill” refers to “experience, ability, education, and training required to perform a set of job duties.” For purposes of the “substantially similar” analysis, skills an employee may have that are not necessary to perform the job function are irrelevant. “Effort” refers to the requirements of the job, taking into account physical or mental exertion required and the employee’s working conditions. Finally, “responsibility” refers to the discretion and accountability the employee needs to perform the job, including supervising others, making high-level decisions, or enacting policies or procedures. Employers cannot rely only on job titles or job descriptions to determine whether two positions are “substantially similar.”
- Employers cannot reduce an employee’s pay to rectify a pay disparity.
- An employee may claim a violation of the Act, even if all of the employee’s comparators are located outside of New Jersey, as the Act provides that wage comparisons may be based on wage rates in any of the employer’s operations or facilities. The employer, however, may defend compensation differentials for employees in different geographical locations by showing that they are based on difference in cost-of-living or labor markets in those areas, and are unrelated to discrimination.
- A pay differential that is permissible because it is made pursuant to a “seniority system” is one that compensates employees based on the length of their service, while a “merit system” is one that allows variations in pay based on employee performance (measured through “legitimate, job-related criteria”). With respect to both merit and seniority systems, the system must be “uniformly applied to all employees in good faith without regard to membership in a protected class.”
- If an employer establishes that the compensation differential is based on legitimate, bona fide factors other than the characteristics of members of the protected class, the employer can still be liable unless it can also show that the factor(s) is not based on, and does not perpetuate a differential in compensation based on membership in a protected class, that each factor is applied reasonable, that one or more factors account for the entire wage differential, and that the factors are job related and a legitimate business necessity.
- The employer bears the burden of proving that a pay differential for substantially similar work exists under one of the Act’s exceptions. If the employer meets that burden, the employee may come forward with evidence that there are alternative business practices that would serve the same purpose without producing the wage differential.
- Retaliation: In addition to broadening the scope of conduct protected against retaliation, the Act amended the LAD to make it unlawful for an employer to require employees or prospective employees to consent to a shortened statute of limitations or to waive any of the other protections afforded by the LAD.
- Liability and Enforcement: A complaint with the DCR must be filed within 180 days of the most recent discriminatory paycheck, compensation, or other benefit. Lawsuits alleging violation of the Act are subject to a two-year statute of limitations. The Act is violated each time disparate wages are paid – i.e., every paycheck is a separate violation of the Act.
- Proactive Steps to Address Equal Pay: The DCR encourages employers to take proactive steps to address pay disparities. To that end, if an employer proactively undertakes a self-evaluation of its pay practices, and makes compensation adjustments as a result, those adjustments will not be treated as admission of liability in proceedings before the DCR.
The appendix to the Guidelines includes a guide for self-evaluations and a sample compensation worksheet for no-range titles for the benefit of public sector employers, as well as the full text of the Diane B. Allen Equal Pay Act.
Although it does not impose any new requirements outside of those already included in the Act, employers should familiarize themselves with the guidelines which explain the DCR’s interpretation of the Act, and therefore, can provide valuable insight into the DCR’s enforcement efforts. Employers should particularly take note of the Act’s and DCR’s broad interpretation of “substantially similar work,” including the factors that comprise it, so employers can evaluate their workforce and proactively ensure that employees are being compensated in accordance with the law.
If you have any questions regarding this blog, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.