On February 11, 2016, the New Jersey Senate passed a new bill (S992) (the “Bill”) in an effort to undo the often-discussed gender pay gap.  The Bill would enhance unequal pay claims under the New Jersey Law Against Discrimination (the “LAD”) and extend the statute of limitations for those claims.  The vote was 28-to-4 in the Senate despite strong opposition from many New Jersey business groups.  The bill was received in the New Jersey Assembly on February 16, and immediately referred to the Assembly Labor Committee.  Last Thursday, March 3, the bill was transferred to the Assembly State and Local Government Committee.

If enacted, the Bill would ban unequal pay for jobs that are “substantially similar” in work in terms of skill, effort, and responsibility. Under the Bill, an employer would be allowed to pay different rates of compensation to employees for substantially similar work only if the employer can demonstrate a seniority or merit system in place or, in the alternative, each of the following five (5) factors:

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

An employer will not be able to satisfy the fifth factor if there is an alternate business practice that would serve the same business purpose without producing the wage differential.

Perhaps the Bill’s most significant impact, however, will be from its effect on the applicable statute of limitations. Similar to federal law, each time a differential pay check is issued to an employee, that act will qualify as a separate adverse action.  Unlike federal law, however, the Bill provides that the back pay period extends backward to include the entire, continuous period in which a pay differential violation is found – not just the two-year limitation found in the federal fair pay law.

The Bill would apply to both public and private employers, and would impose additional reporting requirements on state contractors. It also would prohibit retaliation and adverse action against employees for disclosing certain job information, including their rates of compensation.  These potential changes come on the heels of the EEOC’s recently-announced changes to EEO-1 reports, adding pay ranges to the reports which may put the EEOC on alert if there are disparities in compensation.  (See our prior post on these new data reporting requirements here).

While it may be some time before New Jersey enacts the Bill into law, employers should begin to reevaluate the job descriptions and titles of their employees, identifying “substantially similar” jobs with pay differentials which may be problematic if the Bill is enacted. Employers should also carefully document all pay-related decisions and differences, noting their legitimate business purposes.  We will continue to update you on the advancement of the Bill as it makes its way through the New Jersey Assembly.

National employers should also be aware that both California and New York have recently enacted similar amendments.

(See our prior posts on those amendments by clicking the following links; California and New York).