This past week, Governor Chris Christie predictably conditionally vetoed a pay equity bill that was recently passed by the New Jersey State Legislature, calling the proposed legislation “very business unfriendly.” As explained in a previous Labor & Employment Alert, Senate Bill No. 992 would have exponentially increased the liability of Garden State employers found to have engaged in sex-based discrimination in “compensation or in the financial terms or conditions of employment.”

In his conditional veto, Governor Christie outlined in detail his concerns about the impact of this legislation on the business climate in New Jersey. Among the governor’s apprehensions is that the “bill provides absolutely no limitation on the amount of back pay an employee can recover when claiming wage discrimination.” The governor recommends that the legislation mirror existing law under the federal Lilly Ledbetter Fair Pay Act and the New Jersey Supreme Court’s decision in Alexander v. Seton Hall University, 204 N.J. 219 (2010), which provide for a two-year limitation period on the recovery of back pay.

The governor also took issue with the provision in Senate Bill No. 992 prohibiting employers from requiring employees to consent to a shorter statute of limitations or waive any protections provided under the New Jersey Law Against Discrimination as a condition of employment. This prohibition, the governor finds “unduly constrains an employer’s and employee’s ability to negotiate the terms of employment” and, in any event, is “contrary to state law.”

In addition, the governor objected to the bill’s modification of the legal standard for establishing wage discrimination. In his veto, the governor stated that the bill “oversimplified” pay equity claims by barring considering of “whether employees’ work was equal and whether they undergo similar working conditions.” The Senate’s legislation prevents courts from evaluating the particulars of employers’ “practices or facilities” because it requires a comparison of compensation across all operations or facilities, not solely the employee’s work location, to defend against equal pay claims. In the governor’s perspective, “the identification of unlawful wage discrimination requires an intensive fact-based evaluation of the workplace and positions.” The governor thus recommends that the legislation be modified in accordance with New Jersey Supreme Court precedent, which does not mandate these onerous standards.

Another aspect of the bill rejected by the governor is the treble damages provision, which the governor claims would make New Jersey a “liberal outlier” if adopted. The veto recommends that the legislation conform with existing New Jersey case law and federal precedent, specifically, limiting a plaintiff’s damages to back pay.

Finally, the governor rejected outright the new reporting requirement imposed by the bill on Garden State contractors. Under the proposed legislation, employers doing business with the state would be required to provide the Commissioner of Labor and Workforce Development information concerning the gender, race, job title, occupational category and total compensation of every one of its employees employed in the state working on a specific state contract. Governor Christie bluntly calls this proposal an “outrageous bureaucratic red tape creation,” noting that he has vetoed such a provision in nearly identical legislation during the previous legislative session. Therefore, the governor refused to sign this legislation without excising, what he calls a “burdensome reporting mandate upon the businesses of this state.”

As reflected in the governor’s remarks, the overarching theme of the conditional veto is as follows: existing state and federal laws provide sufficient protections against sex-based wage discrimination and the proposed legislation would unnecessarily exceed those requirements and, in the process, adversely impact New Jersey’s economy.

However, legislative sponsors of Senate Bill No. 992 have vowed to continue fighting for this legislation. If the modifications to the bill recommended by the governor are accepted by the legislature, the impact on employers would be far less dramatic than by the bill’s original incarnation. While it is unclear if, when and in which form the bill will be signed into law, New Jersey employers should closely monitor this pending legislation as it will have a significant impact on their pay practices and, ultimately, their bottom line.