New York is set to enact a new law known as the New York State Fair Pay Act, which recently passed the Legislature and will be headed to Gov. Andrew Cuomo’s desk for signature.  While the Act’s stated purpose of eliminating pay discrepancies based on gender, race or national origin is clearly laudable, the law actually goes much further than that and imposes stark new legal obligations on employers operating in New York.  Given that New York’s legislation may be a harbinger of what’s to come in other jurisdictions, all employers should take note of the new law and monitor the regulatory developments from the New York Department of Labor that are on the horizon.

Some media outlets have mistakenly characterized the passage of the Fair Pay Act as a mere restatement or strengthening of gender equity laws already on the books.  To be sure, the federal Equal Pay Act and Section 194 of the New York Labor Law already provide for equal pay for equal work between genders, and a companion bill to the Act strengthens the penalties under Section 194.  Further, the Act provides for additional “equal pay” protection for race and national origin in what will be a new Article 21 of the Labor Law.  But the Act also does much more than that.  Among other things, the Act and its companion bills recently passed in Albany will also:

  • require employers to pay employees working in jobs that are “dominated by employees of a particular sex, race or national origin” to be paid the same as employees working in “jobs or occupations that are dissimilar but whose requirements are equivalent, when viewed as a composite of skills, effort, responsibility, and working conditions”;
  • grant the Department of Labor broad discretion to fashion a regulatory system for determining whether particular jobs have been “dominated” by a gender, race, or national origin, and whether dissimilar jobs are “equivalent”;
  • expose employers to “disparate impact” liability even for pay differences that result from a bona fide factor that is job-related and consistent with business necessity if the employee can show that “an alternative employment practice exists that would serve the same business purpose and not produce such differential” but that the employer has “refused to adopt”;
  • require employers who discover that they are out of compliance with the Act’s requirements to raise the pay of the lower-paid employees to the level of the higher-paid employees (rather than harmonize their pay somewhere in the middle), as the Act makes it unlawful “to reduce the wage of any employee” “in order to comply with” the Act;
  • provide a private right of action to any employee (regardless of gender, race or national origin) who is “discriminate[d] against, coerce[d], threaten[ed] or interfere[d] with” because “the employee inquired about, disclosed, compared, or otherwise discussed the employee’s wages or the wages of any other employee,” regardless of whether that employee’s disclosure or discussion was related to an attempt to oppose the sort of pay inequity the Act seeks to eradicate;
  • allow employees to seek compensatory and punitive damages for violations of the Act on their own behalf and on behalf of “employees similarly-situated” – an unusual provision in New York’s statutory scheme (only New York’s relatively untested WARN Act contains similar language) that might conceivably be argued as authorization for a representative action not governed by ordinary class action procedures, perhaps similar to collective actions under federal law; and
  • provide an entirely new remedy of quadruple damages for a willful violation of Section 194 of the Labor Law, which means that employees suing under the existing gender pay equity provision of Section 194 will be strongly incentivized to try to prove that the employer’s conduct was “willful.”

Should other states follow New York’s lead, it would be no exaggeration to call the transition a sea change in U.S. employment law.  The entirely new concept of equal pay across “equivalent” jobs under a regulatory scheme that has yet to be determined seems to promise a never-ending stream of litigation.

The Act takes effect 120 days after Governor Cuomo signs it into law, which he has pledged to do.  Given the various impacts listed above and the significant regulatory action required of the Department of Labor, employers operating in New York need to pay close attention to this new law and its forthcoming regulatory scheme and carefully consider how it may impact them.  Moreover, employers in New York should consider with counsel whether to submit comments to the New York Department of Labor during the regulatory notice-and-comment period.