On April 24, 2018, New Jersey Governor Phil Murphy signed the Diane B. Allen Equal Pay Act (Equal Pay Act), requiring pay equality across all protected categories – not just gender – under the state’s anti-discrimination law. The New Jersey Legislature originally passed the Equal Pay Act on March 27, 2018 and it will become effective on July 1, 2018.

While both state and federal law already prohibit discrimination relating to the rate and method of payment of compensation because of an employee’s sex, the Equal Pay Act amends the New Jersey Law Against Discrimination (LAD) to expand this prohibition to all categories of protected classes under the LAD.

Employers should consider the following key points to help ensure that their employment practices are in compliance:

  1. The Equal Pay Act applies to all categories of protected classes under the LAD (e.g., race, national origin, age, marital status, pregnancy, sexual orientation).
  2. The Equal Pay Act makes it unlawful to pay employees in a protected category different rates of compensation than employees outside the protected category for performing “substantially similar work, when viewed as a composite of skill, effort and responsibility.” Compensation includes wages and benefits.
  3. Employers can justify a differential in compensation if the difference is based on a seniority system, a merit system, or other bona fide factors (e.g., training, education, past experience, quality of work), so long as the factors are reasonable, job-related, and based on business necessity.
  4. Employers cannot reduce compensation in order to comply with the new law.
  5. Comparisons of compensation-rate differentials can be based on pay rates in any of the employer’s operations or facilities.
  6. The Equal Pay Act prohibits requiring employees to agree to a shorter limitations period than the two-year period applicable to the LAD or to waive any of the additional protections provided by the LAD.
  7. The Equal Pay Act allows employees to recoup up to six years of back pay and expands the LAD’s two-year limitations period by providing that the limitations period restarts each time the employee receives compensation resulting from a discriminatory decision or employment practice. Essentially, a new claim arises with each paycheck.
  8. Treble damages—three times the compensation differential—are available for prevailing employees. These damages are available for employees who file a lawsuit or employees who file a charge before the New Jersey Division of Civil Rights.
  9. The Equal Pay Act also expands current retaliation prohibitions. Under the Act, employers would be prohibited from retaliating against an employee for discussing or disclosing to others—including co-workers, the employee’s attorney, or government officials—information relating to compensation or compensation differentials.
  10. Employers that contract with the State or other public bodies must report information regarding compensation and hours worked, broken down by gender, race, ethnicity, and job category.

In order to be adequately prepared, employers should consider now whether compensation adjustments may be required so as to be compliance with the Equal Pay Act when it becomes effective on July 1, 2018.