On April 24, 2018, New Jersey Governor Phil Murphy signed the Diane B. Allen Equal Pay Act that was passed by the legislature several weeks ago and is aimed at lessening the wage gap in the Garden State. The Equal Pay Act is more comprehensive than similar laws passed in other states because it extends legal protections not just based on gender, but to all protected classes under New Jersey’s Law Against Discrimination (“LAD”). The bill amends the LAD and makes it illegal for an employer to pay a person protected under the LAD less than an employee performing similar work.

The Equal Pay Act law makes it an unlawful employment practice "[f]or an employer to pay any of its employees who is a member of a protected class at a rate of compensation, including benefits, which is less than the rate paid by the employer to employees who are not members of the protected class for substantially similar work, when viewed as a composite of skill, effort and responsibility." However, employers can pay a different rate of compensation if the employer shows the difference is pursuant to a seniority system, a merit system, or the employer demonstrates (1) the difference is based on one or more legitimate, bona fide factors, other than the characteristics of members of the protected class (such as training, education, experience, or the quality/quantity of production), (2) the factors are not based on and do not perpetuate a difference in compensation based on sex or another protected characteristic under the LAD, (3) each of the factors is reasonably applied, (4) one or more of the factors accounts for the entire wage difference, and (5) the factors are job-related to the position in question and based on a legitimate business necessity. While other equal pay laws typically have a catch all “any other factor” provision, New Jersey’s law sets these specific factors. Further, the comparison is not limited to employees who work in a specific geographic region, but instead is based on rates in all of the employer’s operations or facilities.

The new law also restarts the statute of limitations each time compensation is paid in furtherance of a discriminatory decision or practice. This means that discrimination essentially occurs each time an employee is given a paycheck that is discriminatory. Further, an aggrieved individual under this law can obtain back pay for the entire period of the discrimination, up to six years. This is stricter than the federal law, which caps back pay at two years. Employers cannot retaliate against employees for disclosing or discussing with any other employee, former employee, lawyer, or government agency any information regarding job title, occupational category, and rate of compensation, including benefits. Employers also cannot, as a condition of employment, require an employee or prospective employee to sign a waiver requesting them to not make those requests or disclosures.

The Equal Pay Act also creates enhanced damages available to a prevailing party in a lawsuit. Under LAD, a prevailing party is entitled to compensatory damages, attorney’s fees and costs and potentially punitive damages. Under the new law, an aggrieved employee could also earn triple damages – three times the pay differential - for equal pay violations and retaliation based on equal pay violations. These damages are also available to employees who prevail on a claim that they were required, as a condition of employment, to sign a waiver or agree not to make these types of requests or disclosures.

The enactment of this bill marks a series of recent changes in the political landscape in New Jersey following the election of Democratic Governor Murphy. Former Republican Governor Chris Christie vetoed equal pay legislation in 2012, 2014, and 2016, mainly citing concerns about harming businesses. In 2016, Christie vetoed an equal pay bill that would have prohibited employers from paying women less for “substantially similar” work and would have re-started the statute of limitations each time a woman would have received an unfair paycheck.

However, with the election of Governor Murphy, the tide is turning. Governor Murphy’s first official act as governor was to sign Executive Order No. 1, which prohibits state agencies and offices from asking job candidates their previous salaries. In the Executive Order the governor stated “New Jersey’s state government must set a positive example for other employers to acknowledge and close the gender wage gap by prohibiting inquiry into the salary histories of prospective employees.” The Order went into effect on February 1, 2018. This Order, in combination with the new Equal Pay laws, demonstrates a shift in focus in New Jersey.

The Equal Pay Act goes into effect on July 1, 2018. Employers in New Jersey should keep abreast of these new pay laws and revisit their policies and practices when it comes to hiring and paying employees to ensure they are compliant under the new laws. Employers should consider proactive approaches to ensure compliance, including conducting pay audits and other comprehensive compensation review strategies.