On April 24, 2018 Governor Murphy signed into law a bill amending the New Jersey Law Against Discrimination (NJLAD) to strengthen its existing pay equity protections and other remedies available under the statue. These changes will go into effect on July 1, 2018. Although principally aimed at remediating the pay gap between male and female employees, the pay equity amendments apply to all other protected classes, paving the way for disparate wage claims on the basis of race, age, disability and any other status protected by the NJLAD.
Moreover, the amendments prohibit employers from securing agreements from employees to shorten the statute of limitations for filing NJLAD claims or waving any of the other protections available to employees under the NJLAD (e.g., jury trial, attorney fees).
Changes to the Burdens of Proof in Wage Disparity Claims: Under current pay equity protections, an employee can bring a wage claim alleging that she is being paid at a rate that is lower than a male counterpart engaged in “similar” or “substantially equal” work. If the employee argues and establishes that the work is “similar,” the employer then bears the relatively light burden to merely articulate (not prove) a legitimate, nondiscriminatory reason for the pay differential. If the employer meets this light burden, the employee then bears the burden to show that the articulated reason is a pretext, and that the pay differential is attributable to her gender. However, if the employee argues she is paid at a lower rate than male employees performing “substantially equal” work, the employer faces a heightened burden. In this situation, the employee bears the initial burden of showing that the jobs are “identical” because they require “substantially similar skill, effort, and responsibility.” If the employee meets this burden, the burden then shifts to the employer who must prove that the pay differential is attributable to one of four factors: i) a seniority system; ii) a merit system; iii)a system that measures earnings by quantity or quality; or iv) a factor other than gender. Thus, employees pursuing “similar” work claims faced a heavier burden than those claiming “substantially equal” work claims.
Under the amendments the “similar” and “substantially equal” categories are replaced by a single “substantially similar” work category that is based upon a “composite of skill, effort and responsibility.” Under the new standard, a pay differential for “substantially similar” work will be deemed lawful only if the employer can establish that it is made pursuant to a seniority or merit system. Alternatively, the employer can successfully defend a challenge to a pay differential by demonstrates each of the following elements:
- the differential is based upon bona fide factors other than the individual’s protected characteristic (e.g., gender, race, etc.), such as training, education, experience or quantity or quality of production;
- the factor(s) are not based upon and do not perpetuate differentials based upon characteristics of the protected class members;
- each of the factors is reasonably applied;
- one or more of the foregoing factors account for the entire wage differential; and
- the factors are job-related to the position in question and are based upon a “legitimate business necessity,” a factor only available if the employer shows that are no alternative business practices that would serve the same business objective without producing the wage differential.
The enactment of the new single standard of “substantially similar” work means that in all cases employers will be subject to this heightened burden of proof when defending wage disparity claims, thereby making it easier for employees to ultimately prevail on their claims.
In addition, the amendment s specify that comparison wages shall be based upon wage rates being paid by the employer in all of its operations and facilities, thus depriving employers the ability to argue that the comparison should be limited to the specific locale where the challenging employee works. However, it appears as if employers remain free to argue that local factors, such as cost of living, are legitimate factors warranting the pay disparity. Finally, the amendments prohibit an employer from lowering the rate of compensation of any employee to remediate unlawful pay differential.
The amendments also clarify the protections against retaliation, which now extend to discussions with other employees, legal counsel or government agencies about compensation and wage disparities.
Expanded Recovery For Pay Equity Claims: Prior to the amendments, victims of pay disparity were only able to collect back pay for discriminatory pay practices for a period of two years. Under the amendments, victims of pay disparity can obtain relief for back pay for the period of time that they were subject to the discriminatory pay practice, up to a maximum of six years. In addition, consistent with the Lilly Ledbetter Act, the amendments specify that a new claim arises each time the employee receives a paycheck that is the product of an unlawful pay disparity. Moreover, when a pay disparity is established, the employee must be awarded treble damages, or three times the amount of the unlawful underpayment. Finally, under the amendments, employers are prohibited from shortening the statutory six year statute of limitations for unequal pay claims by way of an agreement with the employee. The amendments do not affect the two-year limitations period applicable to other employment discrimination claims under the NJLAD.
Curtailment of Agreements to Shorten the Statute of Limitations or to Waive Rights Under the NJLAD: In recent years the courts have upheld private agreements between employers and employees to shorten the applicable statute of limitations for bringing NJLAD claims, waiving the statutory right to a jury trial or attorney fees, or mandating arbitration of all NJLAD claims. The Amendments will put an end to most of these practices by making it an unlawful employment practice “to require employees or prospective employees to consent to a shortened statute of limitations or to waive any of the protections provided” under the NJLAD.
It is unclear whether the prohibition against employee waivers was intended to preclude agreements to arbitrate discrimination claims. Whereas any agreement to arbitrate necessarily dispenses with a jury trial that would otherwise be available under the NJLAD, employees will no doubt argue that arbitration agreements are likewise prohibited by the amendments.
New Pay Reporting Requirements for Government Contractors: Employers with government contracts must provide to the Commissioner of Labor and Workforce Development reports detailing the compensation and hours worked by employees that are categorized by gender, race, ethnicity and job category for each of its establishments, which shall be available upon request to employees, former employees and their authorized representatives. The Commissioner will issue regulations regarding the specific reporting requirements.
Employer Actions: In advance of the July 2018 effective date, employers should audit their pay practices to identify any pay disparities that might be attributable to the employee’s membership in a protected class, with due attention given to the new factors to be applied to assessments under the amendments, and take steps to rectify any pay differentials that are identified.
Moreover, employers should review all of their employment agreements and eradicate those provisions that shorten the limitations period for bringing any NJLAD claims, or otherwise waive any of the other protections accorded under the NJLAD.