By Drew M. Smith
As of July 1st, New Jersey’s employment compensation laws will be changed to provide equal pay to all employees throughout the state.
The piece of legislation, called The Diane B. Allen Equal Pay Act, was signed by Governor Murphy last week. This legislation specifically targets the class system that is used to determine wage rates. Whereas other state laws target the gender gap, this one covers all classes protected under New Jersey’s civil rights law. This includes minorities, gender and those with disabilities. The law makes it clear that compensation should be the same for “substantially similar work.”
To justify why one person gets paid more than others, the burden of proof is on an Employer to prove that the different levels of compensation are based on seniority or merit based system. Among the many factors:
- That the difference is based on one or more legitimate, bona fide factors other than the person’s membership to the protected class (i.e. training, education or experience, or the quantity or quality of production);
- That the factors are not based on and do not perpetrate a difference in compensation based on sex or any other characteristic of members of a protected class;
- That each of the factors is applied reasonably;
- That one or more of the factors account for the entire wage difference; and
- That the factors are job-related and based on a legitimate business necessity. If it can be shown that there are alternative business practices that would serve the same business purpose without causing a wage difference, the employer will not be able to satisfy this requirement.1
Importantly, an employer can’t just lower other employee’s wages to comply. They must bring it up to a standard level, meaning a potential raise for lower waged employees. The law also provides for potential lawsuits if the reason for lower compensation was discrimination.
While the courts figure out how it applies legally, New Jersey employers must step up and prepare for it. Their Employee Practices Liability Insurance should be updated to conform with the new law. In addition, their employee handbook should be reviewed to keep up to date with the classes that are protected under New Jersey law.