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The Impact of New Jersey's Equal Pay ActAndrew L. Smith

On March 27, 2018, the New Jersey Legislature passed the Diane B. Allen Equal Pay Act. The Act amends the New Jersey Law Against Discrimination (“LAD”) by providing additional protections against employment discrimination, and to promote equal pay. The Act will take effect on July 1, 2018, once the legislation is presented to, and signed by, Governor Phil Murphy.

The Act was inspired by Lilly Ledbetter. Ms. Ledbetter worked for Goodyear Tire and Rubber Company in Alabama for 20 years. After working for Goodyear for approximately 19 years, she received an anonymous note that she was earning approximately 40% less than her male counterparts in the same position.

Ms. Ledbetter sued Goodyear for paying her significantly less than her male colleagues, though performing substantially similar job tasks and functions. Her lawsuit reached the United States Supreme Court, which denied her claim because it was not filed 180 days from her first paycheck even though she did not know she was being underpaid at that particular time.

Congress later passed the Lilly Ledbetter Fair Pay Act of 2009, which restarted the 180-day clock every time a discriminatory paycheck was issued. Although Ms. Ledbetter was ultimately unable to receive restitution from Goodyear, she has stated, "I'll be happy if the last thing they say about me after I die is that I made a difference."

New Jersey’s pending Equal Pay Act amends LAD by making it an unlawful employment practice for an employer to pay any employee who is a member of a protected class less than the rate paid to other employees who are not members of that protected class. The Act is even more broad than solely gender pay equity, such as the situation presented by Ms. Ledbetter. Rather, the Act mandates equal pay on the basis of membership in a protected class, which can include but is not limited to race, color, national origin, ancestry, age, marital status, pregnancy, disability, and a plethora of various other memberships. Therefore, the Act constitutes sweeping legislation, which legal practitioners and employers should be cognizant of, especially when engaging in business decision-making.

Pursuant to the Act, an unlawful employment practice can occur each time an employer’s pay practice discriminates against an employee. The discriminated-against employee can seek back pay for a six year period, among other remedies. This statute of limitations amends the LAD’s previously-existing limitation of two years.

Most importantly, in the event of an unlawful employment practice, there can be an award of treble damages. This can have devastating business consequences. Therefore, employers should carefully review their employee handbooks as well as hiring and compensation practices to insure pay equity for those employees performing substantially similar work, as defined by the Act. Failure to have in place a merit system, seniority system, or other system that considers bona fide job-related factors in determining compensation risks may run afoul of the Act. Employers may also not decrease the pay of higher-paid employees to comply with the Act. Violation of the Act will be expensive for employers, whether willful or accidental. It is advisable that legal counsel be retained in advance of the implementation of the Act in order to comply with federal and state law.