correct size blogEarlier today, Governor Murphy signed into law S-104, the “Diane B. Allen Equal Pay Act.” The new law, which takes effect July 1, 2018, modifies the Law Against Discrimination (LAD) to provide protections against employment discrimination and promote equal pay for all groups protected by the LAD.

The law expands unlawful employment practice under LAD to include discrimination based on compensation or financial terms or conditions of employment. It will now be unlawful for an employer to pay any of its employees, who are members 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. An employer cannot reduce the rate of compensation of any employee in order to comply with this new requirement.

An employer may pay a different rate of compensation only if the employer demonstrates that the differential is based on a seniority system, a merit system, or the employer demonstrates:

  1. That the differential is based on one or more legitimate, bona fide factors other than the characteristics of members of the protected class, such as training, education or experience of the quantity or quality of production;
  2. That the factor(s) are not based on and do not perpetuate a differential in compensation based on sex or any other characteristic of members of a protected class;
  3. That each of the factors is applied reasonably;
  4. That one or more of the factors account for the entire wage differential; and
  5. That the factors are job related with respect to the position in question and based on a legitimate business necessity. Please note that a business necessity factor does not apply if it is demonstrated that there are alternative business practices that would serve the same business purpose without producing a wage differential.

The comparison of wage rates must be based on wage rates in all of the employer’s operations or facilities.

It will also be considered an unlawful employment practice to require employees or prospective employees to consent to a shortened statute of limitations or waive any of the protections provided by LAD or agree not to make request or disclosure of job title, occupational category, and rate of compensation, including benefits, of any current or former employees.

The law also provides that a discriminatory compensation decision or other employment practice that is unlawful under the LAD occurs each occasion that compensation is paid in furtherance of that discriminatory decision or practice. This provision thus restarts the applicable statute of limitations governing discriminatory compensation claims under the LAD, effectively making each paycheck another instance of the discriminatory compensation decision or other practice and therefore a new or continuing violation. Liability will accrue and an aggrieved person may obtain relief for back pay for the entire period of time not more than six years. If the Director of the Division of Civil Rights or a jury determines that an employer is guilty of an unlawful employment practices based on compensation or financial term or conditions of employment the judge must award three times any monetary damages to the person(s) aggrieved by the violation.

We suggest you review this new law with your labor counsel and administrator. We are in the process of planning a webinar on this new law for late May/early June. We will keep you posted.

Contact:  Frank Marshall, Esq., Staff Attorney,  609-695-3481 x137,  Fmarshall@njslom.org