In 1945, a member of the New Jersey state assembly named Dr. James O. Hill oversaw a radical change in his state’s legal landscape. Dr. Hill sponsored the New Jersey Law Against Discrimination (“LAD”), one of the nation’s first comprehensive anti-discrimination laws. The overarching goal of LAD, as noted by the New Jersey Supreme Court, was “nothing less than the eradication ‘of the cancer of discrimination.’” Over time, Dr. Hill’s law has seen countless amendments.

Now, in 2018, New Jersey has enacted sweeping changes to the LAD in a manner that channels the expansive spirit of its origins.

Gov. Phil Murphy has signed into law The Diane B. Allen Equal Pay Act (“Allen Act”), which amends the LAD. The act was passed by the New Jersey legislature on March 26, 2018. “From our first day in Trenton, we acted swiftly to support equal pay for women in the workplace and begin closing the gender wage gap,” said Governor Murphy in a press release. “Today, we are sending a beacon far and wide to women across the Garden State and in America – the only factors to determine a worker’s wages should be intelligence, experience and capacity to do the job. Pay equity will help us in building a stronger, fairer New Jersey.”

Here are the important features of the Allen Act.

Pay Equity Mandate
The Allen Act ’s most significant change to New Jersey law is its prohibition on paying a lesser rate of compensation—including benefits—to a member of any protected class in New Jersey as compared to employees who 1) do not fall into the protected class and 2) perform “substantially similar work, when viewed as composite of skill, effort and responsibility.” This pay disparity ban has only limited exceptions. An employer may pay different rates pursuant to a seniority system, a merit system, or where the employer can demonstrate the pay differential is based on legitimate, reasonably applied factors other than characteristics of the protected class and that one or more of the factors account for the entire differential. The factors accounting for the differential (such as training, education or experience, or the quantity or quality of production) must be job-related and based on business necessity. Employers will not pass muster if they are found to be paying people differently if other business practices exist serving the same business purpose. Penalties are expensive. If an employer is found guilty of violating certain of its mandates, “a judge shall award three times any money damages to the person or persons aggrieved by the violation.”

Extends the Statute of Limitations for Compensation Claims
Each time an employee is affected by discriminatory pay practices, the time in which to bring a compensation claim restarts. This includes each paycheck and provision of benefits that stems from the discriminatory practice. However, liability for backpay does not extend beyond six years from the last violation of the Allen Act. This time period cannot be waived.

Prohibits Retaliation Based on an Expanded Definition
The Allen Act bans reprisals against employees who discuss job titles, occupational categories, or rates of pay (including benefits) amongst themselves or with legal counsel, former employees, or a government agency. Similarly, the Allen Act prohibits employer retaliation for discussing information concerning the gender, race, ethnicity, military status or national origin of current and former employees. This right cannot be contracted away or otherwise waived with current employees or prospective hires as a condition of employment.

Compensation information Reports Required for Contractors on Public Projects
Contractors on public works will have a new reporting obligation based on compensation and hours worked, disaggregated by gender, race, ethnicity, and job category. More details on this obligation will arise in regulations to be promulgated at a later date.

The workplace looks much different now than in 1945 when Dr. Hill crafted his signature anti-discrimination legislation. Nonetheless, his law continues to evolve in attempts to keep pace with a society increasingly focused on issues of pay equity.

New Jersey employers are encouraged to do a deep dive into their compensation policies and practices across all operations in anticipation of the Allen Act’s effective date of July 1, 2018. Critical to this process is determining which employees perform “substantially similar work” and must generally be compensated at the same wage and benefits rates. Ignoring this obligation places employers at significant risk.

To learn more about achieving pay equity, click here.