Although it is presently illegal under the New Jersey Law Against Discrimination (the “LAD”) to pay people different wages for performing the same work under similar working conditions because of their gender, there is currently pending in both the State Senate and Assembly legislation “concerning equal pay for women and employment discrimination, requiring public contractors to report certain employment information.”

Implications for All Employers: As proposed, the new legislation will make it an illegal act of discrimination to pay any employee at a rate of pay, including benefits, which is less that the rate paid by the employer to employees of the other sex for substantially similar work, when viewed as a composite of skill, effort and responsibility. Unlike prior legislation in this area, the proposed legislation codifies five circumstances justifying a pay differential between the sexes, but the employer bears the burden to prove that any of those circumstances exist.  In so doing, the bill materially changes the legal standard for establishing wage discrimination.  

The proposed legislation also adopts recent New Jersey Supreme Court jurisprudence by specifying that an unlawful employment act occurs each time an individual is adversely affected by a discriminatory compensation practice and paid less because of their sex. Contrary to the federal Lilly Ledbetter Fair Pay Act and current New Jersey law, however, the new legislation does not limit the amount of back pay the aggrieved employee can receive for violations that occur within the applicable statute of limitations period.  Rather, under the new bill there is no statute of limitation, and an aggrieved employee can collect back wages retroactive to the date that discriminatory compensation first occurred, so long as the violation continues into the applicable two year statute of limitation of the LAD. Moreover, the proposed legislation prohibits employers from requiring individuals to agree to a shortened statute of limitation as a condition of employment.

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Equally important, the proposed legislation will provide for awarding three-fold damages for violating its wage discrimination provisions, in addition to other statutory remedies.

   Implications for Public Contractors:  The proposed legislation imposes additional reporting requirements upon public sector contractors, who will be obligated to submit certified payroll records to the Commissioner of Labor and Workforce Development containing information regarding the gender, race, job title and the compensation paid to every employee of the employer living in New Jersey and working on the public project.  The Commission has the right to establish the frequency with which those records will have to be submitted. 

Likelihood of Passage: Governor Christie has threatened to veto the proposed legislation for several reasons. The Governor objects to the unlimited back pay and treble damages provisions, as well as the bill’s material change of the legal standard for establishing wage discrimination.  However, the proposed legislation has substantial support from the State’s legislators, who could override the Governor’s veto.   

Although it cannot be denied that compensation discrimination on the basis of gender is illegal and has no place in today’s workforce, the pending legislation, if adopted, will be in the forefront of equal pay legislation in this country.  It will be yet another example of what makes New Jersey business unfriendly.  We urge employers to contact their legislators to amend the proposed legislation to vote against its adoption, or at a minimum, to eliminate the draconian provisions that the Governor has voiced his objection to.   If the legislation in its current form is adopted, employers should brace themselves for a new wave of wage litigation, claims that likely will not be covered by existing employment practices liability insurance coverage.