Equal pay for equal work is by no means a new concept. Achieving pay equity, defined as eliminating sex (and other) discrimination in the wage-setting system, has been debated for decades. Recently, however, pay equity has become a significant public issue, prompting many state and local governments to enact legislation aimed at eliminating pay disparities, with a strong focus on closing the gender wage gap. To date, attempts to pass pay equity legislation in New Jersey have been unsuccessful. However, with the recent election of Phil Murphy as governor, pay equity legislation in New Jersey appears almost certain.
Pay Equity and the Equal Pay Act
The federal Equal Pay Act (EPA), the first significant pay equity legislation in the United States, was enacted in 1963, and makes it unlawful for employers to pay men and women differently for “equal work” performed under “similar work conditions” at the same establishment. An employer may defeat an EPA claim by showing that the pay differential is based on “seniority, merit, a system which measures productivity based on the quality or quantity of production, or any factor other than sex.” 29 U.S.C. §206. Although progress has been made at narrowing the pay gap since the EPA’s passage, the act’s effectiveness has been limited. The legal standards necessary to prevail on a claim, such as the “equal work” and same establishment requirements, impose hurdles for plaintiffs, and the catch-all “any factor other than sex” defense has been used effectively by employers to defeat EPA claims. As of 2016, women were paid on average 80.5 cents for every $1.00 a male earned. Ariane Hegeswisch, Emma Williams-Baron, The Gender Wage Gap: 2016; Earnings Differences by Gender, Race, and Ethnicity, Institute for Women’s Policy Research (Nov. 16, 2017). The gap is even wider for African American and Latina women, who earn about 63 cents and 54 cents, respectively, for every $1.00 earned by men. Id. Given continuing pay disparities, states and localities have enacted new or strengthened existing pay equity laws to close the gap.
New Jersey Pay Equity Legislation
New Jersey has turned its attention to pay equity. The state legislature has made multiple efforts to pass legislation, which, thus far, have been unsuccessful. Three pay equity bills, S-922/A-2750, A-3480/4119, and S-3256, were introduced in the 2016-2017 legislative session. In February 2016, Senator Loretta Weinberg sponsored S-992, to amend the Law Against Discrimination and which called for equal pay for “substantially similar” work. S. 992, 217th Leg. (N.J. 2016). The bill included provisions to protect employees who discuss wages with their co-workers, imposes treble damages for violations of the bill’s provisions, and restarts the statute of limitations for pay discrimination claims with each paycheck. Additionally, the bill required every employer entering into a contract with a public body to provide the Commissioner of Labor and Workforce Development with demographic, occupational and compensation information for employees. Id. Although the New Jersey legislature passed the bill, Governor Chris Christie conditionally vetoed it. Significant discussion ensued that the Senate would attempt to override the veto, but the bill’s supporters ultimately could not garner sufficient support for an override. A second bill, A-3480, introduced by Assemblywoman Joann Downey in March 2016, sought to prohibit employers from inquiring about an applicant’s past salary history. Assemb. 3480/4119, 217th Leg. (N.J. 2016). This legislation’s goal was to end perpetuation of pay disparities to which a prospective employee may have been victim at her previous job. Governor Christie issued an absolute veto on the bill, arguing that its language “would punish, as discriminatory, otherwise innocuous conduct done with neither discriminatory intent nor a discriminatory impact.” Absolute Veto, Assemb. 3480/4119, 217th Leg. (N.J. 2016). In June 2017, the New Jersey legislature made its most recent attempt at pay equity reform by introducing S-3256, which was, in many ways, similar to the initial NJ bill (S-992), but included variations aimed at addressing Governor Christie’s concerns. S-3256 called for double rather than treble damages, capped back pay at two years, and limited production of employee compensation records. The bill was referred to the Senate Labor Committee, but to date has not received a vote. S. 3256, 217th Leg. (N.J. 2017). With the election of Phil Murphy, who pledged to sign an “equal pay for equal work” law, pay equity legislation in New Jersey is all but assured. While Governor-elect Murphy has not revealed the specifics of a bill he would support, the framework likely will be drawn from the previous unsuccessful bills and may also be influenced by pay equity laws outside the state.
Pay Equity Laws Outside New Jersey
In 2016 and 2017, New York, California, Delaware, Massachusetts, Maryland, Oregon and Puerto Rico introduced new or strengthened existing pay equity laws. While their goals are similar — closing the wage gap — key differences exist, making compliance for multi-state employers difficult. To start, certain states have redefined the requirement of equal pay for “equal work,” to require equal pay for “substantially similar work” (California), “comparable work” (Massachusetts), and “work of a comparable character” (Oregon). Cal. Lab. Code §1197.5; Mass. Gen. Laws ch. 149, §105; Or. Rev. Stat. §652.220. States have also broadened the geographical restrictions used for wage comparisons, so that an employee asserting an equal pay claim is no longer limited to compare her pay to a male employee at the same establishment (as required under the EPA). For example, New York permits comparisons of employees working within the “same geographic region,” and Maryland permits comparisons within the “same county.” N.Y. Lab. Law. §194; Md. Ann, Lab. & Empl. §3-304; P.R. Laws Act 16. California, for its part, eliminates the same establishment requirement, but allows employers to assert geographic considerations as part of a defense. Cal. Lab. Code §1197.5. Unlike the EPA, state pay equity laws, including those in Delaware, Oregon and Massachusetts, prohibit employer inquiries concerning a candidate’s prior salary history during the hiring process, with exceptions (varying by state). Del. Code Ann. tit 19, §709(b); Or. Rev. Stat. §652.220(1)(c); Mass. Gen. Laws ch. 149, §105A(c)(2). New York City, Philadelphia and San Francisco have passed laws barring salary history inquiries, although the Philadelphia law is currently stayed pending a legal challenge. N.Y. Code §8-107; S.F., Cal., Police Code, art. 33J; Phila., Pa, B. 160840. These provisions are intended to eliminate wage inequalities resulting from employees (typically females and minorities) who accept lower starting salaries remaining on a lower compensation track, with pay disparities compounding over time. Several state laws in California, New York, Massachusetts, Maryland and Puerto Rico include pay transparency provisions barring employers from implementing policies prohibiting wage discussions among employees, with the hope that open communications will reveal inequities. Cal. Lab. Code §1197.5(k)(1); N.Y. Lab §194(4); Mass. Gen. Laws ch. 149, §105A(c)(1); P.R. Laws Act 16; Md. Code Ann. Lab. & Empl. §3-304.1(a). Exceptions (again varying by state) exist, such as under New York’s law, which permits employers to place “reasonable limitations” on when and where such discussions may take place and allows restrictions on disclosures by employees with access to wage information, such as human resources personnel. N.Y. Lab. §194(4)(b). Further available defenses under recent pay equity legislation vary, with some laws making it more difficult for employers to defeat unequal pay claims by asserting the EPA’s catch-all “other than sex” defense to justify pay disparity. California and New York, for example, now require an employer to prove a “bona fide factor other than sex” exists for the disparity, such as, but not limited to, education, training and experience. N.Y. Lab. §194(1)(d); Cal Lab. Code §1197.5(a)(1)(D). Oregon includes no “catch-all” defense, instead listing specific business factors which employers may assert to defend disparities. Or. Rev. Stat. § 652.220(2). In an effort to reward those employers that have taken proactive measures, some states have expanded defenses available for employers that self-audit their pay practices to eliminate compensation differentials. For instance, Massachusetts provides a defense if an employer can prove that, in good faith and within three years of a claim being brought, it conducted a self-audit and made “reasonable progress” toward eliminating gender-based wage differentials for comparable work. Mass. Gen. Laws ch. 149, §105A(d). This defense incents employers to initiate pay equity efforts, while limiting the risk that the self-audit will be used to support an unequal pay claim. Oregon and Puerto Rico’s laws also include self-audit defenses but, unlike Massachusetts, serve only to limit damages, rather than as a complete defense. See Or. Rev. Stat. §652.220; P.R. Laws Act 16. Importantly, although California, New York, Maryland, and Delaware’s pay equity laws are in place, the current Puerto Rico and Massachusetts laws will not take effect until March and July 2018, respectively. In Oregon, the majority of provisions do not become effective until January 2019. Mass. Gen. Laws ch. 149, §105A; H.B. 2005, 79th Leg. Assemb. (Or. 2017); H.B. 1, 149th Gen. Assemb. (Del. 2017). The available penalties and enforcement mechanisms also vary by state. Now more than ever, employers must be aware of their varying state pay equity obligations.
While it is difficult to predict the contents of any bill potentially introduced in the next legislative session, such legislation will likely be similar to prior bills passed by the New Jersey legislature and vetoed by Governor Christie. To build a broader consensus for pay equity legislation, Governor-elect Murphy and New Jersey legislators may look to recent state laws which provide affirmative defenses to employers who conduct compensation audits and take steps to eliminate pay discrepancies. Regardless, new legislation aimed at eliminating the gender wage gap is on the horizon for New Jersey.
Brock and Cowit are counsel, and Grierson is an associate, with Gibbons P.C. in Newark. They practice in the firm’s Employment & Labor Law Department.