New Jersey Legislative Update: Equal Pay and Paid Sick Leave
New Jersey recently enacted two new pieces of legislation which will affect nearly all employers. On April 24, 2018, Governor Murphy signed into law the Diane B. Allen Equal Pay Act (the New Jersey Equal Pay Act or Act) and on May 2, 2018, The New Jersey Paid Sick Leave Act.
A summary of both laws is provided below:
The Diane B. Allen Equal Pay Act:
Taking effect on July 1, 2018, the Act amends the New Jersey Law Against Discrimination (the “NJLAD”), N.J.S.A. § 10:5-12, to prohibit employers from paying members of a protected class a rate of compensation and benefits that is less than the rate paid to those who perform substantially similar work and are not members of a protected class. The definition of a protected class under the NJLAD is considerably broader than under analogous federal statutes. The NJLAD protected classes include “race, creed, color, national origin, ancestry, age, marital status, civil union status, domestic partnership status, affectional or sexual orientation, genetic information, pregnancy or breastfeeding, sex, gender identity or expression, disability or atypical heredity cellular or blood trait of any individual, . . . [individuals who have served] in the Armed Forces of the United States . . ., nationality . . ., or [individuals who have refused] to submit to a genetic test or make available the results of a genetic test to an employer. . . .” The existing wage and hour law already prohibits employers from discriminating in the rate or method of payment of wages to an employer because of his or her sex; however, the Act extends those protections to prohibit discrimination in pay or benefits to all classes of individuals otherwise entitled to the NJLAD’s protections ”.
Similar to the federal Equal Pay Act, 29 U.S.C. § 206(d), there are legally permissible reasons for a different rate of compensation, including the differential being based on a seniority or merit system. Under the NJLAD as amended by the Diane B. Allen Equal Pay Act, the different rate of compensation for substantially similar work may only be permitted if the employer is able to demonstrate that the differential is based upon one or more legitimate, bona fide factors other than the characteristics of members of the protected class (e.g. training, education, experience, or the quantity or quality of production). If an employer cannot demonstrate that the pay differential is based upon seniority or merit, the NJLAD as amended requires that the employer demonstrate the following with respect to the pay differential:
- The factors are not based on, and do not perpetuate, a differential in compensation based on sex or any other characteristic of a protected class.
- Each of the factors is applied reasonably.
- One or more factors account for the entire wage differential.
- The factors are job-related with respect to the position in question and based on a legitimate business necessity, where there is no alternative business practice that would serve the same business purpose without producing the wage differential.
As soon as feasible, employers should conduct a pay analysis to ensure that employees who are members of protected classes are receiving equal pay for equal work. To the extent they are not, it is important that employers either note the legitimate reasons for the pay disparity (e.g., more and/or better education, experience, training, and/or performance), or adjust wages to ensure compliance with the Act before it takes effect on July 1, 2018. It is important to note that if adjustment of wages is required to comply with the Diane B. Allen Equal Pay Act, wage adjustments may only be upward. Both the Diane B. Allen Equal Pay Act and the federal Equal Pay Act expressly prohibit reducing the wage of any employee to comply with either law. Moreover, the comparison of wage rates should include all of an employer’s operations, since the Act specifically states “comparison of wage rates shall be based on wage rates in all of an employer’s operations or facilities”.
Employers should also be aware that this new law significantly enhances damages that are available to a prevailing employee in a lawsuit filed under the NJLAD, which are now far more expansive than back pay plus interest. Employers may be liable for discriminatory compensation practices for a period of six years, provided that “discrimination in compensation or in the financial terms or conditions of employment has been continuous”. Also under the Diane B. Allen Equal Pay Act, treble damages (i.e. three times the disparity in pay) are available to employees who are discriminated on the basis of pay and employers will be liable for payment of all of the prevailing employee’s attorney’s fees.
As noted above, the Act goes into effect on July 1, 2018, so now is the time for employers to review compensation practices to ensure compliance and minimize any costs associated with future litigation resulting from these practices.
The New Jersey Paid Sick Leave Act:
Signed into law on May 2, 2018, the New Jersey Paid Sick Leave Act will take effect on October 29, 2018 and will require all employers, regardless of size, to provide paid sick leave to their employees. Per diem health care employees, construction workers employed pursuant to a collective bargaining agreement, and public employees who already have sick leave benefits are excluded from the definition of “employee” under the act.
Under the law, all employers must provide one (1) hour of sick leave for every 30 hours worked, up to at least 40 hours per year. Employers are not required to permit employees to carry more than 40 hours of paid sick leave from year to year. While employees must be permitted to accrue paid sick leave from the date their employment commences, an employer need not permit the employee to actually use that paid sick time until 120 calendar days after the employee commenced employment.
It should be noted that because several municipalities in New Jersey have existing sick leave ordinances, employers must also be cognizant of these local laws. While the Act expressly preempts any and all county and municipal laws concerning earned sick leave after the Act’s effective date, differences between state and municipal leave laws may require an employer to adopt different policies for offices and groups of employees across the state.
Employers must permit their employees to use earned sick time under the Act for, at a minimum, the following reasons:
- Diagnosis, care, treatment or recovery for the employee's own mental or physical condition (inclusive of preventive care).
- Diagnosis, care, treatment or recovery for a family member's mental or physical condition (inclusive of preventive care).
- Time needed as a result of an employee's or family member's status as a victim of domestic or sexual violence (inclusive of counseling, legal services, or participation in any civil or criminal proceedings related to same).
- Time when the workplace, school or childcare is closed by order of a public official due to a public health concern.
- Time to attend a school-related conference or meeting.
The Act permits employers to require advance notice of foreseeable use of paid sick leave and also allows employers to request documentation to confirm that leave was used for permissible purposes when an employee is absent for three (3) or more consecutive days. Furthermore, under the Act, employers are permitted to “blackout” certain days when an employee may otherwise be permitted to foreseeably use accrued paid sick leave and require that an employee provide documentation that paid sick leave was used for a permissible reason if used unforeseeably on a “blackout” day. Notably, the Act expressly forbids employers from sharing any information they may obtain about the employee’s or their family’s health or domestic or sexual violence affecting the employee or their family (such as information obtained when documentation is provided to an employer in accordance with the Act) with anyone other than the affected employee absent the affected employee’s written consent.
As touched upon above, employers are not required to permit the accrual or use of more than 40 hours in a benefit year, or the carry-over of more than 40 hours from one benefit year to the next. However, unused sick leave must carry over from one year to the next unless the employer offers and the employee chooses to accept payment for unused sick time at the end of the year. Employers may opt to employees a payout for unused but accrued sick leave in the final month of the employee’s benefit year and employees must choose within 10 calendar days whether to accept or reject the employers’ offer, or alternatively, accept a partial payout (50%) and carry-over the remainder of time. If the employee refuses to accept the payout, then sick leave must carry over. Additionally, the Act expressly permits employers to institute a policy that would permit employees to donate unused accrued paid sick leave to another employee or employees.
Employers are required to retain employee records of hours work and sick leave taken for a period of five (5) years and must be able to produce those records to the DOL upon demand. A notice from the DOL regarding Paid Sick Leave is forthcoming and must be posted in the workplace and given to new hires at the commencement of their employment.
Though an employer may discipline an employee for taking leave for reasons other than those cited in the law, retaliatory or discriminatory action taken against an employee who uses sick leave for bona fide reasons is strictly prohibited by the Act. It is important to note that in the event an employee makes or file a complaint with any court or department concerning their employer’s alleged violation of the Act, if any adverse employment action is taken against that employee within 90 days of the complaint, there exists a rebuttable presumption under the Act that the adverse employment action was unlawful retaliation for the employee’s complaint. While the presumption can be rebutted, such a presumption creates a significant obstacle to the defense of a retaliation claim. An employer’s failure to comply with any provision of the Act is treated the same as an employer’s failure to pay minimum wage and the non-compliant employer would be penalized in the same manner. These penalties include: quasi-criminal charging with a disorderly persons offense punishable by a fine of up to $1000.00 and imprisonment for 10-90 days for a first offense; payment of actual and liquidated damages to the affected employee; and imposition of additional monetary penalties and surcharges.
For further information regarding these new laws and questions surrounding implementation of policies and compliance, please contact James E. Shepard at x120.
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