New Jersey has the most expansive equal pay law in the nation. It has the harshest penalties and arguably makes it more difficult for employers to justify salary differences for women, minorities and other members of a protect class, than any other equal pay law.
Businesses are not fully prohibited from paying employees differently based on things like seniority, but it does make it much more risky.
So how do you protect yourself as an employer? There’s no fool-proof way to prevent an accusation, but as Luke Breslin, an attorney for Jackson Lewis, explained at NJBIA Hard Decisions seminar that employers can take three approaches to lower their risk.
These are in addition to completing a full pay audit by an outside attorney and designating someone within your organization to be responsible for reviewing pay across company lines.
- Don’t base salaries on previous pay or job titles.
The law does not prohibit employers from basing a starting salary on what a candidate made at his or her previous job, but as a practical matter, you’re asking for trouble. The reason is simple: if the job candidate was paid unfairly in the past, basing future pay on that salary would perpetuate the discrimination.
Breslin recommends basing salaries on job duties and other job-related factors, such as education and experience. “You have to look at what the going salary is in your company for substantially similar work,” Breslin said.
Likewise, avoid basing salaries on job titles and even job descriptions. They won’t be enough to defend against an equal pay lawsuit. Instead, focus on day-to-day operations and what an employee actually does.
“Just because you have two different job titles, that doesn’t mean the two employees are doing different work,” Breslin said.
- Limit discretion in pay decisions.
Providing additional pay for high-performing employees is still permitted, but it does open employers to claims of discrimination. Breslin explained that to have a merit-based pay system or one that considers seniority, it must be spelled out in writing.
“Last year, you could have said, ‘this guy did a really good job, we’re going to give him $10,000, and this guy was okay, so we’ll give him $5,000,’” Breslin said. “Now, if they do the same work, it can really raise some serious issues.”
Pay decisions should be part of a process that is consistent and applies across the board, he said.
- If you find a discrepancy, remedy it immediately.
The statute of limitations for the Equal Pay Act is six years, meaning an employee has six years to bring a lawsuit after discovering the discrimination. The look-back period—that time frame that will be used to determine how much you have to pay an employee in a pay-discrimination case—is also six years. And that is six years from the last time a discriminatory paycheck has been issued.
Hence, if you find a significant discrepancy, Breslin says the best practice is to remedy it immediately. Even if it is especially large, there is no provisions for phasing in increases.
The key here is to make sure you raise the salaries of anyone in a protected class who is being paid unfairly. The law prohibits lowering anyone’s salary to comply with the law.