New Jersey’s Equal Pay Act is Not Retroactive, For Now

In a rare victory for New Jersey employers, on January 14, 2019, U.S. District Judge William Martini of the District of New Jersey ruled that the Diane B. Allen Equal Pay Act (NJEPA) cannot be applied retroactively. In Perrotto v. Morgan Advanced Materials, PLC, et al., Judge Martini held that the new NJEPA lacks the intent to be applied retroactively and is not remedial, since it represents an entirely new statutory scheme for pay equity.

The Diane B. Allen Equal Pay Act

Effective July 1, 2018, the Diane B. Allen Equal Pay Act amended the New Jersey Law Against Discrimination (NJLAD) making it illegal for an employer to pay any employees who are members of a protected class recognized under the NJLAD at a lower compensation than other employees who are not members of a protected class, for “substantially similar work,” unless a pay differential is justified by legitimate business necessity. “Substantially similar work” is determined by a combination of the “skill, effort and responsibility” required for that position and is not limited to employees who work within a specific geographic area or region.

Moreover, although the law carves out an exception for differential pay based on certain factors like merit, seniority, and education, this exception is only so long as these factors do not perpetuate a sex-based differential in compensation. For example, if one employee has a different title than another employee or even works in a different department, but both employees perform the same types of tasks with similar levels of responsibility, both employees should be paid the same. Employers are also strictly prohibited from reducing compensation in order to equalize pay rates.

The NJEPA also imposes a six-year statute of limitations on violations and allows for triple damages. In addition, employees can also seek damages for pain and suffering, punitive damages as well as lost wages as allowed by the NJLAD.

Facts in Perrotto

Darla Perrotto worked as a controller and human resources employee at Morgan Advanced Materials, PLC and Morgan Advanced Ceramics, Inc. in Fairfield, New Jersey. Terminated from her position on April 5, 2018, Perrotto filed suit on July 27, 2018 alleging gender-based discrimination and retaliatory compensation practices in violation of the NJEPA. Perrotto was terminated before the NJEPA was signed by Governor Murphy on April 24, 2018 and her lawsuit was filed three weeks after the law went into effect on July 1, 2018. After removing the case to federal court, Morgan Materials filed a motion to dismiss Perrotto’s complaint arguing that the NJEPA cannot be applied retroactively.

NJEPA Cannot be Retroactively Applied & Is Not Curative

The District Court found that the plain language of the NJEPA, and in fact postponing the effective date of the law for 3 months after its signing, clearly indicated that the Legislature intended NJEPA to have prospective application only. Judge Martini also found that there is no evidence that the Legislature sought to explain or clarify the NJLAD, but instead merely “expanded employee protections.” Thus, the NJEPA cannot be applied to conduct occurring prior to July 1, 2018 and the District Court dismissed Perrotto’s NJEPA claims with prejudice.

Bottom Line

Although the federal District Court ruled that the NJEPA does not apply to conduct before July 1, 2018, it is important to note that the ruling is not binding on New Jersey state courts but does serve as useful guidance for responding to any claims by employees that the NJEPA can be applied retroactively.

Employers must review current job descriptions, employee handbooks and policies to determine which employees perform “substantially similar work” in order to ensure they are being compensated at the same rate to ensure compliance with the law. Employers risk triple damages if they fail to assess possible non-compliance with the NJEPA. Pay equity audits should be conducted with legal counsel since without the protection of the attorney client privilege to ensure confidentiality, the assessment and resulting adjustments are all readily discoverable in the event of litigation. Human Resources, benefits personnel and managers/supervisors should receive updated training on hiring, conducting performance evaluations and promotion practices to ensure compliance with the new law.

For questions regarding the NJEPA and how to implement nondiscriminatory pay practices to comply with the law, please contact Dina M. Mastellone, Esq., Chair of the Human Resources Counseling and Compliance Group, at 973-533-0777 or at dmastellone@genovaburns.com