On July 1, 2018, the Diane B. Allen Equal Pay Act becomes effective in New Jersey. The law contains a myriad of requirements, including recordkeeping and anti-retaliation provisions, and it prohibits pay disparities based on an employee’s membership in a protected class (i.e., sex, race, color, age and religion). The law provides a six-year statute of limitations for pay equity claims (previously limited to two years).

In the absence of a seniority or merit-based system, an employer will not be able to pay different rates of compensation for substantially similar work unless the difference is based on legitimate, bona fide job-related factors that are also based on business necessities. These factors include training, education, experience or performance. However, these factors cannot perpetuate a differential in pay or be based on any protected class. Also, these factors must be reasonably applied and must explain the entire wage differential.

Lastly, an employer cannot claim that a factor is based on a business necessity “if it is demonstrated that there are alternative business practices that would serve the same business purpose without producing the wage differential.” An employer found in violation of the law is subject to treble damages, and a willful violation allows an employee to recover punitive damages.