Today is the third in a five-part blog series on New York’s sweeping changes to the legal landscape for Empire State employers. In prior posts, we covered limitations on the use of nondisclosure provisions in settlement and separation agreements and the new standards for litigating and defending harassment claims. Today, we will cover the expansion of New York’s equal pay law.
As part of New York’s overhaul of its existing anti-discrimination laws, legislators have expanded the scope of the state’s Equal Pay Act (N.Y. Labor Law § 194) to encompass all classes and characteristics protected by the New York State Human Rights Law. In addition, the new law lowers the standard of proof needed to establish pay discrimination. These changes will take effect 90 days after Governor Cuomo signs the legislation, which he is expected to do.
By way of background, federal and New York State law have, for decades, prohibited pay differentials between employees of the opposite sex who perform equal work. In 2015, New York amended its Equal Pay Act to limit an employer’s defenses against equal pay claims. The State also increased the amount of liquidated damages available to a prevailing plaintiff-employee in an equal pay lawsuit.
The Bill passed last week by Albany lawmakers expands New York’s equal pay protections to employees of all classes and characteristics protected by the state’s anti-discrimination law. This means that an equal pay lawsuit can now be brought, as always, on the basis of sex, but also based on alleged discriminatory pay differentials due to age, race, creed, color, national origin, sexual orientation, gender identity or expression, military status, disability, predisposing genetic characteristics, familial status, marital status, and domestic violence victim status. New York State businesses should therefore brace themselves for an uptick in equal pay claims.
Beyond this important change, the 2019 Bill also lowers the legal standard for a plaintiff-employee to prove that they were subjected to discriminatory pay practices. Under the prior iteration of the State’s Equal Pay Act, New York employers were required to ensure equal pay for “equal work on a job requiring equal skill, effort and responsibility, and performed under similar working conditions.” Under the revised law, however, New York employers will now be required to ensure equal pay for “substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.” This change lowers the bar for employees asserting equal pay claims because it broadens the number of employees a plaintiff-employee could identify as comparators for the purposes of establishing differential pay. It is crucial to note that an employee’s actual job duties, not their title, control the determination of whether an employee is being compensated in compliance with the law.
Notwithstanding these two important changes, New York State still allows for pay differentials based upon non-discriminatory factors such as seniority, merit, quantity or quality of work, or a bona fide factor such as education, training, or experience, provided the factor is job-related, consistent with business needs, and is not based upon protected-class-related compensation differentials. In addition, as was the case with the prior version of the law, an employee can overcome an employer’s bona fide factor defense by showing that: (i) the employer’s practice causes a disparate impact on the basis of a protected class; (ii) an alternative practice exists that serves the same business purpose and would resolve the pay differential; (iii) the employer refused to adopt the alternative practice.
The above changes are particularly notable because New York law, which has a six-year statute of limitations for equal pay claims, imposes 300% liquidated damages for willful violations of Labor Law § 194. This means that, if an employee is awarded $10,000 in economic damages because of an equal pay violation, the employer will likely also have to pay an additional $30,000 in liquidated damages (not to mention the other available quanta of damages, including attorneys’ fees).
In light of these changes to New York’s Equal Pay Act and the exponential damages associated with such claims, employers should review their payroll, benefits, and compensation programs to ensure that employees performing substantially similar work are equally compensated, absent a bona fide basis for a pay differential. Employers should further be prepared to justify and support any pay differentials among employees performing substantially similar work. If you have any questions about the implications of this legislation or if you would like help conducting pay equity audits, Reed Smith’s experienced employment attorneys are available to assist.