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OP-ED: Salary scrutiny

How employers can ensure that their compensation practices comply with the state’s equal pay law

DEPOSIT PHOTOS

Last year, the New Jersey Legislature passed the Diane B. Allen Equal Pay Act, which significantly amended the New Jersey Law Against Discrimination (LAD) to strengthen protections against employment discrimination by addressing equal pay for women and other protected categories.  The Act became effective on July 1, 2018.

The Act makes it unlawful for an employer to pay any member of a protected class less than the rate paid to employees who are not members of that protected class for “substantially similar work when viewed as a composite of skill, effort and responsibility.” Membership in a protected class includes 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 hereditary cellular or blood trait of any individual, or liability for service in the armed forces.

There are limited exceptions including if the pay differential is due to a seniority or merit-based system or where the employer can demonstrate each of the following:

  • That the differential is based on one or more legitimate, bona fide factors other than the characteristics of members of the protected class, such as training, education or experience, or the quantity or quality of production;
  • That the factor or factors are not based on, and do not perpetuate differences in compensation based on sex or any other characteristic of members of a protected class;
  • That each of the factors is applied reasonably;
  • That one or more of the factors account for the entire wage differential; and
  • That the factors are job-related with respect to the position in question and based on a legitimate business necessity.

Conducting a well-designed and well-executed pay equity study is now absolutely necessary to manage the risks of compliance.

Employers must carefully review current practices to determine whether there is pay equity among employees performing “substantially similar work.” Conducting a well-designed and well-executed pay equity study is now absolutely necessary to manage the risks of compliance. Employee privacy is important, and the study must affirmatively protect the privacy of employees.

A pay equity study must formulate and answer three questions:

  • Which pay differences are at issue?
  • Whose pay should be compared?
  • What are the legitimate factors that justify differences in pay?

Where to start

The act references “equal pay for the same work.” Pay equity studies begin by comparing the pay of employees who are “similarly situated.” But individuals who are comparable today were not always in the past. Pay today equals pay at hire plus all subsequent changes in pay, including those that result from a promotion or transfer.  Employees who today do similar work might, in the not-so-distant past, have worked in different jobs, different grades, different units, different locations or even different companies. Gathering historical pay information may be needed to understand (but not necessarily justify) present pay differences.

Differences in knowledge, skill, ability, effort or responsibility provide legitimate reasons for some work pay differences. However, there are few, if any, direct measures of these factors available, and pay equity studies typically rely on the “usual suspects” to explain pay disparities: management responsibility; knowledge; communication skills; physical demands; emotional demands; mental skills; initiative; length of time in job or grade; physical/geographic location; education; and prior experience.

Information to be collected and analyzed through a pay equity study should include work activities; human behavior; skilled or unskilled use of machines, tools, equipment and other work aids; job context; and human requirements

Ultimately, adopting and maintaining descriptions is an integral part of a transparent, fair pay system. Developing accurate job descriptions makes it much easier to evaluate and grade different jobs — and ensure that employees doing equal work receive equal pay.

It is essential that job titles and descriptions be free of bias. Although this would appear to be self-evident, historically different titles have been used to signal jobs performed by men versus women, even when essentially the same work is being performed. When writing job descriptions, attention to eliminating this bias must be a major focus for the process.

In addition to formulating bias-free job descriptions, the second step to the pay equity analysis must involve the development of salary guides for all positions. Salary guides help manage the compensation of new employees and to establish appropriate pay increases for existing employees while maintaining equity among other jobs in the company.

In order to proceed with addressing the act’s requirements, the company should consider having an organizational meeting to discuss these matters generally and then to set milestones against a timeline for accomplishing tangible goals. It must be understood that this is a “work in progress” and will be ongoing. The company will get better at compliance as time goes on. By engaging in the process, the company will be able demonstrate its good faith commitment and intention to comply with the law, while – one hopes – achieving its goals.

Gary S. Young is a member in Mandelbaum Salsburg’s Corporate and ERISA Practice Groups with more than 40 year of legal experience.

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