Pay transparency bill moving through legislature could have major impact on employers

A bill before the Senate Labor Committee could have New Jersey joining a wave of states passing pay transparency laws, though employment lawyers caution that it could result in future litigation over pay inequity and other biases by existing employees.

This week, Assembly bill No. 3937 was before the Assembly Consumer Affairs Committee with amendments, which would require employers to disclose the hourly range, salary, or a range of compensation for each job they post. Amendments to the bill would also require employers to make reasonable efforts to notify all current employees of the opportunities for promotion. The committee heard testimony Thursday on the bill but did not take a vote on its passage.

The bill, in its current form, would allow the commissioner of the Department of Labor and Workforce Development to enforce civil penalties of up to $1,000 for the first violation, $5,000 for the second violation, and $10,000 for each subsequent violation. Each failure to include the required information would constitute a separate violation.

Tim Ford, a partner with Einhorn, Barbarito, Frost & Botwinick in Denville who focuses his practice on employment law and commercial litigation, said that if the bill passes, employers could be opened to claims for pay inequity and other biases for existing employees.

“I think employers can best prepare themselves, if the law bill is passed, by undertaking a substantial review of individual compensation and by engaging outside consultants to evaluate their current workforce and their payroll,” Ford told the Law Journal.

Ford noted that states such as Colorado, Connecticut and New York already have either passed or have pending similar legislation. Even some cities such as New York City and Jersey City have such laws. As employers in those states and cities have begun to deal with the new regulations, Ford has seen at least one practice he would caution employers to avoid.

“Some companies have put in salary ranges of $0-$2 million,” Ford said. “I do not anticipate that the attorney general is going to look kindly upon that, to the extent that the state is looking to enforce this in the future.”

If enacted into law, Ford said there could be more Equal Pay Act claims, which he said are difficult and challenging to prove. But at this point, Ford said, it is difficult to evaluate because it is unknown if this will be the actual legislation signed into law.

“I do not know if I anticipate a lot of private causes of action as it relates to new employees,” Ford said. “I think it will probably result in more litigation from a company’s existing employees when they start to see what they pay scales are. Invariably, a lot of companies are going to try to comply with the law, but they are not going to do their due diligence in reviewing their current pay practices. I think that is where a lot of employers are going to find themselves in trouble.”

David A. Rapuano, a partner with Archer & Greiner who concentrates his practice in representing management in all areas of labor and employment law, said that the recent additions to the bill were welcome.

“They took a law that was extremely broad and undefined, and added certain exceptions and added clarity to the fact that many promotions are not advertised at all,” Rapuano told the Law Journal. “They are simply something that happens over time.”

Rapuano said that it is not clear yet how a law such as this would apply to employers outside of New Jersey who have remote workers in the state.

Related: Getting pay transparency right: Best practices and state comparisons

“I think what employers would really like from the Legislature is more certainty. Not making laws that, to figure out what it means, you have to go to litigation,” Rapuano said. “To me, and to my clients, it is bad policy to create laws that cannot be figured out unless a court [is involved].”

Rapuano said that the second version of the bill took away a good amount of uncertainty for employers. In his experience, most employers may not be as formal as the Legislature believes they are about what is and is not a promotion, he said.

“I think that employers, given the legal landscape … ought to be more systematic about understanding and putting positions within their organization within some sort of framework,” Rapuano said.