What NJ Employers Need to Know About Employee Salaries in 2020

As a business owner, recruiting, interviewing and hiring new employees is nothing new. However, new state legislation may very well impact your hiring process—and the penalties of not abiding are costly.

In an effort to strengthen equal pay protections for Garden State workers, two bills have gone into effect: 2018’s New Jersey’s Equal Pay Act and, more recently, a law prohibiting salary history inquiries. Continue reading to find out the details of each measure and how you may have to adjust your hiring process accordingly in order to be compliant.

New Jersey Salary History Ban (2020)

Effective January 1, 2020, New Jersey employers are prohibited from salary history inquiries and screening applicants based on their past wages, salary, commission and/or benefits. Employers cannot require minimum or maximum salary history criteria nor can they make an employment decision based on the applicant’s refusal to disclose salary details.

The new law covers private sector workers, as a ban was enacted in early 2018 for state employees. New Jersey joins 16 other states across the country enacting salary history bans to make progress towards workplace equality.

Exceptions:

• It is not considered a violation if an applicant voluntarily provides previous salary and benefit information “without prompting or coercion.” If volunteered, the employer may use that information to determine compensation.
• With written permission from the applicant, an employer can confirm salary and benefits history only after an offer has been made and includes an explanation of the full compensation package.
• The law does not apply to internal promotions or transfers.
• If the employer’s background check vendor accidentally includes salary history information, even after being told not to, it will not violate the law, but the employer cannot use it to determine compensation.

Penalties:

A first-time violation starts at $1,000 and subsequent violations could go up to $10,000 each.

New Jersey Equal Pay Act (2018)

Effective July 1, 2018 as an extension to the NJ Law Against Discrimination, the Equal Pay Act prohibits pay disparities based upon protected characteristics such as gender, race, origin, nationality, ancestry, age, disability, marital status, sexual orientation, etc. This makes it unlawful to pay employees in the aforementioned protected categories differently for performing “substantially similar work.”  Substantially similar work is classified as duties close in skill, effort, and responsibility.

Employees are to be informed of their right to pay equity and is a mandatory labor law sign that should be displayed on premises. Employers are prohibited from reducing compensation in order to comply with the Equal Pay Act and instead must increase the pay of the lower-paid worker.

Reasonable pay factors:

NJ employers are compliant and in the clear if they can justify difference in compensation is based on the following job-related factors:

• Seniority
• Merit System
• Job-related training
• Experience
• Education level
• Production quantity or quality
• Reasonable, “business necessity” factors other than characteristics of the NJLAD protected classes

Penalties:

Note that the Equal Pay Act’s statute of limitations increased to six years. If an employee can prove discrimination on the basis of pay, the Act mandates an award of treble damages (three times) of the underpayment amount and attorney fees. Employers are also prohibited from retaliation.

What You Need to Do

Now that you are up-to-date with the latest legislative changes, make sure all members of your hiring team are aware as well.

To ensure compliance with the Salary History Ban:

• Examine interview scripts/guidelines and inform interviewers and hiring managers about the illegality of certain questions during the interview and not to “prompt or coerce” the applicant into revealing any information. Prepare them to respond appropriately.
• Instruct recruiters and background check vendors not to ask or supply salary related information from applicants.
• recruiter instructions, and background check vendor instructions to make sure no salary-history inquiries or screening is conducted.
• Review employment applications and templates and remove any fields that could be perceived as asking about salary/benefits (unless you are a multi-state employer, then you are permitted to add a disclosure that states New Jersey applicants may leave this field blank).

To ensure compliance with the Equal Pay Act: 

• Conduct an internal wage and hour audit to ensure pay is fair across all employees and protected classes. Document if any disparity is “reasonable” and a “business necessity” according to the factors listed above.
• Review existing pay practices and policies to ensure that employees are receiving equal pay for performing “substantially similar work.”
• If unreasonable disparities are identified, increase the pay of the lower-paid worker.
• Review job descriptions and update Employee Handbook if needed.
• Inform hiring managers and HR professionals about the Act requirements.
• Post applicable labor law poster in public area.

More Salary Resources

• Make Setting Salaries Easier With These 5 Steps
• Setting Employee Pay
• New Jersey’s Minimum Wage Set to Increase to $15 an Hour
• Establishing a Pay or Salary Raise Budget for Your Business
• Conducting an Internal Wage and Hour Audit
• DOL Announces Final Overtime Rules for 2020

Once your candidates are hired and salaries are set, turn to Abacus Payroll, Inc. for smooth, efficient pay periods. Fill out the sidebar form or give us a call at (856)667-6225 for a no-obligation quote!