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Starting in January, employers will no longer be allowed to ask prospective employees about their current rate of pay. Under the new law and the Diane B. Allen Pay Equity Act, New Jersey now provides some of the strongest wage discrimination protections in the country, according to advocates of both measures.

Acting Gov. Sheila Oliver signed the salary history measure, Assembly Bill 1094, on July 25. Advocates of the law argue that it will help close the wage gap between male and female workers.

“For a very long time, as people pursued moving onto a new job and they went to the interview … and they had all the questions right, often the question comes … what did you make at your last job?” Oliver said at the July bill-signing in Montclair.

“That question is discriminatory … because the person interviewing me that was going to make that personnel decision, will have the ability to create a judgement. ‘Well if she only made $50,000 at her last job, even if the person who had this job before made $60,000, why do we have to pay her or him $60,000 when they made $50,000? So let’s offer $51,000 or $52,000’,” Oliver added.

The pay equity law, which Gov. Phil Murphy signed in April 2018, bars employers from paying women less than their male counterparts and extends the protections to all 15 of the state’s protected classes such as race, ethnicity and sexual orientation. No other state protects as many groups, said Kathie Caminiti, a partner at the management-side law firm Fisher Phillips.

Before the law went into effect, employers could justify paying their female workers less, said Nancy Erika Smith, co-founder and partner at employment law firm Smith Mullin in Montclair.

“For one white man that’s getting more than [one of my clients], they have this excuse, for example, ‘he coaches two teams, not one team’, but another white man who only coaches one team, their excuse is ‘he’s been here longer’,” Smith said.

“When you have six white men getting more than my client, they have to have different reasons for paying all six of them [more],” Smith added. “That will look really suspicious in front of a jury.”

Additionally, the pay equity law has a six-year lookback provision, meaning that the employee can seek back pay for six years if they feel that they had been cheated – and triple the salary amount.

“If somebody starts at a lower wage, they will stay at a lower wage and that’s going to perpetuate discrimination,” Caminiti said. “By comparing pay rates to skills and jobs, irrespective of what their prior [income] history was, helps eliminate discrimination.”

Legitimate salary questions

Employers can still use salary history to determine how much to pay a prospective worker, but only if the applicant voluntarily hands over the information, not at the request or coercion of the employer.

The employer can in turn seek written confirmation that the applicant actually did earn a certain salary.
“You can in negotiations say ‘well your offer is less than I’m making now, or I was about to be promoted and make X’,” Smith explained.

Paula Voos, a labor studies professor at the Rutgers School of Management and Labor Relations, said that the law should help applicants who might, in some cases, be settling for a lower salary.

“At another major recession, someone who had a very high pay, maybe they’re willing to take a lower offer, but the high pay would scare off an employer,” Voos said.

Fines for employers are $1,000 for the first offense, $5,000 for a second offense and $10,000 for any following violation.

If dozens or hundreds of candidates apply for a single job opening, those fines can add up quickly.

Charles Fay, a human resources professor at the Rutgers School of Management and Labor Relations, argued that the inability to ask about pay eliminates one metric to gauge an applicant’s potential qualifications.

“If I have a job that pays $120,000 a year, and I have somebody apply for it who’s making $70,000, there’s a low probability that they’ll be able to do the work. But that doesn’t mean they can’t,” said Fay.
Smith argued that businesses have ample information to gauge how much to pay an applicant without having to ask about their income history.

“There’s a whole complex formula, there’s so many factors. Your education. Years of experience. But mostly what about the job duties, do you have a budget you’re responsible for, how many people report to you, is there travel required,” Smith said.

Changing processes

Business groups were largely neutral on the salary history measure – pushing only for the provision allowing employers to consider an applicant’s current and previous pay if they volunteer that information. Employers will also be allowed to consider the current rate of pay when determining how much of a raise to give to an existing worker.

“Our folks will comply with it, it’s not a big deal,” said Anthony Russo, president of the Commerce and Industry Association of New Jersey. “People will modify their questions and behavior.”

Russo did say he was worried about how the bill would be enforced.

“If somebody comes in for an interview and I don’t say anything [about pay] and I play by the books, can he or she say ‘oh, he asked me salary’?” Russo said.

Likewise with the pay equity bill, New Jersey Business & Industry Association Vice President of Government Affairs Mike Wallace told NJBIZ last year he was concerned that plaintiffs would take advantage of the lookback provision in meritless claims.

Smith argued that the lookback provision is aimed at making up for much more than just lost wages.

“My social security is affected forever, my bonuses are affected forever. All the things I couldn’t do, put my kids through colleges, help my parents pay medical bills, you can’t really fix it,” Smith added.

Fay said employers of blue collar jobs, pink collar service jobs and most retail jobs would not be affected, since those businesses have strict guidelines in their pay schedules.

Rather, the law will face its biggest challenges among white collar, middle and upper level jobs, where “qualifications are not always indicative” of an employee’s potential job performance.

Caminiti said over the next six months, those employers will have to revamp some of their hiring practices to comply with the law.

“Not just paper [applications] but also … electronic job applications. They need to train their managers, as well as whatever recruiters or headhunters they use. They can’t rely on the recruit and headhunter population to know what the law is, it’s the employer burden,” Caminiti said.

Pay should matter much less in the interview process, Caminiti added, saying that “the more you focus on it, the more an employer may be at risk of being accused of pay discrimination.”