New Jersey Case Is a Reminder of The Importance of Regular Pay Audits

Employers in New Jersey should take note of a recent state superior court appellate division ruling that expanded the scope of an employee’s wage discrimination claim under the Diane B. Allen Equal Pay Act, including allowing discovery of pay data across all the employer’s US offices. While the court’s ruling is technical in nature, the case is a good reminder that employers should conduct comprehensive compensation audits and promptly correct any unexplained pay disparities.

A New Jersey court has ruled that a former law firm partner can sue for back pay and damages going back two years, despite filing her lawsuit a year and a half after New Jersey’s pay equity act became law. Sherri Affrunti filed the lawsuit in December 2020, alleging that her employer violated New Jersey equal pay and gender anti-discrimination laws.

Affrunti’s case alleges that her pay was affected from the time she was hired in 2002, including being passed over for a promotion to nonequity partner when she became eligible. Even after becoming a nonequity partner, Affrunti alleges she received minimal bonuses and pay raises compared to her male colleagues. Additionally, she claims her salary was also retroactively reduced by $50,000 in 2017.

The law at issue is New Jersey’s Diane B. Allen Equal Pay Act (the Allen Act), which went into effect July 1, 2018. The Allen Act amended the New Jersey Law Against Discrimination (LAD), prohibiting employers from paying employees in a protected class less than those not in the class for substantially similar work. While the Allen Act expanded the LAD to cover unequal pay and extended the statute of limitations for filing a claim from two years to six years, it did not state that it could be applied retroactively. Because of this, the law firm argued that the lookback period for Affrunti’s claims should be only the few months between when the Allen Act went into effect and when she left the firm. Affrunti argued that she should be able to sue for damages related to the six years of compensation that would be covered by the Allen Act’s statute of limitations.

In its ruling, the New Jersey Superior Court Appellate Division noted that while plaintiffs generally can’t bring a lawsuit based on something that occurred before the effective date of a new law, the alleged unlawful conduct occurred for months after the law went into effect, and the law firm was aware of the law’s approaching effective date and could have adjusted Affrunti’s salary prior to that date. The two years of backpay that Affrunti is being allowed to seek is the timeframe for recovery of damages under the LAD standard, not the full six years under the Allen Act.

In addition to allowing Affrunti to seek two years of back pay, the court ruled that she is allowed to obtain data on pay for the other non-equity partners across the country, going back to the date she became a non-equity partner in 2006. This reversal substantially increases the amount of data that the law firm must make available to Affrunti, giving her the opportunity to gather more evidence to support her claim of pay discrimination, and significantly increasing the cost to the employer of mounting a defense to the lawsuit.

This ruling is significant for employers nationwide as it highlights the continued importance of self-audits to ensure pay equity. Specifically for employers with employees in New Jersey, they should consider performing retrospective audits to review employee compensation for compliance with the Allen Act and other federal and state laws that prohibit wage discrimination based on sex or other protected traits.