Court Rules Diane B. Allen Equal Pay Act Not Retroactive

Court Rules Diane B. Allen Equal Pay Act Not Retroactive

New Jersey’s Diane B. Allen Equal Pay Act does not apply retroactively to conduct that occurred prior to the Act’s effective date, according to a recent decision by U.S. District Judge William Martini of the District of New Jersey. In Perrotto v. Morgan Advanced Materials, 2:18-cv-13825-WJM-MF, Judge Martini dismissed the equal pay claims raised by a female worker who was terminated nearly three months before the law took effect.

Diane B. Allen Equal Pay Act

As discussed in greater detail in prior articles, the Diane B. Allen Equal Pay Act (Equal Pay Act or Allen Act) amended the New Jersey Law Against Discrimination (LAD), N.J.S.A. 10:5-12, et seq., to specifically target pay disparity. The Allen Act makes it illegal for employers to pay a member of a protected class less than a member of a non-protected class when both are doing “substantially similar work, when viewed as a composite of skill, effort and responsibility.” More simply stated, an employer must pay a female employee the same as a male employee when both employees are performing roughly the same work and have similar skills and duties.

Violations of the Allen Act can be extremely costly for New Jersey employers. To start, the LAD’s two-year statute of limitations resets each time an employee is paid at the discriminatory rate. In addition, employees can recover up to six year of back pay. Once damages are calculated, the court “must” treble them, which means if the jury awards $2 million, the judge must multiply that amount times three to $6 million.

New Jersey Employment Lawsuit

The Equal Pay Act took effect on July 1, 2018. On July 27, 2018, Plaintiff Darla Perrotto filed suit in state court alleging employment gender discrimination and retaliation against Morgan Advanced Materials, PLC; Morgan Advanced Ceramics, Inc., a/k/a Morgan Technical Ceramics; and Gerard T. McConvery (collectively, the “Defendants”). On or about June 24, 2013, until her termination on April 5, 2018, Perrotto worked “in the capacity of Controller/Human Resources” at Morgan Advanced Materials, PLC and Morgan Advanced Ceramics, Inc.’s (Morgan) Fairfield, New Jersey, office.

Perrotto’s employment suit alleges the Defendants engaged in gender-based discrimination and retaliatory compensation practices under the Allen Act. Specifically, she maintains that they “pa[id] a rate of compensation, including benefits, to male employees which is [more] than the rate paid to female employees for substantially similar work,” and retaliated against her for engaging in protected activities.

The Defendants terminated Perrotto’s employment before the Equal Pay Act became law. In addition, all of Perrotto’s complained-of conduct occurred prior to statute’s effective date of July 1, 2018. In support of her claims, Perrotto maintains that the New Jersey Legislature intended the Equal pay Act to operate retroactively. Meanwhile, the Defendants argue that there is no basis to apply the law retroactively.

Legal Background Regarding Retroactive Application of NJ Statutes

Under New Jersey Law, prospective rather than retroactive application of new legislation is favored. Under Johnson v. Roselle EZ Quick LLC, 143 A.3d 254 (NJ 2016), a party can overcome the strong presumption against retroactivity through showing (1) the Legislature intended the statute to apply retroactively and (2) that such application would neither unconstitutionally hinder a party’s vested rights or cause manifest injustice. In addition, there are three circumstances that support applying a statute retroactively: “(1) when the Legislature expresses its intent that the law applies retroactively, either expressly or implicitly; (2) when an amendment is curative; or (3) when the expectations of the parties so warrant.”

Court Denies Retroactive Application of Equal Pay Act

Judge Martini sided with the defendants in concluding the Equal Pay Act should not be applied retroactively. Judge Martini first found that there was no express or implied indication that the Legislature intended for the Equal Pay Act to apply retroactively. In support of his conclusion, Judge Martini noted that its effective date was postponed. “This delayed enactment shows the Legislature intended NJEPA to have prospective application only,” he wrote.

Judge Martini next determined that retroactive application would not be curative. “Retroactive application would not be curative here because this is a ‘first of its kind’ statute addressing pay equity for performing ‘substantially similar work,’” Judge Martini wrote. “Contrary to carrying out or simply explaining [the Law Against Discrimination]’s original intent, NJEPA introduced expanded employee protections.”

Finally, Judge Martini concluded that the reasonable expectations of the parties fails to support retroactive application. “With three months between the complained-of conduct and when NJEPA became law, the Court sees no basis to support how the parties’ reasonable expectations warrants invoking retroactivity.” 

Key Takeaway for NJ Employers

The court’s decision in Perrotto v. Morgan Advanced Materials is good news for New Jersey employers. Nonetheless, the Equal Pay Act still remains a significant source of potential liability. If you haven’t done so already, employers must proactively examine their compensation structures, audit disparities between similarly-situated employees doing similar work, and evaluate whether the disparities can be ameliorated through alternative business practices or are otherwise justified under the Allen Act.

If you have any questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Scott V. Heck, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.