New Jersey Legislature Postpones Vote to Override Pay Equity Veto

By Jessica Burt

On Monday, December 19, 2016, the New Jersey State Legislature postponed its vote to override the Governor’s veto of Senate Bill No. 992, also known as the New Jersey Pay Equity Act.  The Act was passed earlier this year by both the New Jersey Senate and Assembly, but vetoed by Governor Christie.

The Act provides that it will be an unlawful employment practice, or unlawful discrimination, for any employer to pay any of its employees at a rate of compensation, including benefits, which is less than the rate paid to employees of the other sex for substantially similar work.  An employer may pay a different rate of compensation only if the employer demonstrates that the differential is made pursuant to a seniority system, a merit system, or the employer demonstrates:

  1. That the differential is based on one or more legitimate, bona fide factors other than sex, such as training, education or experience, or the quantity or quality of production;
  2. That the factor or factors do not perpetuate a sex-based differential in compensation;
  3. That each of the factors is applied reasonably;
  4. That one or more of the factors account for the entire wage differential; and
  5. That the factors are job-related with respect to the position in question and based on a legitimate business necessity. A factor based on business necessity does not apply if it is demonstrated that there are alternative business practices that would serve the same business purpose without producing the wage differential.

See S. 992, 217th Leg. (NJ 2016).

Governor Christie vetoed the bill on May 2, 2016, stating that the remedial measures called for were too broad.  He recommended that the bill mirror the provisions of the Lilly Ledbetter Act to limit back pay to two years.  The bill also contained language that would allow for treble damages.  Christie recommended that the bill be amended to remove that provision “to remain consistent with well-settled State and federal law.”

In addition, Christie stated that the bill, in its current form, would eliminate any consideration of whether employees’ work was equal and whether they undergo similar working conditions.  He called this “nonsensical” and stated that it would make New Jersey “very business unfriendly.”  Christie also asked legislators to remove a provision that would have required employers that contract with the State to regularly report on their demographics and the pay of each employee involved in a contract.  Christie referred to that provision as “outrageous bureaucratic red tape creation.”  Links to the pay equity bill and the Governor’s statement regarding his action on the bill are available at: S-992; Governor’s Statement re S-992.

In New Jersey, a vetoed bill may still become law if the Legislature overrides the veto by a 2/3 vote.  The override vote was scheduled for Monday, December 19, 2016, but was ultimately postponed as state lawmakers discussed possible alternatives or compromise.  We will continue to provide updates regarding the status of New Jersey’s Pay Equity Act as they become available.

Here’s What that New Philadelphia ‘Pay History’ Law Means for Your Business

David Woolf wrote an article for the Philadelphia Business Journal titled, “Here’s what that new Philadelphia ‘pay history’ law means for your business.” Philadelphia will likely become the first city in the nation to ban employers and employment agencies from asking job applicants for their salary history or requiring disclosure of such information. The Philadelphia City Council unanimously approved the bill on December 8; if enacted as expected, the new law will go into effect 120 days after the Mayor signs it. David discusses what this new bill means for local businesses.

Dave notes that the ordinance would also make it unlawful for an employer to base their compensation offer on an applicant’s prior salary unless the applicant knowingly and willingly discloses their salary history to the employer. The new law is meant to lessen the wage gap earnings between white males and women and minorities, but has been met with some controversy. The Philadelphia Chamber of Commerce has openly opposed the bill, stating that the legislation “goes too far in dictating how employers can interact with potential hires.”

Though Philadelphia has previously enacted legislation prohibiting or limiting certain questions that it considers “out of bounds,” this restriction is arguably different in that employers regularly use salary information in the hiring process. Dave highlights that while the inquiries may have unintended consequences, they can also add value, such as gauging an applicant’s assertions regarding their level of authority and responsibility in their current position, their advancement history and potential for future advancement, and a general sense of the applicant’s market value.

Dave advises employers to notify and train those involved in the hiring process of the anticipated ordinance, update their job application materials as needed and develop additional tools to still to get at the information needed. He also advises employers to look as the issue of pay equity more broadly.

Read “Here’s what that new Philadelphia ‘pay history’ law means for your business.”

Resolving Split, Second Circuit Denies FLSA-NYLL Liquidated Damages Double Recovery

By William R. Horwitz

Last week, the U.S. Court of Appeals for the Second Circuit resolved a split among the four New York district courts regarding whether a plaintiff can recover cumulative liquidated damages awards under both the Fair Labor Standards Act (federal law) and the New York Labor Law (state law) for the same wage and hour violation.  In Chowdhury v. Hamza Express Food Corp., 2016 WL 7131854 (2d Cir. Dec. 7, 2016), the Court held that a plaintiff cannot receive double recovery.  The decision will have a significant practical impact on wage and hour litigation.

The Facts

In Chowdhury, the plaintiff, a deli worker, filed a lawsuit against his employer for, among other things, allegedly failing to pay him for overtime work in violation of the Fair Labor Standards Act (“FLSA”) and the New York Labor Law (“NYLL”).  During the litigation, the employer repeatedly failed to comply with the district court’s orders, prompting the court to strike the Answer, enter default judgment against the employer, and proceed to an evidentiary hearing to calculate the plaintiff’s damages award.  After the hearing, the court awarded plaintiff $42,997.50 ($21,498.75 for unpaid overtime wages and $21,498.75 for liquidated damages).  Plaintiff appealed, arguing that he was entitled to an additional $21,298.75 in liquidated damages, because he was entitled to recover liquidated damages under both the FLSA and the NYLL.

The Law

Under both the FLSA and the NYLL, non-exempt (hourly) employees are generally entitled to receive pay at the rate of time-and-a-half for each hour they work over 40 hours in a week.  A plaintiff who succeeds on a claim under either statute typically recovers compensatory damages (unpaid wages) and reasonable attorneys’ fees and costs.

Under the FLSA and the NYLL, a successful plaintiff may also recover liquidated damages.  Specifically, the FLSA entitles a successful plaintiff to liquidated damages in an amount equal to 100% of unpaid wages, unless the employer demonstrates “that the act or omission giving rise to such action was in good faith” and that the employer “had reasonable grounds for believing that [such] act or omission was not a violation of the [FLSA].”  29 U.S.C. § 260.  Similarly, the NYLL entitles a successful plaintiff to liquidated damages in an amount equal to 100% of unpaid wages, “unless the employer proves a good faith basis to believe that its underpayment of wages was in compliance with the law.”  N.Y. Lab. Law § 198.

The Decision

In Chowdhury, the Second Circuit observed that “[t]he NYLL is silent as to whether it provides for liquidated damages in cases where liquidated damages are also awarded under the FLSA.”  The Court considered the fact that permitting cumulative liquidated damages under the FLSA and the NYLL would permit an award of “200 percent in liquidated damages in addition to any underlying wage liability.”  The Court reasoned that, “[h]ad the New York State legislature intended to provide a cumulative liquidated damages award under the NYLL, … it would have done so explicitly in view of the fact that double recovery is generally disfavored where another source of damages already remedies the same injury for the same purpose.”

The Court explained that the legislative history of the NYLL supports this reasoning.  According to the Court, the legislature recently amended the statute twice (in 2009 and 2010) to align it with the FLSA.  Now, the liquidated damages provisions of the FLSA and NYLL are “identical in all material respects, serve the same functions, and redress the same injuries.”  As a result, absent any indication to the contrary, the Court held that it interprets the NYLL’s liquidated damages provision “as satisfied by a similar award of liquidated damages under the federal statute.”

The Court affirmed the district court’s liquidated damages award.

Conclusion

Under both the FLSA and the NYLL, liquidated damages awards can substantially increase a plaintiff’s recovery.  However, the Chowdhury decision definitively limits an employer’s exposure, clarifying that liquidated damages should equal 100% – not 200% – of unpaid wages.  The difference is large in a single plaintiff case, and may be staggering in a case involving multiple plaintiffs or, even worse, a hybrid class and collective action.  Also, by resolving this unsettled question, the Chowdhury decision enables parties to calculate potential damages and exposure more accurately, which should help them make better settlement and strategy decisions.

Recent Scrutiny of Non-Competes

Larry Del Rossi published an article for Today’s General Counsel titled, “Recent Scrutiny of Non-Competes.” Larry provides an overview of non-compete agreements (also known as restrictive covenants) and discusses a recent uptick in government activity that may regulate or challenge private businesses’ use and enforcement of non-competes.

Larry says “one major challenge for national companies is that enforcement of non-competes varies from state to state, so that there is no uniform standard.” In May 2016 the White House issued “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses,” a document intended to identify areas where implementation and enforcement of non-competes may present issues, put forward a set of best practices, and serve as a call to action for state reform.

Larry advises companies to consider whether all employees within the company should have non-competes, evaluate the scope and structure of their agreements, and document the business rationale for requiring employees (including at-will employees) to sign any non-compete.

Read “The Recent Scrutiny of Non-Competes.”

Read Larry’s previous post, “What Employers Need to Know about the Government’s Recent Scrutiny of Non-Competes.”