On July 10, 2019, Governor Andrew Cuomo signed legislation extending New York’s Equal Pay Act. Before, the law only prohibited pay disparity between men and women. Now it will apply to a broad array of personal characteristics, including age, race, sexual orientation, and others. In addition, the standard for proving pay discrimination will be lower. Overall, this will result in more successful pay disparity claims if employers do not review and adjust their compensation practices.
The amendments will take effect on October 8, 2019. The New York Equal Pay Act does not apply to government entities.
This legislation accompanied a new law prohibiting employers from inquiring about applicants’ current or past compensation. Those restrictions cover all New York employers, including the government.
Find out more: New York Imposes Salary History Ban
Current New York Equal Pay Act
Since 1966, New York has expressly prohibited pay discrimination between men and women. The protection applied only for “equal work” requiring “equal skill, effort and responsibility” under “similar working conditions.”
Exceptions could apply for pay differences because of a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or a “bona fide factor other than sex.” Such bona fide factors include education, training, or experience.
Until now, the New York Equal Pay Act closely followed a similar federal law.
Inclusion of Additional Protected Characteristics
The first significant expansion of the New York equal pay law is the addition of many more protected characteristics beyond sex.
The law now applies to all of these categories:
- age
- race
- creed
- color
- national origin
- sexual orientation
- gender identity or expression
- military status
- sex
- disability
- predisposing genetic characteristics
- familial status
- marital status
- domestic violence victim status
The New York Human Rights Law already separately prohibits employers from discriminating based on these characteristics. Those provisions would likely cover claims of pay discrimination. However, the Equal Pay Act affords employees additional penalties and procedural protections.
Lower Bar for Equal Pay Violations
Employees will no longer need to prove that they were performing equal work as the comparison employee receiving higher compensation.
The equal pay law will now apply even in cases of “substantially similar work.” This will depend on “a composite of skill, effort, and responsibility.”
The “substantially similar” standard will make it easier for employees to prove a violation. Thus, it requires employers to review their pay practices to ensure ongoing compliance. This may prove to be a challenge since there is no specific guidance on what types of work are “substantially similar.”
Exceptions still apply for seniority, merit, and production compensation systems, as well as bona fide business distinctions. However, such systems may not yield a disparate negative impact on any protected category of employees if an alternative system without the same disparity exists.
Severe Penalties
In 2016, New York amended the equal pay law to allow employees to recover up to 4 times the pay differential. Claims can go back up to 6 years. Class action lawsuits are possible. Successful plaintiffs also recover their attorneys’ fees.
All of this could mean considerable liability for employers who lose cases under the New York Equal Pay Act.
What Should Employers Do?
These amendments to the New York Equal Pay Act give employers a lot to think about. You should seriously consider a review of your company’s compensation systems before the law takes effect in October.
Even employers who feel confident that they are not discriminating are at risk. The considerable expansion of protected characteristics and the lower “substantially similar” threshold allow many more employees to attempt an equal pay claim. These cases will require complex analyses of many factors, such as education level, work experience, and job duties. This will be costly for employers in itself. Plus the financial impact of losing the case could be devastating.
Employers might go a long way in preventing or creating a strong defense to such claims just by conducting a compensation review with the new equal pay requirements in mind. Plus you might discover some discrepancies that warrant pay adjustments.
For more information on these and related legal developments, watch our recorded webinar on recent New York Employment Discrimination Amendments.