Beginning in January, workers in New York will find it much easier to plead and prove claims of wage discrimination. Effective Jan. 19, 2016, New York employers will face greater difficulty in defending against claims of sex discrimination based on unequal pay. The new Achieve Pay Equity law amends Section 194 of the New York Labor Law, the state’s current legislation that prohibits differential in pay on the basis of sex, by expanding the ways in which employees may claim sex-based pay discrimination and limiting the ways in which employers may defend against such claims.

Expansion of the Law and Limitations on Defenses

Under existing NY Labor Law Section 194, an employer may defend against a claim of gender pay discrimination by showing that the disparity in compensation is justified by a merit system, seniority system, a system measuring earnings based on quantity or quality of work, or any “factor other than sex.” A “factor other than sex” has been broadly defined to include virtually any neutral policy or practice used by employers to establish compensation. The new law eliminates that defense by removing the “factor other than sex” language. In its place, employers are required to demonstrate a “bona fide factor such as education, training or experience.” This bona fide factor must be job-related and consistent with business necessity, and the employer bears the burden of proving the existence of this bona fide factor. This modified standard will make it more difficult for employers to justify paying a male employee more than a female employee in the same position, where, for instance, the decision is based on quality of work, which is not necessarily quantifiable, and is often measured by subjective performance reviews.

Even if an employer establishes a defense under the new, more limited standards, an employee may still prevail under the new law if she/he can establish the following: (1) the employer’s practice causes a disparate impact on the basis of sex; (2) an alternative employment practice exists that would serve the same business purpose and not produce a pay differential on the basis of sex; and (3) the employer refused to adopt the alternative practice. In practice, this gives an employee a way to prevail even if a pay disparity is justified, simply by coming up with a purported “alternative” practice.

Pay Comparisons Are Limited to Jobs in Same County (or Smaller Region)

The new law amends the definition of “same establishment” for purposes of comparisons of pay in an equal pay case. The amendments define “same establishment” as the same geographical region, not to exceed a single county. Thus, when determining whether a pay disparity exists, only employees who work for the company within the same county as the plaintiff may be used as comparators.

Restricts Employer Policies on Confidentiality of Individual Compensation

The Achieve Pay Equity law provides employees with the right to inquire about, discuss, or disclose wages. However, employers may establish written policies containing “reasonable workplace and workday limitations on the time, place and manner” in which employees discuss their compensation. One example of a reasonable limitation, described in the new law, is for an employer to establish and distribute a written policy prohibiting an employee from disclosing a co-worker’s pay without the co-worker’s consent. Employers may also prohibit an employee from disseminating other employees’ wage information where, as part of the employee’s job, he or she is granted access to the details pertaining to other employees’ compensation. Of course, employers must be cautious that any such policies do not run afoul of any protections under Section 7 of the National Labor Relations Act, which allows employees to share pay and benefits information as protected concerted activity.

Trebling of Liquidated Damages  

Finally, the law increases the amount of liquidated damages for a willful violation from 100% to 300% of the wages owed.

Employers Should Immediately Engage in Risk Management

Before the Achieve Pay Equity law takes effect, employers should ensure that they have systems in place to document the underlying factors used to determine employee wages. For instance, where employee pay raises are based on performance evaluations, those performance evaluations should be written and retained, as they may later provide a defense as to why employees in the same position are compensated at different rates. Also, employers should retain the resumes and application materials of individuals they hire, as those resumes may later prove helpful in establishing that their compensation decisions were based on bona fide factors, such as education, training, or work experience.   

New York’s new Achieve Pay Equity law will engender significant risks to employers. Please feel free to contact your Davis Wright Tremaine LLP attorney, or one of the authors, to review what steps they can take to ensure compliance with the Achieve Pay Equity law.