At KSB Law’s last Lunch & Learn, Conducting Pay Equity Audits and Equal Pay Investigations, we discussed how employers can proactively assess pay equity and respond to equal pay concerns while minimizing legal risk. We discussed applicable federal, state, and local laws, contrasted audits versus investigations, and offered guidance on data analysis, remediation, and preserving attorney‑client privilege.
If you were not able to attend, here are some key takeaways and quick practice tips that were discussed:
10 Practice Tips for Employers: Conducting Pay Equity Audits and Equal Pay Investigations
- Pay equity laws apply broadly and are expanding. In New Jersey, nearly all employers are covered, and pay equity protections extend across all protected characteristics—not just sex—under the Diane B. Allen Equal Pay Act.
- “Substantially similar work” focuses on actual job duties, not titles. Employers must evaluate skill, effort, and responsibility as a composite, and minor differences will not defeat comparability.
- Permissible pay differences must be fully justified. Any differential must be explained entirely by bona fide factors such as seniority, merit, or legitimate job-related criteria that do not perpetuate discrimination.
- Pay equity exposure can be significant. Employees may recover up to six years of back pay, and prevailing plaintiffs may be entitled to treble damages, attorneys’ fees, and punitive damages, making early compliance critical.
- Pay transparency and salary history bans change the risk landscape. New Jersey now requires wage ranges in job postings and prohibits reliance on prior salary history, increasing the importance of defensible pay structures.
- Proactive audits and reactive investigations serve different purposes. Audits are voluntary and forward‑looking, while investigations are triggered by complaints or enforcement actions and carry heightened legal and reputational risk.
- Careful scoping and job grouping are essential. Employees should be grouped based on substantially similar work, with documented rationale for comparator selections and consideration of lawful geographic or market differences.
- Data analysis must be both accurate and defensible. Employers should validate compensation and HR data, assess legitimate factors like tenure and performance, and avoid overly broad or narrow comparisons.
- Privilege is not automatic and varies by jurisdiction. Structuring audits through counsel, limiting distribution, and separating legal analysis from business records are key to preserving attorney-client privilege and work product protections.
- Remediation should be strategic and forward-looking. Address disparities without admissions of liability, align fixes with compensation philosophy and budget, and implement training and ongoing monitoring to prevent recurrence.
This summary is for informational purposes only and is not intended to constitute legal advice. This information should not be reused without permission.