Client Updates

Paid Sick Leave

New Jersey has become the 10th state to adopt mandatory paid sick leave. It goes into effect on October 29, 2018. The state sick leave law overrules all municipal ordinances, which will have no force and effect after October 29th. Employers who already have a leave policy in place (including those based on a municipal ordinance) are free to continue to use that policy so long as it is at least as generous as what is required by the state. They should, however, be sure to comply with the state’s notice requirements.

Applicability

All New Jersey employers, regardless of size, must provide employees with paid sick leave. The only employees exempt from the law are construction workers subject to a collective bargaining agreement, per diem healthcare workers, and those employed by a public agency who receive sick leave through another program.

Accrual and Carryover

All employees, whether temporary, part-time, full-time, salaried, hourly, or paid on commission, must accrue one hour of sick leave for every 30 hours worked. Employers may cap an employee’s sick leave accrual and use at 40 hours per benefit year.

The employer and employee may mutually agree to a payout in the final month of the benefit year of 50% or 100% of the employee’s unused sick time. If unused time is paid out in full, carryover is not required. If 50% is paid out, the remaining 50% will carry over. If the employee does not want to be paid out, or the employer chooses not to offer this option, all unused time up to 40 hours will carry over.

Employers may grant sick leave up front in a lump sum. When using the lump sum method, employers may either pay employees for unused sick leave at the end of the calendar year or allow carryover. With lump sum plans, whether to pay out or allow carryover is the employer’s choice – the agreement of the employee is not required. In no case will time be forfeit, unless it is in excess of the carryover limit of 40 hours.

Usage

Employees are eligible to use leave on their 120th day of employment. Sick time may be used for the following:

• Diagnosis, care, treatment of, or recovery from an employee’s mental or physical illness, injury, or health condition, or for preventive health care;
• Diagnosis, care, treatment of, or recovery from a family member’s mental or physical illness, injury, or health condition, or for preventive health care;
• In the case of certain public health emergencies;
• When time off is needed because the employee or a member of their family is a victim of domestic or sexual violence;
• To attend a school-related conference or meeting.

Employers may set increments of use (e.g., one hour or four hours) but may not require an employee to use more time than they were scheduled to work during the shift they are missing. Employees may not be required to find their own replacement for a missed shift.

Employers may require reasonable documentation, such as a doctor’s note, if the employee uses sick leave for sickness or injury for three or more consecutive days.

If the need for leave is foreseeable, employers may require up to seven days’ notice.

Pay Out

When sick leave is used, it must be paid at the employee’s regular rate of pay, but not less than the applicable minimum wage. Unused sick leave does not need to be paid out at the end of employment. Employees rehired within six months must be credited with their previously accrued and unused paid sick leave and allowed to use it immediately.

Notice to Employees

Employers must post a notice that will be produced by the Commissioner of Labor and Workforce Development, as well as provide that notice to each employee individually, no later than 30 days after the notice is made public. Employees hired after this time should be given the notice upon hire.

Action Items

Employers should create and implement a compliant sick leave policy by October 29. They should also watch for the Commissioner’s notice and distribute it to employees as required. The Department of Labor and Workforce Development will likely release rules or FAQs prior to October that will assist employers in better understanding the law, but in the meantime additional information can be found on the HR Support Center.

Equal Pay Act

Effective July 1, 2018, New Jersey will have one of the strongest pay equity laws in the nation. The state joins Oregon in passing a law based not just on gender, but on all the protected classes recognized by the state. New Jersey protects employees from discrimination based on the following:

• Race
• Creed (religion)
• Color
• National origin
• Nationality
• Ancestry
• Age
• Marital status
• Civil union status
• Domestic partnership status
• Affectional or sexual orientation
• Genetic information
• Pregnancy or breastfeeding
• Sex
• Gender identity or expression
• Disability or atypical hereditary cellular or blood trait
• Liability for service in the Armed Forces
• Refusal to submit to or make the results of a genetic test available to an employer

The law makes it illegal to pay employees in a protected class less than those who are not when they do substantially similar work. To determine if work is substantially similar, employers should consider the skill, effort, and responsibility required.

Acceptable Reasons for a Pay Differential

An employer may pay a different rate of compensation only if it can show the following:

1. That the differential is based on one or more legitimate, bona fide factors other than the characteristics of members of the protected class, such as training, education or experience, or the quantity or quality of production;
2. That the factor or factors are not based on, and do not perpetuate, a differential in compensation based on sex or any other characteristic of members of a protected class (prior salary history would perpetuate unfair pay differentials, so should not be used);
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 will not apply if it is demonstrated that there are alternative business practices that would serve the same business purpose without producing the wage differential.

Comparisons of wage rates will be based on all of an employer’s operations or facilities. It is likely that pay differentials based on cost of living (e.g., Long Branch v. Salem) will be acceptable, but claiming a pay differential is based on location when the cost of living is similar is unlikely to pass muster.

Discussion of Wages Must be Allowed

The law also prohibits employers from having policies that bar employees from discussing their wages, benefits, titles, and duties with other employees or former employees, attorneys, or government agencies. Likewise, employers may not retaliate against any employee for those discussions. Although non-supervisory employees’ right to discuss their wages are protected federally by Section 7 of the National Labor Relations Act, those protections only kick in if two or more employees are acting together to improve their wages or working conditions. In contrast, the New Jersey law applies to all employees and does not require any group action for protection.

Action Items

• Conduct a self-evaluation. Assess your overall pay structure, pay bands for job groups, and individual wages. Focus on whether differences in pay can be fully and reasonably explained by the factors allowed by the law. Adjust pay as needed. Be aware that you cannot lower the compensation of one or more employees to equalize pay.
• Remove any policies related to pay secrecy from handbooks, confidentiality policies, and offer letters, and ensure that those with the authority to discipline are aware of the protections provided by the law.
• Train anyone involved in the interview process to steer clear of salary history questions, as these will almost invariably affect the offer made to a candidate but will not be considered an acceptable reason for a pay differential. Likewise, remove questions about salary history from your applications forms and interview process.

Click here for NJ State Wage and Hour Laws and Regulations

Please contact your Payroll Specialist if you have additional questions. Not a client yet? Request a quote today!