Equal pay dispute: Out-of-state remote employee wins first round in court

Scoring a significant preliminary victory, an out-of-state remote employee who lives and works in New Hampshire will be allowed to pursue pay discrimination claims based on the law of New Jersey, where the company is headquartered.

Here’s what happened:

In March 2022, an employee sued her employer under federal and New Jersey law, alleging she received lower pay than some of her male colleagues.

The employer filed a motion to dismiss the state law claims on the grounds that the woman, a remote employee, did not live or work in New Jersey.

To support the motion to dismiss, the employer pointed out that:

• The employee was a resident of New Hampshire.
• The employee worked only in New Hampshire during the relevant time period.
• The employee’s only connection to the state of New Jersey was that the company was headquartered in the state.

Under these circumstances, the company argued that the New Jersey Law Against Discrimination did not apply.

Does state law protect out-of-state remote employee?

First things first: This dispute wasn’t about pay equity – yet.  

At this early stage in the proceedings, the issue was whether protections provided under the state’s anti-discrimination law extended to an employee who works for a New Jersey company from an out-of-state location.

Because the state supreme court has not “issued a controlling decision” on the matter, a federal court in New Jersey looked at existing case law to “predict how the Supreme Court of New Jersey” would rule in the case.  

In Calabotta v. Philbro Animal Health Corp., a “non-New Jersey resident sued his New Jersey-based former employer” to allege a promotion denial and termination amounted to a violation of the state anti-discrimination law. The man, who lived and worked in Illinois, said he was denied a promotion and later fired because his wife had terminal cancer. He said this amounted to associational discrimination.

However, a New Jersey court sided with the employer and dismissed the case.

The case reached a state appeals court in 2019. It found the state law protections could extend to an out-of-state employee who worked for a New Jersey employer. Examining the language in the statute, the court pointed out that the law:

• Says it protects “all persons,” and
• Does not define a “person” specifically as a New Jersey resident.

Thus, the appeals court vacated the lower court’s ruling in the employer’s favor and remanded the case.

This court also looked at a 2022 case with similar facts. In Halliday v. Bioreference Laboratories, Inc., an employee who lived and worked in Texas filed a New Jersey state whistleblower claim against her employer, which was headquartered in New Jersey. Her suit alleged she was fired in retaliation for speaking out about the company’s operations at a Houston lab, which allegedly violated federal safety and health regulations.

The employer filed a motion for judgment, and a state court granted it. However, a state appeals court vacated that ruling and revived the claim, concluding that a state employment law could reach outside the state.

What it all means

Explaining that Calabotta and Halliday are analogous to the current case, this New Jersey federal court said it predicted that the state supreme court would hold that the state anti-discrimination law “can apply to the case of a non-New Jersey resident who works for a New Jersey-based company, but remotely outside of New Jersey.”

As such, the court denied the company’s motion for judgment on the basis that the law’s protection didn’t extend to an out-of-state remote employee. It refused to pare the state law claim from the lawsuit.

Now, the case continues to discovery, where the parties will exchange information about the equal pay claim.

Schulman v. Zoetis, Inc., No. 22-1351(MEF)(LDW), 2023 WL 4539476 (D.N.J. 7/14/23).