The Lilly Ledbetter Fair Pay Act: Should Employers Be Nervous?
5/22/2009
Maybe a little. The first Bill President Obama signed into law is known as the Lilly Ledbetter Fair Pay Act (the “Act”). The new statute is intended to overturn the U.S. Supreme Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007). In that case, an employee, Lilly Ledbetter, sued Goodyear for gender discrimination. The basis for the claim was that Ledbetter was paid less than her male co-workers. The jury found Goodyear’s compensation practices were discriminatory, but when the case ended up before the U.S. Supreme Court, the court ruled that Ledbetter’s claim was time barred. This is because the allegedly discriminatory pay decision had occurred far beyond the 180-day period within which an employee must file a charge of discrimination under Title
Congress made the following findings to support the new statute:
The Supreme Court in Ledbetter v. Goodyear Tire & Rubber Co., *** significantly impairs statutory protections against discrimination in compensation that Congress established and that have been bedrock principles of American law for decades. The Ledbetter decision undermines those statutory protections by unduly restricting the time period in which victims of discrimination can challenge and recover for discriminatory compensation decisions or other practices, contrary to the intent of Congress.
The limitation imposed by the Court on the filing of discriminatory compensation claims ignores the reality of wage discrimination and is at odds with the robust application of the civil rights laws that Congress intended.
The Act is significant for several reasons. First, even though Ledbetter sued for gender discrimination under Title
Second, the 180-day limitation on filing a charge is now essentially dead. The amendment, for purposes of Title
For purposes of this section, an unlawful employment practice occurs, with respect to discrimination in compensation in violation of this title, when a discriminatory compensation decision or other practices is adopted, when an individual becomes subject to a discriminatory compensation decision or other practice, or when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice.
Thus, there are at least three occasions in which the 180-day (or 300-day) clock starts running: (1) when the discriminatory decision or practice is first adopted, (2) when the individual becomes subject to that discriminatory decision or practice, and (3) when the individual is affected—the so called “each paycheck” rule.
Third, the Act targets not only discriminatory compensation decisions, but “other practices.” The legislative history is sketchy, and “other practices” will be defined on a case-by-case basis. Employers can anticipate that plaintiff’s lawyers may begin to argue that the Act encompasses all types of employment decisions that arguably affect compensation—for example, promotions and job assignments.
A fourth area of concern is the fact that the House of Representatives rejected an amendment to the Act which would have limited claims to employees. Instead, the Act refers to “individuals.” This leaves open the possibility that non-employees—for example, a retiree, or perhaps the husband of a deceased female employee—who claims to have been affected by a discriminatory pay practice may be able to file a discrimination claim.
Additionally, the Equal Employment Opportunity Commission (“EEOC”) has announced its intention to enhance enforcement against claims of discrimination in compensation. An advisory issued by the EEOC even tells potential charging parties that if they believe there are unexplained differences between their compensation and the pay of coworkers, and if they think this may be because of race, color, religion, sex, national origin, age or disability, they should contact the EEOC for information on filing a charge. Moreover, the U.S. Department of Labor has hired 250 new wage-hour inspectors, which will certainly increase the risk of scrutiny of an employer’s pay practices.
So, should employers be nervous? While other commentators have engaged in a little hyperbole, referring to a “legal tempest,” or “tsunami,” it is nevertheless clear that the EEOC has taken a heightened interest in the area of discrimination in compensation. The Act expands the potential risk, including empowering many new people as possible plaintiffs. Discriminatory pay claims, in many cases, are amenable to class-action status, increasing possible liability geometrically. Additionally, under the “each paycheck” rule, employers will find themselves defending against allegedly discriminatory decisions made decades ago. Like any old claim, there is the risk of loss of documents and witnesses.
What should employers do? Review all practices and policies having to do with compensation. Look at pay, bonus, pension, vacation, sick leave, and severance pay, and try to assure that practices and policies are applied equitably. Evaluate the wisdom of making a statistical analysis of pay practices, including starting pay, raises and promotional pay increases. Train responsible individuals, supervisors, managers, and human resources personnel on the requirements of the Act. Improve documentation relating to compensation decisions and consider maintaining records relating to pay indefinitely. Consider adopting mandatory alternative dispute resolution procedures, such as arbitration.
There is no reason for panic, but the Act changes the legal landscape and over time will certainly result in more litigation relating to compensation.
