by Berna L. Rhodes-Ford
On January 29, 2009, President Obama signed the Lilly Ledbetter Fair Pay Act of 2009 into law. This law reverses the United States Supreme Court’s holding in Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007). Specifically, the Act changes the way the statute of limitations is calculated for discrimination claims. Individuals who allege they have been discriminated against with regard to pay can now bring their claims within 180 days of their last discriminatory paycheck instead of 180 days from when they were first paid in a discriminatory manner.
Supreme Court Decision
Lilly Ledbetter worked for Goodyear from 1979 until November 1998. However, it was not until March 1998 that she submitted a questionnaire to the Equal Employment Opportunity Commission (EEOC) alleging certain acts of gender discrimination and July 1998 when she filed a formal charge of discrimination. Ledbetter alleged that during the course of her employment, several supervisors had given her poor evaluations because of her gender and that, as a result, she had not received the same merit increases she would have received if she had been evaluated properly. Ledbetter further argued that these past decisions continued to affect her pay throughout her employment because her pay was significantly less than her male counterparts by the end of her career with Goodyear. Ledbetter argued that the paychecks that she received during her employment each violated Title VII and triggered a new EEOC charging period.
On May 29, 2007, the Supreme Court ruled against Ledbetter finding that her arguments failed because they would require the Court to jettison the defining element of the disparate-treatment claim on which her Title VII recovery was based, discriminatory intent. The court determined that the EEOC charging period is triggered when a discrete unlawful practice takes place, holding that the statute of limitations for filing a charge of discrimination with the EEOC starts to run from the time an employment decision is made and communicated to the employee, rather than each time an employee receives a paycheck. The Supreme Court reasoned that a new violation does not occur, and a new charging period does not commence, upon the occurrence of subsequent nondiscriminatory acts that entail adverse effects resulting from the past discrimination. Rather, the Court explained, a fresh violation takes place when each act is committed only if an employer engages in a series of separately actionable intentionally discriminatory acts. Because Ledbetter did not set forth facts establishing that intentionally discriminatory conduct occurred during the charging period nor that discriminatory decisions occurring before that period were not communicated to her, the Court determined that the current effects of such discrimination cannot breathe life into prior, uncharged discrimination.
New Law
The Lilly Ledbetter Act reverses the Supreme Court Rule and clarifies that a discriminatory compensation decision or other practice that is unlawful occurs each time compensation is paid pursuant to the discriminatory compensation decision or other practice. The Act applies to unlawful conduct under Title VII, the Age Discrimination in Employment Act and the Americans with Disabilities Act.
Each of the discrimination statutes was amended to define an unlawful employment practice with respect to discrimination in compensation as one that occurs when
(i) a discriminatory compensation decision or other practice is adopted,
(ii) when an individual becomes subject to a discriminatory compensation decision or other practice, or
(iii) 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.
The Act was made retroactive to cover all claims of discrimination pending on or after May 28, 2007.
Practical Application
Although this Act was promulgated as a result of pay disparities in a gender discrimination context, the Act extends to other forms of discrimination, including age, race, national origin and disability discrimination.
In effect, the statute of limitations has been extended for discrimination claims involving compensation. Employers will need to be mindful of this Act each time it issues raises, demotions, transfers, disciplinary actions, performance evaluations or other tools that affect the employee’s current or future compensation. In other words, this Act means that where a causal link can be established between the decision and the employee’s last pay check, any of these decisions could be challenged ten, twenty or even thirty years from date of the decision.
The practical effects and considerations of this new Act are startling. For example, in twenty years, it is probable that the decision maker will not remember the rationale for her decisions if she is even still employed by the company. There might also be situations in which the decision maker has become adverse to the employer or is not alive. Further, locating the underlying documents/memory that supports the basis for the decision will be an extreme challenge. All of these potential scenarios requires the implementation or use of methods – and quite possible, a combination of various methods – to assist the employer if it is sued years after a decision is made.
1. Audits: An employer might consider conducting a statistical audit of its compensation to determine whether a particular group is disparately impacted. Audits will provide a broad picture, but will not provide sufficient detail on a person-by-person basis. In addition, audits are time consuming and costly. Therefore, while an audit is a good starting point to determine whether there are any significant problems, it would likely be done on an infrequent basis (perhaps every 2-5 years) and would need to be combined with another process to have maximum impact.
2. Mandatory Employee Responses: Requiring employees to provide feedback on a regular basis about the decisions that effected their compensation during the course of a set period (e.g., semi-annually or yearly) could be used as later support for the fact that the employer’s decision was not discriminatory. A downside to this method is that it could create an issue in the minds of the employees where one did not previously exist. However, this method can be successful if it is prepared with precision and introduced in a positive light to employees.
3. Forms: The use of forms is an easy way to ensure consistency throughout the organization. Questions can be added to existing forms or new questionnaires can be created for specific situations. For example, after an employee receives an evaluation, a question could be added to the evaluation that asks a series of questions about whether the employee believes the comments or ratings in the evaluation were based upon a protected classification.
4. Pay Scales: The implementation of pay scales or objective measurements regarding compensation could be extremely beneficial in minimizing arguments related to discriminatory intent. Further, the approach would require that justification be made if any employee fell below or above the normal range. The downside to such an approach is that it is not as easy to compensate merit.
5. Internal Complaint System: Employers should be careful to review employee handbooks and postings on a regular basis to ensure that they are compliant with the law and that they contain clear instructions regarding the complaint procedure. In addition, employers should offer training to all new employees and to existing employees on a regular basis.
6. Document Retention: A review of the company’s document retention and preservation policies will need to be conducted to ensure that the company is able to respond and defend itself when complaints are raised years into the future.
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