On January 29, 2009, President Barack Obama chose the Lilly Ledbetter Fair Pay Act of 2009 ("Ledbetter") as the first piece of legislation to sign into law after assuming office a mere nine days earlier. Ledbetter was no surprise to the electorate as then-candidate Obama endorsed it on the campaign trail. Further highlighting the President's strong support for this piece of legislation was the fact that he signed Ledbetter into law only two days after Congress passed it, thus violating his campaign promise to allow five days of public comment prior to signing any legislation. Ledbetter made the defense of pay discrimination claims even more treacherous than before. However, as explained more fully below, Ledbetter might be simply a bad omen of things to come for employers.
Lilly M. Ledbetter was an area manager for Goodyear Tire & Rubber Company. In fact, she was the only area manager who was a woman. Shortly before her retirement, she discovered that the other area managers, each of whom was male, were earning much more than she. She sued, and a jury found that Goodyear was guilty of pay discrimination in violation of Title VII of the Civil Rights Act of 1964.
However, in a 5-4 decision, the U.S. Supreme Court reversed her win, ruling that she should have filed her suit within 180 days after the date that Goodyear first paid her less than her male counterparts. The narrow majority rejected her argument that each paycheck she received after the discrimination began was a new violation of law.
Ledbetter amends Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act ("ADA"), the Age Discrimination in Employment Act ("ADEA"), and the Rehabilitation Act to allow employees a longer period of time in which to bring pay discrimination lawsuits. Historically, a 180-day statute of limitations governed pay discrimination claims. Ledbetter provides that an employee's limitations period for such claims now resets every time the employee is affected by a discriminatory pay practice or decision. Of course, an employee whose pay is lower as a result of improper discrimination is "affected" by a discriminatory pay practice or decision every time the employee receives an improperly small paycheck. Looking at Ledbetter in this light, one sees how lengthy the limitation period has potentially become.
Ledbetter critics point out that Ledbetter effectively allows employees to challenge pay practices and decisions occurring so far in the past (certainly long after any typical statute of limitations would have barred a claim) that they cannot be defended fairly and effectively,. By way of example, if Sarah A. Employee claims that, as a result of improper discrimination, she was paid less than a male counterpart one time in the 20th year of her employment, Ledbetter now provides that Sarah can claim that a paycheck she received in her first year of employment (and maybe every paycheck thereafter) also was improperly small as a result of prohibited discrimination.
Will the Spring Bring Other Thorny Flowers for Employers?
The old saying is that "when it rains it pours," and Ledbetter's enactment seemingly drenched the landscape of pay discrimination litigation. If Ledbetter didn't create a jungle growth of litigation for employers, the Paycheck Fairness Act which was under consideration by the Senate (Senate Bill 182) might have finished the job. President Obama endorsed the Paycheck Fairness Act this past July and, prior to the mid-term election in November, many believed the Paycheck Fairness Act was on its way to being passed in the U.S. Senate.
The Paycheck Fairness Act would have amended the Equal Pay Act to remove the ceiling on the amount of liquidated damages and back pay that can be recovered under the Equal Pay Act and also would have permitted recovery of unlimited compensatory and punitive damages. In addition, in the context of pay discrimination class actions, class members no longer would have been required to "opt in" to the lawsuit but, instead, automatically would have been a class member unless they took affirmative action to "opt out" if not interested in participating in the collective action. The Paycheck Fairness Act also would have further protected the bargaining rights of employees by penalizing any employer that retaliated against employees who discussed salary information with one another. However, on November 17, 2010, the Paycheck Fairness Act fell two votes short of the necessary 60 votes needed in the Senate to proceed to a substantive vote. Therefore, as it stands now and in light of the recent mid-term election, the bill will not become law in the next two years unless it is modified to attract two additional votes. Despite these recent developments, employers still must be wary of a modified version of the Paycheck Fairness Act or some type of similar legislation. Indeed, there are other proposed acts which still are under consideration by Congress.
For example, the proposed Fair Pay Act (Senate Bill 904) would further complicate and expand the field of potential pay discrimination claims. The Equal Pay Act currently requires such claims to be based only on gender discrimination. The Fair Pay Act would expand the Equal Pay Act and allow employees to bring claims for pay discrimination based on national origin or race as well.
What Employers Can Do Now to Protect Themselves
Before Ledbetter (and the pending Fair Pay Act), employers were advised to maintain pay records until all related statutes of limitation lapsed. Now, given that Ledbetter allows long-term employees to "reach" far back in the past and challenge any pay practice encountered during their entire term of employment, and because some version of the Paycheck Fairness Act and/or the Fair Pay Act could be passed by the lame-duck Congress (or, while unlikely, even in the new Congress, for that matter), employers cannot be content merely to save such records. Managers making pay decisions may retire or otherwise leave the company, and even good memories fade with time. Good documentation that traditionally has supported pay decisions may not be enough now to mount a successful defense to a claim, especially one that arises from activity which occurred decades ago. In the new world of expanding employment discrimination litigation, it is especially advisable for employers to conduct periodic in-house audits to confirm that pay and other employment-related decisions are being made and administered via good business practices. Records of such interim in-house audits also can be maintained along with other documentation to further support employers in the event they are audited by Uncle Sam, compelled to engage in discovery as a result of a lawsuit, or subjected to what previously has been considered a "stale" pay discrimination claim much later than ever before contemplated.
© 2010, Ward and Smith, P.A.
This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.