On January 29, 2009, President Obama signed into law the Lilly Ledbetter Fair Pay Act of 2009. The Act changes the rules for calculating the statute of limitations for claims of discrimination in compensation under Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the Rehabilitation Act. Rather than running from the date an allegedly discriminatory pay decision is made, the Act provides that the statute of limitations begins to run anew each time an employer makes or acts on a discriminatory decision.

The Act Specifically Overturns a Controversial Supreme Court Decision
The Act overturns the United States Supreme Court’s May 2007 decision in Ledbetter v. Goodyear Tire & Rubber Company, 550 U.S. 618, 172 S. Ct. 2162 (2007). In that case, Lilly Ledbetter, who was a Goodyear employee from 1979 to 1998, became aware of a longstanding pay discrepancy around the time of her retirement. She filed an administrative charge alleging that Goodyear engaged in pay discrimination over the course of her career by giving her lower pay increases than her male co-workers. The Supreme Court ruled that Ledbetter was required to bring her claim of pay discrimination with 180 days of the act of discrimination, which the Court defined as date of the actual decision by the employer to pay her less than her male counterparts. (The statute of limitations is either 300 days or 180 days depending on whether there is a state or local fair employment agency involved. In Ledbetter, the 180 statute of limitations applied.) The Court rejected Ledbetter’s argument that each paycheck was a discrete instance of discrimination and restarted the statute of limitations period on her pay discrimination claims.

The Ledbetter decision caused an uproar and prompted calls for changes to the law. The result of that commotion is the Ledbetter Fair Pay Act of 2009, which overturns the Supreme Court ruling.

Description of the Act’s Provisions
The Act, which takes effect retroactively to May 28, 2007, provides that the clock for filing pay discrimination claims starts when the employee receives the compensation rather than when the employer originally made the allegedly discriminatory decision affecting the employee’s pay. In other words, each new payment of wages or benefits that is based on the original discriminatory decision is viewed as a discrete action and restarts the statute of limitations.

Here is the key language in the Act.
 

"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 practice 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."

Click here to view the text of this Act: http://www.lawmemo.com/docs/congress/s181.pdf.

Because of the Act, an employee today, in a situation similar to Ms. Ledbetter’s situation, would be able to bring a pay discrimination claim. The statute of limitations period would begin with the claimant’s most recent paycheck and, if timely filed, the claimant would be able to seek up to two years of back pay (two years prior to the filing of the claim). It would not matter if the allegedly discriminatory decision affecting pay had occurred years before, even if the claimant was aware of that decision at the time it was made.

Practical Implications
In practical effect, the Act revives the statute of limitations for many federal claims that otherwise would have long passed. As a result, this is a crucial time for employers to review their compensation policies –past and present– to identify and review any disparities and, if necessary, to resolve those disparities.

In addition to taking a hard look at whether pay differences exist, it is equally important for employers to review practices that may unintentionally lead to career-long pay disparities, such as offering lower paid positions to female and minority candidates at the time of initial hire.

Please feel free to contact Bullard Law for more information on the Ledbetter Fair Pay Act, compensation policies and practices, or any other labor, employment and benefits issues.

- Devra S. Hermosilla