Obama signs Lilly Ledbetter Fair Pay Act
January, 2009
Today, President Obama signed his first bill into law - the Lilly Ledbetter Fair Pay Act - making it easier for workers and retirees to sue employers for pay discrimination.
Background:
The Act is designed to overturn the Supreme Court's 2007 decision in Ledbetter v. Goodyear, in which the Court ruled that an employee may only sue an employer for pay discrimination if they file the claim within 180 days after receiving the first unfair paycheck, even if the employee did not discover the discrimination until much later. That was exactly what happened to Lilly Ledbetter. She worked for Goodyear for almost 20 years and then she retired. After her retirement, she filed a claim with the EEOC for pay discrimination when she discovered that many of her male counterparts had been paid more than her for the same job. Even though the jury found that Goodyear had discriminated against Ms. Ledbetter, she was unable to recover anything because many years had passed since the discrimination began.
What The Act Does:
Under the new law, the 180-day clock to file a pay discrimination claim under the ADA, ADEA, Title VII, or the Rehabilitation Act restarts every time an employee receives an unfair paycheck. The Fair Pay Act is retroactive. It takes effect as if it had been enacted on May 28, 2007 and applies to all pay discrimination claims that are pending on or after that date.
The Fair Pay Act may have unintended consequences, as happens all too often with new legislation. Employers who are not currently discriminating may end up paying for discrimination that happened decades ago, perhaps even by the company's predecessor.
The Fair Pay Act applies broadly to any discrimination that has any effect on pay – not just to decisions that directly affect pay. This could include, for example, a decision not to promote somebody because of their gender, age, religion, etc. Thus, if an employer chose to promote a male over a female back in 1980, and the decision was discriminatory, the female that was passed over for the promotion could potentially file a lawsuit today or long into the future, so long as she receives a discriminatory paycheck within 180 days before filing the lawsuit. Additionally, the Act covers discriminatory benefits, such as pension payments. That means that a retiree could sue for discrimination that happened quite some time ago if the retiree files the claim within 180 days of receiving an unfair benefit payment.
Even though an employee may now sue for a discriminatory decision that was made years or even decades ago, the employee's ability to prove the case (and the employer's ability to mount a defense) could be affected by the passage of time if the employee waits too long to file suit. Evidence may have disappeared, witnesses may no longer be available, and memories no doubt will have faded.
Tips for Employers:
1. As usual, ensure decisions about pay rates, promotions, and benefits are made for legitimate, documented reasons.
2. If there seems to be a discrepancy between the pay rates of employees who do the same work, those discrepancies should be reviewed to ensure that age, race, gender, religion, or disability is not a factor.
3. Establish objective bases for pay ranges, raises, and promotions, and require written justification in the personnel file for the pay selected.
4. Have HR or a compensation consultant review your compensation and benefit plans for potential discriminatory effects.
Please contact a member of Bullivant's experienced employment team for more information on the Lilly Ledbetter Fair Pay Act or to discuss specific concerns regarding its effect on your business.