Fair Pay Act Becomes Law, Overturning Supreme Court's Ledbetter Decision

(February 9, 2009)

In his first full week in office, President Barack Obama signed into law the Lilly Ledbetter Fair Pay Act, reversing a 2007 U.S. Supreme Court decision that held that a female employee needed to file her pay discrimination complaint with the EEOC (Equal Employment Opportunity Commission) within 180 days of her employer's initial decision to pay her less than her male counterparts. The employee had argued that the 180-day statute of limitations for filing an EEOC charge (300 days in states with an anti-discrimination agency) began anew each time she received a lower paycheck.

The Fair Pay Act amends Title VII, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the Rehabilitation Act to clarify that a discriminatory compensation decision occurs each time a discriminatory paycheck is issued. It is effective retroactive to May 28, 2007, the day before the Supreme Court's decision (Ledbetter v. Goodyear Tire, No. 05-1014).

The Fair Pay Act does not change the fact that employees can only go back two years to recover damages. What it does change is that even more individuals will be able to file suit, instead of having their cases thrown out because they filed too long after the employer made the initial discriminatory pay decision. This helps protect workers who often don't realize they are being paid less when it first happens because employers generally do not publicize employees' wages, and employees don't generally talk (or ask) about it, especially when they're new. In Ledbetter, the employee did not realize she was being paid less until near the end of her 19-year career.

______________________________

We spoke to Eric Rumbaugh, Esq., of Michael Best & Friedrich, LLP, to get his insight on the Fair Pay Act.

Listen to the brief (10 minutes) interview at:

http://www.legalworkplace.com/uploadedfiles/ledbetter.mp3

_______________________________

Full Impact Unknown

The Fair Pay Act has raised many fears among employers regarding the potential for an increase in legal claims and the difficulty in defending employment decisions made many years ago. Eric Rumbaugh, a partner with the law firm of Michael Best & Friedrich, LLP (Milwaukee, WI) agrees that there is going to be an increase in litigation. Rumbaugh, who represents management in all areas of labor and employment law, warned that the increase will likely be in the form of class action litigation. Historically, "there hasn't been much money to be won in compensation litigation," he explained. "Post-Ledbetter, there's a longer time period to aggregate employees who might be affected, and there's an opportunity to get greater class litigation."

However, that's not to say that there won't be an increase in individual lawsuits. A claim that was typically filed under the Equal Pay Act is now more attractive under Title VII because compensatory and punitive damages are now available, "and there are attorney's fees available, which is a real attractor to plaintiffs' attorneys."

What Are "Other Practices"?

The Act refers to "discriminatory compensation decisions or other practices." What these "other practices" include is "really the nub question under this statute," said Rumbaugh. "I will bet you lunch that if we were discussing this three years from now, we're going to be surprised by what courts have found to constitute an "other practice".

Rumbaugh expects that "other practices" would include promotions, transfers, and most importantly, performance reviews. "The thing that's going to affect compensation over years and decades is going to be performance reviews," he predicted.

How Will Employers Be Able To Defend Themselves?

It may seem impossible to defend a decision that was made many years ago. Rumbaugh advises employers "to take better records, and keep better records" going forward. Reason: Someone who sues you 10 years from now for something that you did today is only going to sue if they have a pretty clear recollection of it.

"Having records is really going to be your only basis you have to defend yourself for decisions made 10 years ago," he said. Destroying records, even when allowed by law, "is a bad idea."

To Audit, Or Not To Audit

Rumbaugh stated that periodically auditing yourself to check if you can explain differences in pay, and, in appropriate cases, conducting a statistical self-analysis of your pay practices would be a good idea. "Post-Ledbetter, if you're a large organization and you've got lots of legacy compensation decisions that have been hanging around a long time, this might be a good time to clear those out, and make sure that all of your compensation decisions now are decisions that you agree with and not just decisions you're going along with because someone made them 10 years ago."

HR Compliance Information Specialists

Brought to you by the Alexander Hamilton Institute

Fair Pay Act Becomes Law, Overturning Supreme Court's Ledbetter Decision