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President Obama signed the Lilly Ledbetter Fair Pay Act (“Fair Pay Act”) into law last Thursday, making it the first bill he signed as President. The Fair Pay Act overturns the Supreme Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007), and expands the length of time an employee has to file a claim of pay discrimination. It also potentially expands the class of individuals with standing to bring a claim of pay discrimination. As a result, employers may be subject to litigation for pay decisions made many years in the past and also may need to adjust their record keeping policies.
The impetus for the Fair Pay Act arose from Lilly Ledbetter’s lawsuit against her employer for pay discrimination, claiming that it did not give her the same pay raise it gave to other male employees. Although Ms. Ledbetter did not file her charge until long after this pay decision was made, she argued that her charge still was timely and not barred by the statute of limitations because each pay check she received from that point forward was lower than it would have been if she had been given the raise, effectively making each pay check an act of discrimination that restarted the filing period for her claim. The Supreme Court disagreed, however, and held that an employee must file a charge within 180 or 300 days (depending on the state) of the day the initial discriminatory pay decision was made.
The Supreme Court’s decision was met by strong opposition from those who claimed that, unlike other types of discrimination, pay discrimination is particularly hard to detect because information about co-worker pay usually is confidential. As a result, opponents argued that employees like Ms. Ledbetter would be unfairly prevented from filing claims of pay discrimination because they often do not know they are subject to discrimination until well beyond the normal time for filing a charge. Congress responded to the criticism by enacting the Fair Pay Act to overturn the Supreme Court’s decision.
The Ledbetter Fair Pay Act amends Title VII, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the Rehabilitation Act to state that an independent act of discrimination occurs each time wages are paid to an employee following a discriminatory pay decision. As a result, an employee who normally would have been time-barred from asserting a claim of pay discrimination based on a decision made years, or perhaps decades, in the past can now make such a claim as long as it is filed within 180 or 300 days (depending on the state) of when the employee last received a pay check. It also potentially expands the class of individuals with standing to bring a claim of pay discrimination to include those who are “affected by” the alleged discrimination. Read literally, that could include the families and relatives of the worker who was allegedly discriminated against, and perhaps even more broadly the employee’s survivors (as well as other employees).
All of this means that employers may need to review their record retention policies and consider preserving records of pay decisions for much longer than they have in the past so they are able to defend themselves in later-filed pay discrimination claims. These records would include not only decisions about direct pay increases, but also decisions related to promotions, job assignments, layoffs, and other decisions that affect compensation. Also, it would be prudent for employers to document which managers and supervisors made pay decisions, or decisions that might have affected compensation. Otherwise, if a pay discrimination charge is filed, there may be no way for the Company to identify who made the pay decisions at issue.
The Fair Pay Act went into effect immediately upon President Obama’s signature and even applies retroactively to May 28, 2007, the date of the Supreme Court’s decision. Thus, the new law will apply to all claims of discrimination in compensation under Title VII, the ADEA, ADA, and the Rehabilitation Act pending on or after that date.
If you have any questions, please contact one of our Labor & Employment attorneys.