Lilly Ledbetter was a supervisor at Goodyear Tire and Rubber’s plant in Gadsden, Alabama, from 1979 until her retirement in 1998. At first, her pay was in line with the salaries of men, but over time, a gap developed between her salary and the pay of male area managers with equal or less seniority. By the end of 1997, Ledbetter was the only woman working as an area manager and was paid, by comparison almost $560 less per month than the lowest paid male area manager.
In 1998, Ledbetter sued, alleging disparate treatment. The company argued that the suit should be dismissed because Ledbetter failed to file a complaint with the Equal Employment Opportunity Commission (EEOC) within 180 days of the previous pay decisions that Ledbetter alleges were discriminatory. However, Ledbetter’s attorneys argued that the clock on the 180 day deadline restarted after each paycheck that reflected past discrimination. They claimed that each time the company issued her a paycheck the company demonstrated an intent to discriminate and violated Title VII of the Civil Rights Act of 1964. At the time, the majority of the Supreme Court rejected her arguments, saying Ledbetter should have filed a complaint after each pay decision.
On January 29, 2009, President Obama signed the “Lilly Ledbetter Fair Pay Act” into law. Specifically, the law states that “an unlawful employment practice occurs…..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.” In practical terms, the law eliminates the time limit within which an employee must file a complaint of pay discrimination as long as he/she continues on a company’s payroll.
The law also extends the statute of limitations for claims of compensation discrimination under all of the major federal civil rights laws to include: 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 of 1973. There is some good news for employers. Under Title VII, any award of back pay would be limited to the two (2) years preceding the filing of the claim. However, compensatory and punitive damages may also be awarded in cases of intentional discrimination.
Congress made the law retroactive to May 28, 2007, the day that the Supreme Court ruled against Lilly Ledbetter in her Title VII pay discrimination lawsuit. Thus, the Ledbetter Act applies to all pay discrimination charges that were pending on or after that date under Title VII, the ADEA, the ADA and the Rehabilitation Act. So, until court decisions and regulations help shape the boundaries of the law, employers are vulnerable to pay discrimination charges that may stem from decades-old discrimination.
Here is what employers should do now to guard against future claims:
- Address cases that were pending on or after May 28, 2007. Work with your employment attorney to determine how the new rule might affect each case.
- Identify pay disparities that might give rise to a claim. Conduct an audit of your existing pay practices and pay levels to identify any disparities that might give rise to a claim of pay discrimination. Consult with an employment attorney or HR consultant for advice on the scope of the audit.
- Update policies and procedures and provide training to supervisors and managers.
- Document, document, document. The types of documentation that should be retained include anything related to the pay decision, i.e. performance appraisals/evaluations, merit increase guidelines and policies, documents related to pay, documentation regarding pay discussions with employees and applicants, etc.
- Retaliation is prohibited. Employers should keep in mind that the federal fair employment laws prohibit retaliation against any individual who exercises his/her rights under the laws, files a charge, or participates in an investigation or proceeding under the laws. In addition, the Ledbetter Act prohibits employers from reducing any employee’s pay in order to correct a pay differential. Instead, the pay of the lower paid employee must be increased.
In summary, employers should take steps now to evaluate their exposure, improve pay equity if needed, and train all employees involved in decisions that influence compensation.
So, how does Lilly Ledbetter know President Obama? On January 29, 2009, when he signed the Lilly Ledbetter Fair Pay Act into law, Lilly was in attendance at the White House to witness the signing of the law that bears her name.
Written By: Kristen Shingleton, M.B.A., CCP
President, New Focus HR LLC