Fair pay act expected to make way for further federal legislation

March 1, 2009

Published in the Women’s Business News, March 1, 2009 (http://www.bostonherald.com/business/womens/general/view/2009_03_01_Fair_pay_act_expected_to_make_way_for_further_federal_legislation/)

On January 29, 2009, President Obama signed the Ledbetter Fair Pay Restoration Act of 2009 into law. The Act is designed to overturn the U.S. Supreme Court’s decision from May 2007 in the case of Ledbetter v. Goodyear Tire & Rubber Company limiting the time employees have to file pay discrimination claims to six months.

The history of the case began when Lilly Ledbetter sued her long time employer, Goodyear, for gender discrimination and unfair pay practices related to gender. Ledbetter worked as a manager from 1979 until she accepted an early retirement package from the company in 1998. She typically received salary adjustments annually based on performance evaluations by her supervisor. Her supervisor often ranked her performance near the bottom as compared with her co-workers, and she received minimal salary increases in comparison to the others who were male. Her position was slated for layoff near the end of her tenure, and during her last two years of employment she received no pay raises. By the time of her retirement she was making considerably less than her male counterparts. Ledbetter alleged that she did not discover the pay disparity until late in her tenure with the company when someone anonymously tipped her off to the pay differences.

Ledbetter filed a charge of discrimination with the EEOC in 1998 claiming that the pay disparity was a violation of Title VII of the Civil Rights Act of 1964. She then filed suit in federal court, and the case was tried to a jury resulting in significant back pay, pain and suffering and punitive damage awards totaling in the neighborhood of $3.5 million. The award was ultimately reduced to the statutory cap but was still in excess of $300,000.00.

Goodyear appealed the verdicts alleging that Ledbetter’s claim was time barred by the 180 day limitations period for Title VII claims. Goodyear argued that the statute of limitations began to run from the moment the pay disparity began (many years before) and that there was no evidence of gender discrimination within the six months prior to her claim being filed with the EEOC. The 11th Circuit Court of Appeals ruled in favor of Goodyear and overturned the jury’s verdict finding that any possible disparate pay practices had occurred long in the past and were barred by the statute of limitations.

Ledbetter appealed the decision to the United States Supreme Court which affirmed the Court of Appeals decision. The Court ruled that a pay decision is a discrete act which forms the basis of a claim and essentially that each decision (or the issuance of each paycheck) is a separate act from which the statute of limitations begins to run. Ledbetter had instead argued that the alleged pay discrimination was a continuing violation of Title VII of which even the events which occurred long in the past were a part. The dissent in the Ledbetter case, authored by Justice Ginsberg, was strong and called for Congress to “correct” the majority’s reading of Title VII.

Attempts to pass the Act failed in the last session of Congress. However, renewed efforts were successful this year, and the new law amends Title VII of the Civil Rights Act of 1964. Congress also took the unusual step of making the change retroactive to May 28, 2007, the date of the Supreme Court decision. The Act also amends the Americans with Disabilities Act (“ADA”), the Age Discrimination in Employment Act (“ADEA”) and the Rehabilitation Act of 1973 by establishing that the time periods for filing claims commence when:

    a)    A discriminatory compensation decision or other practice is adopted;
    b)    An individual becomes subject to the decision or practice; or
    c)    An individual is affected by an application of a discriminatory compensation or practice (such as when the compensation is paid).

The law has potentially significant impact on employers for many reasons. First, there is the possibility that companies will be forced to look back long into the past to justify pay decisions made by managers who are no longer with the company and when documentation may not have been as comprehensive as it is now. Looking to the future, employers should take care to retrain their managers in proper methods of documenting not only pay decisions but all forms of employee discipline as well as commendations for excellent performance. Not only must an employer be able to show that one employee was deficient in performance, but for comparison purposes must be able to demonstrate why someone else was better and more deserving. In addition, it is now important to maintain these records for longer periods of time given the possibility that a long time employee’s entire history with the company may be subject to future scrutiny.

It is expected that the Ledbetter Fair Pay Restoration Act is likely to be the first in a string of federal legislation that will have significant impact in the workplace. The House passed the Paycheck Fairness Act in January, and although it has not moved through the process as quickly, it is likely to resurface. The Employee Free Choice Act sometimes known as the “card check” bill which eliminates the private ballot for unionizing workplaces also has significant support in Congress. Efforts are also expected to be renewed at both the state and federal levels to mandate paid sick leave and other time off benefits.

Although the temptation is always there in a soft economy for employers to cut corners when it comes to management training and documentation, it is now even more critical for companies to be proactive in responding to changes in the law. Managers making day-to-day decisions about evaluation, discipline and reward of employees must understand that their decisions may now need to be justified long after they are made.

Charla Bizios Stevens is a Director and Shareholder in the Employment Law Practice Group at the law firm of McLane, Graf, Raulerson & Middleton, P.A. www.mclane.com.