Co-written by: Katie Kiernan Marble
(Article originally published in American Bar Association Litigation News, July 2009)
On January 29, 2009, President Obama signed the Ledbetter Fair Pay Restoration Act of 2009 (the “Act”) 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. This article explores some recent United States District Court decisions in which the Act played a part and addresses how attorneys might advise their clients concerning its impact.
The case began when Lilly Ledbetter sued her longtime 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. 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, 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.
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 by 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 verdict 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.
The Act 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 amends the Americans with Disabilities Act (“ADA”), the Age Discrimination in Employment Act (“ADEA”) and the Rehabilitation Act of 1973 as well, 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 long into the past to justify pay decisions made by managers who are no longer even employed by the company and at a time in which 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 documentation for 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 should 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 longtime employee’s entire history with the company may be subject to future scrutiny.
Federal courts have already been asked to address the implications of the Ledbetter Fair Pay Restoration Act as claims that were once barred may now be considered timely. These cases emphasize the point that documentation of employee performance and pay decisions must be kept for longer periods of time. Compensation or promotion decisions may have an impact on an employee’s salary many years later and within the applicable statute of limitations period. Because decisions such as not promoting an employee, demoting an employee, or modifying wages have long-term ramifications for future salary levels, these decisions have a bearing on an employee's future pay rate and may now be directly at issue in a lawsuit brought by an employee alleging pay discrimination. Employers must therefore have sufficient documentation of the reasoning behind any decision that could have a future affect on an employee's salary. The cases described below provide some illustration of how the Ledbetter Act has affected employment litigation.
Gertskis v. New York City Department of Health and Mental Hygiene, (S.D.N.Y. 3-26-2009)
The plaintiff filed a pro se complaint against her employer alleging sex, national origin and religious discrimination as well as sexual harassment and retaliation. Gertskis is a Jewish female born in the Ukraine. She emigrated to the United States in 1989 and went to work for the defendant in 1993 as an Assistant Chemist in the Public Health Laboratory. The events at issue in the litigation began in 2001 when plaintiff received an evaluation from a supervisor rating her as “very good” rather than “outstanding.” She claimed the rating was lower than she deserved because she was Jewish. She also alleged that the same supervisor beginning in 2003 gave fewer overtime hours to her than to other staff for discriminatory reasons. The City filed a motion for summary judgment on several bases, one of which was the statute of limitations.
The court concluded that with only minor exceptions the plaintiff’s claims were timely. Gertskis’ pay discrimination claims were based on the argument that she received inadequate compensation as late as 2006 based on discriminatory decisions dating back to 2001, including failing to promote her to a higher grade position. The court ruled that because the decisions from many years before had an impact on Gertskis’ pay at the time she concluded her employment, they were relevant and not time-barred.
The court ultimately granted summary judgment in favor of the employer instead on the merits of the plaintiff’s claims finding that she had failed to state a cause of action or to meet her burden of producing evidence of discrimination.
Knox v. Centric Group, LLC (Nev. 3-30-2009)
Lanai Knox filed suit in the United States District Court for the District of Nevada alleging gender discrimination, sexual harassment and retaliatory termination under Title VII. She began employment with the company in 1999 and was terminated on October 14, 2003. She alleged that sexual harassment began in 2002 and filed a complaint before the Nevada Equal Rights Commission (“NERC”) on November 24, 2003. Among the causes of action alleged was a claim of pay discrimination based on the company’s bonus structure which resulted in male supervisors being paid more than female supervisors on an annual basis. The defendant filed a motion for summary judgment relying on the Supreme Court’s Ledbetter decision claiming that the allegedly discriminatory bonus structure was put in place in 2002, thus making Knox’s discrimination complaint untimely. Between the filing of the motion for summary judgment and the court’s ruling, however, the Act was signed into law.
The court ruled that Knox’s claims were timely filed. First, the challenged pay practice was the prevailing policy at the time the plaintiff was terminated, when she filed her discrimination charge and also when she brought her federal court complaint. In addition, the facts were somewhat different from those in the Ledbetter case since the plaintiff was challenging not only past pay practices but the very policy in effect at the time of her discharge from employment.
Gentry v. Jackson State University, (S.D. Miss. 4-17-2009)
This case was also before the court on the defendant employer’s motion for summary judgment. Plaintiff was a female university professor who claimed she was denied tenure and a related salary increase based on gender discrimination in violation of Title VII. The defendant argued that Gentry’s action was time-barred because the denial of tenure in 2004 was a discrete act of which the plaintiff was aware, and the EEOC complaint was not filed until 2006. The court, however, concluded that the denial of tenure was a “compensation decision” or “other practice” affecting compensation as defined by the Act.
The court accepted defendant’s argument, confirmed in later decisions, that the ruling in Ledbetter that “current effects alone cannot breathe new life into prior uncharged discrimination” still applies in disparate impact cases involving allegations of discrete discriminatory acts other than pay. See Leach v. Baylor College of Medicine, 2009 WL 385450 (S.D. Tex. 2-17-2009). The court, however, highlighted the distinction between the facts before it and the facts in Leach where the employee alleged that his employer “imposed disparate job responsibilities” on him on account of his race. Because Gentry was alleging pay disparity and Leach was not, her claims were not time-barred while his were.
AT&T Corp. v. Hulteen, (U.S. May 18, 2009)
This is the first decision issued by the United States Supreme Court discussing the Ledbetter Fair Pay Restoration Act. The Plaintiffs challenged AT&T’s benefits calculation system, arguing that its manner of calculation led to a lesser pension amount for certain female employees who took time off for pregnancy leave. Prior to the enactment of the Pregnancy Discrimination Act (“PDA”), AT&T allowed women to accrue six weeks of benefits while out on pregnancy leave, but any additional time taken was considered “personal” and did not count towards this accrual. This system was lawful under the Supreme Court’s decision of General Electric Co. v. Gilbert, which held that benefits plans excluding pregnancy-related disability plans were not discriminatory. When Congress statutorily overruled this decision by passing the PDA, AT&T changed its benefits plan to allow for accrual for all pregnancy related leave on the same basis as other types of disability leave. The change was not made retroactive. The Plaintiffs challenged AT&T’s failure to make the changes retroactive, and each alleged the she lost months of time toward accrual of benefits and pensions.
The Court found that AT&T’s actions did not violate the PDA because AT&T followed the law in effect at the time of enactment of the policies at issue. In a brief discussion of the Fair Pay Restoration Act, the Supreme Court noted that because the underlying actions were not discriminatory, the Plaintiff’s were not “affected by application of a discriminatory compensation decision or other practice.” While the Fair Pay Restoration Act could ultimately have significant ramifications on benefits and pensions, the Court found that it did not apply in this case where there was no discrimination at the time the plan was put in place.
These cases highlight the fact that the Act’s reach is limited to allegations of pay disparity and that cases with merit which might otherwise have been time barred will now proceed to trial. Conversely, allegations unsupported by evidence will still be subject to summary judgment. For both plaintiffs and defendants, there will be a challenge to compile admissible evidence going back many years to support a position.
Although the temptation is always there for employers to cut corners when it comes to management training and documentation, these decisions show that it is now even more critical for companies to be proactive in responding to changes in the law. Attorneys would be wise to instruct their clients that managers making day to day decisions about evaluation, discipline and reward of employees be trained in the proper means of making and documenting such decisions as it becomes more and more likely that those decisions will have to be justified long after they are made.
Charla Bizios Stevens is a Director and Shareholder and Katie Kiernan is an Associate in the Employment Law Practice Group at the law firm of McLane, Graf, Raulerson & Middleton, P.A. Charla can be reached at 603-628-1363 or [email protected]. Katie can be reached at 628-1490 or [email protected]. The McLane Law Firm is the largest law firm in the State of New Hampshire, with offices in Concord, Manchester, Portsmouth and Woburn, Massachusetts.