On January 29, 2009, President Barack Obama signed a law making it significantly easier for employees to file job bias claims in connection with compensation.  The "Lilly Ledbetter Fair Pay Act of 2009" is the first bill passed by Congress to be signed into law by the new president.

Under the Ledbetter Fair Pay Act, an individual's time for filing a pay discrimination complaint with the Equal Employment Opportunity Commission (EEOC) starts anew each time the employee receives a paycheck with unequal pay.  In effect, the statute of limitations for filing a pay discrimination claim with EEOC restarts every time an individual receives a paycheck, or distribution of benefits or other compensation - no matter how long ago the allegedly discriminatory pay decision was made and implemented.

The Ledbetter Fair Pay Act allows individuals to recover back pay for up to two years before filing the EEOC charge, in addition to other compensatory damages, punitive damages and injunctive relief already available under existing law.

The Ledbetter Fair Pay Act is retroactive to May 28, 2007 and applies to all lawsuits pending on or after that date.

 

Background

 

Ms. Ledbetter claimed that during her 19 years of employment with Goodyear Tire and Rubber, several supervisors gave her poor performance evaluations because of her gender.  As a result, she claims that she was paid 20 percent less than her lowest-paid male colleagues.  A federal jury agreed with Ms. Ledbetter and awarded her back pay and other damages.

An appellate court found that Ms. Ledbetter's lawsuit was time barred because she did not file her EEOC charge within 180 days of the discriminatory pay decision.

 

The Supreme Court agreed, and then went further in ruling that an employee's time for filing an EEOC charge for unequal pay starts to run as soon as the employer makes the "pay-setting decision" and communicates it to the employee - regardless of whether the employee knows or suspects at the time that the decision is discriminatory.  Thus, the High Court rejected Ms. Ledbetter's argument that her time limit should start anew with each paycheck that resulted from a discriminatory pay decision.  Business groups cheered the decision because it seemingly limited these fair pay claims.

Liberal groups were incensed by the Supreme Court.  The new Congress passed the Ledbetter Fair Pay Act to undo the effect of the Supreme Court's decision.  In doing so, the law makes it easier for employees to sue for pay bias.  But, critics say the new law unduly expands the time period for filing suit, and potentially exposes employers to a series of new complaints based on decisions made years or even decades in the past.

Notably, the Ledbetter Fair Pay Act applies not only to gender claims, but to all other forms of pay discrimination outlawed under federal statutes, including race, national origin, religion, age and disability bias.  Those statutes allow for compensatory damages and injunctions, as well as back pay.

Since the Ledbetter Fair Pay Act makes it easier to sue for pay discrimination, we anticipate an increase in the number of job bias lawsuits filed against employers.  Accordingly, it is recommended that pay practices be reviewed in light of this decision.

Your contact at the Firm is ready to assist you if you have any questions about this topic or wish to arrange for a payroll practices audit and policy review in light of this new law.