Ledbetter Fair Pay Act Breathes New Life Into Pay Discrimination Claims

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“Ultimately, equal pay isn’t just an economic issue for millions of Americans and their families, it’s a question of who we are — and whether we’re truly living up to our fundamental ideals,” President Obama said as he signed the Lilly Ledbetter Fair Pay Act into law on January 29, 2009.  “Whether we’ll do our part, as generations before us, to ensure those words put on paper some 200 years ago really mean something — to breathe new life into them with a more enlightened understanding that is appropriate for our time.”

The Ledbetter Fair Pay Act removed several barriers that prevented successful pay discrimination claims.The Act is named after Lilly Ledbetter who worked as a production supervisor at a Goodyear plant in Alabama from 1979 until her retirement in 1998.  Ledbetter received smaller pay increases than the male supervisors.  That pay disparity grew throughout her 20 year employment.  When Ledbetter retired, her compensation was 40% lower than the lowest paid male supervisor at the plant.  She filed an EEOC charge in July 1998.  Ledbetter eventually filed a pay discrimination lawsuit against Goodyear and was awarded more than $3.5 million.  Goodyear asked the Court to set aside the jury’s verdict because Ledbetter’s pay discrimination claim was not filed within the 180 day charge-filing deadline.  The Ledbetter case eventually reached the United States Supreme Court. 

On May 29, 2007, the Supreme Court held that the charge filing deadline for pay discrimination claims begins to run on the date of the first allegedly discriminatory pay decision.  The Supreme Court found that Ledbetter’s pay discrimination claim was untimely because she did not file her EEOC charge within 180 days of Goodyear’s first decision to pay her less than male supervisors.  Justice Ginsburg writing for the dissent stated that “each paycheck less than the amount payable had the employer adhered to a nondiscriminatory compensation regime . . . constitutes a cognizable harm.”  The dissent invited Congress to correct the Court’s Ledbetter decision, by writing “[o]nce again, the ball is in Congress’ court.  As in 1991, the Legislature may act to correct this Court’s parsimonious reading of Title VII.”

Congress attempted to accept that invitation during the Bush presidency.  But, the White House opposed the bill claiming that it would result in more lawsuits.  The Obama administration and the new Congress felt differently about the Ledbetter decision. They believed the Ledbetter decision was unrealistic in its assumption that employees immediately know about pay discrimination.  The Lilly Ledbetter Fair Pay Restoration Act of 2009 became law on January 29, 2009.  President Obama said, “It is fitting that with the very first bill I sign – the Lilly Ledbetter Fair Pay Act – we are upholding one of this nation’s first principles: that we are all created equal and deserve a chance to pursue our own version of happiness.”   The Lilly Ledbetter Fair Pay Act changed pay discrimination claims in the following ways:

  • The Act amended Title VII, the Age Discrimination in Employment Act, and the Americans with Disabilities Act which means that employees can sue for pay discrimination on the basis of gender, race, national origin, religion, age, and disability.
  • The statute of limitations for pay discrimination claims starts over each time the employee receives a paycheck, benefits or other compensation that is impacted by a discriminatory compensation decision.
  • Any action that affects compensation (i.e., a performance review, denial of raise request, stock option award, etc.) can trigger a pay discrimination claim and a new statute of limitations.
  • In addition to the other statutory remedies, a prevailing employee can receive “back pay for up to two years preceding the filing of the charge.”
  • The Act protects individuals “affected” by a discriminatory compensation decision or other practice.  The word “affected” greatly expands who can sue for pay discrimination.
  • The Act is retroactive to May 28, 2007.

The Lilly Ledbetter Fair Pay Act is still relatively new and its impact is not clear.  However, recent pay discrimination decisions provide insight into how the courts will interpret the Act. 

Courts are recognizing that the Ledbetter Fair Pay Act expanded the definition of “compensation decision.” In Mikula v. Allegheny County, the Third Circuit held that denying an employee’s request for a pay increase is a “compensation decision” and the statute of limitation will restart with each paycheck the employee receives after the denial of a pay increase.  And, in Tomlinson v. El Paso Corporation, the Court held that a decision that affects the accrual of pension benefits is a “compensation decision.” 

Courts also are holding that the claim must concern compensation to take advantage of the Ledbetter Fair Pay Act.  The Court in Rowland v. CertainTeed Corporation stated that “the Ledbetter Act does not help Plaintiff here because she pressed no discriminatory compensation claim with respect to her failure to promote.”  Similarly, the Court in Richards v. Johnson & Johnson stated that “[w]hile the Act certainly contains expansive language . . . [it]does not save otherwise untimely claims outside the discriminatory compensation context.”  The District Court in Leach v. Baylor College of Medicine ruled that “[t]he Fair Pay Act of 2009 only affects the Ledbetter decision with respect to the timeliness of discriminatory compensation claims.  . . . The rules set out in Ledbetter . . . cannot breathe new life . . . into disparate treatment cases involving discrete acts other than pay.” 

Finally, the Ledbetter Fair Pay Act not only provides more opportunities to sue for pay discrimination, but it resuscitated many previously time-barred pay discrimination claims.  In fact, both Mikula and Tomlinson involved pay discrimination claims that were time-barred prior to the Ledbetter Fair Pay Act and reinstated after the Ledbetter Fair Pay Act. 

The Ledbetter Fair Pay Act, in restarting the statute of limitations with each paycheck or benefit accrual, gives employees a real opportunity to combat pay discrimination.  And, there is pay discrimination.  Women still earn only 77% of what their comparable male counterparts earn.  And, college educated African-Americans and Hispanics are paid less than similarly educated Caucasians, 78% and 75% respectively.  The Ledbetter Fair Pay Act makes pay discrimination claims a real legal risk for employers which was not the case previously.  Perhaps, that risk will help to close the pay disparities that are all too prevalent today.  As President Obama said, the Lilly Ledbetter Fair Pay Act “is an important step – a simple fix to ensure fundamental fairness for American workers.”

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