Employers had better remember the Ledbetter Act.
By Jon Napier
President Obama earlier this year fulfilled a campaign pledge
by signing into law the Lilly Ledbetter Fair Pay Act of
2009. It significantly expands the potential scope of
employee wage discrimination. Many observers expect this
law to have a significant impact on employers by increasing the
chances of employers finding themselves defending wage related
decisions, often years later.
The Ledbetter Act reverses a 2007 U.S. Supreme Court decision,
Ledbetter v. Goodyear Tire & Rubber Co. In
the Ledbetter case, Lilly Ledbetter, a longtime
employee, alleged her employer engaged in illegal wage
discrimination. The relevant facts indicated that the
original alleged discriminating wage decision had occurred
decades earlier. The Supreme Court decided (in a close
decision) that Ms. Ledbetter’s claim was time barred
because she had not raised the claim within 180 days (extended
to 300 days in certain circumstances) of the allegedly
discriminatory compensation decision by her employer.
President Obama, and many in Congress, strongly disagreed with
the Supreme Court’s decision in Ledbetter, which
led, ultimately, to the Ledbetter Act.
So what does the Ledbetter Act do? The
short answer is that it amends the following federal statutes:
(i) Title VII of the Civil Rights Act of 1964, which prohibits
discrimination in employment on the basis of race, color,
religion, sex or national origin; (ii) the Age Discrimination
in Employment Act, which prohibits discrimination against older
workers (40 and older); (iii) the Americans with Disabilities
Act, which prohibits discrimination against employees with
disabilities; and (iv) the Rehabilitation Act of 1973. If
you employ 15 or more employees, you are subject to Title VII
and the ADA. If you have 20 or more employees, you are
subject to the ADEA.
Okay, but what do the amendments to these laws
accomplish? The Ledbetter Act overturns the
Supreme Court’s decision by stating that an
“unlawful employment practice” occurs when: (1) a
discriminatory compensation decision or other practice is
adopted; (2) an individual becomes subject to a discriminatory
compensation decision or other practice; or (3) 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.
What does this mean for me as an
employer? This means that every time an employer
pays a paycheck or other benefit to an employee, the employee
may have a new cause of action under the Federal
anti-discrimination statutes if the employee asserts that the
compensation decision or “other practice”
(potentially very broad) violated the applicable statute when
made (regardless of how long ago the original decision or
action was made or taken) and, as a result, the
employee’s current pay or benefits are reduced.
Critics of the law point out that this opens up the possibility
that decisions made years, even decades earlier may be
actionable if the employee asserts a link between that earlier
decision or practice and the employee’s current pay or
benefits. Supporters of the law respond that this is
exactly why the law was needed - discriminatory pay decisions
can have lasting effects on employee and their future earnings
and benefits –employees may never “catch up”
or recover from past discriminatory actions.
Okay, but what should I do now? Remember
that the Ledbetter Act makes it easier for employees to bring
claims related to allegedly discriminatory compensation
decisions and other practices from the distant past.
Employers need to consider their records retention
policies. How long do you retain information for
employees relating to compensation decisions? You should
avoid (and must avoid if a complaint has been filed) discarding
information that you may need in the future if faced with an
allegation of a discriminatory activity related to employee
compensation. Consider whether the documentation you
maintain is sufficient in describing the basis for your
compensation decisions and practices. You may want to
re-evaluate your pay structure and how objective criteria
(length of service, experience, etc.) relate to more subjective
criteria (i.e. “performance”) in determining annual
raises. Now would be a great time to evaluate the level
of discretionary authority your managers have regarding
compensation matters – understand that these decisions
can be the basis for liability against the Employer. Be
sure that your managers are trained regarding illegal
discrimination in the work place, and understand how illegal
discrimination can give rise to wage discrimination
claims. If you have any past issues that are of concern,
consider seeking legal counsel to better understand your
potential legal exposure.
Anything else I should know about
Ledbetter? Yes, it has a retroactive effective
date of May 29, 2007 (the date of the Supreme Court decision
that the law overturns). Finally, to end on a positive
note, although the Ledbetter Act expands (or, depending on your
perspective, restores) employee rights in a manner that may
create some additional challenges and responsibilities for
employers, it does specifically preserve the provision under
Title VII limiting recovery of back pay by employees the two
year period preceding the filing of the discrimination charge.