Lilly Ledbetter. That name, and the corresponding legislation signed into law in 2009, changed the way statutes of limitations were viewed. It provided an even longer period for employees to bring certain wage related claims. Enacted in 2009, one would think the the fervor over the Lilly Ledbetter Fair Pay Act would have diminished. However, all signs point to the contrary. During the 2012 presidential campaign it became a hot button on both sides of the aisle as women’s issues took the spotlight. Romney was repeatedly asked by various media outlets whether he supported the Act. During the debates, Obama quickly pointed out that it was one of the first bills he signed and used it to lend credibility toward his focus on women’s rights. Lilly Ledbetter herself has also entered the fray more recently by engaging in a series of press junkets and tours one of which occurred in right here in Tennessee. In October, Ledbetter spoke at the Tennessee Economic Council on Women Summit in Nashville. Considering the new attention given to the Act and its continuing importance and implications, HR Professionals Magazine presents a previous piece on the Act.
The Lilly Ledbetter Fair Pay Act
In one of his first acts in office, President Obama signed into law the Lilly Ledbetter Fair Pay Act. The Act greatly lengthened the statute of limitations for discriminatory pay claims and, in the process, rolled back a heavily criticized Supreme Court ruling issued in Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007).
Plaintiff Lilly Ledbetter worked for Goodyear at its Gadsden, Alabama plant from 1979 until 1998. During much of this time, salaried employees at the plant were given or denied raises based on their supervisors’ evaluations. By 1997, Ledbetter’s male colleague’s earned 15 to 40 percent more than Ledbetter earned. In July of 1998, Ledbetter filed a formal EEOC charge. After taking early retirement in November 1998, Ledbetter filed a discrimination action against Goodyear, asserting claims under Title VII and the Equal Pay Act. Goodyear contended that Ledbetter’s pay discrimination claim was time-barred with respect to all pay decisions made prior to September 26, 1997, which was 180 days before the filing of her initial EEOC questionnaire. Goodyear further argued that no discriminatory act relating to Ledbetter’s pay occurred after that date. The Supreme Court ultimately held that for victims of pay discrimination the statute of limitations for a Title VII discrimination claim begins to run on the date of the initial discriminatory pay decision. Therefore, claims where the initial decision setting the pay occurred outside the statutory window were foreclosed.
In response to what many deemed to be a restrictive interpretation of Title VII, Congress enacted the Lilly Ledbetter Fair Pay Act of 2009, signed into law by President Obama on January 29, 2009. The Act, retroactive to May 28, 2007, does much more than just overturns the Supreme Court’s 2007 ruling. Specifically, it amends Title VII, the Americans with Disabilities Act, the Rehabilitation Act, and the Age Discrimination in Employment Act to specify that unlawful discrimination occurs when: (1) “a discriminatory compensation decision or other practice is adopted,” (2) “when an individual becomes subject to a discriminatory compensation decision or other practice,” or (3) “when 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.”
The “Paycheck Rule”
Under this “paycheck rule,” the statute of limitations for filing a wage claim resets each time the employee receives a paycheck, benefits or other compensation. The Act also expands the definition of an unlawful employment practice to not only include discrete “decisions” regarding compensation, but to include any “other practice” that affects an employee’s compensation. The Act does not define the term “other practice” which, of course, leaves it open to judicial interpretation.
As expected, the Act has generated judicial attention and increased focus by employee advocates. Plaintiffs have succeeded in proceeding with wage discrimination claims years after the alleged discriminatory acts occurred. In Gentry v. Jackson State Univ., 610 F.Supp.2d 564, 566-67 (S. D. Miss. 2009), the plaintiff was denied tenure in 2004 and filed her charge with the EEOC in 2006. The district court allowed her denial of tenure claim to proceed because plaintiff alleged it deprived her of an increase in salary. While stretching the limitations period, the court in effect construed a “discrete act” – the denial of tenure – to be a compensation decision because it denied the plaintiff a salary increase. Likewise, in Boaz v. Federal Express Corporation, 742 F.Supp.2d 925 (W.D. Tenn. 2010), the plaintiff alleged that she was being compensated less than a male employee for similar work that she performed from 2004 to 2008. During this time the plaintiff unsuccessfully attempted to be promoted to a higher pay grade. On June 12, 2008, she accepted a new position and thus the discrepancy in pay was eliminated. Thereafter, she filed a charge of discrimination April 8, 2009. The employer, characterizing her claim as a failure to promote, argued that only allegations of discriminatory conduct occurring after June 12, 2008 were timely under Title VII. The court disagreed deeming her claim to be an unequal pay claim because of the discrepancies in pay for similar work. Because she filed her claims within 300 days after receiving her last paycheck from her first position, her claims were considered timely.
“Compensation Decision or Other Practice”
Another area of uncertainty which is in a state of flux are the terms “compensation decision or other practice” and “other compensation”. In Bush v. Orange County Corr. Dep’t, 597 F. Supp. 2d 1293 (M.D. Fla. 2009), the court held that plaintiffs’ Title VII claims regarding demotions, alongside those involving pay reductions, were timely in light of the Act. In Mikula v. Allegheny County of PA, 583 F.3d 181 (3rd Cir. 2009), while finding the claim to be time-barred, the court determined that an employer’s failure to respond to an employee’s complaints about her failure to receive a raise was a compensation decision. In a 2011 case, Greenleaf v. DTG Operations, Inc., 2011 WL 883022 (S.D. Ohio Mar. 11, 2011), a district court in Ohio concluded that the term “other practice” in the Ledbetter Act covers “performance-based pay evaluation, business reassignments, and job classifications.” In regard to “other compensation”, courts have reached varying conclusions as to what is included in this definition. Employers can be sure that plaintiffs’ lawyers will aggressively push the boundaries in this area of uncertainty.
Recommendations for Employers
The question most asked by is employers is what can they do to mitigate their risks when they are not quite sure which acts will subject them to liability, when, or for how long. Here are some recommendations:
- Audit and regularly review your compensation policies and policies that may affect compensation such as classification policies, seniority policies, performance evaluation policies, benefits accrual policies and bonus accrual policies.
- Analyze compensation data to determine if any statistical disparities exist across gender, race and ethnic lines and make any appropriate adjustments that eliminate unexplained disparities.
- Ensure that there are clear, objective, nondiscriminatory reasons for differences in compensation.
- Develop objective criteria for performance evaluations and compensation decisions.
- Respond appropriately to all compensation-related complaints.
- Train those responsible for administering performance evaluations or making any compensation related decisions.