Employers Lilly Led-Better Watch out

Written by Michael C. Saqui and John F. McCarthy Monday, 09 February 2009 10:12

Harassment & Discrimination

The first bill President Barack Obama signed into legislation sent a clear message to employers-- watch out. Lilly Ledbetter started working for Goodyear Tire in 1979. She accepted an early retirement in 1998.

Ledbetter’s salary was typically determined annually and was based on performance evaluations given by her supervisors. Ledbetter’s reviews typically placed her near the bottom of the rankings amongst her co-workers. By the time Ledbetter retired there was a significant pay gap between her and her male counterparts. Ledbetter sued under Title VII of the Civil Rights Act of 1964, alleging unlawful pay discrimination on account of her sex because she made less money than her male counterparts. Ledbetter argued that each paycheck was a new discriminatory decision to pay her, based on the initial discriminatory setting of her pay.

The United States Supreme Court rejected Ledbetter’s argument applying a simple legal principle known as the "statute of limitations". The Supreme Court ruled that Ledbetter must file the claim with the Equal Employment Opportunity Commission (EEOC) within 180 days of the pay decision and not within 180 days of the receipt of pay. Ledbetter’s case gained national attention. Ledbetter spoke at the Democratic National Convention in 2008 and coincidentally, the “Lilly Ledbetter Fair Pay Act of 2009” was signed by Democratic President Barack Obama on January 29, 2009.

The new law amends Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Rehabilitation Act of 1973 and the Age Discrimination in Employment Act of 1967 to provide that the charge filing periods commence when:

• A discriminatory compensation decision or other practice is adopted;

• An individual becomes subject to the discriminatory decision or practice; or

• An individual is affected by an application of a discriminatory compensation decision or practice (including each time wages, benefits, or other compensation is paid).

Thus, the statute of limitations restarts each time an employee receives a paycheck based on a discriminatory compensation decision. The law is retroactive to May 28, 2007, the day before the Supreme Court’s decision in Ledbetter’s case.

COUNSEL TO MANAGEMENT:

The Lilly Ledbetter Fair Pay Act makes all compensation-based discrimination claims timely as long as one paycheck issued under the discriminatory practice falls within the limitations period. For example, Disgruntled Dana can sue Company C on February 2, 2009 for a paycheck she received on January 30, 2009, if Disgruntled Dana is affected by an application of a discriminatory compensation decision that Company C made in 1986.

The implications of the retroactive effective date are uncertain. The legislation may invite litigation from individuals who refrained from filing claims after the Supreme Court’s decision. The legislation could increase potential liability for damages. The legislation may permit plaintiffs, whose cases were dismissed on statute of limitations grounds after the Supreme Court’s decision, to reassert their claims.

Management wishing to minimize the risks of liability should consider:

• Auditing current pay documentation practices to determine whether there is sufficient documentation to support compensation decisions. Performance based specifics are essential to defending wage disparity claims;

• Developing objective, and measureable guidelines for compensation decisions and applying those guidelines consistently and uniformly;

• Creating a system of checks and balances to ensure that no one supervisor has unfettered discretion when making compensation decisions.

•  Reviewing their current documentation retention policies and investing in a scanner. Management may now need to retain such information for significantly longer than they have in the past.

•  Training all supervisors and managers regarding any policy modifications to ensure they understand:

           o Those policies and

           o Most importantly, the need to objectively support all compensation decisions.

•  Analyzing compensation data to determine statistical disparities across gender, race, or ethnic lines.

Management should continue to monitor our site for updates.

The goal of this article is to provide employers with current labor and employment law information. The contents should not be interpreted or construed as legal advice or opinion. For individual responses to questions or concerns regarding any given situation, the reader should consult with The Saqui Law Group at (831) 443-7100.