PUBLICATIONS

New Law Lengthens Time Period In Which To File Pay Discrimination Claims

2/9/2009

On January 29, 2009, President Obama signed the Lilly Ledbetter Fair Pay Act of 2009, the first legislative enactment of his presidency. The Act overturned Ledbetter v. Goodyear Tire & Rubber Co., a 2007 United States Supreme Court decision that strictly interpreted the time during which an employee could file a Title VII claim for pay discrimination.

As background, Title VII imposes a 300-day statute of limitations (180 days in some states without their own "little Title VII" statutes) on discrimination claims brought under the statute, which means that a claim must be filed within 300 days of an unlawful employment practice. Under the Ledbetter decision, the "unlawful employment practice" giving rise to a claim for discrimination was the original decision to discriminate regarding the rate of pay. Therefore, because Lilly Ledbetter had not filed her pay discrimination claim within 300 days of the decision to pay her a lower rate than her male colleagues, her claim was barred.

The new law sets forth a broader definition of "unlawful employment practice." Specifically, the Act provides that any time an individual is affected by application of a discriminatory compensation decision – including each time that wages, benefits, or other compensation is paid – the 300-day "clock" begins from that date. For example, assume that a discriminatory pay structure is imposed on an employee in 1989. If that employee remains employed and continues to receive paychecks tainted by the discriminatory scheme, the employee will not be barred by the statute of limitations from bringing a lawsuit in 2009, since each paycheck he or she receives begins a new 300-day period. The Act would not, however, permit an employee in this example to recover damages all the way back to 1989. Rather, the recovery of back pay is capped at two years under Title VII.

Additionally, the new law is retroactive, and is effective as of May 28, 2007 – the day before the original Ledbetter decision. The Act applies to discriminatory pay practices based on race, color, national origin, religion, sex, disability, and age. Remedies for discriminatory pay practices include back pay, emotional distress damages, attorneys' fees, and the possibility of recovering punitive damages.

Prior to the Supreme Court's Ledbetter decision, the U.S. Court of Appeals for the Ninth Circuit – which includes California – had already interpreted Title VII in a manner consistent with the new Act. Thus, the Act simply restores the longstanding application of the law in California. Although pay discrimination lawsuits are filed relatively infrequently, the amount of press coverage the Act has received may well result in an increase in the filing of these claims as employees pay closer attention to their rate of pay as compared that of to their coworkers.

Because the new law would permit a lawsuit based on a years-old or even decades-old pay decision, employers may wish to revisit their policies and practices regarding compensation levels. Employers who get sued will face additional challenges in attempting to explain, years after the fact, how and why they arrived at certain pay distinctions that may have persisted into the present. The Act thus makes it even more crucial for employers to implement reliable methods of documenting and storing compensation decision-making data. Some commentators are already advising employers to retain personnel files, even of former employees, essentially forever.