The Lilly Ledbetter Fair Pay Act of 2009

The Lilly Ledbetter Fair Pay Act Of 2009

On January 29, 2009, President Obama signed into law the Lilly Ledbetter Fair Pay Act of 2009, which provides that an unlawful employment practice occurs not only when an employer makes a discriminatory decision about an employee’s compensation, but each time an employee receives a paycheck or other compensation affected by the discrimination. The Act was passed to essentially overturn the U.S. Supreme Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co., which held that the charge-filing deadline on wage discrimination claims begins to run on the date of the first allegedly discriminatory pay decision.

The Ledbetter Act 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 period (300 days in the case of Tennessee) commences when: (1) a discriminatory compensation decision or other practice is adopted; (2) an individual becomes subject to the decision or practice; or (3) 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 Act also provides that an aggrieved plaintiff can recover up to two years of back pay and other relief if discrimination with regard to compensation that occurred during the EEOC charge-filing period is similar to discrimination that occurred outside the charge-filing period. This is an expansion of the Supreme Court’s 2002 decision in National Railroad Passenger Corp. v. Morgan, which held that the EEOC charge-filing period might be tolled in harassment cases under similar circumstances.

The Ledbetter Act is retroactive to May 28, 2007, the day before the Supreme Court's Ledbetter decision, and applies to all pay discrimination claims pending on or after that date. Attempts made in the Senate to amend the bill to change the effective date so that the law would apply only to claims arising after its enactment were debated extensively, but failed. We anticipate that the retroactive application may be challenged by affected defendants on constitutional grounds.

The Act leaves many questions unanswered. It provides that an unlawful employment practice occurs when “a person” is affected by a discriminatory pay decision or other practice. This broad language could sanction pay discrimination charges filed by non-employees, such as the spouses of deceased workers, so long as those individuals claim they have been affected by the discriminatory practice. The House of Representatives rejected an amendment that clearly would have restricted the law’s application only to employees. It remains to be seen how the EEOC and the courts interpret this language.

The implications of the retroactive effective date of the Ledbetter Act also are uncertain. The legislation could cause individuals who had refrained from filing compensation discrimination claims in the 20-month period since the Supreme Court's ruling in Ledbetter to proceed with litigation. The legislation could also increase potential liability for damages. Additionally, the legislation may permit plaintiffs whose cases were dismissed on statute of limitations grounds after the Ledbetter decision to reassert their claims.

What does this all mean for employers? The Ledbetter Act effectively places a heightened priority on documenting decisions affecting pay. Employers will need to maintain indefinitely records related to pay, promotions, job assignments, layoffs, and other decisions that impact employee compensation. Otherwise, the employer will be unable to defend itself against future wage discrimination claims. Most importantly, employers must be especially vigilant about auditing their compensation practices and correcting the “effects” of allegedly discriminatory employment decisions made in the past. For a number of other reasons related to potential wage liabilities, we have begun recommending periodic audits of pay practices. The issues raised by the Ledbetter Act should be part of any audit of payroll and pay practices.