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Lilly Ledbetter Fair Pay Act

Introduction

On January 29, 2009, President Barak Obama signed into law the Lilly Ledbetter Fair Pay Act of 2009. So, what is the Lilly Ledbetter Fair Pay Act (Fair Pay Act)? Well, the Fair Pay Act states that an employee can file a lawsuit against his or her employer for every "unlawful employment practice" related to compensation, including every check in which an employee is underpaid. In other words, every time an employee receives a paycheck based on an unlawful employment practice (such as being underpaid), that paycheck constitutes a new cause of action.

The Fair Pay Act overturned the U.S. Supreme Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co, 550 U.S. 618 (2007), which held that employees were required to file pay discrimination lawsuits against their employers within 180 days (or 300 days under certain state laws) of an employer’s initial discriminatory compensation decision. So, for example, if an employer underpaid an employee from his or her date of hire, that employee would only have 180 days (or 300 days under certain state laws) to file a lawsuit against the employer based on the employer’s decision to underpay the employee – no matter how long the employee worked for the employer. If this still sounds a little confusing, we’ll go over an example below to clarify how it works.

Old Law	New Law
January 1, 2009 Pay Violation January 15, 2010 Pay Violation	January 1, 2009 Pay Violation January 15, 2009 Pay Violation
180 days to file discrimination action against the company from the initial pay violation (e.g. by June 30, 2009).	180 days to file discrimination action against the company. Each violation creates a new right to file an action (e.g. by June 30, 2009 or by July 15, 2009).

As you can see, under the new law, each violation creates a new right to file an action for pay discrimination. This is in contrast to the old law where the female employee would have to had filed her discrimination claim based on the date of the very first pay violation.

In this article, we’ll explore the facts behind the Fair Pay Act, how the Fair Pay Act works, and show some ways in which employers can comply with the Act.

Next, we’ll go over the facts behind the Fair Pay Act.

Facts Behind the Fair Pay Act

Lilly Ledbetter worked as an employee at Goodyear Tire & Rubber Company for almost 20 years from 1979 to 1998. Around the time Ledbetter retired from Goodyear, she filed a charge with the Equal Employment Opportunity Commission (EEOC) alleging pay discrimination because from time to time over the course of her career she received lower pay increases than her male co-workers. Ledbetter alleged that she worked for Goodyear for about 19 years before discovering that Goodyear paid her significantly less than her male counterparts with the same or less experience.

The main contention of the case came when Ledbetter argued that each check she received while employed at Goodyear for almost 20 years constituted a new act of discrimination, which reinitiated the 180-day statutory filing period. However, Goodyear argued against Ledbetter and said that the act of pay discrimination could only have occurred one (1) time – the first time Goodyear made the decision to pay her less than her male co-workers toward the beginning of her employment.

Timeline:

1979: Goodyear hires Lilly Ledbetter.
1979 – 1980: Goodyear makes decision to pay Ledbetter less than male co-workers.

180 day statute of limitations: Ledbetter has 180 days from the date Goodyear made its decision to pay her less to file a claim against Goodyear.

1980 – 1998: Ledbetter receives paychecks from Goodyear for around 20 years at pay slightly less than her male counterparts.

Arguments made by both sides:

Goodyear argues that Ledbetter had to have filed her charge in the early 1980s – 180 days after any alleged discriminatory decision to pay her less than her male co-workers.

Ledbetter argues that she could have filed a charge against Goodyear up until the last paycheck she received sometime around 1998.

Decision of Court:

The U.S. Supreme Court, in a 5-4 decision, found for Goodyear. The Court held that Ledbetter’s claims had to be filed within 180 days of the initial compensation decision, i.e. the first time Goodyear made a decision to pay her less than her male co-workers (in the early 1980s). This decision precluded lawsuits by plaintiffs who alleged ongoing pay discrimination but did not discover it until years later. However, the Court did leave open the possibility that a plaintiff could sue beyond the 180-day period if the plaintiff did not, and could not, have discovered the discrimination earlier.

In 2009, the 111th Congress and President Obama overturned the court and said that employees can file claims against employers for every act of discrimination, including each paycheck received based on a discriminatory act.

Next, we’ll explore how the Fair Pay Act works.

How the Fair Pay Act Works

The Lilly Ledbetter Fair Pay Act overturns Ledbetter and amends Title VII of the Civil Rights Act of 1964 ("Title VII"), the Age Discrimination in Employment Act ("ADEA"), the American with Disabilities Act ("ADA") and the Rehabilitation Act to clarify at which point in time discriminatory actions qualify as an "unlawful employment practice." According to the Lilly Ledbetter Fair Pay Act, unlawful conduct occurs when:

an employer adopts a discriminatory compensation decision or other practice;
an individual becomes subject to the decision or practice; or
an individual is affected by application of the decision or practice, including each time compensation is paid.

As discussed in the previous section, number 3 above allows an employee to file a claim against his or her employer every time a payment is received which is based on an employer’s discriminatory pay decision. Therefore, as long as an employee files a charge within 180 days of any discriminatory payment, his or her charge will be considered timely. Additionally, employees who are victims of pay discrimination may receive up to two years of back pay.

Next, we’ll go over how employers should comply with the Fair Pay Act.

How Employers Should Comply with the Fair Pay Act

The Fair Pay Act will likely increase litigation because employees can file claims against their employers for every paycheck based on an "unlawful employment practice." Employers should consider some of the following ways to minimize violating the Fair Pay Act:

Review All Compensation Decisions: To ensure that supervisors do not violate the law. Employers could also review compensation statistics to see if any differences exist across sex, race, or ethnic backgrounds. Employers should also consider implementing a new review system to see that decisions comply with the Fair Pay Act.

Create Objective Guidelines for Compensation Decisions: To show that decisions are uniform and not based on classification such as sex, race, or ethnic backgrounds.

Retain Compensation Documents Longer: Employers likely will need to retain compensation related documents for as long as an employee receives any form of payments or benefits, i.e. 401(k). Employers should consider using electronic storage of such records.

Finally, we’ll conclude this article with a summary of what we’ve discussed and some additional considerations.

Conclusion

In this article, we discussed the background of the Lilly Ledbetter Fair Pay Act, how it works, and how employers should comply with it. The Fair Pay Act will likely increase litigation because employees can file a claim based on every unlawful employment practice, including each paycheck they receive based on a discriminatory decision.

Additionally, the Fair Pay Act indicates that any type of compensation which is based on a discriminatory act constitutes an act of discrimination. So, the next question becomes whether benefits received by employees, such as 401(k) payments, could constitute a new act of discrimination every time an employee receives a benefit payment. There will likely be more litigation to solve such issues. In the meantime, employers should take all measures to comply with the Lilly Ledbetter Fair Pay Act.