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Congress Returns Serve: The Lilly Ledbetter Fair Pay Act of 2009

by The Human Equation, Inc. on 2/10/2009
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Once upon a time, Lilly Ledbetter was a multi-millionaire.  Unlike a typical fairytale, however, Ms. Ledbetter was not left to live happily-ever-after with her newfound wealth.  Despite convincing a jury that her employer violated Title VII of the Civil Rights Act of 1964 by paying Ms. Ledbetter less than her male counterparts, the U.S. Supreme Court affirmed the dismissal of Ms. Ledbetter’s case against her employer.

In Ledbetter v. Goodyear Tire & Rubber Company, the Supreme Court essentially held that since Ms. Ledbetter waited too long to file her complaint with the Equal Employment Opportunity Commission (EEOC), her claims were barred.  The majority opinion suggests that the Court was bound by the text of Title VII to reject Ms. Ledbetter’s claims, stating that, “we must ‘give effect to the statute as enacted’” by the legislature.

Without conceding the majority’s position, the dissenting justices responded by stating that “the ball is in Congress’ court…to correct this Court’s parsimonious reading of Title VII.”  Wasting little time, Congress did precisely that.

Passing the House by a vote of 247-171, and the Senate by a vote of 61-36, the Lilly Ledbetter Fair Pay Act of 2009 (the “Act”) was signed by President Barack Obama on January 29, 2009.  And, any doubt that this law was not aimed squarely at the Court’s decision in Ms. Ledbetter’s case (other than the name of the law itself, of course) was immediately settled in the Act’s first Congressional finding, which provides:

The Supreme Court in Ledbetter significantly impairs statutory protections against discrimination in compensation that Congress established and that have been bedrock principles of American law for decades.  The Ledbetter decision undermines those statutory protections by unduly restricting the time period in which victims of discrimination can challenge and recover for discriminatory compensation decisions or other practices, contrary to the intent of Congress.

The passage of the Act was precipitated by the manner in which the Supreme Court ruled on Ms. Ledbetter’s Title VII pay discrimination claim.  Ms. Ledbetter, a long-time employee of Goodyear, discovered that discrepancies in annual pay raises resulted in a large pay disparity between her compensation and that of her male coworkers; a discrepancy that Ms. Ledbetter did not discover until the time of her retirement.  Upon discovering the discrepancy, Ms. Ledbetter filed a charge with the EEOC alleging discrimination in compensation under Title VII.

Under Title VII, an individual wishing to challenge an employment practice must first file a charge with the EEOC within either 180 or 300 days (depending on the state) after the alleged unlawful employment practice occurred—the charging period.  If an individual fails to do so, the individual may not thereafter pursue his or her claim in court.

This proved problematic for Ms. Ledbetter because she did not assert that Goodyear acted with discriminatory intent during the charging period.  Rather, she argued that her paychecks were unlawful because they would have been larger if she had been treated fairly prior to the charging period.  In essence, she suggested that each paycheck that paid her less than a man because of her sex is a separate violation of Title VII with its own charging period, regardless of whether the paychecks simply implement a prior discriminatory decision made outside the charging period.

On this point, the Supreme Court disagreed.  The Court held that the EEOC charging period is triggered when a discrete unlawful practice takes place—in this case, the discriminatory decision to pay Ms. Ledbetter less than her male counterparts that allegedly occurred well before the charging period.  According to the Court, a new violation does not occur, and a new charging period does not commence, upon the occurrence of a subsequent nondiscriminatory act (each paycheck) that causes adverse effects resulting from the past discrimination.

The Court succinctly stated that “current effects alone cannot breathe life into prior, uncharged discrimination,” and that Ms. Ledbetter “should have filed an EEOC charge within 180 after each allegedly discriminatory pay decision was made and communicated to her.”  The four dissenting Justices disagreed with this advice.

The dissent noted that pay disparities often occur in small increments, and that unlike discrete adverse actions, such as termination, it is only when a pay disparity becomes apparent and sizeable that an employee “is likely to comprehend her plight and, therefore, to complain.”  The dissent’s skepticism that compensation discrimination will typically manifest within Title VII’s relatively short charging period was echoed in the Act by Congress’s finding that “the limitation imposed by the Court on the filing of discriminatory compensation claims ignores the reality of wage discrimination.”  Hence, the passage of the Act.

The Act provides that, with respect to unlawful discrimination in compensation, an unlawful employment practice occurs:

  • when a discriminatory compensation decision or other practice is adopted;
  • when an individual is subjected to a discriminatory compensation decision or other practice; or
  • 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.

Thus, the Act expressly rejected the Supreme Court’s holding in Ms. Ledbetter’s case, and essentially restarts the charging period each time an employee receives a paycheck based, in whole or in part, on discrimination.  The Act also clarifies that an aggrieved employee may be entitled to receive back pay for up to two years preceding the filing of the charge with the EEOC.

Although Ms. Ledbetter’s claim was filed under Title VII, the Act itself applies to claims brought under Title VII, the Age Discrimination in Employment Act, title I of the Americans with Disabilities Act, and sections of the Rehabilitation Act.  Moreover, employers should not expect a grace period to come to terms with the Act’s requirements because the Act takes effect as if it was enacted on May 28, 2007 (the day before the Supreme Court issued its decision in Ms. Ledbetter’s case), and it applies to all cases that are pending on or after that date.

Despite the Act’s language clarifying the resetting of the charging period after each discriminatory paycheck, it is unclear what impact it will have in practice.  While many believe the Act will open the floodgates to discriminatory compensation claims, as pointed out by the dissent in Ms. Ledbetter’s case, the reality is that federal appellate courts overwhelmingly consider each discriminatory paycheck to constitute a cognizable harm.  The EEOC has maintained a similar view as well for some time.  Thus, some believe that the primary impact of the Act was to overturn Ledbetter and preserve the status quo.  Only time will tell.

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