Lilly Ledbetter Act of 2009 is now the law in the U.S.
On January 30, 2009, President Obama signed the Lilly Ledbetter Fair Pay Act of 2009 (“Ledbetter Act”). The new law amends the following statutes already on the books: Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967 (“ADEA”) the Americans with Disabilities Act of 1990, and the Rehabilitation Act of 1973. It is an unusual piece of legislation because the Ledbetter Act applies retroactively to claims pending on or after May 28, 2007 and it also overturns the U.S. Supreme Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co., in which the justices held that an unlawful employment act occurs only when the discriminatory compensation decision is made and not each time a paycheck is issued. The act also provides that the statute of limitations for claims of discrimination in compensation is re-started each time an employee is affected by application of a discriminatory compensation decision or practice.
Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007), is an employment discrimination decision of the Supreme Court of the United States.
In 1979 Lilly Ledbetter, the plaintiff, began work at the Goodyear Tire and Rubber Company in its Gadsden, Alabama location, a union plant. During her years at the factory as a salaried worker, raises were given and denied based on performance assesstments. All merit increases had to be substantiated by a formal evaluation. In March 1998, Ledbetter inquired into the possible sexual discrimination of the Goodyear Tire Company. In July she filed formal charges with the Equal Employment Opportunity Commission. In November 1998, after early retirement, Ledbetter sued claiming pay discrimination under Title VII of the Civil Rights Act of 1964 and the Equal Pay Act of 1963. She started with the same pay but by retirement, she was earning $3,727 per month compared to 15 men who earned from $4,286 per month (lowest paid man) to $5,236 per month (highest paid man).
In the trial the jury found for Ledbetter and awarded back pay and damages. Goodyear appealed, arguing that all claims to damages before September 26, 1997 were void due to the statute of limitations placed on discrimination claims. The Supreme Court agreed and Justice Alito wrote for the five-justice majority that employers are protected from lawsuits over race or gender pay discrimination if the claims are based on decisions made by the employer more than 180 days ago.The Supreme Court did not rule on whether this was discrimination, just that the statute of limitations to sue barred the majority of her claims for being too old.
The Ledbetter Act overturned the decision. Specifically, Congress said “For puposes of this section, an unlawful employment practice occurs, with repsect to discimination in compensation in violation of this [Act], when a discriminatory compensation decision or other practice is adopted, when an individual becomes subject 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 decision or other practice.”
The new law potentially expands the scope of liability and damages for employers in discrimination cases. Arguably, it permits employees to file claims years after a decision
is made based on its ongoing effect on the employee’s compensation. Further, the “other practice” language will allow plaintiffs’ attorneys to argue that the Act encompasses all types of employment decisions that affect compensation, including employee training and development, promotions, demotions, job classification, and job assignment decisions.
The likely consequence of the Ledbetter Act will be to increase the number of discrimination suits filed. Employers would be wise to review their employment policies and procedures, including their document retention policies as well as the compensation levels and pay scales.