Statute of Limitations for Federal Wage Discrimination Claims Extended

The first bill signed by President Barack Obama makes good on a campaign promise to override a controversial 2007 U.S. Supreme Court Opinion concerning discrimination claims under federal law.  The Lilly Ledbetter Fair Pay Act of 2009 effectively extends the statute of limitations under which employees are able to sue for wage discrimination claims.  Under the Ledbetter Act, employees can now sue for wage discrimination up to six months after the employee receives his or her final paycheck – even if the discriminatory decision regarding the compensation was made years earlier.  The legislation will “take effect as if enacted on May 28, 2007.”

This legislation follows the 2007 Supreme Court case of Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007), in which Lilly Ledbetter, a long-time employee of Goodyear, alleged that the Company violated Title VII each time she received a smaller paycheck than her male counterparts.  An employee wishing to bring a suit under Title VII must file a charge within 180 days “after the alleged unlawful employment practice occurred.”  The Ledbetter Court determined the “unlawful employment practice” in that case occurred at the time Goodyear made its pay-setting decision, which occurred more than 180 days before Ms. Ledbetter had filed her charge.  Ms. Ledbetter was therefore time-barred from sustaining her claims. 

In response, the Ledbetter Act adds language to Title VII and other anti-discrimination laws, explicitly stating that an “unlawful employment practice” occurs “each time wages, benefits, or other compensation is paid,” if such wages have resulted from a prior discriminatory decision or other practice.  As such, if a discriminatory compensation decision is made, every subsequent paycheck affected by the decision revives an employee’s right to bring a wage discrimination claim within six months of receiving the paycheck.  The legislation does not change the limit on recovering back pay of up to two years.              

Although this legislation will have limited effect on California employees who are generally more likely to sue under state anti-discrimination laws, the political attention given to the Ledbetter Act is likely to instigate employee concern regarding compensation.  Accordingly, employers should review their compensation records to evaluate any variation in pay among employees in equal positions.  A review of this nature should assess the demographics of the workforce, including factors such as gender, age, disability, and race.  All discrepancies should be supported by ample documentary evidence of performance history, prior qualifications and skills, and any other legitimate, non-discriminatory reasons for the pay-setting decision.  Such a review should be provided by legal counsel, and proper steps should be taken to ensure the results of the assessment will remain privileged.