New Law is a Potential Minefield for Employers

The Lilly Ledbetter Fair Pay Act, which was signed into law today by President Obama, extends the time for an employee alleging pay discrimination to file a lawsuit.  The new law was drafted to overrule Ledbetter v. Goodyear Tire & Rubber Co., a case where the United States Supreme Court ruled that the statute of limitations for unequal pay discrimination claims begins running at the first instance of pay discrimination.  After working at Goodyear for nearly 20 years, the plaintiff learned that she had routinely been paid significantly less than men.  The Court ruled that she was barred from collecting back wages because she did not file her lawsuit within 180 days after the initial discriminatory decision.  The Act nullifies Ledbetter and makes clear that each discriminatory paycheck constitutes a new violation and resets the time for a plaintiff to file a lawsuit.  

While advocates of the Act applaud its passage, many opponents believe that it guts the statute of limitations and may cause significant problems for employers.  Employers may now face the prospect of having to defend the rationale for a pay disparity that began 5, 10, or 15 years ago.  To avoid this nightmare scenario, employers should review their document retention policies and practices.