• The Fair Pay Act and Discrete Employment Actions
  • June 1, 2009 | Authors: Daniel G. Prokott; Daniel G. Wilczek
  • Law Firm: Faegre & Benson LLP - Minneapolis Office
  • In a disturbing development for employers, plaintiffs are using the provisions of the Lilly Ledbetter Fair Pay Act to challenge discrete employment decisions, such as promotions, that would otherwise be time-barred. They seek to extend the limitations period by arguing that the time-barred decision continues to affect their compensation and that therefore every paycheck creates a new claim.

    Background

    The Lilly Ledbetter Fair Pay Act amended Title VII, the Age Discrimination in Employment Act, the Americans With Disabilities Act, and the Rehabilitation Act of 1973 to fix what Congress saw as a gap in the protection afforded by these laws against unlawful discrimination. Specifically, the Fair Pay Act was intended to allow persons to bring pay discrimination claims when their pay is affected now by a past discriminatory compensation decision or other practice, even if that decision was made or practice instituted outside the limitations period (typically 300 days).

    In Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618, (2007), the United States Supreme Court held that Ledbetter could not challenge allegedly discriminatory evaluations that were time-barred even though she claimed that those evaluations caused her to be paid less than similarly situated men. Congress concluded that the Supreme Court's decision undermined the protection of the discrimination laws and the Fair Pay Act, in effect, reversed the Supreme Court's decision.

    Case Law

    The legislation does not indicate that Congress also intended to change the well-established case law regarding the application of the limitations period to discrete employment actions. Before the Fair Pay Act, the courts had been clear that the limitations period runs separately for each "discrete act" of alleged discrimination, such as a promotion, demotion or discharge decision. Hence, an employee could not bring a claim that he was not promoted because of race, age or disability after the limitations period ran following the decision (typically 300 days). The limitations period was intended to ensure that claims be brought fairly quickly, before facts grew stale, memories faded, personnel changed and alleged damages grew to a large amount.

    Challenging Discrete Decisions

    Not surprisingly, plaintiffs are now using the Fair Pay Act to challenge discrete decisions, such as promotions, that would otherwise be time-barred. They seek to extend the limitations period by arguing that the time-barred decision continues to affect their compensation and that therefore each new paycheck creates a new claim. Some courts have accepted this argument. For example, in Gentry v. Jackson State University, 2009 WL 1097818, No. 3:07-CV-00584 (S.D. Miss. Apr. 17, 2009), the judge refused to dismiss a claim challenging a time-barred tenure decision because the plaintiff alleged that it continued to affect his compensation. The judge concluded that this allegation transformed the time-barred "discrete act" (promotion) into a "compensation decision" that can be the basis of a claim under the Fair Pay Act. Similarly, in Bush v. Orange County Corrections, 597 F.Supp. 2d 1293 (M.D. Fla. 2009), the court held that the claim based on a 16-year-old demotion decision was not time-barred because it allegedly affected the plaintiff's current pay (the claim was dismissed on other grounds).

    This interpretation of the special exception created by the Fair Pay Act for compensation claims threatens to vitiate the statute of limitations relating to discrimination claims, as the great majority of discrimination claims involve acts or decisions that affect compensation. We believe this interpretation is in fact contrary to Congress' intent and will force employers to defend decisions—and burden federal courts with numerous claims—that are many years, or even decades, old, made by a person whose memory has faded with time and where key witnesses may have changed employers, retired or died.

    What Employers Can Do

    We are not aware of any decision in Minnesota, Iowa or Colorado that has addressed this issue. But, the trend is disturbing. Although employers can hope that this trend in how some courts are interpreting that the Fair Pay Act is corrected, the early decisions reinforce the value of: (1) auditing your compensation practices; (2) correcting disparities; (3) carefully documenting the reasons justifying decisions that may affect compensation; and (4) revisiting your records retention practices related to documents concerning pay decision.