• Pay Fair....or Else
  • March 18, 2010 | Authors: Don L. Hearn; Leigh Taylor White
  • Law Firm: Glankler Brown, PLLC - Memphis Office
  • On January 29, 2009, the Lilly Ledbetter Fair Pay Act (the “Act”) became the first bill signed into law by President Obama. This law nullifies the May 2007 decision in Ledbetter v. Goodyear Tire & Rubber Co., wherein the United States Supreme Court held that a female employee of Goodyear was precluded from asserting claims of sex discrimination under Title VII of the Civil Rights Act of 1964 because she failed to timely file her charge with the Equal Employment Opportunity Commission (“EEOC”). Ledbetter, an area manager in a Goodyear Tire plant in Alabama from 1979 to 1998, started at the same salary as her male counterparts. During her tenure with Goodyear, Ledbetter received raises based on performance evaluations. Early in her career, however, she received lower raises than her male counterparts and the differences started to accumulate. When Ledbetter took early retirement in November of 1998, she was earning $6,700.00 a year less than the lowest-paid male area manager. Since her pension was tied directly to her salary, it was lower than that of her male counterparts as well. Ledbetter learned of this discrepancy toward the end of her career through an anonymous tip and filed a charge of discrimination with the EEOC alleging pay discrimination under Title VII and the Equal Pay Act. Ledbetter believed that over the course of her almost twenty years of employment, she was paid less than male co-workers because she was subjected to poor performance evaluations based on her sex.

    Ledbetter ultimately won a jury verdict in federal court, where she argued that pay discrimination occurs with each paycheck, just like hostile workplace discrimination occurs with each affront. The appeals court, however, did not agree that each paycheck constituted a separate act of discrimination and the case traveled to the United States Supreme Court. Five of the nine Supreme Court justices agreed with the Court of Appeals. Justice Alito, writing for the Court, stated that “a pay-setting decision is a discrete act that occurs at a particular point in time.” For that reason, the Court held that Ledbetter should have filed her Title VII claim with the EEOC within 180 days of the initial employment action she contended led to the pay disparity. The dissenting judges, like the EEOC, thought it unfair to hold Ledbetter to a 180-day statute of limitations because information about co-workers’ salaries is typically a closely guarded secret.

    Less than a month after the Supreme Court’s Ledbetter decision, Congress introduced the Lilly Ledbetter Fair Pay Act of 2007 for the express purpose of overturning that decision. The Act, which has now become law, restores the former position of the Equal Employment Opportunity Commission (the “EEOC”) that each paycheck which delivers compensation based on a discriminatory decision is a wrong that is actionable under the federal equal employment opportunity statutes, regardless of when the discrimination began. While combating gender-based pay discrimination was the impetus for this legislation, the Act broadly prohibits pay discrimination based on membership in all protected categories under federal law, including discrimination prohibited by Title VII of the Civil Rights Act of 1964, and the Age Discrimination in Employment Act of 1967, by extending the charge-filing period under each law, among other changes. Additionally, the law is retroactive to May 28, 2007, and is not just aimed at pay, but also at “practices” that affect pay.

    The Department of Labor has not yet issued regulations providing guidance on compliance with the Act. And because the Act is so new, case law interpreting the Act’s provisions is not yet available. Consequently, it will be important for employers to stay abreast of any regulations promulgated and the case law as it evolves in this area to see what interpretations are given to any ambiguous terms used in ¿the Act. For example, the term “practices” could mean any employment practice that affects compensation, or could be limited to specific compensation practices like the delivery of a check or other form of payment. Similarly, a “person” could be defined to mean an employee or immediate family member of an employee, thus creating a whole new class of plaintiffs in employment cases.

    The Fair Pay Act is a likely sign of things to come from the Obama administration. Employers nationwide should take steps to evaluate or re-evaluate existing compensation policies and practices, including a review of how a particular compensation grading system is designed and how the system is implemented in practice. It is now critical under the current administration for employers to ensure that their policies and practices effectively combat unlawful discrimination, specifically with respect to issues relating to compensation, and that their policies are implemented meaningfully and in a manner that accomplishes their goals.