- New Law, New Scrutiny on Pay Practices
- March 12, 2009
- Law Firm: Leonard, Street and Deinard, Professional Association - Minneapolis Office
Employers have yet another reason to audit their pay, benefits and recordkeeping practices as a new law widens the time period for an employee to file a federal charge alleging pay discrimination on the basis of gender, race, national origin, age or disability.
The Lilly Ledbetter Fair Pay Act of 2009 (Public Law 111-2) overturns the 2007 Supreme Court decision Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007), in which the Court narrowly interpreted the statute of limitations for a pay discrimination claim to the 180- or 300-day period after the first allegedly discriminatory act of compensation occurred. Under the Court's approach, employees who failed to file a claim within that time period could not make a claim for pay discrimination in future years.
Rejecting this limitation, the Ledbetter Act requires that the period for filing a charge starts with each allegedly discriminatory act of compensation. For instance, an employee who claims pay discrimination on the basis of gender now starts a new time clock for filing a charge of discrimination each time the employee receives an allegedly discriminatory paycheck.
Because compensation decisions may now be challenged many years after the decision was actually made, it is important that employers create appropriate documentation of the nondiscriminatory business reasons for decisions that affect or may affect compensation, especially when such decisions may result in one employee being paid more than another. Of course, employers should review their pay and benefit practices, and any current pay or benefit disparities between employees holding the same job, to verify that decisions are based on appropriate factors such as educational requirements, years of service or other criteria.
The Lilly Ledbetter Fair Pay Act of 2009 applies retroactively to May 28, 2007. The amount of back pay available, however, is limited to two years.