New Ledbetter Fair Pay Act Now In Effect

January 30, 2009

On Thursday, January 29, 2009, the Lilly Ledbetter Fair Pay Act became the first legislation signed into law by President Obama. Contrary to some press reports, the Act is not an “equal pay bill” or a “gender pay equity law,” although it may generate and revive a lot of pay discrimination claims, including but not limited to those alleging sex discrimination.

The express purpose of the Act is to reverse the United States Supreme Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007). In Ledbetter, the Supreme Court held, in a 5-4 decision, that the time for an employee to challenge discrimination in compensation begins to run from the time the discriminatory compensation action occurs. Ledbetter’s claim that her current pay was unlawful sex discrimination resulting from a discriminatory compensation action taken years before was, therefore, untimely. In overturning this ruling, the Act is not limited to sex discrimination claims. It reinstates all types of compensation discrimination claims based on the present paycheck effects of discriminatory actions that may have occurred years, or decades, in the past.

What Does The Act Do?

The Act amends Title VII of the Civil Rights Act of 1964 (“Title VII”), the Age Discrimination in Employment Act of 1967 (“ADEA”), the Americans With Disabilities Act of 1990 (“ADA”) and the Rehabilitation Act of 1973 (the “Rehabilitation Act”) to specify the time in which claims of compensation discrimination may be brought and how that statute of limitations will be calculated.

When Does The Time For Bringing Pay Discrimination Claims Now Begin to Run?

Under the new Act, the time for filing a claim of an unlawful employment practice with respect to discrimination in compensation occurs:

  • When a discriminatory compensation decision or other practice is adopted;
  • When an individual becomes subject to a discriminatory compensation decision or other practice; or
  • When an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice.

Thus, the Act makes a compensation discrimination claim timely under any of the primary federal employment discrimination laws if it is brought within the statutory charge filing period beginning on the date of the last paycheck that the employee contends was affected by a discriminatory compensation action, no matter when the discriminatory action occurred. Each successive affected paycheck restarts the period for filing a charge.

For What Period of Time May The Employee Claim Relief?

An employee may obtain relief, including recovery of back pay, for two years preceding the filing of a charge of discrimination, where the unlawful practices that occurred during the charge filing period are similar or related to unlawful discrimination in compensation that occurred outside the time period for filing a charge.

When Is The Ledbetter Act Effective?

The Act is in effect immediately and is retroactive to May 28, 2007 for all claims of discrimination compensation under Title VII, the ADEA, the ADA, and the Rehabilitation Act that are pending on or after that date.

What Should Employers Do?

Besides calling and working with their lawyer to ensure that any compensation analysis conducted in response to Ledbetter is privileged, employers should, at a minimum:

  • Review current compensation systems to determine whether they perpetuate the effects of potentially discriminatory compensation actions that have occurred in the past.
  • Consider options that will eliminate possible continuing effects of past compensation discrimination, or document why past decisions were in fact not discriminatory. This may include changing to new compensation systems based on current job duties, performance, market value or other non-discriminatory business factors that are not affected by past compensation decisions and practices.
  • Review record-keeping procedures with respect to compensation practices and decisions to make certain relevant records are preserved and available in the event the employer is required to defend claims that current pay is affected by old practices or decisions that are alleged to have been discriminatory.

For advice or assistance in complying with or responding to the Act, please contact any member of the McGuireWoods Labor & Employment or Employee Benefits teams.