The Fair Pay Act allows employees to sue at the time of an alleged discriminatory pay practice, or at any time thereafter if the employee is affected by that compensation decision.
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PRESIDENT SIGNS
FEDERAL FAIR PAY ACT
EXPECT MORE LITIGATION,
SAY LEGAL EXPERTS
By Christopher W. Olmsted
In a move that could lead to a significant increase in employment litigation, on January 29th President Obama signed the Lilly Ledbetter Fair Pay Act of 2009 into law. Notably, it was the first act that he signed into law upon taking office. The Act negates a 2007 U.S. Supreme Court decision relating to the statute of limitations (deadline to sue) for pay discrimination claims. The case was titled Ledbetter v. Goodyear Tire & Rubber Co., Inc.
First, The Old Rule
To understand the significance of the Fair Pay Act, a brief overview of the Ledbetter decision is in order.
Under Title VII, employees generally must file a discrimination charge with the EEOC within 180 days of the alleged illegal act. Next, after the EEOC issues a right-to-sue notice, the employee then has 90 days to file suit.
Lilly Ledbetter was a supervisor at Goodyear Tire and Rubber's plant in Gadsden, Alabama, from 1979 until her retirement in 1998. For most of those years, she worked as an area manager. Initially, Ms. Ledbetter's salary was in line with the salaries of men performing substantially similar work. But she received several poor performance reviews and her pay suffered. Over time, she earned less in comparison to the pay of male area managers with equal or less seniority. At the end of 1997, Ledbetter was the only woman working as an area manager along with 15 male counterparts. Ms. Ledbetter was paid $3,727 per month; the lowest paid male area manager received $4,286 per month, the highest paid, $5,236. Ms. Ledbetter retired in 1998. Then she sued.
Ms. Ledbetter claimed that during the course of her employment, her supervisors gave her poor performance evaluations based on her sex--a violation of Title VII--which evaluations resulted in her pay not increasing as it would have if she had been evaluated fairly. According to Ms. Ledbetter, those past evaluations, each of which occurred outside the limitations period, decreased the level of her pay then and throughout her subsequent employment, so that by the time she retired years later, she was earning significantly less than her male colleagues. The jury found for Ms. Ledbetter on her Title VII pay discrimination claim and awarded her backpay and damages.
The U.S. Supreme Court determined that Ledbetter sued too late; she should have sued years earlier when the alleged discriminatory wage decisions took place. No allegedly illegal conduct took place within the last period of her work, during the limitations period. “The EEOC charging period is triggered when a discrete unlawful practice takes place,” wrote Justice Alito. “A new violation does not occur, and a new charging period does not commence, upon the occurrence of subsequent nondiscriminatory acts that entail adverse effects resulting from the past discrimination.”
The New Rule
The Fair Pay Act allows employees to sue at the time of an alleged discriminatory pay practice, or at any time thereafter if the employee is affected by that compensation decision. At the latest, employees will still have to file a charge with the EEOC within 180 days of termination.
Section (3)(A) of the Act states:
“For purposes of this section, an unlawful employment practice occurs, with respect to discrimination in compensation … 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.”
The Act permits employees to recover up to two years in back pay.
The Act extends the time to sue not only for instances of sex discrimination, but also other Title VII categories, including race, color, religion and national origin. The Act also amends the ADA and the ADEA so that the same rule applies to disability discrimination and age discrimination claims.
EEOC Elated
In reaction to the new law, the EEOC issued a gushing press release. “The Commission celebrates this important piece of civil rights legislation, especially because it was the first bill signed into law by President Obama,” said Chairman Ishimaru. “The Act is a victory for working women and all workers across the country who are shortchanged by receiving unequal pay for performing equal work.”
The EEOC expressed vindication. “The Act reinstates the EEOC’s longstanding position on the timeliness of filing pay discrimination charges, a position that had been overturned by the Supreme Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co., Inc.”
The EEOC will now use the Fair Pay Act to pursue more employers. Chairman Ishimaru “intends to enhance enforcement in this area, in addition to increasing public outreach and education.” The EEOC already receives upward of 5,000 wage bias charge filings nationwide each year under all the statutes it enforces. Expect more.
What About Existing Claims?
The Act is retroactive to May 28, 2007, the day before the Supreme Court decided the Ledbetter case. Therefore any potential or existing claims that would have been “dead” are now resurrected. It is unknown what will happen to all of the litigated cases that have been dismissed since 2007 (including Lilly Ledbetter’s).
What About California Law?
The federal legislation does not affect California law. There remains some uncertainty over what is the equivalent rule in California.
In California, the Fair Employment and Housing Act (“FEHA”) is comparable to Title VII. Among other rights, it protects employees from discriminatory pay practices. FEHA does not expressly address the Ledbetter question. It provides that within one year of an alleged discriminatory act, employee must file a charge with Department of Fair Employment & Housing (“DFEH”). After the DFEH issues a right-to-sue letter, the statute of limitations for a civil lawsuit is one year.
California courts interpreting FEHA have created the “continuing violation” doctrine. A “continuing violation” may be found where the employer's unlawful conduct begins before the limitations period and continues in effect during that period. Where the violation consists of a course of discriminatory conduct against a single individual, the employer may be liable for the entire course of conduct, including acts predating the statutory period. Plaintiff attorneys argue that a discriminatory pay practice “counts” as a “continuing violation” because the effects—lower wages—are felt each new pay period. However, there are court decisions, particularly the 2001 California Supreme Court decision in Richards v. CH2M Hill, Inc., suggesting that such a theory is not the law in California.
Another pay disparity law in California can be found in the Equal Pay Act, Labor Code section 1197.5. This section is limited to wage discrimination on account of sex. Aggrieved employees can file a charge with the Labor Commissioner, or file suit in court within two years two years after the violation (three years if the violation was “willful”). Any employer who violates the Act is liable to the employee affected in the amount of deprived wages, and in an additional equal amount as liquidated damages. Although the Labor Code does not address the Ledbetter question, at least one published case seems to indicate that the California rule for Equal Pay Act claims is similar to that found in the new federal Act.
Perhaps recognizing the uncertainty in California law, the California legislature passed AB 437 in the fall of 2008. The legislature sought to reject any interpretation of California law that followed the U.S. Supreme Court’s decision in Ledbetter v. Goodyear. However, Governor Schwarzenegger vetoed the bill, and the question remains open.
Fair Pay Act Practical Tips
Review Pay Practices. As always, employers must avoid pay decisions based on sex or any other protected category. With the Fair Pay Act in play, employers should redouble their efforts. Talk to H.R. professionals or legal counsel to ensure that your company’s pay scale is fair, consistent and lawful. Consider implementing a written policy regarding pay policies. Train managers and supervisors regarding pay raise practices.
Audit Pay Levels. Certainly there are legitimate reasons for differences in pay. Experience, training, skill, demand in a particular market, cost of living, seniority, etc. Determine the rationale for differences. Inadvertant discrepancies in pay should be detected and corrected if appropriate.
Keep Records. Review your record retention policies relating to pay and personnel records. Pay decisions made years ago could remain relevant under the new Act. Why was employee A given a 2% raise in 2001 when others received a 4% raise? You will need records to prove it.
Contact Chris Olmsted at (619) 682-4040 or cwo@barkerolmsted.com for help with compliance issues.
More Legal Update articles.
Download entire February 2009 Legal Update in PDF format.
This article is intended as a brief overview of the law and are not intended to substitute as legal advice. Any questions or concerns regarding any statute or case law should be addressed to a licensed attorney. Copyright © 2009 by Barker Olmsted & Barnier, APLC. San Diego, California. All rights reserved.
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