Is Ledbetter Fair Pay Act Needed?

Last week, I discussed the Supreme Court’s Ledbetter decision and the criticism of it that led to the introduction of corrective legislation in the form of the Fair Pay Act.

(That Act was blocked by Republicans in the Senate, but is likely to be reintroduced if the political balance shifts significantly this fall.)

Today, I’ll cover some reasons why I believe the impact of Ledbetter on employees is not as harsh as critics claim, and why compensation discrimination is not as different from other types of job discrimination as they claim.

First, let’s look at some of the inherent limitations of the reach of Ledbetter.

The “Loopholes”

The urgency of legislative change is diminished when the following points are all considered (quoting the “Hot Topic” publication about the Ledbetter case by the American Bar Association’s Section of Labor and Employment Law.

The Court’s ruling does not doom all compensation discrimination cases in which the plaintiffs have received unfairly low pay for more than 180 days. The majority explicitly limited its holding to “disparate-treatment pay cases,” excluding disparate impact claims from its coverage.

The majority also distinguished cases involving discriminatory “pay structures,” as opposed to individualized compensation decisions.

These limitations suggest that this ruling need not affect many class-wide pay disparity cases.

An interesting passage from Ledbetter is the one referred to above mentioning discriminatory “pay structures”:

[An] employer violates Title VII and triggers a new EEOC charging period whenever the employer issues paychecks using a discriminatory pay structure.

But a new Title VII violation does not occur and a new charging period is not triggered when an employer issues paychecks pursuant to a system that is “facially nondiscriminatory and neutrally applied.” . . .

The fact that precharging period discrimination adversely affects the calculation of a neutral factor (like seniority) that is used in determining future pay does not mean that each new paycheck constitutes a new violation and restarts the EEOC charging period.

This makes the following a critical question:

What is a “pay structure” and when does it become discriminatory?

Perhaps a “pay structure” is the aggregate distribution of pay rates for a particular job or set of jobs.

And perhaps a structure “becomes” discriminatory if management becomes aware of an apparent inequity along the lines of gender or race and fails to remedy it.

At this point, arguably, the system can no longer be said to be “facially nondiscriminatory and neutrally applied.” There might be case to be made that it was discriminatorily applied, intentionally, from that point forward.

So perhaps bringing an old, otherwise time-barred inequity to the employer’s attention could, in a certain sense, revive the claim.

Another important issue was well summarized by a reader’s comment on another blog post:

Pay discrimination cases can continue to be brought under the Equal Pay Act (for sex discrimination) and 42 U.S.C. 1981 (for race discrimination) even if they are time-barred under Title VII.

Michael Fox of the blog “Jottings By An Employer’s Lawyer” made three other excellent points:

The press has not frequently enough pointed out that more than half of the states have deferral agencies which means the time period for filing a claim is 300 days not 180.

And for those who claim that employers will hide their discrimination by prohibiting employees from talking about their wages — they may do so, but they do it in violation of another law, the National Labor Relations Act.

They of course also risk extending the statute of limitations under other equitable doctrines of “waiver, estoppel and equitable tolling.”

A Need For Legislative Change?

There may be some legitimacy to the claim that six months (or even 300 days) is not a long enough charge-filing period, especially because roughly a third of companies do prohibit employees from divulging their salaries to one another. But how different is this than with other types of discrimination?

Uniqueness of Pay Discrimination?

Justice Ginsburg’s dissent in Ledbetter emphasized what she considered to be unique aspects of pay discrimination:

• “Pay disparities often occur, as they did in Ledbetter’s case, in small increments; cause to suspect that discrimination is at work develops only over time.”
• “Comparative pay information . . . is often hidden from the employee’s view.”
• In contrast, adverse actions “such as termination, failure to promote, . . . or refusal to hire,” all involve “fully communicated discrete acts, ‘easy to identify’ as discriminatory.” According to Justice Ginsburg, the employee knows immediately when these events occur, they “are generally public events, known to co-workers,” so “an employee can immediately seek out an explanation and evaluate it for pretext”; whereas “[c]ompensation disparities . . . are often hidden from sight.”

So if the issue is that pay disparities are often hidden:

1. Why would this justify a blanket special rule for all pay disparities, even those that are not hidden, rather than a “discovery” rule that would require prompt filing of a charge upon discovery of such disparities?

2. What sense does it make to say that “cause to suspect that discrimination is at work develops only over time”? If you don’t know what anyone else is making, you don’t know. It’s not time that changes this, but specific knowledge of someone else’s pay, again arguing for a “discovery” rule, not a blanket and indefinite expansion of time limits.

Now, what about adverse actions “such as termination, failure to promote, . . . or refusal to hire“?

It is true that the individual knows an action is occurring in which other persons are treated differently, i.e., promoted, hired, or not fired, whereas with pay discrimination even this basic fact is often unknown.

But does this render them able to “immediately seek out an explanation and evaluate it for pretext”? Not in the real world in which I work. There’s often only one good way to do this: file an EEOC charge followed by a lawsuit.

You see, just as employers prefer to encourage or mandate secrecy about pay differences, they also prefer not to publicize sensitive and potentially incriminating details about these other types of employment decisions, such as discrepancies by race or gender in rates of hire or promotion.

So, lack of adequate information upon which to evaluate possible discrimination in these “fully communicated discrete acts” is often every bit as problematic for potential claimants as in the case of compensation discrimination.

And, just as one may learn years after the fact that one’s male or white coworkers were far better paid, one may also learn years after the fact that male or white coworkers were disciplined much more leniently or promoted with inferior qualifications. Employees just don’t hold all the cards on these facts, especially in larger organizations. That’s what an EEOC investigation is for.

And, by the way, the lack of information on compensation upon which Justice Ginsburg and the Fair Pay Act proponents dwell is far from complete in today’s more transparent business environment. A great deal of information is available for pay comparison purposes. Not necessarily the same company, but same geographic area, industry, and job title. “Salary calculators based on vast databases are readily available on the Internet. And the taboo on pay discussions is falling.

Such information should be enough to raise a question of possible discrimination if there is a significant discrepancy.

There is again a strong parallel to other discriminatory acts. Often, a terminated employee who files a discrimination charge has but one reason for suspecting discrimination — the conviction that they were not treated fairly and didn’t deserve to get fired. They have no idea of why it would be a matter of race, sex, etc. One who becomes convinced that they are not being paid fairly and that they deserve more, is in the same boat.

Comparison to Hostile Environment Harassment

In her dissent in Ledbetter, Justice Ginsberg also compared pay discrimination to hostile environment harassment claims, in which Supreme Court precedent recognizes that “[a] hostile work environment . . . typically comprises a succession of harassing acts, each of which may not be actionable on its own.”

For this reason, the Court has held that as long as “an act contributing to the claim occurs
within the filing period, the entire time period of the hostile environment may be considered . . . for the purposes of determining liability.”

I agree that the comparison to sexual harassment is worth considering, but find it leads elsewhere.

In a harassment case, it is true that an employee who does not complain about the initial incidents of harassment will not find the claim time-barred for that reason in every instance.

However, such an employee is likely to lose the case on the merits, as the law requires that the employee have promptly complained, in the case of harassment by a supervisor, or be able to prove the employer knew or should have known of the harassment, in the case of harassment by a coworker (which is tough to prove if the employee didn’t complain).

So, in effect, in harassment situations, employees are expected to complain promptly, giving employers an opportunity to correct the situation.

Ledbetter has a similar effect of requiring employees to raise pay discrimination concerns promptly, giving employers an opportunity to correct the situation before extensive back-pay liability has accrued.

The Fair Pay Act would allow the opposite: employees could sit on their rights, accruing up to two years of back pay, even if they did have knowledge of a pay inequity.

That is neither good law nor good policy. Which is not to say I feel the same way about some form of a “discovery rule,” running the charge-filing period from discovery of crucial evidence of discrimination, at least if it can be shown the employer actively prevented such discovery.

Photo credit: Patty 74_99 via flickr