Lilly Ledbetter Fair Pay Act Signed by President Obama
Today (January 29, 2009) President Obama signed into law the Lilly Ledbetter Fair Pay Act, a law named for an Alabama woman who lost her pay-discrimination case at the Supreme Court on the basis that she had not filed a timely charge of discrimination. The Ledbetter Fair Pay Act directly overrides this much-criticized Supreme Court decision.
This post provides background on the Ledbetter case, summarizes the Ledbetter Fair Pay Act, and offers a few thoughts on its implications.
The Supreme Court’s Ledbetter Decision
In Ledbetter v. Goodyear Tire & Rubber Co., decided in May 2007, the Supreme Court ruled that employees claiming intentional pay discrimination must do so by filing an administrative charge of discrimination within 180 or 300 days (depending on state law) of the original discriminatory act — not 180 or 300 days of their last discriminatory paycheck.
Specifically, the Court ruled that Lilly Ledbetter, the lone female supervisor at a Goodyear tire plant, did not file her lawsuit in time because it concerned pay disparities based on discriminatory decisions made many years earlier.
The Ledbetter decision thus made it easier for employers to defend against workplace discrimination claims based on long-ago decisions about salary and raises.
Ledbetter Case Factual Background
Ledbetter contended that during her employment with Goodyear from 1979 to 1998:
- Several supervisors gave her poor evaluations because of her sex.
- As a result, her pay did not increase as much as if she had been evaluated fairly.
- Those past pay decisions affected the amount of her pay throughout her employment.
- By the end of her employment, she was earning significantly less than male colleagues.
The Statute (Title VII)
Title VII of the Civil Rights Act of 1964 prohibits discrimination based on race, color, religion, sex, or national origin.
It requires that before filing suit an individual complaining of discrimination must file a charge with the Equal Employment Opportunity Commission (EEOC) within 180 or 300 days (depending on state law) after “the alleged unlawful employment practice occurred.”
Ruling Below and Issue at the Supreme Court in Ledbetter Case
After Ledbetter won at trial, the 11th Circuit Court of Appeals reversed. It found insufficient evidence that Goodyear acted with discriminatory intent in making the only two pay decisions (denials of raises) that occurred within 180 days before Ledbetter filed her charge.
Ledbetter did not challenge this finding before the Supreme Court, but sought review of the following question:
Whether and under what circumstances a plaintiff may bring an action under Title VII … alleging illegal pay discrimination when the disparate pay is received during the statutory limitations period, but is the result of intentionally discriminatory pay decisions that occurred outside the limitations period.
The Supreme Court’s Majority Opinion in Ledbetter
The Supreme Court essentially held that the answer to the above question is “never.”
Justice Alito, in the majority opinion, reasoned that previous Supreme Court decisions held that the time for filing an EEOC charge begins when the discriminatory act occurs, and that “this rule applies to any discrete act of discrimination.” “Because a pay-setting decision is a ‘discrete act,’ it follows that the period for filing an EEOC charge begins when [that] act occurs.”
The majority opinion continued:
Ledbetter does not assert that … Goodyear … acted with actual discriminatory intent either when they issued her checks during the EEOC charging period or when they denied her a raise in 1998.
Rather, she argues that the paychecks were unlawful because they would have been larger if she had been evaluated in a nondiscriminatory manner prior to the EEOC charging period.
Similarly, she maintains that the 1998 decision was unlawful because it “carried forward” the effects of prior, uncharged discrimination decisions.In essence, she suggests that it is sufficient that discriminatory acts that occurred prior to the charging period had continuing effects during that period. … This argument is squarely foreclosed by our precedents.
The majority opinion concluded that these precedents all stand for the proposition that the mere fact that an employer’s actions perpetuate adverse effects of past discrimination does not allow them to be considered new violations for purposes of charge-filing timeliness.
Therefore, the Court held, issuing paychecks without any discriminatory intent may not be the basis of a timely charge even though it perpetuates the effects of a discriminatory decision to initially set a woman’s pay rate lower because of her gender, where such decision occurred more than 180 (or 300) days before the charge was filed.
In contrast, in a 1986 case, the Supreme Court had stated: “Each week’s paycheck that delivers less to a black than to a similarly situated white is a wrong actionable under Title VII…..”
Because of this earlier statement, the outcome in Ledbetter was surprising to many employment lawyers, who considered the matter settled — in a manner that would have favored Lilly Ledbetter.
For this reason, the Supreme Court could easily have ruled differently while still following past precedent. This caused many observers to view Ledbetter as a prime example of “conservative judicial activism” and as a decision calling for congressional action to return the law to what many had previously understood it to be.
The Dissenting Opinion in Ledbetter
When the Ledbetter decision was announced, much media attention was focused on Justice Ruth Bader Ginsburg’s biting dissent, which charged that “the Court does not comprehend, or is indifferent to, the insidious way in which women can be victims of pay discrimination.”
Justice Ginsburg explained that a woman may not be aware of others’ salaries when she first joins a company, and she “understandably may be anxious to avoid making waves” at her new workplace.
Criticism of the Ledbetter Decision
One writer described Ledbetter as having the effect that as long as employers “can hide their discriminatory behavior for six months, they’ve got the green light to treat female employees badly forever.”
This statement echoed Justice Ginsburg’s dissent in Ledbetter, in which she said the majority “immunized forever discriminatory pay differentials unchallenged within 180 days of their adoption.”
A critic of Ledbetter said the ruling allows employers to save money by continuing to underpay victims of past pay discrimination, as long as their present “motivation is greed, laziness, indifference, or anything else but discrimination.”
The Lilly Ledbetter Fair Pay Act
In the last Congress, Republicans blocked the Lilly Ledbetter Fair Pay Act, intended to overturn the results of the Ledbetter case.
Supporters of this bill acted promptly in the current Congress, reintroducing it in the House on January 6, 2009. The House then passed it almost immediately, on January 9, 2009. The Senate passed it on January 22, 2009, and President Obama signed it into law on January 29, 2009, as the first new law of his Administration.
This Act is intended to overturn the holding of Ledbetter by clarifying that:
[A]n 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.
Critics of the Act argued it would impose virtually unlimited liability, allowing litigation over pay decisions made long ago, often by people no longer employed by the company -– or even alive.
The Act does, however, provide some limit to such liability, as it limits the recovery of back pay to “two years preceding the filing of the charge, where the unlawful employment practices that have occurred during the charge filing period are similar or related to unlawful employment practices with regard to discrimination in compensation that occurred outside the time for filing a charge.”
The Act also applies to age and disability discrimination, which had not been directly impacted by the Ledbetter decision because covered under statutes other than Title VII.
Implications of Ledbetter Act for Employers
When a major new law is passed, or the Supreme Court decides a case, experts and mainstream media are typically quick to declare winners and losers and predict how the litigation scene will be impacted.
To some extent, of course, this can be done, and some conclusions seem obvious enough. But over the years I have found that “time will tell”is often a better way to approach the analysis (though certainly not what most mainstream journalists want to hear from a legal expert when fishing for a soundbite!).
Here, it is obvious that the Ledbetter Act has created a category of pay practices that can now be challenged without being subject to the timeliness defense as applied in Ledbetter.
It would, therefore, appear safe to conclude we will see increased litigation in this area. Certainly, the publicity effect of the President signing a bill with great fanfare will stimulate interest in litigating fair pay claims.
But I say that only “time will tell” how significant the impact really is. Why? A couple of reasons:
- The Ledbetter Act just rolls back the law to what many lawyers and courts understood it to be pre-Ledbetter. So, aside from the Presidential halo effect (which I wouldn’t underestimate), why would there be more litigation than before the Ledbetter case came along and surprised us?
- Being able to sidestep a timeliness defense, while essential to success on a pay discrimination claim, is just a claimant’s first step on a long path towards proving such a claim (or convincing the employer the legal costs and risks are such that settlement is the best move). The frequency of such litigation will depend on the success rates observed by attorneys considering pursuing such cases.
Regardless of the impact on litigation, in terms of recommended human resources practices, the Ledbetter Act does not directly require any specific changes, since it merely alters the procedures claimants must follow — and the corresponding procedural defenses available to employers.
Rather, it reinforces the need, in order to comply with substantive pay discrimination law, to carefully review employee compensation, identify any significant disparities along the lines of race, sex, or other protected characteristics, and take all necessary steps to ensure that compensation differences are supported by sound, objective business reasons.
Photo credit: MShade via flickr.
