Reviving Title VII's Protection Against Pay Discrimination In the Wake of the Supreme Court's Harsh Decision: A Call for Congressional Action

By JOANNA GROSSMAN AND DEBORAH BRAKE

Tuesday, Jul. 10, 2007

The Supreme Court has made a mess of pay discrimination law. In a prior column, we criticized the Court's recent ruling in Ledbetter v. Goodyear. In this column, we will argue that Congress should legislatively overturn that ruling - and should also take the opportunity to amend Title VII, the centerpiece of federal protection against employment discrimination, in other ways as well.

The Ledbetter decision requires employees to file a Title VII pay discrimination claim within 180 days (300 in states with state fair employment agencies) of when the discriminatory decision was first made and communicated to the employee. The Ledbetter Court rejected the so-called "paycheck accrual" rule, which would have permitted an employee to file a claim within 180 days of any paycheck containing a discriminatory wage.

As we explained in the previous column, the Court's ruling will have disastrous consequences for victims of pay discrimination, who are likely to suffer from salary discrimination that compounds throughout their careers. Moreover, the Court failed to effectively address the problem that many discrimination victims are not likely to be immediately aware that their paychecks are affected by discrimination.

Fortunately, on June 12, the House Education and Labor Committee held a hearing on the Ledbetter ruling to consider whether to take legislative action to restore Title VII's protection against pay discrimination. The Chairman of that Committee, Congressman George Miller (D-CA), recently introduced The Ledbetter Fair Pay Act of 2007, which would overturn the Court's decision and restore the paycheck accrual rule. As we will argue, that change is necessary to restore key Title VII protections. In addition, Congress should take further measures to ensure Title VII provides meaningful protection for discrimination victims.

Ledbetter's Silence on When to Start and Toll the Clock: Discovery Rules and Equitable Tolling

The Ledbetter Court dismissed as "policy arguments" the concerns raised by the dissent about the hardship for employees who do not learn about pay disparities until it is too late. The Court ignored the elephant in the room: What kind of information suffices to place an employee on notice that she has a potential pay claim, so as to start the 180-day clock ticking? The majority simply states that the clock starts to run when the "discriminatory pay decision was made and communicated."

But exactly what information must be communicated to the employee in order to trigger the statute's short limitations period? Is it enough for the employer to simply specify the employee's new pay level? If so, then Title VII pay claims have just been relegated to the dustbin of civil rights history.

Perhaps, more charitably, the majority meant that the time period starts running once the employee learns that she will receive an amount that is less than some of her male comparators who perform similar work will receive? Or perhaps it meant that the time period starts running when she learns she will receive a specified percentage raise that is less than the raises received by others? Yet, even the communication of that more detailed salary information, providing comparisons to other workers, is unlikely to actually place an employee on notice that she has a potential pay discrimination claim, without additional facts pointing to some basis for believing that discrimination entered into the decision.

Instead of answering, or even entertaining, such questions, the Court simply reiterated that it has never specified whether or not a "discovery rule" applies to Title VII claims. (A discovery rule, if adopted by courts, operates to delay the onset of the statute of limitations until a plaintiff has "discovered" her injury.) By its silence, the Court invites lower courts to fashion their own approach, a worrisome prospect, especially in conservative federal circuits hostile to discrimination claims.

Some lower courts have rejected a discovery rule altogether. Others have applied a narrow discovery rule that starts the clock when the plaintiff first learns of an employment-related injury, not when the plaintiff has reason to suspect discrimination. In an age discrimination case, Cada v. Baxter Healthcare Corp, for example, the U.S. Court of Appeals for the Seventh Circuit ruled in 1990 that the clock starts ticking from the time the employee learned he was fired, not when he later learned that he was replaced by a younger worker and began to suspect age discrimination.

Such interpretations make the discovery rule an ineffective tool for protecting employees who do not have reason to suspect discrimination. To be meaningful, a discovery rule must reflect the realities of the workplace, with sensitivity to the types of information necessary to apprise employees that they have suffered pay discrimination. The information sufficient for a reasonable person to suspect pay discrimination should include not just the concrete numerical changes in the employee's own pay, but also organization-wide comparisons of salary by gender, accompanied by the employer's explanation of any gender disparities. Only if an employee knew all this, could we accurately say that she was on notice that she might have suffered pay discrimination.

In lieu of a robust discovery rule, another device called "equitable tolling" could be used to delay the limitations clock where an employee does not have reason to suspect discrimination. (The idea of "equitable tolling" is that, at times, for fairness reasons, it serves justice to consider the ticking statute of limitations clock to have paused during a particular period of time.) While courts generally acknowledge the availability of this device in Title VII, its typical application is too limited to have an impact in most cases. Many courts do not toll the limitations period based on the employee's lack of information unless the employer actively concealed relevant facts, or actively misled the employee into believing she did not have a claim. And of course, they are right do so: Deceptive conduct like this is an excellent reason to invoke equitable tolling. But it is not the only just reason to do so. Moreover, in reality, employer concealment of wrongdoing is not the main reason victims fail to perceive pay discrimination.

Equitable tolling rules have other limitations as well. For example, pursuing a discrimination allegation through an employer's internal complaint process does not toll the limitations period. Thus, an employee who first pursues a suspicion of discrimination through the employer's internal procedures in an effort to find out what happened and try to resolve it internally will be foreclosed from filing a Title VII charge if she waits until that process ends, and the 180-day time period passes.

The failure to toll the limitations period while employees pursue internal procedures for redress creates an incentive to channel employee complaints into lengthy internal procedures, and run out the clock so that employees lose their chance to file a formal claim. Refusing to toll the limitations period also goes against the Supreme Court's own hope that some claims will be resolved internally, and emphasis that companies need to have a chance to be alerted of and address claims.

The absence of a meaningful discovery rule and of fair equitable tolling rules, in combination, makes plaintiffs' compliance with the Ledbetter rule all the more impossible, Title VII's guarantee of employment equality all the more elusive, and the need for Congress' intervention all the more pressing.

Proposed Fix #1: Adopting the Paycheck Accrual Rule

Justice Ruth Bader Ginsburg closed her dissent in Ledbetter with the exhortation that "[o]nce again, the ball is in Congress' court." Ginsburg was referring to the Civil Rights Act of 1991, a federal law that overturned a spate of harsh Supreme Court decisions adopting unnecessarily narrow interpretations of Title VII and other civil rights statutes.

One of the decisions overturned by the 1991 Act was Lorance v. AT&T Technologies. The Court in Lorance took a near-identical approach to filing requirements for challenging a discriminatory seniority system, as Ledbetter more recently did for pay discrimination. In the Lorance ruling, the Court held that employees had to challenge the discriminatory seniority system within 180 days of when it was first adopted, rather than within 180 days of when it was first applied to them.

Congress specifically overturned the Lorance ruling in the 1991 Act, correcting the injustice of barring employees from challenging discrimination that was perpetuated each time the seniority system was applied. Although the statutory correction was specifically directed to seniority systems, the legislative history reflects Congress' broad disapproval of the reasoning and the result. In fact, an interpretative memorandum written by Senator Danforth, a key player behind the 1991 Act, disapproved the application of Lorance to contexts outside of seniority systems.

In Ledbetter, however, the Supreme Court ignored this legislative history, and instead relied on the now-repudiated Lorance to support its similar approach to pay claims. As Justice Ginsburg points out in her dissent, the Court has "not once relied upon Lorance" in the "more than 15 years" since Congress passed the 1991 Act, and "[i]t is mistaken to do so now."

The Court's failure to take the lessons of the 1991 Act to heart makes the need for Congress to revisit its teachings all the more pressing. Specifically, Congress should restore the paycheck accrual rule--permitting employees to challenge pay discrimination that extends into the filing period, regardless of when it first began--that lower courts had applied before Ledbetter. The point is simple and just: As long as an employees' paycheck is still tainted by discrimination, she should not be time-barred from challenging it.

Proposed Fix #2: Lengthening the Statute of Limitations

At the root of the problem for rights-claiming under Title VII is the unusually short statute of limitations. Under current law, a victim of employment discrimination must file a charge with the EEOC within 180 days "after the unlawful employment practice occurred." (The limitations period is 300 days in states with a state employment agency with authority to grant relief. The rationale behind this slightly longer period is to give states a chance to solve employment discrimination issues first prior to federal involvement.)

When Title VII was first enacted in 1964, the statute of limitations was a mere 90 days. That provision of the law merited little discussion, beyond the occasional reference to the problem of stale claims. Congress extended the limitations period to 180 days in 1972 to bring Title VII into line with the National Labor Relations Act, the federal law that regulates unions. Although Title VII's statute of limitations is 2-3 years shorter than the applicable period for most civil lawsuits, no serious effort was made to extend it again until 1990.

The Civil Rights Act of 1990, a bill that was never ultimately passed, included a provision extending the statute of limitations to two years. This time, the proposed extension was intended to bring Title VII into line with other federal anti-discrimination laws, such as Section 1981, which prohibits race discrimination in employment contracts. The House report accompanying the bill criticized the existing limitations period because of the "substantial time" it takes for an individual to realize discrimination has occurred, to become educated about what remedies are available, and to seek the assistance of counsel. Opponents repeated familiar concerns about "stale claims."

A very similar bill was introduced in 1991, again including a two-year limitations period for discrimination claims brought under Title VII. But this provision was contested and ultimately removed from the bill enacted into law as the Civil Rights Act of 1991. Opponents cited concerns about Title VII's goal of "prompt resolution" and the foreseen expansion of liability for businesses.

Since 1991, no serious effort to extend Title VII's statute of limitations has been made. Yet, such an extension would alleviate many of the unfair pressures currently placed on discrimination victims. Time, it turns out, is important to the realization of discrimination and the willingness to complain, not to mention more mundane steps like figuring out how to file a complaint, finding a lawyer who will take the case, and so on.

Put simply, there is no good reason why a person who slips in a grocery store aisle because of an uncleaned spill should have two years longer than a person who suffers pay discrimination to figure out what happened, who is to blame, and how to enforce her rights.

Proposed Fix #3: Lifting the Caps on Damages

Justice Ginsburg also noted in her dissent in Ledbetter the unfairness that arises from the non-uniformity among federal civil rights laws. Women, for example, may be able to seek redress for some types of pay discrimination through the Equal Pay Act, thereby avoiding the Court's harsh rule in Ledbetter. But victims of pay discrimination based on race, for example, will not have that option. And even for women, as we noted in our previous column, the Equal Pay Act is inadequate to fill the gaps in Title VII's protection that have been created by Ledbetter.

In addition, there is another kind of inequity resulting from the non-uniformity of our federal civil rights laws that is also blatantly apparent from the Ledbetter case. Because Ledbetter involved a claim for sex discrimination under Title VII, the plaintiff's damages were capped by the statutory limit of $300,000 applicable to large employers. The $300,000 limit applies to combined compensatory and punitive damages, and to all claims in the case. Thus, even an employer that violates the statute in numerous ways -- for example, by retaliating against the employee as well as engaging in discrimination and harassment -- cannot be liable for more than $300,000 in combined damages on all claims.

The cap applies to Title VII violations except for claims challenging conduct covered by Section 1981, which bars race discrimination in the making and enforcement of contracts, including employment contracts. Thus, damages from sex discrimination are capped under Title VII, while damages for race discrimination are not.

The Ledbetter case is a good illustration of how the caps work in practice. The jury awarded Ledbetter over $3.5 million, which included a substantial punitive damages award to punish Goodyear for its gross misconduct. But that award was reduced to $360,000 - representing the $300,000 maximum allowable combined compensatory and punitive damages, plus an award of $60,000 in back pay. Thus, a company such as Goodyear stands to lose very little (compared to its total profits, that is) by violating Title VII, even if its conduct is blatant and egregious.

Even when adopted in 1991, a $300,000 cap on damages (lower for smaller employers) was ill-advised for a statute purportedly designed to deter employers from violating Title VII. Sixteen years later, it is obviously insufficient to deter violations of the law. Surely, one of the lawyers at Goodyear could have easily discovered that the Gasden plant paid its only female manager a substantially lower salary than each of its fifteen male managers, and indeed, had never paid a female manager equally to a man. If the penalties for violating Title VII were more substantial, companies like Goodyear would have more incentive to be proactive, and to make sure that they complied with equal pay requirements.

Congress should thus lift the statutory cap on damages in Title VII, so as to permit plaintiffs full recovery for intentional employment discrimination and impose sufficient incentives on employers to deter discrimination in the first place.

If Congress Acts Now, It Can Teach the Court a Needed Lesson About Title VII

We hope Congress accepts the Ledbetter dissent's invitation to correct this unnecessarily narrow reading of Title VII and to grant employees a fair chance at challenging unlawful pay discrimination. In so doing, Congress can not only advance justice for discrimination victims, but also send a strong message to the Court -- and lower federal courts -- that crabbed interpretations of Title VII are not in line with Congress' intent.

This is a Court that is sorely in need of such a reminder. The paramount goals of Title VII are, and always have been, to prevent discrimination and provide make-whole relief to the individuals harmed by it--not to protect employers from "stale" challenges to ongoing discrimination. But one would not know that from decisions such as Ledbetter.


Joanna Grossman, a FindLaw columnist, is a professor of law at Hofstra University. Her columns on family law, trusts and estates, and discrimination, including sex discrimination and sexual harassment, may be found in the archive of her columns on this site. Deborah Brake is a professor of law at the University of Pittsburgh. Her research focuses on sex discrimination in employment, education, and athletics. Together, Brake and Grossman wrote an amicus brief in support of the plaintiff in Ledbetter v. Goodyear, which was filed on behalf of the National Partnership for Women and Families and the National Women's Law Center, as well as other interested women's groups.

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