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The Lilly Ledbetter Fair Pay Act of 2009: A Preliminary Report, Part One


Monday, September 28, 2009

This is Part One in a series of three columns by the authors on the Lilly LedBetter Fair Pay Act. – Ed.

Last January, Congress enacted, and President Obama signed, the Lilly Ledbetter Fair Pay Act. The Act makes it easier for employees who have experienced pay discrimination to seek redress. It was designed to overturn the Supreme Court's 2007 decision in Ledbetter v. Goodyear Tire & Rubber Co., which had construed the statute of limitations under Title VII, the main federal anti-employment-discrimination statute, unduly narrowly. But is the new law a complete fix?

In this three-part series of columns, we will consider the legal questions raised (and sometimes answered) by the first wave of cases to invoke various provisions of the Ledbetter Act, as well as some lingering problems in the enforcement of equal pay laws.

Ledbetter v. Goodyear Tire & Rubber Co.: The Case That Necessitated the Act

In the Ledbetter ruling, a 5-4 opinion written by Justice Samuel Alito, the Court considered whether Title VII's statute of limitations for pay discrimination claims starts running only when the initial discriminatory pay decision is made, or whether each subsequent paycheck reflecting that decision resets the clock for filing a claim.

The question is a crucial one because Title VII imposes a strict 180/300-day limitations period (the length varies by state) that runs from the time of an "unlawful employment practice." During that period, an employee who suffers discrimination must file a charge of pay discrimination with the Equal Employment Opportunity Commission (EEOC), or forever lose the right to challenge the employment practice at issue.

Lilly Ledbetter worked as a production supervisor at a Goodyear plant in Alabama for two decades, but took early retirement in 1998 after being involuntarily transferred to a job on the production floor. A jury ruled that she had suffered illegal pay discrimination, based on evidence that her salary was as much as 40 percent lower than that of the lowest-paid male supervisor at the plant, despite the fact that she had received a performance award. The jury found Goodyear's conduct so egregious – the company had a history of under-paying its female managers at the plant and excluding women from management positions – that it awarded Ledbetter punitive damages.

Her victory was reversed, however, by a federal appellate court, which ruled that her EEOC charge was untimely. According to the Eleventh Circuit Court of Appeals, an employee must challenge the initial discriminatory pay decision within the statute of limitations period; the later pay decisions and paychecks that incorporate that discriminatory pay disparity are not actionable in their own right.

The Supreme Court sided with Goodyear and upheld the Eleventh Circuit's decision, ruling that an employee must file an EEOC charge within 180/300 days of the intentionally discriminatory decision to pay an employee less because of her sex. Because the discriminatory decisions in Ledbetter's case had occurred outside of that period, the Court affirmed the order vacating the jury's verdict, even though, after that decision was made, Ledbetter continued to receive lower pay because of her sex for the rest of her career at Goodyear.

The Ledbetter ruling worked an unfair hardship on employees who experience illegal pay discrimination. It exacerbated Title VII's already short statute of limitations by requiring employees to discover and complain about pay discrimination almost immediately, regardless of the consequences they may suffer for doing so. This rule placed untenable burdens on employees and circumvented Title VII's substantive protection against pay discrimination. The negative effect of this ruling was made clear by Justice Ginsburg's dissent: "Any annual pay decision not contested immediately (within 180 days) . . . becomes grandfathered, a fait accompli beyond the province of Title VII ever to repair."

The decision was especially harsh because the Court did not decide how an employee's lack of knowledge of a pay disparity might bear on the triggering of the statute of limitations, or even whether Title VII requires courts to apply a "discovery rule" – that is, a legal rule that starts the statute of limitations running only when the plaintiff discovers she has been the victim of discrimination -- at all.

In the case before the Court, Ledbetter had no reason to suspect pay discrimination until long after the statute of limitations had run on those decisions. She received annual raises, but, it turns out, they were significantly lower than those of her male colleagues. Still, the Court allowed her to be paid less for life for failing to identify and challenge the pay decision that first introduced that wage disparity into her paycheck.

The Lilly Ledbetter Fair Pay Act of 2009

Ledbetter herself will never see the pay discrimination she suffered redressed. The Supreme Court's ruling represents the end of her case, and she will continue to collect a pension for the rest of her life that reflects the wage discrimination she experienced. But thanks in part to her own advocacy on Capitol Hill, Congress passed a bill to reverse the Ledbetter court ruling, and it became the first bill that President Obama signed into law when he assumed control of the Oval Office in January of 2009.

In the preamble to the Act, Congress denounced the Supreme Court's decision as one that "significantly impairs statutory protections against discrimination in compensation that Congress established and that have been bedrock principles of American law for decades." The Act is designed to reverse the effects of the Court's ruling, and is made retroactive to May 28, 2007, the day before the Court issued its decision in Ledbetter.

The Ledbetter Act's First Key Provision: Redefining "Unlawful Employment Practice"

The Ledbetter Act has two basic provisions. First, it redefines "unlawful employment practice" under Title VII (and three other anti-discrimination statutes, the ADEA, the ADA, and the Rehabilitation Act) to include three different points on a pay discrimination timeline: (1) "when a discriminatory compensation decision or other practice is adopted;" (2) "when an individual becomes subject to a discriminatory compensation decision or other practice;" or (3) "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." Under the Act, each of these three events should qualify as an unlawful employment practice that is actionable if challenged within the limitations period.

For example, consider a straightforward, though hopefully far-fetched, example where an employer announces on January 1, 2010 that it will give all male employees a 5% raise on July 1, 2010, while female employees, regardless of merit, will receive only a 2% raise.

Under the first provision of the Ledbetter Act, a female employee facing this scenario could challenge the employer's sex-based pay discrimination within 180 days of the date the decision was made, within 180 days of the date the decision was implemented and applied to her, or within 180 days of receiving any paycheck thereafter whose amount was affected by the discriminatory raise decision.

The Act's Second Key Provision: Entitlement to Back Pay

The second provision of the Act stipulates that a person who proves pay discrimination can recover "back pay for up 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."

Let's say our hypothetical female employee begins receiving paychecks incorporating the discriminatory raise decision on July 1, 2010, and thereafter continuously receives paychecks incorporating that discrimination. Having lost all faith that her employer would correct the injustice on its own, and having seen her wage deficit grow over time, she files an EEOC charge on June 1, 2014.

Under the Act, she should be able to recover backpay (the difference between what she would have been paid in the absence of discrimination and what she was paid) from June 1, 2012 through the date of a verdict in her favor. Thus, although this woman suffered discrimination for at least four years (possibly longer, depending on what happens next and how long it takes to get a verdict in her favor), her backpay is limited to the two years preceding the date when she filed the charge. One can surely argue about the wisdom of that limitation, since a discriminatory shortfall in pay that goes back more than two years from the date of filing the charge may never be recovered, however egregious.

In sum, the new Act should make clear that our hypothetical plaintiff can recover for a full two years back from the date of filing the charge, as opposed to just the 180 days in between the last act of discrimination and her EEOC charge, as long as she suffered similar or related discrimination during that time period.

Litigation After the Ledbetter Act

Although the Ledbetter Act is a relatively straightforward reversal of the Ledbetter decision and a broad rebuke of the Court's reasoning in that case, it has already engendered litigation and questions about its scope and effects.

As described above, the Act takes a broad view of the unlawful employment practices in a pay discrimination claim that trigger the limitations period under Title VII. But the Act explicitly covers only a "compensation decision or other practice." While "other practice," read in isolation, might be taken to include other types of discriminatory practices wholly apart from those related to compensation, the overall structure and wording of the Act likely defies any interpretation that would de-couple the words "other practice" from compensation decisions. Assuming, then, that the Act is limited to discriminatory practices affecting compensation, a critical question becomes "What exactly is a 'compensation decision or other practice'?"

Certainly, a decision setting an employee's salary would fall in this category, but what other kinds of decisions might qualify? What about a discriminatory change in job assignments or title that later affects pay? What about a failure to receive a promotion that deprives the employee of the pay raise that would normally accompany such promotions? How broadly—or narrowly—should courts apply the Act to the plethora of employment practices that affect pay?

Beyond the narrower question of what counts as a compensation decision lie important policy questions about the effects of the Act, if any, on discriminatory practices beyond the reach of the Act. Are there broader lessons from Congress' rebuke of the Ledbetter decision that courts should be learning? What are the implications of leaving out other types of discriminatory practices from the Act, and if the Ledbetter reasoning continues to apply in such cases, how effective will the Act be in effectuating Title VII's goals? Relatedly, what spillover effect is the Court's Ledbetter decision having on other discrimination statutes that were not explicitly amended by the Ledbetter Act? To what extent, even after Congress' quick action overturning the Ledbetter decision, is the Court's unpopular decision in that case continuing to limit the reach and scope of our civil rights laws?

In Parts Two and Three, we will take a preliminary look at these questions.

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. She is the author of a forthcoming book, Getting in the Game: Title IX and the Women's Sports Revolution (NYU 2010).

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