The Supreme Court Slams the Door on Pay Discrimination Claims: The Ruling in Ledbetter v. Goodyear Tire & Rubber Co.

Last week, the Supreme Court issued a 5-4 decision in Ledbetter v. Goodyear Tire & Rubber Co. that will be devastating for plaintiffs who have suffered pay discrimination and seek to sue under Title VII, the main federal anti-employment-discrimination statute.

In its decision, the Court applied the statute of limitations in a way that ignored the realities of both pay discrimination claims specifically, and workplace bias more generally. In so doing, it imposed an obstacle that will gravely inhibit the ability of bona fide discrimination victims to assert their rights.

The Case's History, and Its Outcome

As we explained in a previous column, this case was brought by Lilly Ledbetter, the only female production supervisor at Goodyear Tire and Rubber's plant in Gadsen, Alabama. An employee there for twenty years, she took early retirement in 1998, after being involuntarily transferred to a less-desirable job on the production floor.

Six months prior to her retirement, Ledbetter filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC), alleging various forms of sex discrimination. Her case eventually went to trial, where a jury concluded she had indeed suffered illegal pay discrimination on the basis of sex. (Her salary was as much as 40 percent lower than that of the lowest-paid male supervisor.) The jury awarded Ledbetter $3 million, but that amount was reduced by the judge to $300,000, in accordance with Title VII's damage cap.

On appeal, Goodyear argued that Ledbetter's claim had been time-barred with respect to all pay decisions made prior to September 26, 1997 -- 180 days prior to the date she filed her charge with the EEOC.

The Supreme Court ultimately decided Goodyear was right. Thus, for Lilly Ledbetter, the Court's adverse decision means that the entire $300,000 verdict in her favor must be vacated. Though she proved to a jury that multiple discriminatory decisions occurred that continued to affect her pay until the day she retired, none occurred after September 26, 1997.

However, as we will discuss below, Ledbetter is far from the only loser in this case. All victims of pay discrimination will suffer for this ruling.

The Supreme Court's Ruling: Discriminatory Pay Decisions Are Discrete Acts

The issue presented by Ledbetter's case is when pay discrimination claims must be brought in order to be timely. No one disagrees that the applicable statute of limitations is 180 days. But 180 days from when? There are three possible answers: (1) from the day of the pay decision that sets a discriminatory wage, (2) from the day an employee learns her pay is discriminatory (in the law, this is called a "discovery" rule), or (3) from the date of any paycheck that contains an amount affected by a prior discriminatory pay decision (this is deemed a "paycheck accrual" rule).

Briefly, the Supreme Court opted for the first approach: According to the majority, the plaintiff has 180 days after the pay decision that sets the discriminatory wage to file her charge with the EEOC in compliance with Title VII's statute of limitations.

The majority declined to consider whether a discovery rule - the second approach -- might be used to extend the statute of limitations for discrimination that is unknown to the employee. In addition, it flatly rejected the paycheck accrual rule - the third approach - even though the Court had endorsed just such an approach in previous cases.

This case turned primarily on the Court's interpretation of its own precedent, a 2002 ruling in Amtrak v. Morgan. There, it had held that "discrete" acts of discrimination must be challenged within 180 days of their occurrence. In so doing, it rejected the so-called "continuing violations" doctrine -- under which some lower federal courts had permitted plaintiffs to challenge a series of related acts of discrimination, as long as at least one had occurred within the 180 days prior the filing of an EEOC charge.

In Morgan, the Court carved out an exception for "hostile environment" harassment since, by its very nature, the claim accrues over time and through the aggregation of multiple incidents of misconduct that together create the hostile environment. (Imagine, for example, the progression from a single unpleasant, sexist remark, directed to the lone woman in an office, to a situation in which such remarks become routine.) For such claims, a plaintiff can challenge harassment as long as at least one of the acts that together created the hostile environment occurred within the 180-day charge-filing period.

Thus, the issue in Ledbetter was whether pay discrimination claims - for statute of limitations purposes - would be treated like claims based on, say, discriminatory firings, where the clock starts ticking immediately, or like hostile environment claims, where the clock starts ticking with the final act alleged.

In an opinion written by Justice Samuel Alito, the Ledbetter Court ruled that the "discrete" act rule, rather than the harassment rule, applies to pay discrimination claims. This ruling departs from the longstanding position of the EEOC, the agency charged with enforcement of Title VII, which followed the paycheck accrual rule instead - the third approach which, as readers may recall, allows the plaintiff to sue within 180 days of her last discrimination-tainted paycheck.

The Court's rejection of Ledbetter's claim turned on two basic conclusions: First, the Court ruled that under Morgan, a discriminatory pay decision is a discrete act that triggers the statute of limitations. Second, it ruled that a paycheck containing a discriminatory amount of money is not a present violation, but, instead, is merely the effect of a prior act of discrimination. "[C]urrent effects alone cannot breathe life into prior, charged discrimination," the Court wrote, "such effects have no present legal consequences."

The Precedents the Court Cited - and Those It Ignored

To reach the second conclusion, the Court relied on United Air Lines v. Evans, in which it had dismissed the discrimination claim of a flight attendant who had been wrongfully terminated and then rehired -- without seniority -- years later. The Court refused to permit her to challenge the loss of seniority, since it held that that was just an "effect" of the prior, uncharged wrongful termination.

The Court also relied on Delaware State College v. Ricks, in which a librarian who had been denied tenure, allegedly on the basis of race, was not permitted to sue within 180 days of his departure, since the notice of the tenure denial had been communicated to him a year earlier. Again, the Court held that the actual termination was merely an effect of the allegedly illegal denial of tenure, rather than a present violation of Title VII.

In relying on these precedents, the Court in Ledbetter effectively ignored another line of precedents in which it had applied a different rule to pay claims. For example, in Bazemore v. Friday, all members of the Court joined Justice Brennan's separate opinion, in which he wrote: "[e]ach week's paycheck that delivers less to a black than to a similarly situated white is a wrong actionable under Title VII."

The Court in Ledbetter attempted to distinguish Bazemore on the theory that the employer had carried forward a discriminatory pay structure rather than a discriminatory pay decision. But this is the least persuasive of the Court's justifications for its harsh rule, for a paycheck that is deflated because of a decision to pay an individual woman less because of her sex is no less a discrete instance of discrimination than one that is deflated because of a decision to pay all women less because of their sex.

As Justice Ginsburg argues in dissent, the majority's opinion in Ledbetter means that "[a]ny annual pay decision not contested immediately (within 180 days) . . . becomes grandfathered, a fait accompli beyond the province of Title VII ever to repair." An employer could pay a woman less than her male counterparts for her entire career, and admit that the reason for doing so is because she is female, as long as the decision to set the discriminatory wage happened at least six months earlier. This rule places untenable burdens on employees and circumvents Title VII's substantive protection against pay discrimination.

Perceiving Discrimination: An Obstacle to Enforcing Substantive Rights

In order to prevail on a pay discrimination claim after Ledbetter, a victim must quickly perceive that she has suffered discrimination and promptly report it. But that is a rare occurrence in the typical case, and surely discrimination law should address the typical cases where real-life plaintiffs suffer discrimination, not just the rare ones.

As we have discussed in a prior column, there are many obstacles to bona fide victims' perceiving discrimination generally, and pay discrimination in particular. For example, social psychologists have shown that women are reluctant to perceive themselves as victims of sex discrimination because it conflicts with deeply-ingrained beliefs that the world is meritorious and individuals are responsible for their own fate. Women also tend to compare themselves to other women - not to similarly-qualified, similarly-skilled men -- in evaluating their treatment.

For example, working women tend to evaluate the fairness of their current pay by reference to what other women earn, and what they themselves have earned in the past. Such within-gender comparisons by women lead to diminished salary expectations. In studies where men and women are asked to set their own rates of pay for performing a specified task, men typically pay themselves one-third more than what women pay themselves for the same task. Recognizing that one's wage is deflated, and the product of discrimination, is thus difficult.

In addition, the limited availability of information, paired with limits upon the way people process the information that is available, further thwarts people's ability to quickly perceive sex discrimination. Studies have found that people resist perceiving individual instances of sex discrimination under normal conditions of information-gathering -- in which information trickles in piece-by-piece, showing individual instances of different treatment. People are much more likely to perceive discrimination when information regarding disparities is presented all at once -- showing across-the-board, organization-wide comparisons between men and women. Since employees almost never have access to that kind of global, synthesized information (at least until they have filed a lawsuit and gain information through discovery), individual instances of discrimination frequently go unnoticed.

While these problems make perceiving sex discrimination difficult in general, the problems are greatly compounded for pay discrimination. Employers rarely disclose company-wide salary information, and workplace norms often discourage frank and open conversations among employees about salaries. As a result, employees rarely know what their colleagues earn, much less what raises and adjustments are given out to others at each and every pay decision.

That's a major problem from the perspective of eliminating discrimination, since an employee who learns that she will receive a 5% raise will have little reason to suspect pay discrimination, without knowing, at the very least, what raises others have received. Indeed, the discriminatory pay gap may begin with no change at all in an employee's pay, but rather with a decision to increase the pay of a male colleague, while leaving her pay unchanged for a discriminatory reason.

Unless corrected, a discriminatory pay decision or starting wage will be perpetuated and magnified by subsequent percentile pay adjustments. Even if an employee is aware of a minor disparity between her own pay and her colleagues' pay, relatively minor disparities may go unnoticed until, over the years, the disparity becomes too large to ignore. But by that time, under Ledbetter, the employee will have lost long ago the right to complain.

The Court's rule thus effectively immunizes employers from Title VII liability for pay discrimination in many cases.

Catch 22: Complain Immediately - But Not Too Soon!

Perhaps the most troublesome aspect of the Court's opinion is the dilemma it creates for employees who, under the Court's ruling, must file a charge alleging suspected pay discrimination within 180 days of when it begins, or lose forever the right to challenge it. One might think, at first glance, that employees should respond by filing with the EEOC the moment they suspect discrimination. However, in a cruel Catch-22, an employee who complains to her employer too soon, without an adequate factual and legal foundation for doing so, may find herself in an even worse position: out of a job because she complained, and with no legal recourse for the retaliation she suffered.

Under Clark County School District v. Breeden, the Supreme Court held that an employee who opposes what she believes (inaccurately) to be unlawful discrimination is protected from retaliation only if she had a "reasonable belief" that the practice she opposed in fact violates Title VII. The plaintiff in Breeden internally complained about a sexually explicit colloquy between her supervisor and a coworker during a meeting that she found offensive. She was subsequently assigned to less desirable job duties and relieved of her supervisory responsibilities - as a result, she alleged, of her speaking out.

Title VII outlaws not only discrimination, but retaliation done to punish those who speak out about it. Yet the Supreme Court rejected Breeden's retaliation claim on the ground that even if she had experienced retaliation in response to her complaint, no reasonable employee could have believed that the sexual dialogue would, without more, create a hostile environment in violation of Title VII. In other words, if Breeden had waited under further offensive comments were made on other occasions to speak out, then she might have been able to win her retaliation claim.

This standard leaves employees unprotected from retaliation if they oppose an employment practice too soon. Lower courts have applied this standard harshly, leaving plaintiffs unprotected for acting on their subjective beliefs that certain employer conduct is discriminatory without sufficient factual and legal support for proving an actual violation of Title VII.

The dilemma for pay discrimination claimants is poignant: It may take a pattern of substantial pay disparities in order to establish an inference that the gap in pay is attributable to gender bias, rather than to some legitimate nondiscriminatory reason such as performance or experience. If the plaintiff waits too long, she loses her ability to challenge continuing discrimination in pay, even as the gap increases through neutral percentage-based raises. Yet if she complains to her employer at the first sign of a pay gap, she risks lacking an adequate foundation for a "reasonable belief" that the gap is attributable to gender discrimination -- leaving her vulnerable and unprotected from retaliation in response to her complaint. This is the essence of a Catch-22.

The only way out of this dilemma is for the employee to immediately file a charge with the EEOC at her very first suspicion of pay discrimination, without saying a word to her employer or anyone in the workplace -- since Breeden's reasonable belief standard applies only to forms of "opposition" short of the formal EEOC charge-filing process. Once a formal EEOC charge is filed, protection from retaliation kicks in, regardless of whether the plaintiff reasonably or unreasonably believed a violation occurred.

One of the stranger results of the Ledbetter-Breeden dilemma is to encourage employees to avoid precisely the kind of informal, prompt resolution and conciliation of disputes that the majority in Ledbetter insists Title VII intends. Rather than risk speaking out to improve the situation within a given company, employees may go straight (and silently) to the EEOC.

Employees unfamiliar with the strange and unexpected landmines now embedded in Title VII law may find themselves injured -- bringing suspected pay discrimination immediately to the attention of their employer, only to find themselves punished for their forthrightness and without protection from retaliation. Yet the Court's opinion reflects an utter lack of concern for the dilemmas now confronting pay discrimination plaintiffs.

Implications for Victims of Pay Discrimination

Pay discrimination victims can also file claims under the federal Equal Pay Act of 1963, which may enable them to challenge pay discrimination under a different tolling rule than the Court adopted in Ledbetter for Title VII claims. The Equal Pay Act requires employers to pay men and women equally if they do substantially similar work, with possible defenses for pay disparities resulting from merit-based systems, seniority systems, or a factor other than sex. A plaintiff may challenge an ongoing violation of the Equal Pay Act at any time, and may seek recovery for the prior two years of discrimination (or three years, if the violation is "willful").

However, the existence of an alternative statutory remedy for sex discrimination in pay does not fully solve the problem, because some pay discrimination that violates Title VII is not covered under the Equal Pay Act. The Equal Pay Act is limited to cases where the plaintiff can point to a comparator of the opposite sex who does the same work in the same job for more money. Title VII, in contrast, reaches all claims of intentional pay discrimination, regardless of whether there is an opposite-sex comparator who earns more. For example, a woman in a workplace where she holds a unique job, or simply a job that is not the equivalent of any job performed in that workplace by a higher-earning man, will have no hope of prevailing under the Equal Pay Act, even if can clearly be proven that the employer paid her less because of her sex.

The unfortunate consequence of the Court's ruling in Ledbetter is to effectively nullify Title VII's broader reach by imposing a harsh and unrealistic filing deadline, leaving women only the protection of the narrower Equal Pay Act. This is an odd result, given that Title VII was passed after the Equal Pay Act and was intended to broaden pre-existing federal legal protection from sex discrimination.

The consequences are even harsher for victims of pay discrimination on bases other than sex: They are not protected by the Equal Pay Act at all. Victims of race-based pay discrimination, for example, will have no recourse if their claims are more than 180-days old. Women of color, in particular, who already have difficulty sorting out the "race" from the "gender" components of bias in court cases, will have a particularly tough road to navigate. This seems especially unfair, as women who may be suffering two types of pay discrimination that converge, may end up having no viable case at all.

In a subsequent column, we will urge that Congress fix the untenable situation the Supreme Court has created for pay discrimination victims through its ruling in Ledbetter. Specifically, we will argue in favor of an expansion of Title VII's statute of limitations, a "discovery" rule for all discrimination claims, a reduction in emphasis on the "prompt resolution" of claims, and a restoration of the robust protection against discrimination Title VII was supposed to guarantee.

What the Supreme Court has done in a single case will take much effort to undo. But equality, and the rights Title VII was designed to protect, demand that it be undone.