Human Resources Action Plan for the Lilly Ledbetter Fair Pay Act
There has been much debate about the impact of the Lilly Ledbetter Fair Pay Act (FPA) on human resources and the likelihood of employers experiencing an escalation in pay discrimination charges. On one hand, the FPA does not create a new cause of action.
Employers know that Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Rehabilitation Act and the Equal Pay Act (EPA) prohibit employers from paying employees differently because of their membership in a protected category.
Yet the FPA potentially has lengthened the period of time over which an employer would have to defend its decision-making process in relation to compensation. Also, claims that an employer assumed were untimely after Ledbetter v. Goodyear Tire & Rubber Co. now may be revived.
Lilly Ledbetter, a former supervisor, worked for her employer for almost 20 years. After voluntarily taking early retirement in November 1998, Ledbetter filed a charge with the U.S. Equal Employment Opportunity Commission (EEOC) alleging pay discrimination under Title VII and the EPA. Ledbetter believed that over the course of her employment she was paid less than male coworkers because she had been subjected to poor performance evaluations based upon her sex. After Ledbetter dropped her EPA claim, on May 29, 2007, the U.S. Supreme Court ruled that Ledbetter’s Title VII claim was untimely.
Title VII requires that an employee who claims pay discrimination must file a charge with the EEOC within 180 days of the occurrence of the discriminatory act (in some jurisdictions it is 300 days). The Supreme Court ruled that a pay-setting decision was a discrete act that occurred at a particular point in time. Thus, Ledbetter should have filed her Title VII claim with the EEOC within 180 days of the decision that she contended led to the pay discrimination. Ledbetter had not identified any act within 180 days of her charge that caused her to receive discriminatory compensation.
Prior to Ledbetter, the EEOC and most federal courts applied the paycheck accrual rule. Under the paycheck accrual rule, each paycheck that delivered discriminatory compensation to an employee was a wrong actionable under the federal antidiscrimination statutes regardless of when the discrimination began. While Ledbetter lost her case, she ignited a campaign to restore the paycheck accrual rule. During the 2008 presidential election campaign, Ledbetter became the symbol for equal pay for women.
With a stroke of a pen, on January 29, 2009, President Obama overturned the Supreme Court’s decision and restored the paycheck accrual rule. The legislation went a step further. While the Supreme Court’s decision focused on a discriminatory compensation decision, the FPA includes all "practices" that affect compensation. There is no definition of the term "practices" in the FPA. Consequently, it is not only starting salaries, annual merit increases and the like that may be challenged through a pay discrimination suit. Employment practices, such as performance appraisals, promotions and geographical assignments, are not immune should they affect compensation. Moreover, although Ledbetter focused on equal pay for women, the new rules apply to pay discrimination based on race, color, national origin, religion, sex, age and disability.
The FPA recognizes three types of events that can trigger the start of the time period within which an employee must file an EEOC charge. The employee’s charge is timely if filed: 1) when the pay-setting decision is made or the practice is adopted; 2) when the employee is affected by the decision or practice; or 3) each time the employee receives a paycheck. The third category means that an employee has a new opportunity to file a charge each time the employee receives wages, benefits or other compensation that is affected by a discriminatory pay decision or practice. All the employee has to do is link the paycheck to a discriminatory decision or practice.
Importantly, the FPA is retroactive to May 28, 2007, the day before the Supreme Court issued the Ledbetter decision. As a result, any claims pending since May 28, 2007—which would have been untimely because of the Supreme Court’s rejection of the paycheck accrual rule—now become viable. The FPA does, however, limit liability. The back-pay period cannot extend more than two years prior to the date on which an EEOC charge is filed even if the alleged discriminatory decision or practice occurred many years prior.
With more employment legislation pending in Congress and the anticipated increase in EEOC enforcement, those in human resources must be vigilant regarding compensation and compliance programs. With the FPA now a law, human resources must look at its organization both retrospectively and prospectively. Not only does human resources need to examine the organization’s overall compensation philosophy, it also needs to review all policies or practices of the organization that impact pay directly or indirectly. Also, human resources should consider the amount of discretion supervisors have to make compensation decisions. By completing this exercise, human resources can advise its organization as to any weaknesses and steps that can be taken to reduce the risk of liability in the event of a FPA claim.
A statistical analysis of past and current employee compensation rates to identify any disparities by protected categories should be considered as an aspect of the plan. Human resources will have to decide whether to conduct an initial diagnostic analysis or a more thorough, in-depth analysis. Any analysis should consider the proposed amendments to the EPA under the Paycheck Fairness Act currently pending in Congress. Human resources also should consider involving counsel in this assessment.
Human resources need to pay attention to record keeping. Under the EEOC regulations, an employer is required to retain records for one year from the date of creation of the record or the personnel action involved, whichever is later. Other laws require employers to preserve records for longer periods. The FPA does not include a record-keeping provision. However, under the FPA, employers may be investigated and held liable for acts and decisions made years earlier. A worker or retiree may seek damages against an employer based upon decisions or actions of former managers—decisions that did not involve current management. In the latter situation, an organization may have to rely on personnel records. Human resources must determine whether the organization’s current record-keeping practices for personnel records are adequate to enable the organization to defend pay discrimination claims.
Finally, the FPA is an opportunity to reinvigorate supervisor and EEO training. Employees should be reminded that there are internal avenues available for raising concerns about pay. Human resources should re-emphasize the importance of a supervisor’s ability to articulate a legitimate business reason for an employment decision, and create accurate records that should be retained in compliance with the organization’s record-retention policy.
First published on Human Resources IQ.