Back on January 29, 2009, President Barack Obama signed into law the “Lilly Ledbetter Fair Pay Act of 2009 (“Act”). Although signed in early 2009, its effective date was May 28, 2007. The significance of the President’s signing was that he carried through on a campaign promise and that it represented one of his first official acts after taking office. The significance for HR professionals and business owners is that there is some work to do now to protect yourself from claims of pay discrimination. Below you will find my legal advice for getting your pay practices and documentation up to date.
The Background on the Lilly Ledbetter Fair Pay Act
Essentially, the Lilly Ledbetter Fair Pay Act rejected the U.S. Supreme Court’s prior decision in Lilly Ledbetter v. Goodyear Tire & Rubber Company, holding that the charge-filing deadline on Title VII compensation discrimination claims begins to run on the date of the first allegedly discriminatory pay decision.
You may already know the facts behind Lilly Ledbetter’s discrimination claim. Briefly, Lilly Ledbetter worked as a manager in Goodyear’s Gadsden, Alabama plant from 1979 until accepting an early retirement package in 1998. During most of her career with Goodyear, her salary was determined annually and based upon supervisor rankings of her performance. Typically placed near the bottom of rankings compared to her male co-workers, she received small salary increases. During her last two years with Goodyear, she was placed in a position targeted for layoff, and consistent with Goodyear policy, did not receive any raises. When she retired, the compensation gap between her and her male co-workers was significant.
In July 1998, Ledbetter filed a charge with the EEOC alleging that she was unlawfully discriminated against under Title VII of the Civil Rights Act of 1964 on the basis of her sex as she received lower pay increases than her male counterparts. At trial, a jury awarded Ledbetter compensatory damages plus punitives to punish Goodyear. The case made its way to the U.S. Supreme Court via numerous appeals by both parties.
The U.S. Supreme Court affirmed an appeals court decision and opined that a “pay-setting” decision, like a termination or demotion, is “a discrete act” forming the basis of a Title VII claim thus triggering the 180-day period to file a charge. The high court rejected Ledbetter’s position that the issuance of each paycheck based on an allegedly discriminatory pay decision made outside of the statutory charging period resulted in a continuing violation of Title VII. Justice Ginsburg dissenting opinion prompted Congress to correct the Court’s interpretation of Title VII.
What Is the Impact of the Lilly Ledbetter Fair Pay Act Of 2009?
The Lilly Ledbetter Fair Pay Act accomplishes the following:
- It extends the time period in which employees can pursue disparate pay claims under four anti-discrimination laws: Title VII; the Age Discrimination in Employment Act (ADEA); the American’s with Disabilities Act (ADA); and the Rehabilitation Act (Rehab Act); and,
- It amends the Equal Pay Act (EPA) by providing for uncapped compensatory and punitive damages for violators; preventing employers from retaliating against employees who share salary information with co-workers; and requiring employers who make legitimate employment decisions based on factors other than sex to prove these factors are “job related” and consistent with business necessity.
- In addition, any discriminatory pay decision restarts the 180/300- day period to file an EEOC charge. That is, each time a discriminatory paycheck is issued should:
- A discriminatory compensation decision or other practice be adopted;
- An individual becomes subject to the decision or practice; or
- An individual is affected by an application of a discriminatory compensation decision or practice – including each time wages, benefits or other compensation is paid, then the statute of limitations on pay discrimination claims restarts.
Thus, the Act restores the pre-Ledbetter position held by the EEOC regarding the manner in which the statute of limitations is to be applied.
What Steps Should Employers Take to Ensure Their Pay Practices Are Nondiscriminatory?
2009 was a challenging year for business. In many cases, companies impacted by the economic downturn froze salaries. Other companies went further and reduced headcount. By broadening the statute of limitations for wage disparity claim, the time is ripe for impacted employees to challenge their employer’s actions.
Having a fiduciary responsibility to our organizations is implied, but we also should be driven by doing “what is right.” The following steps, at a minimum, should be taken.
1. Audit Your Current Pay Documentation Practices. Audit compensation practices to determine whether there is sufficient documentation supporting compensation decisions since performance-based specifics underlying such decisions will be essential to defending a wage disparity claim.
2. Develop Criteria for Compensation Decisions. Develop objective, measurable guidelines for compensation decisions that are applied consistently and uniformly by job classification, work group, department and/or business unit.
3. Set Up a Process to Review Your Compensation Decisions. Set up a process to ensure that managers and supervisors do not have unregulated discretion when making compensation decisions. Rather, consider implementing a review system so that compensation decisions are subject to the same scrutiny that terminations or other adverse actions receive.
4. Revise Your Document Retention Practices. Post Ledbetter, employers likely will need to retain certain information concerning compensation decisions longer than before; therefore, a review of your document retention policy might be in order.
5. Train Your Key Employees. Supervisors and managers should understand any policy modifications and be able to objectively consider and support all compensation decisions they make.
6. Analyze Your Compensation Practices. Analyze compensation data to determine if any statistical disparities exist across gender, race and ethnic lines and make any appropriate adjustments that eliminate unexplained disparities.
Civil rights legislation is designed, not to expose violators, but rather to correct a “wrong” and make it “right.” Better for HR professionals to internally address inequities before victims of pay discrimination seek external recourse. That too is right.
- Compensation Policy: Respond Now to the Lilly Ledbetter Act
- Employer’s Guide to Worker’s Compensation
- HR Guide to the Free Choice Act
Do you have a topic you would like Compensation Today to cover? Write us at firstname.lastname@example.org.
Are you paying your best employees enough to retain them after the economy picks back up? Get up-to-date and make sure your external salary market data is specific enough to the education, skills set and experience of employees you want to keep. Give a PayScale Demo a try.
Get accurate compensation data with a free PayScale Compensation Report. Learn how performing
* Lilly Ledbetter image used with permission under a Creative Common License from the House Committee on Education and Labor at Flickr.