Fair Pay Act of 2009

February 16, 2009

On January 29, 2009 President Obama signed into law the Lilly Ledbetter Fair Pay Act. The Act is seen as a legislative "fix" to the U. S. Supreme Court's May 29, 2007 decision in Ledbetter v. Goodyear Tire & Rubber Co, where the high court limited the time in which employees can bring disparate pay claims under Title VII.

The court held that an employee must file charges with the Equal Employment Opportunity Commission (EEOC) within 180 days (or a 300-day period if the charge is also covered by a state or local antidiscrimination law) of the adverse pay setting decision ? otherwise the claim was barred. The court ruled that the time limit for filing a charge of discrimination begins to run when an employer makes an allegedly discriminatory compensation decision ? not, as Ms. Ledbetter argued, every time an employee receives what he or she considers to be a lesser paycheck due to unlawful discrimination.

The Fair Pay Act of 2009 reverses the Supreme Court ruling and expands the time period in which employees can pursue discrimination claims related to employment compensation. The Act amends Title VII, the Age Discrimination in Employment Act, and the Americans with Disabilities Act and will therefore affect compensation claims based on age, race, disability, and other statutorily-protected classes of employees. The Act states that an unlawful employment practice occurs not only when an employer makes the initial allegedly discriminatory pay decision, but also upon "the application of a discriminatory compensation decision or practice, including each time wages or other compensation is paid." In short, each individual paycheck or other compensation alleged to be discriminatory can be considered a distinct unlawful act which starts the limitations period (180 days or 300 days) again.

For example, John Doe resigns his employment at XYZ company and receives his last pay check March 1, 2009. Four months later he concludes that he had been paid at a lower rate because of his age ? a decision that was initially made four years prior to his leaving XYZ. Under the Fair Pay Act he may file a charge with the EEOC for discrimination in pay since his claim occurs within the time window after his last pay check.

The Act allows employees to seek back pay for a period of two years predating their charge. Notably, the effective date of the Fair Pay Act is retroactive to May 28, 2007 (the day before the Supreme Court's decision in Ledbetter), and will apply to all disparate pay claims pending on or after that date. Critics of the law contend that the Act will encourage lawsuits and will be a boon to trial lawyers.

It is recommended that you review your compensation and benefit polices to ensure that policies are being applied consistently. Appropriate guidelines should be in place for compensation decisions, both at the time of hiring as well as upon advancement within your organization. In addition, it is important to document compensation decisions made for new hires and current employees.

SESCO consultants are available to assist with your compensation issues, including responding to allegations of discriminatory pay.