A Brief Background on Lilly Ledbetter:
Lilly Ledbetter worked for the Goodyear Tire and Rubber Company in their Gadsden, Alabama, union plant from 1979 until 1998. While employed as a salaried worker, raises were given and denied based on evaluations and recommendations regarding employee performance. All merit increases had to be substantiated by a formal evaluation. In 1998, Ledbetter inquired into the possible sexual discrimination of the Goodyear Tire Company. Later that year, she filed formal charges with the Equal Employment Opportunity Commission based on the disparity between her pay and that of her male peers. After early retirement, Ledbetter sued claiming pay discrimination under Title VII of the Civil Rights Act of 1964 and the Equal Pay Act of 1963.
It is unlawful for an employer to discriminate against any individual with respect to his or her compensation, terms, conditions, or privileges of employment because of an individual’s race, color, religion, sex or national origin. Prior to the passage of the Lilly Ledbetter Fair Pay Act, a charge of discrimination needed to be filed within 180 days after the alleged unlawful employment practice occurred.
Ledbetter took her case to the United States Supreme Court where, in 2007, the Court held that according to Title VII of the Civil Rights Act of 1964, discriminatory intent must occur within the 180 day charging period. Ledbetter claimed that each paycheck she received was an act of discrimination. The Court refuted her claim because it felt she provided no evidence of discriminatory intent in the issuance of her paychecks.
What is the Lilly Ledbetter Act?
The Lilly Ledbetter Fair Pay Act, signed into law by President Barack Obama on January 29, 2009, overturned the United States Supreme Court decision. The Act amends federal fair employment laws by stating that an unlawful discriminatory act occurs each time an employee is paid wages, benefits or other compensation that reflect a discriminatory decision or unlawful practice. This means that the 180 day charging period begins with each paycheck or other payment of benefits or compensation. The passage of the Ledbetter Act effectually amends Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act and Rehabilitation Act of 1973, by applying the Ledbetter Act to any claims of compensation discrimination based on any of the protected characteristics and classes, not just gender.
Some Caveats:
Congress made the Ledbetter Act effective retroactive to May 28, 2007, the day before the United States Supreme Court ruled against Ledbetter. Therefore, any pending cases, where employers were relying on the outcome of the Ledbetter decision, will need to be reevaluated. Additionally, an audit of a company’s past payroll might impact the prior and future funding and matches of that company’s profit sharing and pension plans.
Also note that the language of the act is broad, leaving open the possibility that a spouse, domestic partner, child, or other dependent of an employee could be affected by a compensation decision, and allows claims by third parties against the deceased employee’s estate.
And finally, a company should be mindful that Federal employment laws prohibit retaliation against any individual who exercises his or her rights under the laws including the filing of a charge, or participation in an investigation or proceeding under the laws.
Steps To Help Safeguard a Company against Pay Practices Discrimination Claims
- Conduct an audit of your existing pay practices and pay levels to identify disparities that might give rise to a claim of pay discrimination. Consult your attorney to determine the scope of the audit and have information protected by the attorney-client privilege. If a pay disparity in fact exists, take action as advised by counsel.
- Update Policies and Procedures making sure they reflect your commitment to fair pay practices and prohibit retaliation; this includes policies and practices regarding start salaries, promotions, and merit increases. Compensation practices should contain a process for objective review of compensation decisions including comparisons of individuals in similar jobs, with similar experience at similar levels.
- Establish a compensation decision review process.
- Review and update job descriptions to accurately reflect job duties, education and experience levels required to perform the specific job.
- Retain contact information of former managers, supervisors and other personnel responsible for pay decisions and decisions that might have affected compensation, including that of retired employees.
- Train management personnel who make decisions regarding hiring, firing, compensation, promotions, transfers, benefits, training, and other terms and conditions of employment on such topics as polices regarding salaries, promotional and merit increases, documentation and rules for retaining records.
- Management personnel should have a refresher course as to what is prohibited discrimination under the law.
- Create a document retention program and policy that will allow you to support a defense against a future pay discrimination claim. This includes retention of documentation of pay decisions related to promotions, job assignments, layoffs, and other decisions that affect compensation. Policies and guidelines that were relied upon for making a compensation or promotion decision should also be retained.
