Ledbetter Fair Pay Act


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Ledbetter Fair Pay Act

  1. 1. ® PROSKAUER ROSE LLP Client Alert A report for clients and friends of the Firm January 2009 that the time clock for filing a Charge with the EEOC President Obama Set for compensation-related discrimination restarts each time an employee receives a paycheck that manifests To Sign Ledbetter Fair the discrimination. In other words, under the Ledbetter Act, so long as workers file a Charge within Pay Act 180/300 days of receiving a discriminatory paycheck, their Charge is timely, notwithstanding how long ago in time the discriminatory decision was made. Finally, On January 27, 2009, the House of Representatives, by the Ledbetter Act applies retroactively, as if the law a vote of 250-177, approved S. 181, the Lilly Ledbetter was in effect on May 28, 2007, the day before the Fair Pay Act of 2009 (“the Ledbetter Act”) sending the Supreme Court’s landmark ruling. bill to President Obama who has promised to sign the legislation into law. Earlier, on January 22, 2009, the Background: Ledbetter v. Goodyear Tire & Senate voted 61-36 approving the Ledbetter Act. A signing ceremony is anticipated for later this week Rubber Co. signaling the Obama Administration’s intention to On May 29, 2007, the Supreme Court held in revamp current labor laws and expand coverage under Ledbetter, that disparate treatment pay discrimination existing employment laws. Many believe that the claims under Title VII of the Civil Rights Act of 1991 selection of the Lilly Ledbetter Fair Pay Act as the first must be filed within the Charge-filing period (either law enacted under the Obama administration is a 300 days in states with fair employment practices harbinger of things to come. agencies, or 180 days) after the alleged pay decision is made – not within 180 days of receiving the last paycheck. The Ledbetter Act reverses a May 2007 Supreme Court decision, Ledbetter v. Goodyear Tire & Rubber, 550 U.S. 618 (2007), that Ledbetter could not recover in a For nearly 20 years, Lilly Ledbetter worked for discrimination suit because her claim – alleging her Goodyear as a supervisor at its Gadsden, Alabama employer paid her less than her male co-workers during plant. Just prior to taking early retirement, Ledbetter most of her 19-year career – had not been filed in a filed a Charge with the Equal Employment timely manner, notwithstanding the continuing effects Opportunity Commission (“EEOC”) alleging sex of alleged past discrimination. This was so, the Court discrimination. In her lawsuit, Ledbetter alleged that reasoned, because Ledbetter did not timely complain she received smaller raises than her male counterparts of discrimination when Goodyear purportedly made its as a result of performance evaluations motivated by discriminatory decisions about Ledbetter’s discrimination, and by the conclusion of her compensation, years prior to her Charge-filing date. employment with Goodyear, Ledbetter was earning The 5-4 decision was controversial, and the dissent by significantly less than her male counterparts. Justice Ginsberg called upon Congress to reverse the decision. Congressional leaders, including The jury found in Ledbetter’s favor awarding her then-Senator Obama, vowed to overturn Ledbetter. backpay and more than three million dollars in punitive damages. On appeal, the U.S. Court of The new law effectively eases the statute of limitations Appeals for the Eleventh Circuit reversed. The court for compensation-implicated personnel actions held that a Title VII pay discrimination claim could (including promotion, hiring, evaluation, and employee not be based on pay decisions which were made and benefits decisions) under Title VII, as well as under implemented prior to the Charge-filing period, and that other federal employment discrimination statutes (e.g., Ledbetter had not established that Goodyear had acted ADEA, ADA, and the Rehabilitation Act). It codifies with discriminatory intent in either of its pay decisions made within 180 days of her Charge.
  2. 2. In a 5-4 decision, authored by Justice Alito, the Supreme and that the proposed legislation would effectively eliminate Court affirmed the Eleventh Circuit’s decision, holding that the uniform statute of limitations on many discrimination Ledbetter’s pay discrimination claim was untimely. The claims forcing employers to have to defend against alleged Court rejected the “paycheck rule,” that each time employees discriminatory actions that may have occurred years prior. receive a paycheck that evidences prior discriminatory pay practices, it triggers anew the EEOC Charge-filing period, The Ledbetter Fair Pay Act of 2007 moved swiftly through permitting the employee to bring a timely claim. The Court the House of the Representatives where it passed in July 2007, found that, in order to state a viable disparate treatment pay before stalling in the Senate. In April 2008, then-Senator claim, there must be evidence that the discriminatory act Obama flew back to Washington, D.C., in the middle of his occurred during the Charge-filing period. The Court presidential campaign, to cast his vote in favor of the Lilly reasoned that a pay-setting decision is a discrete act, Ledbetter Fair Pay Act, but the bill fell 4 votes shy of independently identifiable and actionable, and that “current stopping the Senate debate and was tabled for the remainder effects alone cannot breathe life into prior, uncharged of the 110th Congress. discrimination.” Accordingly, the Court ruled, the statute of limitations for Ledbetter’s pay discrimination claim ran after Before the 111th Congress had convened, House leadership each alleged discriminatory decision was made and announced its intention to take up the Ledbetter bill along communicated to her. with another pay discrimination bill as its first order of business. In the first week of the 111th Congress, The Lilly In the wake of Ledbetter, employees could not pursue a Ledbetter Fair Pay Act of 2009 (H.R. 11) was introduced backpay claim under Title VII for sex-based pay and moved directly to the floor of the House, where it was discrimination based on pay decisions made and considered under a special rule and passed without the communicated prior to the applicable limitations period for possibility of an amendment. The House followed the same filing a Charge, even when the employee was, arguably, course of action with The Paycheck Fairness Act (H.R. 12), a unaware of the disparity. As a result, employees who claimed sweeping bill that would transform the Equal Pay Act by, compensation-related discrimination, pointing to decisions among other things, limiting employer defenses and adding made beyond the 180/300 day limitations period, were out of uncapped punitive and compensatory damages. The House luck, absent evidence that discriminatory animus permeated linked the two bills and sent them on to Senate for pay decisions during the Charge-filing period. As the consideration as one. Supreme Court, long ago, remarked in United Airlines v. Evans, 431 U.S. 553, 558 (1977), “the continuing effects of Senate leadership, recognizing that the Paycheck Fairness Act the precharging period discrimination did not make out a would be a more protracted fight, decided to take up the present violation.” Ledbetter bill (S. 181) on its own. On January 22, 2009, the Senate voted by a margin of 61 to 36 to pass the Ledbetter Justice Ruth Bader Ginsberg, in dissent, argued that the legislation and on January 27, 2009, the House voted Court’s opinion was contrary to Congressional intent and overwhelmingly to approve the Ledbetter Act. (S. 181). ignored common characteristics of pay discrimination and the realities of the workplace. The dissent urged Congress to correct the Court’s “cramped interpretation” and Key Provisions of The Lilly Ledbetter Fair “parsimonious reading of Title VII.” Justice Ginsberg opined Pay Act that “[o]nce again, the ball is in Congress’s court,” referring to the 1991 Civil Rights Act, which superseded a series of Adopts the “Paycheck Rule.” The time period for Supreme Court decisions on civil rights. filing a pay discrimination charge with the EEOC begins to run each time an employee receives a paycheck that Congress Takes Action manifests discrimination. The new rule effectively eliminates the statute of limitations for compensation- On June 22, 2007, just one month after the Supreme Court’s implicated personnel actions because each new paycheck ruling in Ledbetter, Rep. George Miller (D-CA.) introduced gives rise to a new Charge-filing period. We say H.R. 2831, the Lily Ledbetter Fair Pay Act of 2007, to “compensation-implicated personnel actions” because, in overturn the Court’s decision. As proposed, an unlawful Ledbetter, she claimed that the pay discrimination arose employment practice occurs when: (1) a discriminatory from performance evaluations that reflected compensation decision or other practice is adopted; (2) an discriminatory animus resulting in smaller wage increases individual becomes subject to the decision or other practice; than to similarly situated male counterparts. or (3) an individual is affected by application of the decision or practice, including each time the compensation is paid. Applies to claims of pay discrimination under Title VII, as well as the ADEA, the ADA, and the Rehab. Opponents of the bill argued that the Supreme Court’s ruling Act. Although the Ledbetter decision involved sex-based in Ledbetter, was entirely consistent with its prior decisions 2
  3. 3. compensation discrimination under Title VII, the new Undefined terms will result in additional litigation. legislation amends all of Title VII, as well as the ADEA, The new Act includes a number of terms and phrases the ADA, and the Rehabilitation Act. Thus, the that are undefined or could have far broader application, Ledbetter Act now applies to claims alleging e.g. “when an individual is affected by application of a compensation-implicated discrimination based on sex, discriminatory compensation decision or other practice.” age, race, color, religion, national origin, and disability. Employers should anticipate litigation over who is protected and what employer conduct/practices may Applies to Retirees. The new law applies to retirement trigger liability. payments such that it will restart the time period for filing a Charge to the first time a retiree receives an annuity Conclusions: What Employers Should Do check or other retirement benefit that s/he claims was This new law could have broad implications for all employers based on wage decisions permeated with discrimination but should be of particular concern for those who have not because his/her pension benefits are depressed. The been vigilant in documenting the rationale for pay and Ledbetter Act is less clear as to whether the paycheck rule promotion decisions, as well as merit pay increases based on will apply to each new pension payment. performance evaluations. In our view, executives, officers, managers, and/or supervisors would do well by considering Any employment action affecting compensation the following: could be considered timely. The new law extends the paycheck rule beyond pay raises to include any decision Ensure that your workplace has systems in place for or “other practice” affecting compensation “in whole or setting and reviewing all pay decisions – including in part” that may have influenced compensation received. merit-based decisions arising from performance Therefore, the paycheck rule could be applied to any evaluations; employment action – including decisions on employee benefits, hiring, employment transfers and/or evaluations Document the reasons for pay decisions, particularly the – that impacts compensation in any way. rationale for why certain employees may receive higher or lower pay, benefits, or evaluations than similarly situated Two-year recovery cap remains. While employees and co-workers; retirees may now reach back to their first day of employment for evidence of a discriminatory pay Recognize that documentation is key to defending against decision, they can only recover back-pay for up to the a pay discrimination claim which, as a result of this two years preceding the filing of their EEOC Charge. legislation, can be based on almost every personnel action; Applies to intentional discrimination and disparate impact claims. The Act applies to both intentional Retain complete personnel files … forever; discrimination and disparate impact claims alike. Train managers, supervisors, and executives on how to Retroactive application. The Act takes effect conduct an appropriate performance evaluation. retroactively as if it was enacted on May 28, 2007, the Consider having a committee review all personnel day before the Supreme Court issued the Ledbetter evaluations that impact merit-based pay decisions; decision and expressly applies to all claims of compensation discrimination pending on or after that date. Train managers, supervisors, and executives in document retention and maintenance to ensure consistent employment records; and What Employers Should Look Out For Seek advice of counsel when unsure of your obligations Exposure to the Paycheck Rule. The law effectively under the new law. ends the statute of limitations for compensation- implicated personnel actions. Each paycheck provides If you have any questions about compliance under the new employees with all the documentation they will need to law, or any other employment-related questions, please bring a timely action for wage discrimination – even in contact any of the attorneys listed on this Client Alert, or situations where the alleged discrimination occurred your Proskauer relationship attorney. years earlier. 3
  4. 4. BOCA RATON BOSTON CHICAGO HONG KONG LONDON LOS ANGELES NEW ORLEANS NEW YORK NEWARK PARIS SÃO PAULO WASHINGTON, D.C. Client Alert The Proskauer Rose Employment Law Counseling and Training Practice Group is a multidisciplinary practice group throughout the national and international offices of the firm which advises and counsels clients in all facets of the employment relationship including compliance with federal, state and local labor and employment laws; review and audit of employment practices, including wage-hour and independent contractor audits; advice on regulations; best practices to avoid workplace problems and improve employee satisfaction; management training; and litigation support to resolve existing disputes. If you have any questions about the impact of these changes to the New York Labor Laws, please contact your Proskauer relationship lawyer or one of the lawyers listed below: Washington, D.C. Leslie E. Silverman 202.416.5836 – lsilverman@proskauer.com Lawrence Z. Lorber 202.416.6891 – llorber@proskauer.com New York Elise M. Bloom 212.969.3410 – ebloom@proskauer.com Fredric C. Leffler 212.969.3570 – fleffler@proskauer.com Katharine H. Parker 212.969.3009 – kparker@proskauer.com Marc A. Mandelman 212.969.3113 – mmandelman@proskauer.com Boston Mark W. Batten 617.526.9850 – mbatten@proskauer.com Boca Raton Allan H. Weitzman 561.995.4760 – aweitzman@proskauer.com Newark John P Barry . 973.274.6081 – jbarry@proskauer.com Wanda L. Ellert 973.274.3285 – wellert@proskauer.com New Orleans Charles F. Seemann 504.310.4091 – cseemann@proskauer.com Howard Shapiro 504.310.4085 – howshapiro@proskauer.com Los Angeles Anthony J. Oncidi 310.284.5690 – aoncidi@proskauer.com Harold M. Brody 310.284.5625 – hbrody@proskauer.com Arthur F. Silbergeld 310.284.5624 – asilbergeld@proskauer.com Special thanks to associate, Keji Ayorinde, for her contribution in drafting this Client Alert Proskauer Rose is an international law firm that handles a full spectrum of legal issues worldwide. This publication is a service to our clients and friends. It is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice or render a legal opinion. © 2009 PROSKAUER ROSE LLP All rights reserved. Attorney Advertising. . 4 You can also visit our Website at www.proskauer.com