In his first significant act as President in the labor and employment arena, President Obama effectively overturned the United States Supreme Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co. by signing the Lilly Ledbetter Fair Pay Act (“Ledbetter Act”) into law this Thursday. The main thrust of the Ledbetter Act is that it “resets” the statute of limitations for wage claims based on discrimination each time an employee receives a paycheck affected by the alleged discriminatory practice.
Lilly Ledbetter worked for her employer, Goodyear, for 19 years. She accused Goodyear of gender discrimination under Title VII on the grounds that, throughout her almost 20 career, she was consistently paid less than male employees who were similarly situated. The Supreme Court found that Ledbetter’s Title VII action was time-barred; holding that the statute of limitations starts running under Title VII when the employer makes the original discriminatory pay decision. The Court rejected Ledbetter’s argument that her claim was “refreshed” each time she received a paycheck affected by Goodyear’s discrimination.
The Ledbetter Act
The Ledbetter Act “resets” the statute of limitations for wage claims based on discrimination (in any form recognized by federal law) each time an employee receives a paycheck affected by the alleged discriminatory practice. Moreover, the Act defines “unlawful employment practices” broadly to encompass any practice that affects an employee’s compensation.
Given the speed of which this new administration was able to push through this fairly substantial legislation, employers should anticipate continued robust efforts from Washington to further bolster employee protections in the coming months.
What Steps Should Employers Take?
While it will likely take some time for the courts to interpret the new law and provide guidance for employers to take steps to avoid litigation, there are a few initial steps employers should consider taking now:
- Examine compensation policies to ensure they do not discriminate on the basis of a protected class or protected activity.
- Work with employment counsel to structure and conduct a self-audit of compensation practices and discuss best practices for retention and destruction of compensation records.
- Train supervisors and managers regarding proper and improper considerations when making discretionary compensation decisions.