U.S. Supreme Court Rules On Compensation Bias

Holds Workers Must Timely Challenge Pay Decisions

In a sweeping decision, a 5-4 majority of the U.S. Supreme Court recently ruled that workers who sue under Title VII of the Civil Rights Act must timely challenge pay decisions and cannot rely on the “continuing violation theory” to reach back to allegedly discriminatory decisions made before the charge filing period established by the Equal Employment Opportunity Commission (EEOC). Ledbetter v. Goodyear Tire & Rubber Co., No. 05-1074, U.S. Supreme Court (May 29, 2007).

Lilly Ledbetter worked for Goodyear from 1979 until 1998. Shortly before she retired in 1998, Ledbetter filed an EEOC charge alleging that Goodyear had discriminated against her based on her gender in violation of both Title VII and the Equal Pay Act (EPA). The trial judge dismissed her EPA claim at an early stage of the litigation and she did not pursue that claim further.

In support of her Title VII claim, Ledbetter alleged that in years past the company had lowered her performance evaluations because of her gender and that the lower evaluations resulted in lower merit pay increases. She argued that those tainted lower pay increases, in turn, perpetually reduced her compensation (because of her gender).
     
Justice Samuel Alito, writing for the majority, held that “the time for filing a charge of employment discrimination [with the EEOC] begins when the discriminatory act occurs.” That rule, he explained, “applies to any discrete act of discrimination” including decisions relating to pay. Ledbetter unsuccessfully argued that compensation discrimination is unlike other forms of illegal bias and that a different rule should apply.
 
The majority opinion held that an EEOC charge must “identify with care the specific employment practice that is at issue,” and that this requirement applies as much to pay claims as it does to challenges to other forms of discrimination (such as claims relating to hiring, promotion or termination). Because Ledbetter did not allege that Goodyear made any intentionally discriminatory decisions within the charge filing time period, her pay claims were time-barred.

A shareholder in Ogletree Deakins’ Morristown office, predicted the outcome of the Ledbetter case in an article published more than a year ago in the Journal of Forensic Economics. According to Copus, the immediate impact of the decision will be to negate the Office of Federal Contract Compliance Programs’ guidelines on compensation discrimination. Those guidelines were based on the exact theory rejected by the Ledbetter decision. This ruling also will have an immediate impact on EEOC charges in general because employees will not be able to sue employers for pay discrimination based on decisions that were made years earlier. Look for more on this key ruling in a future edition of The Employment Law Authority.

Note: This article was published in the April/May 2007 issue of The Employment Law Authority.