Fair Pay Act Clears Congress

On January 27, the House of Representatives voted 250 to 177 in favor of the Lilly Ledbetter Fair Pay Act, which now will be sent to President Barack Obama for his signature to enact the bill into law.  The new law allows individuals and “other affected parties” to file charges of alleged pay discrimination under Title VII of the 1964 Civil Rights Act, the Age Discrimination in Employment Act (ADEA), the Americans with Disabilities Act (ADA), and the Rehabilitation Act after the expiration of the 180/300-day statutory charge filing period (that generally runs from the time of an alleged unlawful compensation action).

The statute allows the filing of charges alleging pay discrimination with the issuance of each paycheck, often referred to as the “paycheck rule.”  Consequently, each new paycheck or post-retirement benefits check serves as an unlawful employment practice for which a charge could be filed even when the alleged discrimination occurred years, perhaps even decades, before.

The new law overturns the U.S. Supreme Court’s decision in Ledbetter v. Goodyear Tire and Rubber Co., Inc., 550 U.S. 618 (2007), where the Court held by a 5-4 vote that the plaintiff’s charge of pay discrimination was untimely filed, and therefore not actionable, after the 180-day statutory filing period.

Also, the new law applies retroactively to May 28, 2007, the date of the Supreme Court’s decision.  Thus, the new law will apply to all claims of discrimination in compensation under Title VII, the ADEA, ADA, and the Rehabilitation Act pending on or after that date.

“Unlawful Employment Action” Defined

Specifically, the law declares that an unlawful employment practice occurs when: (1) a discriminatory compensation decision or other practice is adopted; (2) an individual becomes subject to the decision or practice; or (3) an individual is affected by application of the decision or practice, including each time there is a payment of compensation.  In addition, it allows for the accrual of liability and an aggrieved person to obtain relief (including the recovery of back pay for up to two years preceding the filing of the charge), where the unlawful employment practices that have occurred during the charge filing period are similar or related to the practices that occurred outside the time for filing a charge.

The new law appears to make other significant changes as well.  It also potentially expands the class of individuals with standing to bring a claim of pay discrimination to include those who are “affected by” the alleged discrimination.  Read literally, that could include the families and relatives of the worker who was allegedly discriminated against, and perhaps even more broadly the employee’s survivors (as well as other employees). Although the bill’s Floor Manager, Sen. Barbara Mikulski (D-MD), attempted to assure critics during the debate that the bill did not change current law relating to individuals eligible to file pay discrimination charges, Senate amendments offered to delete the “affected by” language from the bill were defeated.   The defeated amendment specified that only workers alleging discrimination could file charges, not family members and others.

The new law also refers to “other practices” of discrimination, thus leading to the concern that it broadens the types of employment discrimination beyond pay discrimination.  An amendment to clarify that the bill did not go beyond pay discrimination was defeated.  Once again, Sen. Mikulski stated that the amendment was unnecessary.

The new law also applies to unintentional disparate impact claims, and creates new causes of action that could be brought when an individual receives retirement benefits. A substitute bill, offered by Sen. Kay Bailey Hutchison (R-TX), was defeated. The Hutchison substitute would have clarified these issues by extending the time limit workers have to file employment discrimination charges beyond the statutory 180/300 days in cases only where workers could not reasonably be expected to have known they had been discriminated against. Specifically, the Hutchison substitute would have clarified that the limitations period for bringing a claim is measured from the time of the discriminatory action – which is current law – unless the employee can demonstrate that he or she did not know, and should not have known, about the discrimination (such as in a pay disparity case).

What Employers Must Do Now

According to Hal Coxson, a shareholder in Ogletree Deakins’ Washington, D.C. office and a principal in Ogletree Governmental Affairs: “This bill was introduced and passed immediately upon its introduction in the House with little debate and no amendments permitted, and then passed through the Senate without any Committee hearings or markup. Every amendment on the Senate Floor was defeated and the bill was passed as introduced, with retroactive application.  Although the Senate Floor Manager gave assurances that the bill did not change existing law beyond extending the allowable time to file charges of pay discrimination, amendments which would have confirmed those assurances were defeated.

“As a result, employers will need to adjust to significant changes in the law relating to the filing of pay discrimination charges years after the alleged unlawful actions.  That means that employers must retain records of pay decisions for decades, including decisions related to promotions, job assignments, layoffs, and the like that affect compensation, in order to have the ability to defend themselves in subsequently-filed pay discrimination actions.  Also, it would be a good idea for employers to maintain addresses and contacts with former managers and supervisors who made pay decisions, or decisions which might have affected compensation, even after those employees have retired.  Otherwise, if a pay discrimination charge is filed there may be no one from the company available to testify as to why such decisions were made in a legal, non-discriminatory manner.”

Additional Information

Should you have any questions about this legislation or its impact on employers, contact the Ogletree Deakins attorney with whom you normally work or the Client Services Department at 866-287-2576 or via e-mail at clientservices@ogletreedeakins.com.

Note: This article was published in the January 27, 2009 issue of the National eAuthority.