Class Claims of Pay Discrimination After Ledbetter

The Supreme Court’s Ledbetter decision invalidates traditional class claims of pay discrimination and the Office of Federal Contract Compliance Programs’ (OFCCP) pay discrimination standards.

On May 29, 2007, the U.S. Supreme Court ruled that pay decisions are “discrete acts” and that a Title VII plaintiff alleging intentional pay discrimination must identify the specific pay decisions being challenged and must focus exclusively on pay-related decisions made during the 180/300-day charge filing period. Ledbetter v. Goodyear Tire & Rubber Co., Inc., 127 S. Ct. 2162 (2007).

A Title VII plaintiff may not challenge pay-related decisions made outside the narrow limitations period, even if earlier decisions were intentionally discriminatory and reduced subsequent pay during the charge filing period. Title VII bans discriminatory decisions (i.e., “discrete acts”) that affect pay, but does not ban the mere payment of discriminatorily set pay unless the pay system itself is facially discriminatory.

Although Ledbetter involved only an individual claim, the primary impact of the decision will affect class pay discrimination claims because the traditional method of proving Title VII class claims of pay discrimination is incompatible with Ledbetter. In addition, because the OFCCP Interpretive Standards for Systemic Compensation Discrimination rely on that same traditional approach to class claims of pay discrimination, the OFCCP’s current pay discrimination initiative is also incompatible with Ledbetter. 

For more than 30 years, plaintiffs have based class claims of pay discrimination on multiple regression analyses of current pay in search of unexplained disparities based on gender or race/ethnicity. For example, plaintiffs successfully invoked a regression analysis of current pay to obtain class certification in Dukes v. Wal-Mart, Inc., 474 F.3d 1214, 1230 (9th Cir. 2007).

Conceptually, however, any analysis of current pay – whether by regression techniques or otherwise – is irreconcilable with Ledbetter’s requirement to focus on discrete pay decisions made within the limitations period. For example, Ledbetter’s then-current pay was the accumulated result of 21 specific pay-related decisions spanning 19 years. Because she focused on her current pay and did not challenge a discrete pay decision within 180 days of filing her EEOC charge, Ledbetter’s Title VII claim failed.

So, too, will any plaintiff’s Title VII claim based on current pay – even one buttressed by sophisticated statistical tools such as regression analyses. Thus, in the ordinary case, an employee’s current pay is the accumulated result of decisions regarding starting salary and merit pay increases (as in Ledbetter’s situation), as well as decisions regarding promotions and associated pay increases as the employee advanced in pay grade. If a plaintiff analyzes only current pay (whether by regression analysis or otherwise), the plaintiff will have no ability to identify any discrete act which caused the alleged pay disparity, much less identify discrete acts occurring during the limitations period.

In other words, Title VII class claims of pay discrimination must meet Ledbetter’s core requirements: (a) challenge discrete pay decisions that are (b) made during the charge filing period. The traditional approach to proving Title VII class claims of pay discrimination is wholly incompatible with Ledbetter because it does not satisfy either of Ledbetter’s prime requirements.

Indeed, in the only decision to date addressing the issue, the court relied on Ledbetter and (a) rejected plaintiffs’ traditional regression analysis of current pay, and (b) denied class certification because such an analysis was not probative of pay decisions made during the relevant time period. Gaston v. Exelon Corp., 247 F.R.D. 75 (E.D. Pa. 2007).

Because OFCCP’s 2006 Interpretive Standards for Systemic Compensation Discrimination reflect the traditional approach of analyzing current pay to establish systemic discrimination in compensation, Ledbetter also invalidates those standards.

Finally, because Ledbetter renders unlawful only pay decisions made during the relevant limitations period, employers should not conduct so-called “pay-equity” regression analyses of current pay. Such analyses will not identify potentially unlawful pay decisions. Instead of studying current pay, employers should actively monitor three key pay decisions: starting pay, merit raises, and promotional pay increases. Most employers’ compensation staffs probably already monitor those decisions closely to ensure company guidelines are followed. Employers also should consider adding race/gender/ethnicity to the monitoring mix.
 
Note: This article was published in the July 2008 issue of the Class Action eAuthority.