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EMPLOYMENT NOTES

Lilly Ledbetter Fair Pay Restoration Act Passed

02.23.2009
On January 29, 2009, President Obama signed the Lilly Ledbetter Fair Pay Act (Pub. L. No. 111-2), overturning a 2007 U.S. Supreme Court decision, Ledbetter v. Goodyear Rubber & Tire Co., Inc.  The law, which addresses time limits faced by employees who sue for pay discrimination, amends Title VII of the Civil Rights Act of 1964 (Title VII), the Age Discrimination in Employment Act (ADEA), the Americans With Disabilities Act (“ADA”) and the Rehabilitation Act. The Act is retroactive to May 28, 2007, the day before the Court’s decision, and effectively revives all claims that are pending on or after that date. 

The new law makes it easier for employees to bring pay bias complaints by providing that the federal
Equal Employment Opportunity Commission charge-filing periods, 180/300 days from the issuance of the last discriminatory act, are triggered each time compensation or benefits are paid that emanate from a discriminatory compensation decision or practice. Practically speaking, the law restarts the time period for filing a charge each time wages or benefits (e.g. a paycheck) are paid to an employee under a discriminatory compensation scheme, regardless of how long ago that decision was made.
 
The law overturns the Supreme Court’s prior ruling that the statute of limitations began running from the date of the pay-setting decision, and that each new paycheck did not trigger a new charge-filing period. Ms. Ledbetter had worked as an Account Manager for Goodyear, a position overwhelmingly held by men. She discovered decades later, after receiving an anonymous note, that she had been receiving significantly less pay than her male counterparts.
 
The Ledbetter Fair Pay Restoration Act will make it easier for employees to bring federal pay bias claims and is anticipated to result in a surge in claims based on current paychecks that allegedly manifest earlier discriminatory pay decisions. We foresee that employers will have greater exposure to class action lawsuits alleging disparate pay practices.
 
Recommended Employer Practices:
 
Employers should review their pay practices to ensure that any possible pay discrepancies cannot be characterized as discriminatory under any federally protected employee categories and are based on legitimate, nondiscriminatory factors. The grounds for compensation decisions should be well documented. Documentation supporting compensation decisions should be retained to ensure that the original rationale for compensation decisions is preserved in case of litigation commenced years later.
 
Employers who adopt salary freezes during challenging economic times should be mindful that such measures apply equally to employees without disparate impact to federally protected employee categories.
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