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/ PAY DISCRIMINATION CLAIM PERIODS
STATUS
The Ledbetter Fair Pay Act of 2009 was signed
into law by President Obama as Public Law 111-2 on January 29, 2009. The law amends various federal equal employment
opportunity laws to clarify discrimination occurs every time a paycheck is
issued following a discriminatory compensation decision. In effect, a new 180-day period to file a
discrimination claim would commence.
BACKGROUND
The topic of equal pay discrimination is a complicated one. There are actually four federal laws in
play, the Equal Pay Act (EPA,) Title VII of the Civil Rights Act, the
Americans with Disabilities Act (ADA), and the Age Discrimination in
Employment Act (ADEA).
On June 10, 1963, President John Kennedy signed into law the Equal
Pay Act, making it illegal to pay women lower wages for the same job
strictly on the basis of their gender. The law
went into effect a year later on June 11, 1964.
Under the EPA, in order to prove discrimination an employee must
show that different wages are paid to employees of the opposite sex, the
employees perform substantially equal work on jobs
requiring equal skill, effort and responsibility, and that the jobs are
performed under similar working conditions.
Once the employee establishes his/her case, the employer may only
avoid liability if the unequal pay is the result of a seniority system,
merit system, a system that measures earnings by quantity or quality of
production, or “a differential based on any other factors other than
sex.” Under the Equal Pay Act,
an employee has three years to bring a charge against his or her employer.
Title VII, the ADEA, and the ADA
prohibit compensation discrimination on the basis of
race, color, religion, sex, national origin, age, or disability. Unlike the EPA, there is no requirement
under Title VII, the ADEA, or the ADA
that the claimant's job be substantially equal to
that of a higher paid person outside the claimant's protected class, nor do
these statutes require the claimant to work in the same establishment as a
comparator.
The coverage threshold for a business for Title VII and the ADA is fifteen or more
employees and the ADEA threshold is twenty or more employees. Most folks do not realize it, but the
Equal Pay Act amended the Fair Labor Standards Act. For the most part, almost all businesses
that have an employee are covered by the FLSA and
thus subject to the EPA. There are
some very limited exemptions for certain types of
businesses. (e.g. A retail establishment with an
annual dollar volume of sales of at less than $500,000 and no employees
engaged in interstate commerce.)
This law has to do with claims under Title VII, the ADEA and the ADA;
not under the EPA. While the case that
brought attention to the law was about pay discrimination based on sex, the
proposed change is applicable to compensation decisions of race, color,
religion, sex, national origin, age, or disability.
180 Day Rule
Title VII of the Civil Rights Act “prohibits discrimination
by covered employers on the basis of race, color, religion, sex or national origin.” The ADEA added the prohibitions against
discrimination based on age and the ADA
added prohibitions against discrimination based on disabilities. Many of the procedural aspects of the
three laws are the same.
Title VII originally mandated that an employee had 90 days to file
a charge with the EEOC “after the unlawful employment practice
occurred.” That limit was extended to
180 days in 1972 under the Equal Employment Act, bringing it in line with
the National Labor Relations Act, the federal law that regulates
unions. In the early 1990s, several
attempts were made to increase the statute of limitations to two years to
bring it in line with the time period for most
civil lawsuits.
In order to file suit against an employer, an employee must first
submit a claim to the EEOC within 180 days after the alleged discrimination
occurs. The EEOC then makes a determination as to whether or not
probable cause exists to believe discrimination has occurred. If the
EEOC determines discrimination has occurred, it will
either pursue reconciliation and/or prosecution of the claim itself
or it will issue a "right to sue" letter to the complainant.
On May 29, 2007, the U.S. Supreme Court issued a major ruling on
pay discrimination when it decided on the case of Ledbetter v. Goodyear
Tire & Rubber Co., Inc. In its 5-4 decision, the Court ruled
against the plaintiff, Lilly Ledbetter, stating that she did not prove her
employer, Goodyear, intentionally discriminated against her during the 180
days preceding her complaint.
Ledbetter worked for Goodyear from 1979 until 1998. In March
1998, Ledbetter submitted a questionnaire to the EEOC alleging certain acts
of sex discrimination, and filed an official charge in July of that
year. Following her early retirement in November 1998, Ledbetter
filed suit against her former employer, alleging pay discrimination.
The original suit alleged sex discrimination under both the Equal Pay Act
of 1963 and Title VII of the Civil Rights Act of 1964.
During her trial in the District Court, Ledbetter introduced
evidence that during her time at Goodyear, she had been
given poor evaluations because of her sex, resulting in lower pay
than if she had been evaluated fairly. These decisions had a negative
impact on her throughout her time with Goodyear resulting in her receiving
significantly less than her male colleagues.
Goodyear maintained that the evaluations were nondiscriminatory. The
District Court found in favor of Goodyear on the Equal Pay Act claim, due
to the Act’s allowances for pay discrimination due to merit.
However, the court allowed the Title VII claim to proceed and the jury found
for Ledbetter, awarding her back pay and damages worth over $3.5
million. The judge reduced the award to $360,000, due to the
congressional cap of $300,000 in damages (the $60,000 was for back pay).
Goodyear appealed the decision, saying that the claim was time
barred with respect to all decisions before September 26, 1997, 180 days
before her EEOC questionnaire. They argued that no discrimination
occurred after that date. The Eleventh Circuit
Court of Appeals reversed the District Court’s decision, agreeing
with Goodyear that pay discrimination cannot be based on any pay decision
before the 180 days and that there was insufficient evidence to prove that
Goodyear acted with discriminatory intent in making the only two pay
decisions within the 180 days--namely a decision in 1997 and 1998 denying
Ledbetter a raise.
Ledbetter then filed a petition for a writ of certiorari asking the
Supreme Court to review what circumstances a plaintiff may bring an action
under Title VII of the Civil Rights Act of 1964 alleging illegal pay
discrimination when the disparate pay is received
during the statutory limitations period, but is the result of a decision
outside the limitations period.
The plaintiff claimed that each paycheck she received following the
discriminatory action of denying her a raise was a separate act of
discrimination, and therefore all of her paychecks were unlawful,
which would place the discriminatory act within the 180 days. She
also claimed that the 1998 decision denying her raise was unlawful because
it carried forward intentionally discriminatory disparities from prior
years.
Majority
Opinion
The majority opinion, issued by Justice Samuel Alito, found that
Ledbetter did not argue that Goodyear acted with discriminatory intent when
they issued her checks during the EEOC charging period or when they denied
her raise in 1998. Instead, her claim was that the paychecks were
unlawful because they would have been larger if she had
been evaluated in a nondiscriminatory manner prior to the 180
days. The plaintiff also contended that the 1998 decision was
unlawful because it “carried forward” the effects of prior,
uncharged discrimination decisions.
The court also reviewed Ledbetter’s argument that precedent
for her case was set by the Supreme Court’s
decision in Brazemore v. Friday. In this case, employees of a
firm were segregated into a “white
branch” and a “Negro branch.” The branches were merged in 1965, but the black employees were still
paid at the disparate old dual pay schedule. After Title VII was
extended to public employees in 1972, the black employees filed suit, saying that “discriminatory difference in salaries
should have been affirmatively eliminated.” In its ruling, the
Supreme Court found that when an employer adopts a facially discriminatory
pay structure that puts employees on a lower scale because of race, the
employer engages in intentional discrimination whenever it issues a
check to one of the disfavored employees.
While Ledbetter argues that Brazemore found that every paycheck
issued after a discriminatory action occurred is another actionable
offense, the Supreme Court actually ruled that this is true only when the
paychecks are issued using a discriminatory pay
structure. However, if the paychecks are issued
pursuant to a system that is “facially nondiscriminatory and
neutrally applied” then the paychecks do not trigger a new EEOC
charging period. The court found that Ledbetter did not provide
evidence that Goodyear adopted its performance-based pay system in order to
discriminate on the basis of sex or that it was
applied to her with discriminatory animus. Instead, she only alleges
that Goodyear discriminated against her in the past and that that act of
discrimination reduced the amount of later paychecks.
Dissent
In a heated dissent read from the bench (a rare practice), Justice
Ruth Ginsburg, joined by three of her colleagues stated that the 180 day
statute of limitations for Title VII complaints was far too rigid and that
the majority “does not comprehend, or is indifferent to, the
insidious way in which women can be victims of pay
discrimination.” In the minority’s view, every paycheck should be considered a separate, discrete, and
actionable act of discrimination.
Justice Ginsburg argued further that
“pay disparities often occur, as they did in Ledbetter’s case,
in small increments; only over time is there strong cause to suspect that
discrimination is at work.” The minority also asserted that it
often takes more than 180 days after a pay raise decision is made to determine whether they have been unfairly
paid.
At the conclusion of her dissent, Justice Ginsburg called on
Congress to rectify the majority decision of her colleagues.
“Once again, the ball is in Congress’ court. As in 1991, the
Legislature may act to correct this Court’s parsimonious reading of
Title VII.”
LEGISLATION
In the 110th Congress, immediately following the Ledbetter
v. Goodyear decision, Chairman of the Education and Labor Committee
George Miller (D-CA), issued a release stating that his committee would
immediately act to “clarify the law’s intention that the
ongoing effects of discriminatory decisions are just as unacceptable as the
decisions themselves.” This was taken
to mean that Congress would follow through on Justice Ginsburg’s plea
to revisit this issue and amend the law so that each paycheck following a
discriminatory pay decision would be considered a new actionable instance
of discrimination.
Two weeks later, Congressman Miller chaired a hearing on
“Justice Denied? The Implications of the
Supreme Court’s Ledbetter v. Goodyear Employment Discrimination
Decision.” The hearing included testimony from the
plaintiff, Lilly Ledbetter.
On June 22, 2007, Chairman Miller introduced H.R. 2831, the
Ledbetter Fair Pay Act of 2007. The House quickly passed the bill but a
cloture motion in the Senate failed to garner the 60 votes to allow debate
and consideration to continue.
The legislation amends Title VII, the ADA and the ADEA
to allow the filing of a claim many years after the original alleged
discriminatory pay decision. Specifically, it makes it an unlawful employment practice with
respect to discrimination in compensation under those laws, when a
discriminatory compensation decision or other practice is adopted, when an
individual becomes subject to a discriminatory compensation decision or
other practice, or when an individual is affected by application of a
discriminatory compensation decision or other practice, including each time wages, benefits, or
other compensation is paid, resulting in whole or in part from such a
decision or other practice.
ANALYSIS
While there is a lot of passion regarding the issue of equal pay,
it is important to understand what is really at stake. Many in the media have contended, and
will continue to contend, that the Supreme Court decision is a major blow
for discrimination. However, what
the Supreme Court’s ruling and subsequent legislation are really
about is whether or not there should be a statute
of limitations regarding discriminatory acts.
In the past, Congress has made clear that there needs to be a time
limit on how far into the past an employee can go to file a discrimination
suit against the employer. With the new law, employers will face
open-ended exposure for discrimination claims. This
is a heavy burden on businesses that will now be compelled to keep
extensive documentation of these decisions.
Proponents of the legislation asserted that businesses should be held liable for the results of any of their
discriminatory acts, even if it means maintaining old documentation.
Every paycheck an employee receives as a result of
a discriminatory decision is a discrete action that should be
considered a new violation of Title VII and therefore actionable under the
law.
Because of the coverage thresholds of Title VII, the ADA
and ADEA, the number of small businesses potentially affected by the change
is modest. However, in a
compensation discrimination case based on gender, a “larger”
small business, subject to both the Title VII and the EPA, is more likely
to be subject to a claim based on Title VII rather than EPA because of the
evidentiary requirements of the EPA.
Finallyk, while the Ledbetter case was about compensation
discrimination based on sex, the bill covers compensation based on race,
color, religion, sex, national origin, age, or disability. .
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