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Talent Management Perspectives

Published March 2009

The Lilly Ledbetter Fair Pay Act: Game-Changer for Employers

  Nita Beecher

On January 29, 2009, Lilly Ledbetter, a 70-year-old widow, was the guest of honor at a reception hosted by first lady Michelle Obama. She was then escorted by President Barack Obama to the signing of the bill that bears her name. How did Ledbetter go from being an unknown, retired Goodyear foreman to the poster woman for gender discrimination, with the first bill passed under the Obama administration named for her?

Prior to her retirement, Ledbetter, the only female supervisor at the Goodyear plant in Alabama, learned she was making substantially less than her male counterparts. She sued for pay discrimination under Title VII of the Civil Rights Act of 1964 and was awarded $360,000, a decision later reversed by the Eleventh Circuit Court of Appeals. Ledbetter appealed the case in the U. S. Supreme Court, and in May 2007, it determined that Ledbetter could not recover for the prior unlawful pay discrimination — even though the unlawful pay discrimination was proven — because she did not file a charge of discrimination within 180 days of the discriminatory pay decision being made.

The Court rejected the "paycheck rule," under which each new paycheck could be the basis for a new claim of pay discrimination even though the adverse pay decision was made outside the 180-day period. In her sharp dissent to the decision — Ledbetter v. Goodyear Tire & Rubber Co. — Justice Ruth Bayer Ginsburg called on Congress to fix the Court's "cramped interpretation of Title VII."

During the 2008 presidential election, the Lilly Ledbetter Fair Pay Act was a centerpiece of the Democrats' agenda. And when Obama was elected president and the Democrats received larger majorities in both the House and Senate, the stage was set to make this Act the first passed under the new administration.

Provisions of the Act
The Act overturns the Supreme Court's Ledbetter decision by amending Title VII, the Age Discrimination in Employment Act, the Americans with Disabilities Act and the Rehabilitation Act to state that an unlawful employment practice in compensation occurs when one or more of the following occur:

• When a discriminatory compensation decision or other practice is adopted.
• When an individual become subject to a discriminatory compensation decision or other practice.
• 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.

The major change for employers is that an "unlawful employment practice" occurs each time an employer issues a paycheck that has been impacted by a prior discriminatory pay decision, regardless of when the initial alleged discriminatory pay decision was made. The Act allows employees to recover back pay and damages for up to two years prior to the filing of a charge of discrimination with Equal Employment Opportunity Commission (EEOC). It is retroactive to all claims pending on or after May 28, 2007.

What This Means for Employers
Employers now are liable for accumulated pay differences that have occurred over an extended period of time, potentially from the beginning of a person's employment. Employers have the burden of proving the reasons for the pay difference are legitimate. This may be difficult if the one-time decision makers are no longer with the company. To minimize their risks, employers should at the very least consider doing the following:

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