Lilly Ledbetter Fair Pay Restoration Act of 2009 - What it Means For Employers
Anne E. Zerbe
On January 29, 2009, President Obama signed the Lilly Ledbetter Fair Pay Restoration Act of 2009. This new law creates an ongoing time frame within which individuals may file discrimination claims alleging discrimination in compensation on the basis of gender, age, disability, race and other protected classes. The Lilly Ledbetter Fair Pay Restoration Act expands the definition of an unlawful employment practice to include when an employer adopts a discriminatory compensation decision or practice, when an employee or individual becomes subject to a discriminatory compensation decision or practice, or when an individual is affected by application of a discriminatory compensation decision or practice, including each time wages, benefits or other compensation is paid.
The Statute of Limitations Restarts with Every Payment of Wages or Benefits.
In other words, the statute of limitations to file these claims (currently 180 days instates without an equal employment agency or 300 days in states that operate equal employment agencies) restarts with every paycheck issued and each time wages, benefits or other compensation is paid. Under the new law, when the employee is terminated and receives a final paycheck or a severance payment, the 188/300-day clock starts again. If individuals or their beneficiaries receive payments from an employer-provided pension or life insurance plan, potentially even years after the retirement of the employee, an individual or beneficiary has another 180/300 days to file a complaint.
The Ledbetter Fair Pay Act Expands the Statue of Limitations for Compensation Discrimination Claims based on Protected Class and Expands those Eligible to Sue.
The Lilly Ledbetter Fair Pay Restoration Act amends other civil rights statutes, and extends the statute of limitations for filing claims based on discrimination in compensation for all protected classes of employees, including gender, age, color, race, disability, religion and national origin. In addition to expanding the statute of limitations for all types of wage discrimination claims, the law expands the class of plaintiffs who may bring claims based upon discrimination and compensation. By defining an unlawful discrimination compensation practice to include when an “individual” becomes subject to a discriminatory compensation decision or practice, or when an individual is affected by such discriminatory compensation decision or other practice, the class of plaintiffs is not limited to employees, but includes beneficiaries or other individuals who were affected by the discriminatory compensation decision or practice.
The Law is Retroactive to May 28, 2007.
The new law is retroactive to May 28, 2007, the day before the U.S. Supreme Court issued its landmark decision ruling that Lilly Ledbetter’s Equal Pay Act and discrimination claims were time barred based on the fact that the discriminatory decision occurred 19 years before she brought suit. The law applies to all pay discrimination claims pending on or after that date. Now, those cases that have been dismissed because the statute of limitations expired have a chance to reinstate their claims. The Law also gives plaintiffs the ability to collect back pay for up to two years before they filed the claim.
How do Employers Mitigate the Risks under the New Law?
Employers need to carefully review and audit their current compensation practices. Employers should focus on objective performance-based specifics underlying compensation and promotion decisions that will be essential to defending a wage disparity claim.
Other recommended actions include”
Develop objective, measurable guidelines or criteria for compensation decisions and apply them consistently and uniformly within job classifications, departments or business units.
- Review compensation decisions in a similar manner to decisions regarding termination, demotion, discipline or other adverse actions to provide a framework within which adverse employment actions are reviewed by upper level management in order to ascertain the risk factor of compensation decisions.
- Review all job descriptions and revise them periodically to ensure they are accurate and timely.
- Train supervisors and managers regarding implementation of compensation criteria.
- Keep records longer – consider electronic archiving.
- Examine compensation data to look for any possible disparities and assess whether or not the company is at risk.
- Educate and train supervisors and managers who conduct performance evaluations to accurately and fairly reflect the performance based on objective criteria and to adequate explain findings based on subjective criteria.
In summary, employers should expect an increase in litigation challenging disparities in compensation that occurred well outside the original 180 day/300-day filing period. Employers who wish to reduce their potential exposure should carefully review their overall compensation practices in order to identify any disparities that adversely affect groups of protected class members. A statistical analysis of compensation rates for these individuals may disclose whether the disparity results from lawful and defensible non-discriminatory factors or if these discrepancies are a cause for concern that should be addressed prior to litigation. In summary, adequate and objective documentation and record retention practices related to compensation decisions will be a key factor in defending pay disparity claims.
For more information regarding the Lilly Ledbetter Fair Pay Restoration Act of 2009, please contact Anne E. Zerbe at azerbe@cgalaw.com, Benjamin Pratt at bpratt@cgalaw.com, or Anthony Bowser at abowser@cgalaw.com.
