Lilly Ledbetter Fair Pay Act: How Fair Are Your Pay Practices?

Do you know who Lilly Ledbetter is? Well, you’re about to get to know her story and the impact that she has made in the workplace. She is an Alabama woman who lost her pay discrimination case at the Supreme Court on the basis that she had not filed her discrimination charge in a timely manner. On January 29, 2009, President Obama overrode that Supreme Court decision and signed into law the Lilly Ledbetter Fair Pay Act.

The Facts

Lilly Ledbetter was a Production Supervisor at a Goodyear tire plant in Alabama who filed an equal-pay lawsuit regarding pay discrimination six months before her early retirement in 1998. She claimed that during her employment from 1979 to 1998, her supervisors gave her poor evaluations based on her sex. Because of that:

  1. Her pay did not increase as much as it would have if she had been evaluated fairly;
  2. Those past pay decisions impacted the amount of her pay throughout her entire employment; and
  3. At the end of her employment, she was earning significantly less than her male counterparts.

The Law

Title VII of the Civil Rights Act of 1964 prohibits discrimination based on race, color, religion, sex or national origin. The law requires that individuals complaining of discrimination must file a charge with the Equal Employment Opportunity Commission (EEOC) within 180 days after the alleged unlawful employment practice occurred.

With the passage of the Fair Pay Act, outdated claims, such as Ledbetter’s, would now be permitted because a new unlawful employment practice would occur with each paycheck that comes after the initial discriminatory pay decision. Specifically, the 180-day statute of limitations would reset with each paycheck or other applications of discriminatory pay decisions or practices. Also, the new law significantly extends the window of time during which an employee may file a wage discrimination claim by allowing an employee to recover back pay for up to two (2) years preceding the filing of a discrimination claim.

So What Should Employers Do?

The new law does not directly require employers to make any specific changes in their workplace practices. However, employers may want to consider the following steps in order to minimize their liability:

  • Develop Criteria for Compensation Decisions: develop a compensation philosophy along with objective, measurable, uniform and consistently applied pay guidelines. Create a process so that compensation decisions do not occur in a vacuum and are carefully reviewed to screen out bias.
  • Audit Current Compensation Practices: analyze and review your current workforce to identify any significant pay disparities with regard to any protected characteristics under the law.
  • Update Document Retention Practices: Review your current document retention policies to determine if you are in compliance. It’s very likely that with this new law that employers will need to retain pay-related information indefinitely.

Given the current economic situation and the associated impact that it has on business, employers need to carefully weigh the risks of potential claims by current and former employees. The more effort and diligence you apply now to get your house in order will certainly help to ensure that Lilly won’t pay you a visit later on.

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