IMPORTANT E-ALERT: The Lilly Ledbetter Fair Pay Restoration Act – What it Means for You and How to Respond to It

The first piece of legislation President Obama signed into law was the Lilly Ledbetter Fair Pay Restoration Act of 2009 on January 29, 2009.  This new law squarely rejected the United States Supreme Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co., which had held that the filing period for Title VII pay discrimination claims started to run on the date of the first allegedly discriminatory pay decision.  The new law, which is Congress’ response to the Court’s “parsimonious reading of Title VII” in the Ledbetter decision, significantly broadened the statute of limitations for filing discriminatory compensation claims.  Specifically, the law provides that the period for filing a charge of discrimination, which is 300-days in most states, begins when: (1) a discriminatory compensation decision or other practice is adopted; (2) an individual becomes subject to the decision or practice; or (3) an individual is affected by an application of a discriminatory compensation decision or practice.  Under the new law, the statute of limitations period is restarted each time an employee receives compensation based on a discriminatory pay decision.  The law amends Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the Rehabilitation Act and the Americans with Disabilities Act and applies retroactively to all pay discrimination claims pending on or after May 28, 2007, which is the day before the United States Supreme Court reached its decision in Ledbetter.

Significantly, the new law expands protection to non-employees by allowing an aggrieved “person” to obtain relief so long as that “person” is affected by the discriminatory practice or decision.  Indeed, the House of Representatives specifically rejected an amendment to the legislation that would have restricted the application of the law solely to employees.  At this point, it is unclear how the EEOC and the courts will interpret this language.

As this law greatly expands the limitations period for discriminatory pay claims, an increase in filing such claims is likely to ensue.  In light of that, employers should take certain steps to reduce their risk of liability, such as auditing current pay practices, developing guidelines for making pay decisions, training the supervisors and managers responsible for making and/or recommending pay decisions and implementing a process for reviewing those decisions.  Indeed, employers should conduct an audit of their current compensation practices in order to determine whether adequate documentation supports prior pay decisions.  For instance, if employees receive performance-based raises, employers should be sure that the underlying documentation clearly supports the reasons for the pay decisions.  If the audit reveals that documentation is lacking, employers should create guidelines for compensation decisions, which should outline the specific, objective criteria to use in making these decisions. These guidelines should be applied consistently and uniformly within departments or job classifications. 

In addition, supervisors and managers who are responsible for evaluating employee performance and recommending pay increases should be trained on how to objectively support compensation decisions.  Employers should implement a review process by designating an individual in upper management to review the compensation decisions made by supervisors.  Employers should also periodically conduct a statistical analysis of their compensation data to ensure that there is not a disparate impact on a particular protected class. 

If you have any questions about the Lilly Ledbetter Fair Pay Restoration Act, or if you need any further information, please contact Amy B. Royal at (413) 586-2288 or at aroyal@rkesq.com.  The Act can be read in full at: http://www.whitehouse.gov/briefing_room/LillyLedbetterFairPayActPublicReview.