Lilly Ledbetter Fair Pay Act

Scope

Now, with the LLFPA signed into law, each paycheck (or other compensation, such as bonus payments) is a new discriminatory act. This means that the statute of limitations can begin on the date of any paycheck, including the final paycheck, which could encompass decades of employment.

Regulatory citations

• None

Key definitions

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Summary of requirements

Background. On January 29, 2009, President Obama signed the LLFPA to overturn a U.S. Supreme Court ruling from several years earlier. In that case, the issue before the court was whether Ledbetter had filed a discrimination complaint in a timely manner. The statute of limitations for filing a claim is 180 days after the discriminatory act (or 300 days if the claim is also covered by state law).

Ledbetter filed a gender discrimination suit against her employer shortly after retirement from nearly 20 years of service. She learned that her annual salary was $6,700 less than the lowest-paid male counterpart for the same job, and about $18,000 per year less than the highest-paid male counterpart. She alleged that the pay disparity started when her initial pay was set at the time of her hire. The employer argued that her claim was therefore barred by the statute of limitations, since that decision had been made decades earlier. Ledbetter then argued that each paycheck was a discriminatory act because each one was smaller than those received by men in the same position, and her pay had been affected throughout her employment. Since she had filed within the statute of limitations after the final paycheck, she argued that her claim was timely.

The Supreme Court rejected her argument, indicating that the date when the company initially set the disparate pay was the point at which the statute of limitations began, even if she wasn’t aware of the disparity.

What has changed? As under the Equal Pay Act, the LLFPA limits the claimant to two years of back pay. Even though claim can be made years after the wage rate was established, the employee is still limited to compensatory back pay of two years. However, unlike the Equal Pay Act, those other laws also provide for punitive damages and emotional distress damages. This means that awards to an employee could be far greater than the two years of compensation differential.

What must employers do? Since employees now have the option of filing a claim throughout the course of employment, regardless of how long ago a discriminatory decision was made, employers may want to re-evaluate procedures and time frames for purging or destroying older records. Those records may be needed to show that decisions were based on non-discriminatory factors. If records supporting a decision are no longer available, the employer’s challenge in defending against a claim may be greater.

The actual decision-making process regarding promotions or compensation should not need to be changed. Although the new law prohibits discrimination in compensation, the employer can still establish different wages or salaries based on legitimate (non-discriminatory) factors. For example, employers could give a higher salary to someone with more experience.

However, the LLFPA makes it even more important that employers ensure their compensation and promotion decisions are nondiscrimintory because — since employees may receive pay based on those decisions for years to come — the decisions could result in legal challenges long after they were made.