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Lilly Ledbetter Fair Pay Act of 2009 Signed Into Law

On January 29, 2009, President Obama signed into law the Lilly Ledbetter Fair Pay Act (“Ledbetter Act”) into law. Pub. L. No. 111-2. The new law changes litigation of pay discrimination claims in the following ways:

(1)       Resets the statute of limitations clock for filing a wage claim each time an employee receives a paycheck, benefits, or “other compensation,” allowing an employee to sue for alleged discrimination based on when she is  impacted rather than when the decision occurred.

(2)       Applies to alleged discriminatory pay practices based on all protected categories, including race, gender, age, color, disability, national origin and religion.

(3)       Expands the definition of an unlawful employment practice to include not only discreet “decisions” regarding compensation, but also any “other practice” that affects an employee’s compensation.

The statute applies retroactively back to May 27, 2007.

The Ledbetter Act was passed in direct response to the United States Supreme Court decision in Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007). The Plaintiff  worked for Goodyear from 1979 to 1998. After she retired, she filed a gender discrimination claim against Goodyear on the grounds that she received smaller annual pay increases than her male counterparts throughout her employment. While a jury initially found that Goodyear’s pay practices were discriminatory, the Supreme Court nonetheless held that Ledbetter’s claim was time-barred. The Court interpreted Title VII’s statute of limitations for equal pay claims to require that the time for filing a claim begins to run when the discriminatory pay decision is made, rather than each time an employee receives a paycheck affected by the initial decision. The new law reverses this, and does much more. It amends Title VII, the Americans with Disabilities Act of 1990 (ADA), the Rehabilitation Act of 1973, and the Age Discrimination in Employment Act of 1967 (ADEA) to specify that unlawful discrimination occurs when: (1) a discriminatory compensation decision or other practice is adopted, (2) when an individual becomes subject to a discriminatory compensation decision or other practice, or (3) 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 Ledbetter Act increases employer exposure to pay discrimination claims for alleged discriminatory decisions, even though they may have been made years earlier, based on whether they have continuing impact on an employee’s compensation. In addition, the Act is not limited to claims based on gender discrimination, but also applies to pay discrimination based on race, national origin, religion, age, and disability.

The broad language of the Act also expands the potential pool of plaintiffs in several other respects. The Ledbetter Act re-triggers the limitations period with each paycheck, and whenever “benefits” or “other compensation” are paid. These terms arguably include the full range of entitlements that an employer’s discriminatory decision could impact, including health benefits, paid leave, bonuses, stock options, and pension payments. The Act does make clear it will not allow employees to rely on post-retirement pension payments to stretch the limitations period beyond the end of the employment relationship.

The Ledbetter Act does not alter the limit on recovery of back pay to a maximum of two years preceding the filing of a discrimination charge under Title VII.

More so now than in the past employers must be careful to make sure their compensation and benefit plans are not discriminatory. No doubt passage of the Ledbetter Act will spawn a recurrence of pay discrimination claims throughout the State and across the Country.