On January 29, 2009, President Obama signed the Lily Ledbetter Fair Pay Act. The legislation, which is the first law signed by the new President, amends federal civil rights laws to provide that a claim of discriminatory compensation must be filed within no more than 300 days of the date on which the employee receives a paycheck or other benefit check (such as a pension check) affected by a discriminatory decision. The law reverses the Supreme Court’s 2007 decision in Ledbetter v. Goodyear Tire & Rubber Company, which required that employees file claims within no more than 300 days of the date on which the discriminatory compensation decision was made.
The Fair Pay Act amends Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans With Disabilities Act, and the Rehabilitation Act of 1974 to provide that charge filing periods (which are 300 days in most states, and 180 days in the few states which do not have a Fair Employment Practice agency) are triggered “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.” A claimant can recover back pay and other relief for up to two years preceding the filing of the charge. The new law applies to all claims of discrimination in compensation that were pending on or after May 28, 2007 (the date of the Supreme Court’s Ledbetter decision).
Although supporters of the Fair Pay Act tell us that it is only intended to restore the law to where it was before the Supreme Court’s decision, we believe that the statute may have a far more expansive scope. Our concern with the Fair Pay Act is that employees can now challenge decisions made many years before they file a claim of discrimination, even if the decision- makers have long since departed the company or even passed away. For example, imagine the case of a woman who claims she is paid less today because she was discriminatorily denied a promotion ten years earlier. As proof of discrimination, she cites the fact that a male co-worker with less qualifications than her received that promotion ten years ago. However, that male co-worker left the company five years ago, and the employer has since destroyed his personnel file. Although the company may believe the decision to promote the male employee was defensible because he had better performance evaluations, the employer will not be able to establish that defense if it no longer has records on the male employee and witnesses are long gone.
Similarly, employees who receive pension benefits may be in a position to challenge compensation decisions years after the fact. For example, if an employee’s pension is less than he claims it should be because of a discriminatory pay decision made years earlier, he could file a claim of discrimination years after leaving the company, so long as he does so within 300 days of receiving a pension check.
The net impact of the Fair Pay Act is that employers must immediately take steps to preserve personnel records of departed employees indefinitely. Likewise, employers need to be sure that there is good documentation supporting decisions regarding compensation, as well as decisions concerning promotions and other personnel actions that affect compensation. We expect this is just the first of what will be many new obligations imposed upon employers by the new leadership in Washington.