February 25, 2009

January 29th, President Obama signed the Lilly Ledbetter Fair Pay Act, only two days after Congress passed the law (see Ogletree Deakins’ January 27, 2009 E-Alert). The Fair Pay Act is the first law passed by the new Congress and the first law signed by President Obama. Civil rights groups and their union supporters hailed the symbolism of the Act’s “first law passed and signed” status.

The Act will require employers to redouble their efforts to ensure that their pay practices are non-discriminatory and to make certain that they keep the records needed to prove the fairness of their pay decisions.

The new law allows individuals to file charges of alleged pay discrimination under Title VII of the 1964 Civil Rights Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the Rehabilitation Act without regard to the normal 180/300-day statutory charge filing period. The law declares that an unlawful employment practice occurs 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 application of the decision or practice, including each time there is a payment of compensation.

By eliminating the normal 180/300-day charge filing period for pay discrimination claims, the statute allows the filing of charges alleging pay discrimination with the issuance of each paycheck tainted by alleged past discrimination. Thus, each new paycheck or post-retirement benefits check serves as a potentially unlawful employment practice for which an employee may timely file a charge, even if the allegedly discriminatory pay decision occurred years, perhaps even decades, before. The new law overturns the U.S. Supreme Court’s decision in Ledbetter v. Goodyear Tire and Rubber Co., Inc., 550 U.S. 618 (2007), where the Court held by a 5-4 vote that the plaintiff did not file a timely charge within the statutory 180/300-day time limit.

Although the courts will take years to sort out the full ramifications of the Act, the practical implications for employers are already coming into focus.

Because current and former employees can now challenge pay decisions made in the distant past, employers need to modify their record retention policies and begin retaining records surrounding pay decisions indefinitely. According to David Copus, a shareholder in Ogletree Deakins’ Morristown, New Jersey office and a nationally recognized expert in compensation discrimination: “Employers also seriously should consider conducting an immediate self-audit of their pay practices.”

A Ledbetter Fair Pay self-audit, Copus recommends, should examine the written policies to assure that proper limits control managers’ discretion and should include a statistical analysis of starting pay, promotional pay increases and merit raises. Employers should be prepared to take appropriate remedial action to correct any identified problems.

Before embarking on a self-audit, however, employers should consult with counsel to determine if they can protect the results of the audit with some form of privilege.

Additional Information

If you have any questions about this legislation or its impact on employers, contact the Ogletree Deakins attorney with whom you normally work or the Client Services Department at 866-287-2576 or via e-mail at [email protected].