California Labor &
Employment Law Blog
Jan 30, 2009

Statute of Limitations Extended for Discriminatory Pay Claims

Topics: New Laws & Legislation

Marking what may be a bad sign of things to come for employers, President Obama signed his first bill into law Thursday--the Lilly Ledbetter Fair Pay Act. The Act overturns a 2007 United States Supreme Court decision addressing the statute of limitations for claims of alleged discriminatory pay practices under Title VII. In order to pursue a claim for discrimination under Title VII, an employee must first file an administrative charge with the EEOC within 180 days of the discriminatory act. Failure to timely file an administrative charge bars the employee from filing a lawsuit.

Lilly Ledbetter worked for Goodyear Tire & Rubber for 19 years, until retiring in 1998. Shortly before retiring, Ledbetter filed a claim with the EEOC alleging that she had been paid less than male employees as a result of unfair performance evaluations during her 19 years of employment. Ledbetter ultimately filed suit on her claim, and a jury found in her favor. Goodyear appealed, arguing that the statute of limitations barred Ledbetter's discriminatory pay claim because all of the alleged discriminatory pay decisions were made more than 180 days prior to Ledbetter's EEOC charge. Ledbetter argued that because she continued to receive pay checks during the relevant 180-day period, each pay check was a discriminatory act that started the 180-day clock running anew. In essence, Ledbetter argued that because she continued to suffer the effects of the allegedly discriminatory pay decisions up until the end of her employment, the statute of limitations had not yet run. The case eventually made its way to the United States Supreme Court, which ruled in favor of Goodyear and held that Ledbetter's claim was indeed barred by the statute of limitations. The Court held that Title VII's statute of limitations required Ledbetter to bring her charge within 180 days of the alleged discriminatory pay decision being made and communicated to her. The Court rejected the argument that each subsequent paycheck Ledbetter received re-started the statute of limitations. The Court reasoned that the paychecks were not themselves acts of intentional discrimination; if anything, they were effects of a prior decision and "current effects alone cannot breathe life into prior uncharged discrimination."

Shortly after the Ledbetter decision was issued in May 2007, Congress began work on a bill to overturn the Court's decision. The bill did not have sufficient support in the Senate during the Bush administration, and Bush had vowed to veto the bill in any event, referring to it as a job-killer bill. Following the election of Barack Obama as President, the Lilly Ledbetter Fair Pay Act sailed through Congress and has now been signed into law. Under the Act, an unlawful employment practice "occurs" every time an employee is affected by application of a discriminatory decision or practice. This includes each time wages are paid following a discriminatory pay decision. In effect, employers may have exposure for pay decisions made many years before any allegation of discrimination is made by an employee.

Interestingly, the effective date of the Act is May 28, 2007--the day before the United States Supreme Court issued its decision in the Ledbetter case--meaning that the Act operates retroactively and would apply to all cases pending since then.

In light of this new law, employers have even more reason than before to carefully analyze, substantiate and document pay decisions, and to ensure sufficient mechanisms are in place to retain such information for a sufficient period of time.

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