Originally published January 29, 2009

Keywords: Lilly Ledbetter Fair Pay Act, statute of limitations, EEOC, compensation discrimination, Title VII, ADA, Rehabilitation Act, ADEA, disparate impact claims

On January 29, 2009, President Obama signed the Lilly Ledbetter Fair Pay Act, a new law that is applicable to the vast majority of the country's employers. Meant to overturn a recent US Supreme Court ruling, the law significantly extends the time limit for employees to file claims with the Equal Employment Opportunity Commission (EEOC) that allege compensation discrimination. The law covers compensation discrimination claims based on race, color, religion, sex or national origin in violation of Title VII of the Civil Rights Act of 1964 (Title VII), based on disability in violation of the Americans with Disabilities Act of 1990 (ADA) and the Rehabilitation Act of 1973, and based on age in violation of the Age Discrimination in Employment Act of 1967 (ADEA).

This legislation was passed in response to the US Supreme Court's controversial 2007 decision in Ledbetter v. Goodyear Tire and Rubber Company. In Ledbetter, the Supreme Court held that the statute of limitations for filing a charge of pay discrimination with the EEOC starts running on the date when the allegedly discriminatory pay decision is made. The Supreme Court explained that, in the context of a pay discrimination claim, the unlawful act of discrimination is the employer's decision to implement different pay on a basis prohibited by the discrimination statutes, not the subsequent issuance of paychecks or other compensation that reflect that differential. Ledbetter had sued her employer after she discovered that for almost 20 years she allegedly had been paid less than male coworkers performing the same or similar work. The Supreme Court denied Ledbetter's claim because the last allegedly discriminatory decision regarding her pay had occurred more than 180 days before she filed her claim, which fell outside the statute of limitations for filing claims with the EEOC in her state.

The new law overturns the Ledbetter decision by amending Title VII, the ADA, the Rehabilitation Act and the ADEA to provide that the statute of limitations for filing with the EEOC charges of discrimination in compensation starts running each time an employee is "subject to" or "affected by" the application of an allegedly discriminatory compensation decision or other practice. The statute specifies that a new statutory violation will occur, and a new claim will arise, every time an employee receives wages, benefits or other compensation that results, in whole or in part, from a discriminatory pay decision or other practice.

Congress intends for the new law to apply retroactively to all claims of discrimination in compensation brought pursuant to Title VII, the ADA, the Rehabilitation Act and the ADEA that were pending on or after May 28, 2007, the day before the Ledbetter decision was issued. Prevailing plaintiffs may recover back pay for up to two years prior to the filing of the EEOC charge as well as compensatory and punitive damages; they also may be granted injunctive relief.

This legislation is potentially burdensome on employers. It will permit individuals to bring intentional discrimination and disparate impact claims, including class action claims, based on allegedly discriminatory decisions regarding all forms of compensation (including wages and salaries, pensions and other benefits) which may have been made many years before their claims were filed. Defending such claims is likely to be costly, and may be very challenging due to the difficulty, and in some cases the impracticality, of gathering the evidence needed to defend the legality of past compensation decisions.

In addition, Congress is currently considering the Paycheck Fairness Act which, if enacted, will make significant amendments to the Equal Pay Act of 1963. With some limited exceptions, the Equal Pay Act requires that male and female employees must receive equal pay for equal work when performing jobs that call for equal skill, effort and responsibility, and which are performed within the same establishment under similar working conditions. If Congress passes the Paycheck Fairness Act, we shall issue a separate Client Alert when it has been signed into law.

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