Under a newly enacted federal law, unlawful discrimination occurs every time compensation is paid pursuant to a prior discriminatory compensation decision or practice. This new legislation – President Obama’s first enactment – is called the Lilly Ledbetter Fair Pay Act, as it effectively overturns a 2007 Supreme Court decision in which the Court ruled that Ms. Ledbetter had filed her equal pay case against Goodyear Tire & Rubber Co. too late. Ms. Ledbetter had not learned until she was near retirement that throughout her 17-year career she had been paid less than similarly situated male employees. Thus, she had not filed her claim until decades after the alleged discrimination had occurred. Because the only actual intentional discrimination at Goodyear had occurred many years prior to the date Ms. Ledbetter filed suit, the Supreme Court held that the 180-day statute of limitations had long since expired. The Court did not consider it consequential that the effects of the discrimination continued every time Ms. Ledbetter received a paycheck.

Now, each time an employee in a protected class (e.g., sex, race, age, etc.) receives a paycheck based on a prior discriminatory decision to pay the employee less than another person doing the same job, the federal statute of limitations is extended another 180 days. The rule limiting back-pay awards to two years, however, remains. This legislation applies to all claims pending on or after May 28, 2007.

Because it may be impossible for employers to recreate the facts underlying decisions made many years previously, employers are well-advised to be vigilant in making and documenting the basis for every employee compensation decision.

 


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