Lilly Ledbetter Fair Pay Act of 2009

On January 29, President Obama signed into law the Lilly Ledbetter Fair Pay Act  of 2009 (Public Law No. 111-2) (the Act). The Act applies to discrimination in compensation on the basis of race, color, religion, sex, national origin, age and disability. It does not change the standards for determining whether illegal discrimination occurred.  Rather, it aims to make sure that victims of discrimination can recover if they are currently being paid less than others because of discrimination that occurred in prior years.

Specifically, the new law codifies the "paycheck accrual rule" that most federal appellate courts and the Equal Employment Opportunity Commission (EEOC) had followed in pay discrimination lawsuits until the U.S. Supreme Court's 2007 decision in Ledbetter v. Goodyear Tire & Rubber Co. Inc.. Under the Ledbetter decision, a victim of ongoing pay discrimination would be required to file a complaint with the EEOC within 180 days of the employer's original discriminatory pay decision. Under the paycheck accrual rule, each discriminatory paycheck is considered a new act of discrimination and the 180-day clock starts anew.

The key language in the Act states:

[A]n unlawful employment practice occurs, with respect to discrimination in compensation…, when a discriminatory compensation decision or other practice is adopted, when an individual becomes subject to a discriminatory compensation decision or other practice, or 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. [new 42 U.S.C.§ 2000e-5(e)(3)(A)]

Advocates of the Act consider it a return to the status quo, consistent with cases from most federal circuit courts of appeal pre Ledbetter. It means, however, that employers defending pay discrimination lawsuits may face (or continue to face) charges stemming from initial actions that took place in the past. Charges may arise upon the receipt of a paycheck or pension benefits that reflect past illegal discrimination. Note that the Act does not necessarily mean that back pay would be awarded back to the original discriminatory pay decision. The Act does not extend the time period for recovery of back pay; back pay may only be awarded for up to two years preceding the filing of the charge.

The Act applies to claims of discrimination pending on or after May 28, 2007.

Employers may want to review their current compensation practices in light of the law's enactment to identify and correct any lingering traces of past illegal discrimination, or to validate pay differentials that result from non-discriminatory factors.

Paycheck Fairness Act

The Paycheck Fairness Act (PFA) was part of the House-passed bill (H.R. 11) that also included the Lilly Ledbetter Fair Pay Act, but the PFA was not included in the Senate-passed version of the bill and has yet to be acted upon in the Senate. The PFA amends the federal Equal Pay Act  of 1963 in a number of ways.

To understand what the PFA would do, if enacted, it is important to understand the basic prohibitions in the Equal Pay Act  (Pay Act ). The Pay Act  prohibits employers from paying women less than men for "equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where such payment is made pursuant to (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor than sex. . . ."  Thus, the law contains certain prohibitions and certain defenses that employers may assert.

The PFA does not change the Pay Act's basic prohibition on paying women less for equal work. Rather, it would amend the Pay Act to make it easier for claimants to prove that pay differentials between men and women are illegal.  The major proposed changes are described below:

  • In defending a Pay Act claim, an employer would have to show that a pay difference was "based on a bona fide factor other than sex, such as education, training, or experience", not just "any factor other than sex" as under current law. And this factor-other-than-sex defense would not be available if the employee could show that the employer could achieve the same business goal by using a sex-neutral approach, which the employer has rejected.
  • The Pay Act bans discrimination between men and women working in the same "establishment." The PFA would treat employees as in the same establishment if they work for the same employer at workplaces in the same county or similar political subdivision. So, a company could not be challenged if it pays female secretaries in its Manhattan office less than it pays male secretaries in its Queens office, because they are in separate counties. The PFA would also allow the EEOC to issue regulations that broaden the geographic reach of an "establishment." If EEOC regulations expand the area to include all similar employer-owned locations within a single city, the pay differential between the Manhattan and Queens offices might still be permitted but the employer would have to be able to justify it.
  • The PFA would strengthen the ban against employers' retaliating against employees who claim that the Pay Act is being violated, expand the damages available when a violation is demonstrated and make it easier to bring Pay Act suits as class actions.

* * * * *

We will alert you if it appears that the Paycheck Fairness Act has a realistic chance of enactment, to see what more detailed information would be useful.

In any event, neither Sibson nor Segal practices law or is in a position to offer legal advice.  Employers should always be urged to rely on their attorneys for advice on the interpretation and application of the Ledbetter Act, as well as the possible impact of the proposed Paycheck Fairness Act.

Learn more about Sibson's Performance and Rewards

Share this page