Lilly Ledbetter Fair Pay Restoration Act of 2009 – January 29, 2009

The new law amends Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Rehabilitation Act of 1973, and the Age Discrimination in Employment Act of 1967 to provide that the charge-filing periods (300 days in most states and 180 days in states that do not have a fair employment agency) would commence 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 an application of a discriminatory compensation decision or practice (including each time wages, benefits, or other compensation is paid). Thus, the statute of limitations restarts each time an employee receives a paycheck based on a discriminatory compensation decision.

In addition, the new law provides that an unlawful employment practice occurs when “a person” is affected by a discriminatory pay decision or other practice. This broad language could sanction pay discrimination charges filed by non-employees, such as the spouses of deceased workers, so long as those individuals claim they have been affected by the discriminatory practice. The House of Representatives rejected an amendment that clearly would have restricted the law’s application only to employees. It remains to be seen how the EEOC and the courts interpret this language.

The law is retroactive to May 28, 2007, and applies to all pay discrimination claims pending on or after that date. Attempts made in the Senate to amend the bill to change the effective date so that the law would apply only to claims arising after its enactment were debated extensively, but failed.

Experts are encouraging employers who wish to minimize the risks of liability under this new law to consider the following steps:

1. Audit Current Pay Documentation Practices: Employers should audit their compensation practices to determine whether there is sufficient documentation supporting compensation decisions. Performance-based specifics underlying such decisions will be essential to defending a wage disparity claim.
2. Develop Specific Criteria for Compensation Decisions: Employers should develop objective, measurable guidelines for compensation decisions to be applied consistently and uniformly with job classification, work group, department or business unit.
3. Review Compensation Decisions: Employers should create a process to ensure that managers and supervisors do not have unfettered discretion when making compensation decisions. Rather, employers should consider adopting a review system so that compensation decisions are subjected to the same rigorous scrutiny that terminations, discipline, or other adverse actions typically receive.
4. Revise Document Retention Practices: Employers should review their current document retention policies to determine how long they maintain documentation regarding compensation decisions. In the post-Ledbetter world, employers likely will need to retain such information for significantly longer than they may have in the past. Employers may need to consider electronic archiving given the voluminous nature of pay-related records.
5. Train Supervisor and Managers: Employers should train all supervisors and managers regarding any post-Ledbetter policy modifications to ensure that they understand those policies and, most importantly, the need to support objectively all compensation decisions.
6. Conduct Periodic Statistical Analysis of Compensation Data: Employers should analyze compensation data to determine if any statistical disparities exist across gender, race and ethnic lines. Once identified, an employer can make appropriate adjustments to eliminate any unexplained disparities.