Lilly Ledbetter Fair Pay Act Makes Employers Fair Game

John McCain had Joe the Plumber, and Barack Obama had Lilly Ledbetter. McCain lost, and Obama won, so Lilly Ledbetter became the law of the land. The first piece of legislation signed by Obama as president was, in fact, the Lilly Ledbetter Fair Pay Act, which is a revenge of sorts on the Supreme Court for tossing out Ledbetter’s cash won in a lawsuit over being paid less than her male counterparts. No law, perhaps, could have been more symbolic of the shift in administrative viewpoints and policies from George Bush to Barack Obama. Bush was, in short, pro-business, and Obama pro-employee and pro-union. Welcome to the new world.

The Lilly Ledbetter Fair Pay Act was written to be retroactive to May 28, 2007, the day before the Supreme Court, in a 5-4 decision, ruled that Ledbetter’s earlier courtroom victory in a discriminatory compensation lawsuit was invalid because she had filed her claim after the statute of limitations had run its course. The majority ruled that the statue of limitation (in her case, 180 days) had begun on the day she was hired; Ledbetter’s lawyers argued that it began anew each time she received a discriminatory paycheck. Her lawyers’ viewpoint was subsequently codified in the very law that bears Lilly Ledbetter’s name.

It would be hard to imagine that this, the first law of 2009, would not swing open the floodgates for many more Lilly Ledbetter-type lawsuits. In fact, it’s been called by its critics a goldmine for lawyers.

Who is Lilly Ledbetter, and how did she get to figure some prominently in the new world order of Washington, D.C.?

Ledbetter, who is now 70, is an Alabama resident who was hired in 1979 at the Goodyear Tire and Rubber Company in Gadsden. She worked as an overnight supervisor on the 7 p.m. to 7 a.m. shift until she accepted early retirement in 1998. What happened in these two decades is a kind of he-said/she-said tale. Her performance reviews, according to Goodyear, ranked near the bottom of her coworkers’, so she received smaller pay raises than others did. Eventually, the company decided to lay her off and withheld any pay raises before it carried out the staff reduction. She subsequently accepted a proffered early-retirement package and left.

However, Ledbetter has a side to tell as well. She asks, if she were such a poor performer, why did she receive a Top Performance Award in 1996? In addition, she claims her supervisor once asked her for sexual favors in return for a good job evaluation. She reported him to the EEOC (Equal Employment Opportunity Commission), and he was investigated and reassigned. After that, she says she felt isolated at work and subject to constant discrimination.

Sometime before she was offered a retirement package, a coworker slipped her an anonymous note showing that she was being paid less than her male counterparts, even some who were junior to her. While she was being paid $3,737 a month, the men were being compensated anywhere from $4,286 to $5,236 a month. Ledbetter filed a pay discrimination complaint with the EEOC in July 1998 and suddenly found herself reassigned to lift heavy tires, which she felt was done in retaliation.

In November 1999, Ledbetter filed suit, alleging she had been unlawfully discriminated against because of her sex in violation of Title VII of the 1964 Civil Rights Act and was owed back pay to cover the differential in compensation between her and her male counterparts. A jury awarded her $223,776 in back pay, along with $4,462 for mental anguish and $3,285,979 for punitive damages. The judge reduced the award to $360,000 plus attorneys’ fees and costs.

Goodyear naturally appealed, and the Eleventh Circuit Court of Appeals reversed the district court’s ruling, saying that Ledbetter had not filed her EEOC claim in timely fashion and had missed the statue of limitations’ deadline. Ledbetter, just as naturally, appealed to the Supreme Court, setting up a final showdown over whose definition of when the clock on the statute of limitations starts ticking would prevail. The Supreme Court upheld the Circuit Court, and the past being prologue, this decision quickly became the basis of Congressional action. Pro-labor Democrats immediately took up the cause, but they couldn’t get the Lilly Ledbetter Fair Pay Act out of the Senate the first time around in 2007. With renewed strength in 2009, however, they easily passed the legislation, and Obama, who had featured Ledbetter as a speaker at his nominating convention, signed it swiftly.

What exactly does the Lilly Ledbetter Fair Pay Act do?

First, of course, it enshrines Ledbetter’s lawyers’ argument on the statute of limitations. The statute in question involves both the filing of EEOC complaints and the filing of lawsuits, and it runs either 180 or 300 days. The statute is 300 days in most states, but just 180 days in states that do not have fair employment agencies. The Supreme Court held that the clock starts ticking when the discriminatory pay decision is made, generally when the person is hired. Her lawyers argued that it began each time a person received a paycheck that reflected discrimination, and indeed, this view had been the common interpretation by many courts throughout the land prior to the decisions by the 11th Circuit Court and the Supreme Court. The Ledbetter Law, however, doesn’t stop at merely adopting the paycheck interpretation; it also includes language that, some have argued, virtually eliminates the statute of limitation and makes pay discrimination cases, like murder, limitation-less.

Opening language in the law sets the enactment date (May 28, 2007) and says the legislation applies to all discrimination claims arising under not just Title VII of the Civil Rights Act, but also the Americans With Disabilities Act (ADA), the Age Discrimination in Employment Act (ADEA), and the Rehabilitation Act of 1974. Then the language gets really interesting. The law reads:

"For purposes of this section, an unlawful employment practice occurs, with respect to discrimination in compensation in violation of this title, 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."

The interesting phrase, and it’s been argued in legal and labor blogs over and over again, is “affected by application of a discriminatory compensation decision.” Some have mused that this implies a limitation-less to the legislation. For instance, could a person retired for many years claim that, since his or her retirement savings or compensation was “affected by” prior discrimination in pay, it’s perfectly okay to take the matter to court and recover lost wages? No doubt, there are lawyers out there right now formulating just such arguments.

The good news is that the Lilly Ledbetter Fair Pay Act allows for just two years in back pay from the date of the lawsuit with a cap of $300,000. However, the Civil Rights Act, which the Ledbetter Act references, does provide for punitive damages, which can go sky high depending on the will or whim of the jury.

Since Ledbetter’s time, it’s become easier to file employment lawsuits as the Supreme Court in 2008 in a case involving FedEx workers ruled that, while lawsuits need to originate in an EEOC complaint, the plaintiff doesn't necessarily have to wait for permission from the agency to file suit. But that ruling came after the Ledbetter decision and didn't completely apply to her situation. In the new world, however, the statute of limitations has been stretched out way into the horizon, depending on how one reads the actual text of the Lilly Ledbetter Fair Pay Act.

Ledbetter has said she doesn’t think her eponymous law will allow her to reopen her case, but enterprising lawyers may have a different viewpoint. As she packed her suitcase to travel to D.C. for the signing ceremony, Ledbetter told the Birmingham News: “I’m just thrilled that this has finally passed and sends a message to the Supreme Court: ‘You got it wrong’.”

Personnel Concepts has, in light of this new legislation, developed a comprehensive Compensation Discrimination Compliance Kit, an invaluable tool for use in the new world of American labor relations.

About the author:
Gary McCarty is a researcher and Web Content Manager for Personnel Concepts.

Note: The details in this white paper are provided for informational purposes solely. All answers are general in nature, not legal advice and not warranted or guaranteed. Readers are cautioned not to rely on this information. Because laws change over time and in different jurisdictions, it is imperative that you consult an attorney in your area regarding legal matters and an accountant regarding tax matters.