It is now more difficult for employees to bring claims against employers for continuing pay disparity claims. In a very close decision, the United States Supreme Court recently held that an employee must timely file an administrative charge of discrimination as to each alleged discriminatory paycheck. An employee will not be able to obtain relief for prior pay periods outside the time period for filing a discrimination charge.

It has always been the case that individuals wishing to fi le a lawsuit alleging discrimination under Title VII of the Civil Rights Act of 1964 must fi rst fi le a charge with the Equal Employment Opportunity Commission (“EEOC”) within 180 or 300 days, depending on the state, after the alleged unlawful employment practice occurred. In “deferral states,” where the state has a state agency akin to the EEOC authorized to enforce the state anti-discrimination laws, the employee has 300 days to fi le a charge following the alleged discrimination. In “non-deferral states” with no such state agency, the employee must fi le within 180 days of the alleged discrimination. In the pay discrimination context, the EEOC and some federal courts have applied a “paycheck accrual rule” which provides for a continuing pay discrimination violation. In practice, this means that an employee can timely fi le an EEOC charge many years after the past discriminatory pay decision so long as the charge is within 300 or 180 days of the last discriminatory paycheck being issued. On May 29, 2007, however, in a 5-4 opinion the United States Supreme Court, in Ledbetter v. Goodyear Tire & Rubber Co., Inc., U.S. No. 05-1074, 5/29/05, invalidated the paycheck accrual rule and found that the employee will not be able to claim a continuing violation but must fi le a timely charge with respect to each discriminatory paycheck issued.

In July 1998, Lily Ledbetter fi led an EEOC charge. After her November 1998 retirement, she fi led suit, asserting, among other things, a sex discrimination claim under Title VII of the Civil Rights Act of 1964. At trial, Ledbetter introduced evidence that during the course of her employment several supervisors had given her poor evaluations because of her sex, that as a result of these evaluations her pay was not increased as much as it would have been if she had been evaluated fairly, and that these past pay decisions continued to affect the amount of her pay throughout her employment. The jury found for Ledbetter, awarding backpay and damages for pay discrimination dating back several years. Goodyear appealed to the Eleventh Circuit, which reversed, holding that a Title VII pay discrimination claim cannot be based on allegedly discriminatory events that occurred more than 180 days before she fi led her EEOC charge. Further, the Court concluded that there was insuffi cient evidence to prove that Goodyear had acted with discriminatory intent within the relevant 180-day period.

Ledbetter appealed the Eleventh Circuit’s decision to the United States Supreme Court, arguing that the paychecks she received during the charging period each violated Title VII and triggered a new EEOC charging period. Ledbetter did not argue, however, that the decision makers acted with actual discriminatory intent either when they issued her checks during the EEOC charging period or when they denied her a raise in 1998. Instead, she argued that it is suffi cient that discriminatory acts that occurred prior to the charging period had continuing effects during that period. The Court found that “Ledbetter’s attempt to take the intent associated with the prior pay decisions and shift it to the 1998 pay decision is unsound. It would shift intent from one act (the act that consummates the discriminatory employment practice) to a later act that was not performed with bias or discriminatory motive.” The Court also found that accepting Ledbetter’s argument “would distort” the deadlines chosen by Congress to encourage the prompt processing of charges.

The Court also rejected Ledbetter’s reliance on the Supreme Court’s statement in Bazemore v. Friday, 478 U.S. 385 (1986), that “[e]ach week’s paycheck that delivers less to a black than to a similarly situated white is a wrong actionable under Title VII.” In that case, the state employer merged previously segregated branches but continued on a dual pay scale under which black employees were paid less. The Court found that Bazemore was “of no help” to Ledbetter because there was no evidence that Goodyear created its performance-based pay system to further a discriminatory purpose as was the case with the pay structure in Bazemore.

Writing for the dissent, Justice Ginsberg argued that past Supreme Court precedent set apart claims such as hostile work environment and pay discrimination claims that recur and are cumulative in impact for purposes of Title VII’s timely fi ling requirement. She concluded that “[t]hough component acts fell outside the charge-fi lling period, with each new paycheck, Goodyear contributed incrementally to the accumulating harm.” The effect of the Ledbetter decision on employers is the ability to seek aggressively the dismissal of untimely EEOC charges alleging pay discrimination. And for those claims that survive, employers will be able to limit damages to the 180- day or 300-day period prior to fi ling the charge.

There are some indications, however, that Ledbetter may be short lived as the law of the land. Several Congressional Democrats including Senators Edward Kennedy (D-Mass.), Tom Harkin (D-Iowa) and Hillary Rodham Clinton (D-N.Y.) have stated they will introduce legislation in the coming days to clarify federal law to state that the statute of limitations under Title VII would restart for each payment of a discriminatory wage. Moreover, it must be remembered that Ledbetter does nothing to immunize employers from the facially discriminatory payment practices banned in Bazemore. Finally, most states have their own anti-discrimination laws. While most states are likely to adopt the federal view, some state courts may choose to interpret state anti-discrimination laws differently and permit a continuing violation theory.

The U.S. Chamber of Commerce has applauded the decision as a “victory for employers that eliminates a damages windfall for employees.” Nonetheless, vigilant employers can further reduce exposure to employee pay claims by:

1. Adopting and reviewing written job descriptions for each position;

2. Developing consistent and relevant performance evaluation processes that include manager training and human resources review;

3. Developing clear and consistent salary, pay increase and promotion guidelines;

4. Conducting audits of pay practices, including statistical analyses where appropriate; and

5. Quickly responding to and resolving internal pay disparity complaints.