Ruling on the scope of the Lilly Ledbetter Fair Pay Act (“LLFPA”), the Third Circuit holds that it does not cover mere failure-to-promote claims, but only discriminatory compensation claims.

The Underlying Facts and Claims

In Noel v. Boeing Co., the Plaintiff, Emmanuel Noel, was a black Haitian unionized worker, who began working for Boeing in 1990 as an aircraft mechanic. Boeing sometimes offered off-site assignments, which were highly desired by the union workers because they typically resulted in an increased pay grade and per diem allowance. Under the union contract, off-site assignments were doled out to the most highly skilled and able worker, with seniority being the tie-breaker.

After a decade with no off-site assignments, Noel was assigned off-site in 2002 and his pay grade was raised from 7 to 8, his hourly rate increased from $26.11 to $28.75, and he began receiving a $57 per diem allowance. Also in 2002, two white non-Haitian co-workers were assigned off-site with Noel and received similar pay adjustments.

However, after 7 months at the off-site assignment, the two white co-workers were promoted to permanent off-site positions that carried a pay grade of 11, but Noel remained at grade 8. Noel complained about these promotions both to his union and internally at Boeing in September 2003, but his complaints allegedly went unanswered. However, Noel took no further action until March 2005, when he filed an EEOC charge alleging race and national origin discrimination. Noel subsequently filed a court complaint alleging race and national origin discrimination under Title VII and Pennsylvania law and retaliation.

The District Court’s Rulings

The District Court agreed with Boeing that all of Noel’s claims were time-barred. While Noel’s co-workers had been promoted over him in 2003 and he had complained at that time, he did not file his EEOC charge until March 2005 – well beyond the 300-day deadline imposed by Title VII.

The Appeal to the Third Circuit

Noel appealed to the Third Circuit on the grounds that the 2009 Lilly Ledbetter Fair Pay Act (“LLFPA”), revived his failure-to-promote claim. The LLFPA provides that:

[A]n unlawful employment practice occurs, with respect to discrimination in compensation in violation of this subchapter, when a discriminatory compensation decision or other practice is adopted, when an individual becomes subject to a discriminatory compensation decisions 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.

42 U.S.C. § 2000e-5(e)(3)(A) (emphasis added). Since the LLFPA provides that “each paycheck that stems from a discriminatory compensation decision or pay structure is a tainted, independent employment action that commences the administrative statute of limitations” (id.), Noel argued that he was continuing to be adversely affected in his compensation because of the allegedly discriminatory failure to promote him in 2003.

If Noel prevailed in his argument that a promotion decision years earlier had continuing discriminatory effects on his compensation – and thus could be challenged more than 300 days after the promotion decision – then it could effectively force every employer to justify promotion decisions from years even decades earlier – a difficult and sometimes impossible challenge given the mobility of the modern workforce and typically incomplete documentation concerning promotion decisions.

The Third Circuit’s Analysis and Decision

The Third Circuit, however, rejected Noel’s contention that the statute of limitations on his failure-to-promote claim began ticking anew with each paycheck. Specifically, the court held that “a failure-to-promote claim is not a discrimination-in-compensation charge within the meaning of the [LLFPA].”

In so holding, the court analyzed whether Noel had claimed a “pay setting” or discriminatory compensation claim as distinct from a failure-to-promote claim. The court specifically noted that Noel’s complaint alleged discriminatory compensation occurring in 2005, but did not allege disparate compensation at the time he was not promoted in 2003. The court next analyzed whether a failure-to-promote claim is equivalent to a discriminatory compensation claim. After all, employees typically seek promotions largely (if not exclusively) to earn more pay.

The Third Circuit rejected Noel’s contention that the two types of claims were legally equivalent. Following the D.C. Circuit’s lead in a similar case, the Third Circuit concluded that “in order to benefit from the LLFPA, Plaintiff must bring a claim involving discrimination in compensation and point to a discriminatory compensation decision or practice.” Construing the statute more narrowly than the management bar had feared, the Third Circuit defined “discrimination-in-compensation” as “paying different wages or providing different benefits to similarly situated employees, not promoting one employee but not another to a more remunerative position.” By narrowly construing the LLFPA as a prohibition against paying similarly situated workers differently, the court prevented every garden-variety failure-to-promote claim from morphing into a LLFPA claim – a result that could potentially open up every promotion decision ever made by an employer to scrutiny at any time.

In reviewing the legislative intent of the statute, the Third Circuit noted that the LLFPA was enacted “to provide greater protection against wage discrimination but not other types of employment discrimination.” In the Ledbetter case itself, Lilly Ledbetter claimed that she was being paid less for doing the same work as similarly situated males. Ms. Ledbetter’s claim was found untimely because her employer was able to trace the pay differential to compensation decisions made several years earlier and the Supreme Court determined that a challenge to such an old decision would violate the relatively short 300-day deadline enshrined in Title VII, even though Ms. Ledbetter had acted promptly when she first learned of the pay differential. In the first act of the newly-inaugurated administration, President Obama signed the LLFPA to ensure that current pay differentials among similarly situated employees could be challenged even if the discriminatory compensation decision had been made years earlier.

What Noel Means for Employers

The Noel decision – the second of its kind this year – makes clear that failure-to-promote claims are not at all interchangeable with discriminatory compensation claims. If followed by other circuits – as now appears likely – the decision provides a degree of clarity and predictability over the appropriate scope of the LLFPA that will be helpful to most employers. So while an employer should be prepared to justify pay differentials among similarly situated workers – based on seniority for example – it should now be able to rest assured that it will not be called upon to justify the propriety of every promotion decision it ever made.