Dear Clients and Colleagues:
On January 29, 2009, President Barack Obama signed into law the “Lilly Ledbetter Fair Pay Act of 2009” (the “Act”), which extends the time in which a person may assert a claim of pay discrimination under Title VII of the Civil Rights Act of 1964 (“Title VII”), the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990 and the Rehabilitation Act of 1973. The Act provides that an “unlawful employment practice” occurs (i) when discriminatory compensation decisions or other practices are adopted by an employer; (ii) when an individual is subject to a discriminatory compensation decision or other practice and (iii) when an individual is affected by the application of a discriminatory compensation decision or other practice, e.g., “each time wages, benefits or other compensation [are] paid.”1
The Act overturns the decision of the United States Supreme Court in Ledbetter v. Goodyear Tire & Rubber Co., Inc., (2007) which held (among other things) that allegedly discriminatory compensation decisions are “discrete acts” that must be challenged within 180 days (or 300 days if in a deferral state) of when the original compensation decision is made. In Ledbetter, the Court expressly rejected the so-called “paycheck accrual rule” which provided that each paycheck that carries forward the effects of a prior allegedly discriminatory compensation decision is a new discriminatory act. Under the paycheck accrual rule a person therefore may file a claim of pay discrimination within 180 (or 300) days of receiving each paycheck issued under an allegedly discriminatory compensation decision. In rejecting this rule, the Court required employees to file such claims within 180 (or 300) days of the original discriminatory compensation decision even if the employee’s pay continued to be affected by that decision years later.
Congress determined that the Ledbetter decision “significantly impairs statutory protections against discrimination in compensation that Congress established... by unduly restricting the time period in which victims of discrimination can challenge and recover from discriminatory compensation decisions...” The Act remedies this by now permitting pay discrimination claims to be brought up to 180 (or 300) days after an “unlawful employment practice,” which includes each time that the employee receives a paycheck.
The Act retroactively applies to “take effect as if enacted on May 28, 2007,” which is the day before the Supreme Court issued the Ledbetter decision. For claims brought under Title VII, employees may seek “back pay for up to two (2) years” before the date they file their claims.