On Thursday, January 29, President Obama signed what will be the first of a number of employment statutes expanding the rights of employees. The Lilly Ledbetter Fair Pay Act overturns the U. S. Supreme Court’s decision in Ledbetter v. Goodyear Tire and Rubber Co., 550 U.S. 618 (2007). In Ledbetter, the Court ruled that an employee may sue only within 180 days of the initial discrimination, even if it occurred years earlier and the employee did not discover the discrimination until years later.

Under the Lilly Ledbetter Fair Pay Act, an employer violates the Act (a) when an employer adopts a discriminatory compensation decision or other practice, (b) when an employee becomes subject to a discriminatory compensation decision or practice, or (c) when an employee is affected by the application of a discriminatory decision or practice. The Act states that a violation occurs “each time wages, benefits or other compensation is paid, resulting in whole or in part from the discriminatory decision or other practice.” Liability is limited to the compensation and/or benefits the employee would have earned during the previous two years.  

Thus, employees may sue for wage or benefit discrimination within 180 days of the first or each instance of an alleged discriminatory action. For example, a female employee who learns that she has been paid less than a male employee performing the same job duties may file suit years, if not decades, after she was paid differently than the male employee. All employees protected by the Title VII of the Civil Rights Act as well as the Age Discrimination in Employment Act, the Americans With Disabilities Act and the Rehabilitation Act are covered by this Act. Taking a swipe at the Supreme Court, the Act is effective from and applies to all cases pending as of May 28, 2007, the date before the date of the Supreme Court’s decision.

According to Alan M. Kaplan, the implications of the Act are serious and wide ranging. Since most employees are now protected from compensation discrimination, employers may have liability caused by decisions made years earlier that impact employees now and in the future. Although the back pay liability is limited to the previous two years, calculating that amount will prove difficult and speculative, requiring the expensive services of expert witnesses. Thus, employers should analyze their salary structures, compensation programs, wages and benefit plans as well as the rationales used to determine that compensation. Employers need to make decisions relating to compensation and benefits for non-discriminatory reasons. These actions can assist employers determine and manage their risks.