For the first time a federal court of appeals has addressed the reach of the Lilly Ledbetter Fair Pay Act (“the Act”). In Schuler v. PriceWaterhouseCoopers, No. 08-7115 (D.C.Cir. Feb. 16, 2010), the District of Columbia Court of Appeals issued a ruling favorable for employers, finding that the Act does not apply to discrimination claims based on a failure to promote.

Signed into law in January 2009, the Act extends the statute of limitations available to plaintiffs alleging discrimination in compensation. A complete description of the Act is found here in a previous Franzcek Radelet e-bulletin. From day one employers realized that the Act could revive compensation claims previously believed to have been untimely. However, the reach of the Act was unknown because it applies “when a discriminatory compensation decision or other practice is adopted . . .” Congress failed to define “other practice” and its broad wording led to concern that courts would interpret the Act to apply to actions merely related to pay, such as hirings and promotions. Soon after the Act took effect the concern was realized when several federal trial courts interpreted “other practice” to include claims for denial of tenure and failure to promote.

In Schuler, the appellate court rejected that reading of the Act. The plaintiff alleged that years earlier his employer refused to promote him due to his age. The plaintiff acknowledged that the promotion decision at issue took place outside the limitations period, but argued that the Act rendered his claim timely because the failure to promote resulted in ongoing lower pay. The court rejected the plaintiff’s argument, finding that “in employment law the phrase ‘discrimination in compensation’ means paying different wages or providing different benefits to similarly situated employees, not promoting one employee but not another to a more remunerative position.” The court reviewed Congress’ intent behind the Act and reasoned that “other practice” must be limited to claims in which an employer’s determination of rate of pay is at issue, as it was in Lilly Ledbetter’s case where she argued that a poor evaluation given due to her sex resulted in her receiving lower pay. The court found that a decision to promote can itself be a discriminatory act and that it is distinct from a “other practice” related to compensation. As a result, the court concluded that such decisions are not subject to the Act’s extension of the limitations period.

The Schuler decision is significant because it rejects a broad reading of the Act’s “other practice” provision. While decisions tied to compensation are still subject to the Act’s extension of the limitations period, according to Schuler other discrete acts that indirectly affect compensation are not. It remains to be seen whether other federal appellate courts will adopt the Schuler court’s reasoning.