Recently, in a split decision, the United States Supreme Court made it more difficult for employees to bring pay discrimination claims. The Court majority determined that an employee who seeks to recover damages for unlawful pay discrimination must file suit within 180 or 300 days (depending upon the state) of the discriminatory pay decision, even if the effects of that decision are felt for many years. Ledbetter v. The Goodyear Tire & Rubber Co., Inc. Previously, the EEOC and many courts had followed the “paycheck rule,” which provides that each paycheck that reflects the adverse effects of past discrimination constitutes a new violation. The decision sparked a controversy that led the House of Representatives to introduce a bill – “The Lily Ledbetter Fair Pay Act of 2007” – which seeks to legislatively overrule the Supreme Court’s decision. What’s all the fuss about? Read on...

Lily Ledbetter worked for the Goodyear Tire & Rubber Co. (“Goodyear”) from 1979 until 1998. In March of 1998, Ledbetter submitted a questionnaire to the EEOC; in July 1998, she filed an EEOC charge against Goodyear; and in November 1998, Ledbetter took early retirement. After she retired, Ledbetter sued Goodyear for pay discrimination under Title VII of the Civil Rights Act of 1964 and the Equal Pay Act of 1963. She claimed that several supervisors gave her bad evaluations because of her sex, and that these evaluations resulted in her getting less pay than she would have received if she were evaluated fairly. Ledbetter contended that these decisions continued to affect her pay throughout her employment, and that she was receiving significantly less pay than her male colleagues at the end of her employment. The Equal Pay Act claim was dismissed, but a jury awarded Ledbetter more than $3.5 million in backpay and damages on her Title VII pay discrimination claim.

Goodyear appealed, claiming that Ledbetter’s pay discrimination claim was time barred with regard to all pay decisions made prior to September 26, 1997 (180 days before she filed her EEOC questionnaire). The Eleventh Circuit Court of Appeals agreed. Reversing the jury verdict, the court held that Ledbetter could not base a Title VII pay discrimination claim on any pay decision that occurred prior to the last pay decision that affected the employee’s pay during the 180 day EEOC charging period. It concluded that there was no evidence of discriminatory intent in the pay decisions made in 1997 and 1998.

Ledbetter appealed to the United States Supreme Court, and asked it to resolve the following question:

“Whether and under what circumstances a plaintiff may bring an action under Title VII of the Civil Rights Act of 1964 alleging illegal pay discrimination when the disparate pay is received during the statutory limitations period, but is the result of intentionally discriminatory pay decisions that occurred outside the limitations period.”

Five of the nine Justices concluded that, “The EEOC charging period is triggered when a discrete unlawful practice takes place. A new violation does not occur, and a new charging period does not commence, upon the occurrence of subsequent nondiscriminatory acts that entail adverse effect resulting from the past discrimination.” Thus, it rejected Ledbetter’s argument that each paycheck she received violated Title VII and triggered a new EEOC charging period. The majority noted that, “current effects alone cannot breathe life into prior, uncharged discrimination.” Rather:

Ledbetter should have filed an EEOC charge within 180 days after each allegedly discriminatory pay decision was made and communicated to her. She did not do so, and the paychecks that were issued to her during the 180 days prior to the filing of her EEOC charge do not provide a basis for overcoming that prior failure.

Four Justices disagreed with the majority’s opinion and issued a dissent. They would have allowed Ledbetter to recover for pay discrimination, explaining:

The Court’s insistence on immediate contest overlooks common characteristics of pay discrimination. Pay disparities often occur, as they did in Ledbetter’s case, in small increments; cause to suspect that discrimination is at work develops only over time. Comparative pay information, moreover, is often hidden from the employee’s view. Employers may keep under wraps the pay differentials maintained among supervisors, no less the reasons for those differentials. Small initial discrepancies may not be seen as meet for a federal case, particularly when the employee, trying to succeed in a nontraditional environment, is averse to making waves. The dissenters also stated: The problem of concealed pay discrimination is particularly acute where the disparity arises not because the female employee is flatly denied a raise but because male counterparts are given larger raises. Having received a pay increase, the female employee is unlikely to discern at once that she has experienced an adverse employment decision. She may have little reason even to suspect discrimination until a pattern develops incrementally and she ultimately becomes aware of the disparity. Even if an employee suspects that the reason for a comparatively low raise is not performance but sex (or another protected ground), the amount involved may seem too small, or the employer’s intent too ambiguous, to make the issue immediately actionable – or winnable.

Apparently, the dissenters’ analysis made sense to Congress. The House passed the Lily Ledbetter Fair Pay Act, which seeks to legislatively overturn the Court’s decision. The Bill amends Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act, the Rehabilitation Act of 1973 and the Age Discrimination in Employment Act to provide that an unlawful employment practice occurs when a discriminatory compensation decision or other practice is adopted, when an individual becomes subject to the decision or practice or when an individual is affected by the application of the decision or practice, including each time compensation is paid.

If the Senate passes this legislation and if it is signed by the President will it open the floodgates to equal pay litigation? Probably not. In many jurisdictions, it will simply restore the status quo, because many courts had been using the “paycheck rule” that was rejected by the Court in the Ledbetter case. Ironically, if the legislation is not passed, the decision may result in an increase in charges of pay discrimination, because attorneys may counsel employees to file charges as soon as they suspect that they may be victims of pay discrimination.