On May 29, 2007, the U.S. Supreme Court handed down its controversial decision in Ledbetter v. Goodyear Tire & Rubber Co., which held that the time period for challenging allegedly discriminatory pay practices under Title VII runs from the time the discriminatory pay decision was made rather than from each payment made pursuant to that decision. Congress promptly reacted to the Ledbetter decision by introducing legislation to override it, and on July 31, 2007, the U.S. House of Representatives passed its version of that legislation, the Lilly Ledbetter Fair Pay Act, thus setting the stage for action by the Senate and a possible showdown with the Bush Administration.

The Statute of Limitations for Discrimination Claims and the Ledbetter Decision

Under Title VII of the Civil Rights Act of 1964, the federal law that prohibits employment discrimination based on race, color, sex, national origin, and religion, individuals who believe that they have been discriminated against must file a charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”) within 180 or 300 days (the time period varies from state to state) of the alleged violation. When an individual fails to bring a charge before the Commission within the applicable statutory limitations period, the individual is barred from recovering on that claim in subsequent litigation.

In the Ledbetter case, an employee alleged that she received discriminatory evaluations that affected her eligibility for pay increases during her employment because of her gender. Many of the alleged discriminatory evaluations/pay-setting decisions occurred years before the employee filed her EEOC charge and therefore fell outside the statutory limitations period. In an attempt to recover for each of the untimely pay-setting decisions, the employee attempted to circumvent the statute of limitations by claiming that every time her employer issued her a paycheck after the alleged discriminatory pay-setting decisions were made, the employer discriminated against her again, thereby triggering a new statutory period in which she could file a charge. The Supreme Court, in a 5-4 decision, disagreed with the employee’s interpretation of the law and held that the statute of limitations ran from the dates of the alleged discriminatory pay-setting decisions, not the dates on which the employee received checks from her employer.

The Proposed Lilly Ledbetter Fair Pay Act

Viewing the Ledbetter decision as unfairly restricting the opportunity of discrimination victims to challenge discriminatory pay practices, which often are not immediately apparent or suspected, many members of Congress felt that legislation was needed to override the effects of the Supreme Court’s ruling. Within days after the Supreme Court handed down its decision, a Democrat-led faction in the House of Representatives introduced the Lilly Ledbetter Fair Pay Act (H.R. 2831), named for the plaintiff in the Ledbetter decision, and rushed it to a vote without first conducting hearings on the need for the legislation.

H.R. 2831 would amend Title VII, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the Rehabilitation Act to provide that an unlawful practice occurs with respect to discrimination in compensation when a discriminatory decision or practice is adopted, when an individual becomes subject to the discriminatory compensation decision or practice, or when an individual is affected by the discriminatory compensation decision or practice. The bill expressly states that an individual is affected by the discriminatory compensation decision or practice each time the individual receives a payment of wages, benefits, or other compensation. Thus, the applicable 180- or 300-day time period for filing an EEOC charge challenging an allegedly discriminatory compensation practice would begin to run anew with the receipt of each paycheck or benefit reimbursement check reflecting the discriminatory compensation action, no matter how long it has been since the discriminatory practice began.

Although discrimination claimants ordinarily may not recover for discriminatory acts occurring more than 180 (or 300) days before the filing of their EEOC charge, H.R. 2831 provides that aggrieved individuals may recover for unlawful compensation practices occurring outside the statutory limitations period if they are “similar or related to” unlawful compensation practices occurring within the statutory period. The bill would, however, limit recovery of back pay to discriminatory compensation practices occurring no more than two years before the filing of a claimant’s EEOC charge.

H.R. 2831 would apply retroactively as of May 28, 2007, the day before the Supreme Court issued the Ledbetter decision, and it would apply to all suits pending on that date as well as to all discrimination suits brought after that date.

Practical Implications

If enacted into law, H.R. 2831 would make it much easier for plaintiffs to litigate stale discrimination claims. It is not difficult to see how the bill’s special statute of limitations for unlawful employment practices related to “compensation” could be stretched to cover just about any employment discrimination claim. As written, the bill could conceivably apply to any employment decision – for example, a transfer, failure-to-promote, or demotion decision – that tangentially involves or impacts pay. Moreover, the bill would expose employers – and possibly even successor employers – to liability for alleged discriminatory acts that occurred years, if not decades earlier. Employers may find it difficult to defend against such claims because the decision-makers have long since left the company, memories have faded, or relevant records have been discarded. Enactment of the bill could therefore lead to significant changes in employers’ recordkeeping practices, with longer record-retention periods becoming the norm.

Enactment of the Lilly Ledbetter Fair Pay Act is far from certain at this point, however. The Senate has not yet voted on its version of the legislation, and the Bush Administration has announced that the President will veto the measure if it is adopted by Congress. Nevertheless, this is an important piece of employment-related legislation that may well return in the future if it is not enacted in the current Congress.