On Thursday, January 29, 2009, President Barack Obama signed the Lilly Ledbetter Fair Pay Act ("Fair Pay Act") into law following the bill's passage in the House of Representative two days earlier. The Fair Pay Act allows individuals and other affected parties to file charges of alleged pay discrimination under Title VII of the 1964 Civil Rights Act, the Age Discrimination in Employment Act ("ADEA"), the Americans with Disabilities Act ("ADA"), and the Rehabilitation Act. Claimants are now able to file these charges after the expiration of typical 180/300-day statute of limitations for charges of discrimination.

The Fair Pay Act overturns the United States Supreme Court's decision Ledbetter v. Goodyear Tire and Rubber Co., Inc., 550 U.S. 618 (2007). Lilly Ledbetter was employed by Goodyear Tire from 1979 to 1998, and received information at the time of her retirement that she had been paid less then her male colleagues. Ms. Ledbetter brought a charge of pay discrimination in the Equal Employment Opportunity Commission, and was awarded back pay and punitive damages following a jury trial. In May 2007, the Supreme Court found that Ms. Ledbetter's charge was untimely, as she had not filed her charge within 180 days of the initial act of discrimination.

The Fair Pay Act was drafted in response to the Ledbetter decision and clarifies that the 180-day statute of limitations is extended every time an employer violates the law by issuing a paycheck or engages in other practices that discriminate. Specifically, the Fair Pay Act declares that an unlawful employment practice occurs when: (1) a discriminatory compensation decision or other practice is adopted; (2) an individual becomes subject to the decision or practice; or (3) an individual is affected by application of the decision or practice, including each time there is a payment of compensation. So, if an employee alleges that a salary she was awarded 20 years ago was less than that of male co-workers because of discrimination, each new paycheck since that occurrence would be a new unlawful employment practice that resets the statute of limitations. The Fair Pay Act also allows for a claimant to obtain relief, including the recovery of back pay for the two years prior to the charge, when the unlawful employment practices that have occurred during the limitations period are similar or related to those practices that occurred outside the limitations period.

In addition, the law applies retroactively to May 28, 2007, the date of the Supreme Court’s Ledbetter decision.

Advice for Employers

Employers will need to take some precautions to adjust to these significant changes in the law regarding pay discrimination. Employers may wish to retain records of pay decisions for much longer periods of time so that they will be able to adequately defend against pay discrimination actions. In addition, it would be wise for employers to maintain some contacts with key personnel who make decisions affecting compensation to ensure that there will be someone available to testify as to the reasons for certain pay decisions. Finally, employers may wish to consider conducting an audit or examination of their pay practices to ensure current pay practices are non-discriminatory. For example, employers may have years ago offered women managers less simply because she was willing to take less pay to be part of the management team. Today's management team may find it has inherited a problem which should be discovered and corrected sooner rather than later.