President Obama has signed into law the Lilly Ledbetter Fair Pay Act of 2009 ("Fair Pay Act"), which provides that an unlawful employment practice occurs not only when an employer makes a discriminatory decision about the employee's compensation, but each time an employee receives a paycheck or other compensation affected by the discrimination. The new law would allow plaintiffs to potentially bring pay discrimination claims years after an initial pay decision by starting a new statute of limitations each time an employee receives compensation affected by the initial pay decision.

The Fair Pay Act specifically overturns the U.S. Supreme Court's decision in Ledbetter v. Goodyear Tire & Rubber Company (2007) (reported here). In Ledbetter, the Court held that the time limits for filing a discrimination charge with the Equal Employment Opportunity Commission (EEOC)—300 days in most states and 180 days in the few states that do not have a fair employment agency—commenced when the employer made the discriminatory compensation decision about plaintiff's compensation, not each time she received a paycheck affected by the discrimination.

Under the newly enacted law, however, a fresh discriminatory offense occurs each time an employee is impacted by a discriminatory practice, including each time an employee receives a paycheck or other compensation affected by the discriminatory decision. The law, which amends Title VII of the 1964 Civil Rights Act as well as other major federal anti-discrimination statutes, provides that plaintiffs may recover back pay for up to two years preceding the filing of a charge of discrimination.

In light of this new law, employers should carefully review their current compensation programs to clarify and remedy any potentially unlawful disparate pay practices. Employers should exercise caution in conducting this analysis as such investigations may not be protected from disclosure in litigation unless legal counsel is involved in privileged communications.