On May 29, 2007, the Supreme Court resolved a long-standing split among the lower courts regarding the statute of limitations applicable to pay discrimination claims under Title VII of the Civil Rights Act of 1964 (as amended). In a 5-4 decision representing a significant victory for employers, the Court in Ledbetter v. Goodyear Tire & Rubber Co. held that employees must file an EEOC charge of discrimination within 180 or 300 days (depending on the state) of the discriminatory pay decision at issue and cannot simply rely on the continuing adverse effects of a discriminatory act that occurred prior to the applicable charge-filing period.

Plaintiff Ledbetter was a manager for Goodyear in Alabama who contended that she was paid less than men in the same position in violation of Title VII. Ledbetter claimed that the discriminatory pay resulted from two discriminatory evaluations done by her former manager, but those evaluations occurred more than 180 days prior to the date that she filed her EEOC charge. Ledbetter’s attorneys argued that her charge was still timely because she received paychecks during the 180-day period that continued and compounded the effects of the prior discriminatory acts by the manager. In support of that argument, Ledbetter relied principally on the Supreme Court’s decision in Bazemore v. Friday, 478 U.S. 385 (1986), which stated that “[e]ach week’s paycheck that delivers less to a black than to a similarly situated white is a wrong actionable under Title VII.” Ledbetter prevailed at trial, but the jury’s verdict was overturned on appeal by the Eleventh Circuit Court of Appeals, which held that a Title VII pay discrimination claim cannot be based on any pay decision that did not occur within the EEOC charge-filing period. Because the Eleventh Circuit’s holding conflicted with the holdings of several other circuits, the Supreme Court granted a writ of certiorari to resolve the split.

Prior to Ledbetter, the Supreme Court had issued a number of decisions dealing with the applicable charge-filing periods and when they begin to run. For claims relating to “discrete acts” of discrimination like hiring, firing and promotion, the Court had held repeatedly that a charge of discrimination must be filed within 180 or 300 days of the actual date on which the discriminatory act occurred. However, in National Railroad Passenger Corporation v. Morgan (the most recent of its decisions on this issue), the Supreme Court created an exception to the “discrete acts” rule for claims like harassment, where the unlawful employment practice cannot be said to have occurred on any particular date and is the result of a series of repeated acts that occur over a period of time. For example, under the Morgan standard, a harassment claim under Title VII may be timely so long as one of the alleged harassing acts occurred during the charge-filing period, even if the bulk of the harassment occurred more than 180 or 300 days prior to the charge. Thus, with that precedent in mind, the central issue to be resolved in Ledbetter was whether pay discrimination claims should be treated like promotion and hiring claims (i.e., claims involving discrete acts of discrimination) or like harassment claims (i.e., claims involving repeated acts of discrimination with a cumulatively discriminatory effect).

Fortunately for employers, the five-justice majority concluded that a pay-setting decision is a discrete act of discrimination that occurs at a particular point in time and, therefore, a charge must be filed within 180 or 300 days after the occurrence of that discrete act. While the majority opinion, written by Justice Alito, carefully traced the holdings in its prior discrete acts cases and concluded that pay claims fall squarely within those prior decisions, the majority also took a practical approach to this issue and clearly recognized that a contrary holding in Ledbetter would severely prejudice an employer’s ability to defend itself by requiring it to defend and explain allegedly discriminatory decisions that may have been made years, or even decades, earlier. In fact, the majority specifically noted that the critical issue in a pay case may be whether a long-past performance evaluation was discriminatory, which the court found to be a “subtle determination” where “the passage of time may seriously diminish the ability of the parties and the factfinder to reconstruct what actually happened.” The facts of Ledbetter actually illustrate this concern because the supervisor responsible for the allegedly discriminatory evaluations died before Ledbetter’s claims were raised with the EEOC.

The dissent, authored by Justice Ginsburg, sharply criticized the majority for placing too great a burden on plaintiffs in pay discrimination cases. According to the dissent, pay disparities are “cumulative” in nature, like harassment claims, not discrete acts of discrimination like promotion and hiring decisions, because “small initial pay disparities may not be seen as [cause] for a federal case” and “it is only when the disparity becomes apparent and sizable, e.g., through future raises calculated as a percentage of current salaries” that an employee is likely to complain. The dissent also emphasized that employees may not know the facts giving rise to the pay discrimination claim within a 180 or 300-day period because comparative pay information is often “hidden from the employee’s view” and kept “under wraps” by employers. Finally, to emphasize the dissent’s dissatisfaction with the majority’s analysis, Judge Ginsburg took the unusual step of reading the dissent aloud from the bench and concluded the dissenting opinion with a plea to Congress to remedy the majority’s “cramped interpretation of Title VII.”

Though Ledbetter is obviously a terrific decision for employers facing pay discrimination claims, it remains to be seen whether Congress will answer the dissent’s call to arms. Given the Democratic control of both houses, it would not be surprising to see an amendment to Title VII make its way to President Bush’s desk. Finally, it should be noted that all is not lost for plaintiffs in pay cases because the majority in Ledbetter declined to answer the question of whether there should be an exception to this rule in situations where a plaintiff can show that the facts relating to the alleged discrimination were not “discovered” until after the charge-filing period had already expired. Rather than answering that question, the Court wrote in footnote 10 that “we have previously declined to address whether Title VII suits are amenable to a discovery rule” and, because Ledbetter made no such argument, “we have no occasion to address this issue.”