On Thursday, Jan. 29, 2009, President Obama signed an act into law that many business leaders are concerned will lead to an explosion of employment discrimination litigation. The Lilly Ledbetter Fair Pay Act of 2009 is a victory for civil rights proponents.

The Fair Pay Act is expected to peak employees` interest in discriminatory pay claims. It represents a marked shift in the application of the statute of limitations in employment discrimination claims. It applies to discriminatory pay on the basis of gender, race, national origin, disability, age, or religion. Most importantly, it extends the statute of limitations on a discriminatory pay claim such that an employee can wait throughout his or her entire employment and file a charge after termination alleging unequal pay. Despite waiting to file a charge, if the employee prevailed, he or she would be entitled to back wages for the two years preceding the filing of an EEOC charge. According to the law, each paycheck marks the beginning of a new statute of limitations. It permits employees to investigate the possibility of such claims and accumulate evidence for years before deciding to seek relief.

The Act expressly overturns the United State Supreme Court`s May 2007 decision in Ledbetter v. Goodyear Tire & Rubber Co., Inc. In that case, Lilly Ledbetter complained that her supervisors gave her poor performance reviews based on her sex, and that as a result, they did not increase her pay as much as they did the pay of her male co-workers. After her resignation, Ledbetter submitted a questionnaire to the EEOC and later filed a sex discrimination suit under Title VII. The jury found in her favor and awarded her back pay and damages. On appeal, however, the Eleventh Circuit reversed, holding that Ledbetter`s claim was time-barred because the pay decisions about which she complained occurred outside the 180-day period prior to the time she filed her questionnaire with the EEOC; further, there was insufficient evidence that the pay decisions which fell within the 180-day period were discriminatory. The Supreme Court upheld the Eleventh Circuit’s ruling, declaring that because the initial decision to discriminate against Ledbetter occurred outside the 180-day period, Ledbetter’s claim was barred.

As part of the Fair Pay Act, Congress specifically chided the Supreme Court for its decision, declaring it ``ignores the reality of wage discrimination and is at odds with the robust application of the civil rights laws Congress intended.`` The Act amends Title VII and the ADEA by adding sections dictating that a discriminatory pay practice occurs: (1) when a discriminatory compensation decision or practice is adopted, (2) when an employee becomes subject to such decision or practice, or (3) when an employee is affected by the application of such decision or practice, including each time wages or other compensation is paid. In addition, the Act provides for the recovery of up to two years of back pay from the filing of the EEOC charge for a violation under Title VII. This means each time an employee is paid, if it is discriminatory, there is a cause of action. The Act takes effect as if it were enacted on May 28, 2007 and applies to all compensation discrimination claims on or after that time.

Employers should be reviewing their compensation practices and providing training on the consequences of the Fair Pay Act, as it eases the path for employees to challenge discriminatory pay practices and imposes increased back pay liability. The Act is expected to be the first of many pro-employee pieces of legislation during the Obama administration.