The Lilly Ledbetter Fair Pay Act: The Death of the Statute of Limitations Defense?

On January 29, 2009, President Barack Obama signed into law the Lilly Ledbetter Fair Pay Act of 2009 (FPA). The act overturned the U.S. Supreme Court's decision in Ledbetter v. Goodyear Tire & Rubber Co.((2007) 550 U.S. 618, 127 S.Ct. 2162, 185 CPER 61.)

With the enactment of the FPA, the statute of limitations defense is dead, or atleast dying, in employment discrimination claims. The FPA resets the limitations period with each paycheck issued to the employee, and whenever benefits or other compensation are paid. Employees may now resuscitate discrimination claims that involve decisions that are years or decades old so long as a plaintiff can tie that decision to the employee's compensation. The FPA likely will lead to an enormous increase in pay discrimination claims that previously were time barred but now have been revived due to the retroactive application of the act.

How Did We Get Here?

Lilly Ledbetter worked for Goodyear Tire & Rubber Company in Alabama from 1979 until she retired in 1998. During much of this time, salaried employees at the plant were given or denied raises based on their supervisors' evaluations. In March 1998, Ledbetter submitted a questionnaire to the Equal Employment Opportunity Commission alleging certain acts of sex discrimination by her employer. In July 1998, she filed a formal EEOC charge. After her retirement, Ledbetter filed a lawsuit against Goodyear, in which she asserted, among other claims, a Title VII pay discrimination claim and a claim under the Equal Pay Act of 1963.

The district court granted summary judgment in favor of Goodyear on several of Ledbetter's claims but allowed her Title VII pay discrimination claim to proceed to trial. In support of this cause of action, Ledbetter established that, during the course of her employment, several supervisors had given her poor evaluations because of her sex. As a result of these evaluations, her pay was not increased as much as it would have been had she been evaluated fairly. These past pay decisions continued to affect her compensation throughout her employment.

Prior to her retirement, she was paid significantly less than any of her male colleagues. Ledbetter was the only woman working as an area manager, and the pay discrepancy between her and her 15 male counterparts was stark: She was paid $3,727 a month; the lowest-paid male area-manager received $4,286 a month; and the highest-paid male manager received $5,236 a month. Goodyear maintained that Ledbetter's performance evaluations had been non-discriminatory, but the jury found otherwise and awarded $223,000 in back pay, and punitive damages of more than $3 million.

Goodyear appealed, contending that Ledbetter's pay discrimination claim was time barred with respect to all pay decisions made prior to September 26, 1997 - that is, 180 days before she filed her EEOC questionnaire. Title VII provides that a charge of discrimination must be filed with the EEOC within 180 days of any alleged unlawful employment practice, or 300 days where there is a state or local agency with authority to grant or seek relief from suchpractice. (42 USC Sec. 2000e-5(e)(1).) Goodyear argued that no discriminatory act relating to Ledbetter's pay occurred after September 26, 1997. Thus, Ledbetter's pay discrimination claim was untimely.

The Eleventh Circuit Court of Appeals agreed with Goodyear that Ledbetter's claim was untimely, and reversed the jury's verdict. The Court of Appeals did not find sufficient evidence that Goodyear discriminated against Ledbetter in the two pay decisions which occurred after September1997.

Ledbetter sought review by the U.S. Supreme Court, and it agreed to hear her case. But, the Supreme Court affirmed the Eleventh Circuit's decision holding that the 180-day limitation period prohibited Ledbetter from filing her Title VII discrimination charge after 180 days from the occurrence of the alleged discrete discriminatory act. In a majority opinion written by Justice Alito, the Supreme Court rejected Ledbetter's argument that, by issuing paychecks based on past discriminatory practices, Goodyear had violated Title VII anew each time the company issued her a paycheck. Rather, the majority held, "[t]he EEOC charging period is triggered when a discrete unlawful practice takes place. A new violation does not occur, and a new charging period does not commence, upon the occurrence of subsequent nondiscriminatory acts that entail adverse effects resulting from the past discrimination." (Ledbetter, 127 S.Ct. at 2169, 185 CPER 61.)

Justice Ginsburg, with whom Justices Stevens, Souter, and Breyer joined, wrote a strong dissenting opinion in which she maintained that each paycheck Ledbetter received from Goodyear that reflected the pay discrepancy represented pay discrimination based on sex. Therefore, calculation of the 180-day period commences on the date of the most recent paycheck, not the date of an obvious act of discrimination, such as a poor performance evaluation. The dissenting justices called on Congress to correct the majority's "parsimonious reading of Title VII." (Ledbetter, 127 S.Ct. at 2188 185 CPER 61.) (For a complete discussion of the Supreme Court's decision, see CPER No. 185, pp. 61-66.)

Congress and President Obama Respond

Congress answered the call of the dissenters shortly after the Supreme Court issued its decision. In June 2007, the House Committee on Labor and Education first introduced the Lilly Ledbetter Fair Pay Act at the 110th Congress. On July 31, 2007, the bill passed in the House of Representatives, but it did not pass in the Senate.

At the 111th Congress, the FPA was reintroduced by House Committee on Labor and Education Chair George Miller (D-Cal.) on January 6, 2009, and Senator Barbara Mikulski (D-Md.) on January 8. The House passed the measure (H.R. 11) on January 9 by a vote of 247 to 171 The Senate approved the bill (S.B. 181) on January 22, by a vote of 61 to 36. On January 29, President Obama signed the FPA into law.

The act essentially overturns Ledbetter. Section 2 of the act sets forth the findings of Congress in its analysis of the Ledbetter decision. Congress found that the U.S. Supreme Court decision in Ledbetter significantly impaired statutory protections against discrimination in compensation that have been bedrock principles of American law for decades. In its view, the Ledbetter decision unduly restricted the time period in which victims of discrimination can challenge and recover for discriminatory compensation decisions or other practices. Congress further found that "the limitation imposed by the Court in the filing of discriminatory compensation claims ignores the reality of wage discrimination and is at odds with the robust application of the civil rights laws."

In Ledbetter, the plaintiff's claims of discrimination were time barred because the U.S. Supreme Court did not consider issuance of a paycheck to be a form of continuing discrimination. The act reverses this decision by establishing that "an unlawful employment practice" occurs:

• when a discriminatory compensation decision or other practice is adopted;
• when an individual becomes subject to a discriminatory compensation decision or other practice; or
• when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice.

In essence, the act provides that each new paycheck that an employee receives resets the statute of limitations period where the plaintiff alleges that a discriminatory decision affects the employee's pay or compensation. The employee has 180 days (or 300 days depending on the state in which the EEOC charge is filed) from the date that a discriminatory compensation decision is adopted, the employee becomes subject to a discriminatory compensation decision, or is affected by such a discriminatory compensation decision or practice to file a claim with the EEOC. Section 3(B) of the act provides that, "liability may accrue and an aggrieved person may recover back pay for up to two years preceding the filing of [an EEOC] charge, where the unlawful employment practices that have occurred during the charge filing period are similar or related to unlawful employment practices with regard to discrimination in compensation that occurred outside the time for filing a charge." The act is retroactive to May 28, 2007, the day before the U.S. Supreme Court rendered its decision in the Ledbetter case. Therefore, any potential or existing claims that would have been time barred under Ledbetter may be pursued as they relate to any claims on or after May 28, 2007.

Note that the FPA not only applies to claims under Title VII of the Civil Rights Act of 1964, but also to claims under the Age Discrimination in Employment Act of 1967, the Rehabilitation Act of 1973, and the Americans with Disabilities Act of 1990. Therefore, the FPA applies to claims of discrimination based on sex, race, national origin, religion, age, and disability that affect pay or compensation.

Impact on California Employers

Title VII, the ADEA, the Rehabilitation Act, and the ADA all apply to California employers. In addition, an employee in California has the option of suing under a similar state statute, the Fair Employment and Housing Act.

In 2007, California Assembly Member Dave Jones introduced A.B 437 in response to the Ledbetter decision. On August 30, 2008, the California Assembly voted on and passed the bill, and sent it to Governor Schwarzenegger. A.B. 437 was submitted as a rejection of the Ledbetter decision and was modeled after the FPA. The bill clarified that the time period for alleging pay discrimination under California law runs from the date of each discriminatory wage payment.

On September 30, 2008, Governor Schwarzenegger vetoed the bill along with a number of other bills awaiting his signature during the state's budget stalemate. For this reason, the governor's true position on A.B. 437 is unknown, and it is expected that the bill will be renewed. At the very least, A.B. 437 reveals the California legislature's opinion of the statute of limitations issue. Even if the bill does not pass, it is likely the courts will adopt the FPA's rationale since California has a "continuing violation" doctrine, and unlike Title VII, the FEHA statute of limitations provision expressly states that it must be "construed liberally." (See Richards v. CH2M Hill, Inc. (2001) 26 Cal.4th 798, 150 CPER 70; Yanowitz v. L'Oreal USA, Inc. (2005) 36 Cal.4th 1028, 174 CPER 23; Cal. Gov. Code Sec. 12993(a).)

Application of the Ledbetter Act in Recent Federal Court Decisions

Several federal courts already have implemented the FPA since its enactment on January 29. As these cases demonstrate, the act has opened the door for more pay discrimination claims than at issue in the Ledbetter decision itself.

Bush v. Orange County Corrections Dept.((M.D.Fla.) 2009 WL 248230.) In Bush, African-American female employees brought an action under Title VII and the Equal Pay Act alleging racial and gender discrimination. They alleged that while they were working as nurses for the corrections department in 1990, they were told they would lose their corrections certification, as well as their 3 percent special-risk retirement status, if they remained in their nursing positions. The plaintiffs then transferred to corrections officer positions, believing that this was a promotion.

In February 2006, however, the plaintiffs noticed payroll discrepancies and learned that the 1990 transfers "had been recorded as a voluntary demotion and their pay had been reduced without their knowledge." The plaintiffs filed complaints with the EEOC and filed their lawsuit in April 2007. They alleged that they were being paid less than similarly situated males and less than similarly situated white employees, and they were the victims of pay discrimination since 1990. In February 2009, the district court held that the plaintiffs' claims regarding demotions and pay reductions that occurred in 1990 - 16 years before their suit was initiated - were not time barred because of the FPA. (The plaintiffs in Bush lost on other grounds, however.)

Gilmore v. Macy's Retail Holdings. ((D.N.J. 2009) 2009 WL 305045.) Here, the plaintiff asserted that the defendant discriminated against her by denying her promotion. She also raised a disparate treatment claim premised on numerous instances where she allegedly was treated differently from her white colleagues on account of her race. The plaintiff filed a charge with the EEOC on the basis of alleged racial discrimination in 2005 and, after the EEOC was "unable to conclude" that the defendant violated Title VII, she commenced an action in federal court in May 2006.

On its own motion, on February 4, 2009, the district court reconsidered its partial grant of summary judgment. It ruled that the FPA applies to the plaintiff's EEOC claim that was filed in 2005, and that back pay may be awarded for compensation discrimination that took place as early as July 2003, so long as the alleged discrimination is "similar or related to unlawful employment practices" at issue in the EEOC charge.

Rehman v. State University of New York at Stony Brook. ((E.D.N.Y.) 2009 WL 303830.) In this case, the plaintiff, a physician whose appointment as assistant professor was non-renewed, brought an action against the university and others, alleging age, race, and religious discrimination in violation of Title VII and other statutes. In March 2007, the plaintiff received an unfavorable performance evaluation, which the plaintiff contends included false allegations. The evaluation recommended that the plaintiff's year-to-year employment with the university not be renewed. A month later, the plaintiff received a letter of non-renewal. On April 13, 2007, the plaintiff filed a claim with the EEOC asserting discrimination and retaliation, and filed a lawsuit in January 2008. (E.D.N.Y.) 2009 WL 303830, 3.)

The defendants argued that Title VII discrimination claims arising prior to June 16, 2006, were barred by New York's statute of limitations. On February 6, 2009, relying on the FPA, the court held that the plaintiff's wage discrimination claims based on actions occurring on or after April 13, 2005, two years prior to his EEOC charge, were timely. (E.D.N.Y.) 2009 WL 303830, 5.)

Vuong v. New York Life Insurance Co. ((S.D.N.Y.) 2009 WL 306391.) Here, the plaintiff brought an action alleging discrimination based on race and national origin. The plaintiff alleged that the company failed to fairly promote and compensate him beginning in 1998 when he received a lesser percentage of its San Francisco office's performance-related compensation than did his co-managing partner. Vuong claimed the paychecks he received thereafter would have been greater if the company had not made the discriminatory decisions in 1998. The plaintiff filed a charge with the EEOC in 2002, and filed the lawsuit against his employer on February 18, 2003. On February 6, 2009, the district court held that the plaintiff's claim of discrimination was timely by virtue of the FPA, even though the alleged discriminatory pay decision was made in 1998.

Conclusion

Since the FPA extends the limitations period for compensation discrimination claims and is retroactive in nature, its impact will be far reaching. Stale claims brought under a host of federal anti-discrimination statutes are now timely so long as a plaintiff can tie the discrimination claim at issue to compensation. Indeed, within a few weeks of President Obama's signing, federal courts already have addressed and implemented the FPA in their decisions. Employers now have one less weapon at their disposal to combat discrimination claims, and the FPA undoubtedly will drive up the cost of doing business for the nation's employers.