The Ledbetter Fair Pay Act: Time in a Bottle
By Chuck Young, Kramer Rayson LLP
If you believe your employer has unfairly set your compensation as a result of unlawful discrimination, congratulations: you've been granted time in a bottle. But if you're an employer, you need to figure out how to handle that bottle carefully, so it doesn't erupt like a shaken soda.
On January 29, President Obama signed the Lilly Ledbetter Fair Pay Act. In a nutshell, the Ledbetter Act extends the time within which employees can bring claims for pay discrimination. Previously, an employee had to file such claims within 180 days of the making or adoption of the discriminatory decision. Thus, if an employee's pay had been affected as a result of discrimination, the employee had an incentive to discover that discrimination quickly and bring a claim while memories and evidence were still relatively fresh.
Now, such claims can also be brought within 180 days of receiving any compensation affected by the decision. Therefore, a discriminatory decision that was adopted years ago and is still in effect can be challenged after the employee receives his or her most recent paycheck.
The Ledbetter Act arose from a gender discrimination case in Alabama, where a female manager was paid less than her similarly situated male coworkers. Former law barred her pay discrimination claim because the decisions she challenged had been made years before she sued. Consequently, much attention has focused on gender-based pay discrimination - and that focus is too narrow. Some employers may be surprised to learn that the statutes of limitation have been extended for all pay discrimination claims, not just claims based on gender.
In other words, the Ledbetter Act has also extended the time for employees to bring pay discrimination claims based on race, color, national origin, religion, disability and age.
Employers doubtless now face more exposure to risk. But they also should view this legal development as an opportunity to strengthen their organizations. Here are some things employers should do to make the most of this challenge:
1. Conduct a privileged pay and job classification audit. This will help identify whether (a) pay disparities exist, (b) any jobs that may traditionally have been held by males and paid at higher rates are open to challenges that they are classified in a discriminatory way, and (c) alternative practices could eliminate any pay differentials. Some employers may balk at picking up payroll and employment records and hiring outside counsel. Doing so, however, may help employers avoid expensive wage claims and, where issues are identified, start the company on the way to full compliance.
Along these lines, if you have no compensation policy, you should institute one with the help of legal counsel. Courts have held that lack of an "objective plan" along with evidence of slipshod practices can be evidence that the employer was not free from bias. That said, a policy which is not adhered to may be worse than having no policy at all, so if you choose to adopt one you need to make its ongoing management someone's responsibility.
2. Check employment policies regarding how employees may discuss wages. One of the reasons Ms. Ledbetter allegedly waited to raise her pay disparity claim was because her employer had a policy that forbid employees from discussing wages. This policy violates federal law (e.g., NLRA § 158(a)(1)) and some states' laws. The better practice is to encourage employees to bring questions or concerns about their rate of pay to their department head or the company's Human Resources Manager.
3. Develop a system for responding to requests for information about pay. Employees will make more requests for information about their pay relative to their co-workers as news of the Ledbetter Act spreads. Employers must decide whether they are required to provide, or want to provide, such information if no lawsuit has been filed. If so, they must develop a mechanism for responding that respects other employees' privacy rights. For example, employers may wish to develop a generic summary of pay information for a particular position. The summary could identify differentials as being based on permissible criteria such as seniority, education, or training.
4. Check your record retention policies. That time in a bottle means employers may now be required to dig through old records. Accordingly, employers should revisit their record retention policies and investigate the best technological methods for retaining and managing this information. At a bare minimum, employers need a formal "litigation hold" procedure to preserve relevant records when a pay claim (or any other employment claim) is reasonably foreseeable.
5. Update your performance review practices to ensure pay decisions are properly documented. Since pay decisions are now more vulnerable to challenge, managers giving performance reviews and participating in annual salary decisions must understand the potential issues. Managers should develop a standard format for making these determinations and ensure proper documentation to strengthen the defense of any type of discrimination claim.
6. Alert and train your managers to watch for retaliation claims. As employees begin to request the information needed to support pay discrimination claims, there will be an increase in retaliation claims for seeking such information from co-workers, supervisors or human resource departments. Train your managers that retaliation based on such requests is unlawful, and train your HR personnel to be alert to the possibility that it may occur.
7. Be sensitive to possible increases in gender tensions. If one group's pay must be increased, as the equal pay statutes require to remedy pay disparities, then economic consequences will follow. In an already tense economic climate, this could increase friction between male and female employees -for example, a perception could arise that "women are to blame" for layoffs, furloughs, or other measures. Not only could such strain create potential for gender discrimination claims, it could also give rise to sexual harassment claims-which can be based on any harassing actions undertaken "because of sex," not just stereotypical bad behavior.
8. Be aware of increased activity by government agencies. Because the Ledbetter Act requires the EEOC and U.S. Department of Labor to obtain data from employers about employee pay information, employers can expect heightened scrutiny of their practices and data by these and other agencies. If you receive a notice or request from any agency for employment data, or seeking to visit your premises to review records, check with your counsel about how to respond. You must understand the rights of, and limitations on, these agencies in coming to your employment site.
9. Check the Department of Labor Web Site. Finally, under the Ledbetter Act, the U.S. Department of Labor must "make readily available" accurate information on compensation discrimination and assist the public in understanding and addressing such discrimination. This assistance includes, among other things, "instructions for employers on compliance." While the site probably will not answer all your questions, it can add focus to any audit or investigation you conduct. If you decide the assistance of counsel is needed, the site might guide you and your attorneys in assessing and remedying issues in a more efficient way.
The combination of difficult economic times and new employee-friendly legislation could be combustible. But employers can do their best to prevent explosions by acting now to identify potential issues and problems, remedy them, and train their managers accordingly. The result will be a stronger organization.
If time in a bottle must be released, let's do it slowly, over the sink.
Chuck Young is a partner at Kramer Rayson LLP who handles employment issues and other complex litigation. He is also an adjunct professor at the University of Tennessee College of Law and a member of the Tennessee Bar Association's 2009 Leadership Law class.