After the Supreme Court ruled against Lilly Ledbetter, the Congress got busy passing the Ledbetter Act. With a Democratic majority and president, it was passed into law this year. Section III of the Ledbetter Act amends Title VII as follows:
For purposes of this section, an unlawful employment practice occurs, with respect to discrimination in compensation in violation of this title, 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 wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice … Liability may accrue and an aggrieved person may obtain relief as provided in subsection (g)(1) including recovery of back pay for up to two years preceding the filing of the charge …
This means that employers are now subject to a possible two-year exposure for unequal pay claims even when that exposure was generated many years ago. What’s an employer to do?
In a sense, this situation is like finding out you had a wage and hour violation for misclassification of an employee and failure to pay overtime. The only difference is that under the Ledbetter Act the statute of limitations never really expires. Somebody can wait a long time to finally claim that they were treated unfairly and then seek the difference between pay scales of men and women during the past two years as their damages. Employers basically have three choices:
- Ignore the difference and hope it goes away. Since there’s a “rolling” statute of limitations which starts and expires every day for a two-year period, theoretically the claim of anyone who has worked for you for a while doesn’t expand much.
- Try to pay a “caught up” rate and hope that the employee doesn’t file a claim.
- Reimburse the employee for the difference during the past two years.
The court basically said that a woman can go as far back in time to show where the pay disparity started and how it affected her career. As a result, some attorneys are advising clients to save payroll records and compensation decisions forever. Since this is a brand new act, it will be interesting to see how the courts interpret it.