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New Labor Laws with Lilly Ledbetter

Business owners need to know what the act changes
to avoid a discriminatory lawsuit.

By Carl Kleimann

History

Lilly Ledbetter, a female 19-year employee of Goodyear Tire & Rubber Co., sued Goodyear in 1998 claiming she was paid less than equally qualified men. The case went to the Supreme Court where her claim was denied.

The Supreme Court decision was not based on pay being discriminatory, but on whether the claim was viable because of the statute of limitations. The Supreme Court decided that her claim should have been filed within 180 days of being hired rather than years later as she approached retirement.

The Changes

The Lilly Ledbetter Fair Pay Act of 2008 essentially reverses the Supreme Court decision by resetting the statute of limitations with each discriminatory paycheck. This greatly expands the time frame for making gender-based claims of discriminatory pay. A result of the act is the risk of increased noncompliance with discriminatory pay laws.

Discriminatory pay, in many cases could occur without malicious intent and happens unknowingly. Many small businesses lack a formal compensation policy and those that have one, don’t always have managers that ensure adherence.

For Example:

A company hired a female employee 10 years ago and since that time has hired and promoted numerous employees of varying skill, experience and education levels. Ten years later, she files a claim alleging pay discrimination dating back to the date of hire. This claim is now allowed as long as one or more paychecks within the last 180 days reflected the alleged discriminatory pay practice.

The company must now assert a viable defense and will likely be required to produce documents dating to the date of hire. Maintaining accurate employment applications, reference information, work history, testing and/or screening results, education information and other data is viable in defending company pay decisions.

What should employers do?

The following is recommended:

• Review pay policies or develop a policy relating to starting pay, promotional pay increases and merit pay increases to ensure equality. Set limits to control managers’ discretion when making pay decisions. Train your managers on these policies and implement safeguards to ensure they follow them.
• Maintain all records of compensation and promotion decisions. The Lilly Ledbetter Act suggests a need for very long record-retention periods. Consult your labor attorney in order to determine which records to keep and for how long.
• Conduct a statistical self-audit by analyzing starting pay, promotional pay increases and merit pay increases over the last two years to identify possible patterns of discrimination. It’s also wise to include all protected classes (race, color, religion, sex and national origin) in your analysis, as Title VII of the Civil Rights Act addresses each of these.

Most importantly, take immediate action to address any problems and repeat this process periodically to ensure that your compensation policy is working effectively.

To learn more about the Lilly Ledbetter Fair Pay Act, please visit us at:

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