Wage Bias Law Will Burden Employers, Some Say

On January 29, President Barack Obama signed a bill that will ease time limits on wage discrimination claims and could lead to increased litigation and administrative headaches for many employers, observers say.

The Lilly Ledbetter Fair Pay Act of 2009, which reverses a 2007 Supreme Court decision, provides that every paycheck resulting from an earlier discriminatory pay decision constitutes a violation of Title VII of the Civil Rights Act of 1964 as well as the Age Discrimination in Employment Act, the Americans with Disabilities Act and the Rehabilitation Act.

The Supreme Court had ruled in Ledbetter v. Goodyear Tire & Rubber Co. that plaintiffs alleging illegal pay discrimination under Title VII must file a complaint within 180 days of receiving the first discriminatory paycheck.

Under the law, as long as workers file charges within 300 or 180 days of a discriminatory paycheck, depending on the state where they live, their charges would be considered timely. The law will be retroactively effective as of May 28, 2007, which is the day before the Ledbetter decision.

Thomas H. Christopher, an attorney with Kilpatrick Stockton in Atlanta, says, “Employers are going to have to look carefully at their compensation decisions and make sure that they are not affected by some past discriminatory history, because the new law would give employees considerably greater leeway to look back on what has happened in the past.”

Advocates of the law say it will only return matters to where they were before the Supreme Court ruling. The law is “a modest fix for changing back the law to what it was before the Supreme Court decision,” says Sharyn Tejani, senior political advisor with the Washington-based National Partnership for Women & Families.

“That’s a common refrain,” responds Michael Layman, manager of employment and labor policy at the Alexandria, Virginia-based Society for Human Resource Management. But, he adds, “There were circuit disputes prior to the Ledbetter decision” on the issue of when discriminatory compensation claims can be filed, “which is one of the reasons the Supreme Court granted cert to the case.”

Many observers say the law will mean increased litigation and administrative problems for employers. Richard Gisonny, a principal with Towers Perrin in Valhalla, New York, says, “It will lead to an increase in costly litigation, and that would come in the midst of a difficult economic climate” where many companies are laying off employees “and trying to stay in business.”

Lawrence Z. Lorber, an attorney with Proskauer Rose in Washington, agrees that litigation is likely to increase. “They’re removing the statute of limitations and adopting a very liberal paycheck policy,” he says.

There is “no question the Ledbetter decision cut off not just pay cases, but basically any type of discrimination cases” in which plaintiffs felt they were suffering from alleged discriminatory actions that occurred more than two years in the past, says Christopher J. McKinney of the McKinney Law Firm in San Antonio.

“Plaintiffs now have every incentive to dredge up old pay disputes and to label them discriminatory,” says Marc L. Fleischauer, an attorney with Porter Wright Morris & Arthur in Columbus, Ohio.

The law increases the potential for old claims with long look-back periods that employers may find difficult to defend if people involved in the decisions have either moved on or don’t recall the details, says Richard I. Greenberg, an attorney with Jackson Lewis in New York.

Amy Kohn, a consultant with Hewitt Associates in Lincolnshire, Illinois, says another concern is that the law says it is applicable “when an individual is affected” by a discriminatory compensatory decision.

This “suggests someone like a family member would have the right to file a claim, which seems counterintuitive, because family members are not subject to the discriminatory decision in the first place,” Kohn says. “That would extend the reach of the law.”

The law also will create administrative headaches, observers say.

Jonathan T. Hyman, an employer attorney with Kohrman Jackson & Krantz in Cleveland, says that from a records-retention standpoint, employers will not “know when a decision can’t be challenged,” nor when they can get rid of documents. “It’s really going to create a huge administrative burden on companies,” he says.