Lilly Ledbetter Fair Pay Act: What Employers Need to Know

Elizabeth L. Riles
March 13, 2009 — 2,970 views  
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Have you heard about Lilly Ledbetter and the Ledbetter Act in the news? Here is a straightforward explanation of how this Act affects you as an employer.

The Ledbetter Case

In 2007, the United States Supreme Court ruled on the case of Ledbetter v. Goodyear. Ms. Ledbetter, a 20-year employee of Goodyear, claimed that, in her early years at Goodyear, her supervisors discriminated against her by unfairly evaluating her performance less favorably than her male counter-parts, resulting in lower salary increases. She believed that those discriminatory evaluations affected every paycheck she received throughout her tenure with Goodyear. As such, she argued the right to bring a claim of discrimination based on each paycheck she received that was less as a result of the evaluations, even though they were years after the last discriminatory evaluation had been conducted. The Supreme Court disagreed, saying that Ms. Ledbetter needed to have brought her discrimination claim within 180 days of the actual discriminatory decisions, i.e., when the evaluations happened. She could not bring a claim based on the affects of the prior decisions.

The Ledbetter Act

President Obama signed into law the Lilly Ledbetter Fair Pay Act of 2009, overturning this Supreme Court decision. The law now permits an employee to bring a claim for discrimination 180 days from not only a discriminatory compensation decision, but also any affects of that decision. Even if the discriminatory action (i.e., an evaluation) happened 20 years ago, an employee can bring a claim based on a current paycheck reflecting a lesser salary than male counter-parts, which the employee can argue is the result of the 20-year old decision.

What can you do? Evaluate and Document, Document, Document

"Don't discriminate" is the easy answer. Unfortunately, we all know that it is impossible to control the whims of every supervisor, even with the best training and policies. Not discriminating is definitely a first step, however, what this Act really requires is good documentation. Too often employers find themselves in court defending a long-term employee's claim with no documentation to show why certain decisions were made.

It is vitally important to document employee evaluations and decisions that affect their compensation and to keep this documentation in the employee's personnel file. Having detailed documentation to demonstrate why an employee was evaluated a certain way or to explain why certain compensation decisions were made provides some institutional memory and proof that can help avoid or defend against claims that may come years after the decision was made. You can also evaluate how your employees are being compensated. Examine each position. Are there large salary discrepancies from one person to the next? Is there some reasonable explanation for that discrepancy, e.g., seniority, experience, skill level, or geographic area? A good negotiator can end up with a significantly greater salary than an equally experienced and qualified counter-part. That is the beginning of a discrimination claim. As much as possible, you want to avoid discrepancies and, when they are discovered, make some effort to correct them. There is no guarantee that you will never face a discrimination claim under this Act, but by evaluating how employees are compensated and documenting compensation decisions, you can go a long way toward preventing claims and putting yourself in the best position to defend against any you face.

About the Author

Elizabeth Riles is a partner at Bohbot & Riles, a women-owned firm in Oakland, California. She has been practicing employment law for the last 9 years. She specializes in human resource consulting and mediation; specifically, creating employee handbooks, advising on general employee matters and mediating a resolution to any employee disputes. For more information about Ms. Riles or her practice, contact Bohbot & Riles at (510) 273-3111 or e-mail Ms. Riles at [email protected]

Elizabeth L. Riles