Federal Appeals Court Rules that Ledbetter Fair Pay Act Does Not Apply to Promotion Claims
October 15, 2010
In a ruling that should provide relief to employers worried about the threat of litigation concerning decisions made years ago, a second federal court of appeals held that the Lilly Ledbetter Fair Pay Act (“the Act”) does not apply to discrimination claims arising from denial of a promotion. In Noel v. Boeing, the Third Circuit Court of Appeals, the federal appellate court for Delaware, New Jersey and Pennsylvania, joined a ruling by the D.C. Circuit earlier this year, and held that a Title VII claim is untimely if it concerns a promotion decision made more than 300 days before the plaintiff files a charge with the EEOC or other employment agency, even if the decision resulted in the plaintiff receiving lower pay within the most recent 300 days.
The concern about lawsuits arising from old employment decisions arose in 2009 when Congress passed the Act with the express purpose of undoing the Supreme Court’s Ledbetter v. Goodyear decision. In Ledbetter, the Court dismissed a plaintiff’s lawsuit for discriminatory pay due to gender, finding it untimely because the decision at issue occurred more than 300 days before the plaintiff filed a charge with the EEOC. The Court rejected plaintiff Lilly Ledbetter’s argument that her charge was timely despite the fact that the pay decision at issue continued to affect her pay within the 300-day limitations period. Congress responded by amending the law so that each time an individual is affected by a discriminatory compensation decision (e.g., receives a paycheck), an unlawful employment action occurs and resets the time period in which an employee can file a charge. This gives employees a potentially unlimited length of time in which to file discriminatory pay lawsuits. The Act also includes language that “other practices” will restart the time period to file a lawsuit, but it does not provide guidance as to what those other practices are. This amorphous provision was a serious cause for concern among employers, as it could potentially open the door to a flood of lawsuits based upon employment decisions made years or even decades ago.
The Third Circuit’s recent decision in Noel may help put those concerns to rest, at least to a degree. In Noel, the plaintiff, a black Haitian national, claimed that he had been passed over for a promotion two years ago while his white co-workers were advanced. The Third Circuit ruled that Noel’s claim was untimely. The court reasoned that Noel’s claim is fundamentally different than a discriminatory compensation claim that would fall within the Act’s coverage. Discriminatory compensation claims require a plaintiff to show that he or she received different pay for equal work. Noel’s promotion claim required him to show that he applied for a promotion and was passed over, without regard to any difference in wages. Also, one of the justifications for the Act is that pay decisions are often cloaked in secrecy and the reasoning behind the decisions is not accessible to affected employees. Noel’s failure to promote claim differs significantly and is easier to identify. Thus, although Noel’s missed promotion continued to affect his compensation, the court held that his claim did not concern a discriminatory pay practice.
The reasoning now adopted by both the Third and D.C. Circuits suggests that claims concerning a failure to hire or other similar discrete employment actions will not be covered by the Act. Employers should take some comfort in this interpretation, as it supports continued use of a bar against lawsuits premised on promotion or hiring decisions that are filed more than 300 days after those decisions are made. However, the Ledbetter Act remains a serious concern for employers, not only in the area of compensation decisions, but also in the majority of jurisdictions where the federal courts have yet to decide whether the Act applies to other types of employment decision.