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President Obama Signs Ledbetter Fair Pay Act

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January 29, 2009

On January 29, President Barack Obama signed his first piece of legislation, the Lilly Ledbetter Fair Pay Act of 2009. The Act makes it easier for plaintiffs to sue for pay discrimination, and allows lawsuits to be filed even if the original discriminatory act occurred years or even decades ago.

The Act overturns the Supreme Court's 2007 decision in Ledbetter v. Goodyear Tire & Rubber, in which a 5-4 majority of the Court rejected Lilly Ledbetter's Title VII sex discrimination claim against her employer on statute of limitations grounds. To maintain a lawsuit under Title VII, an employee must first file a charge of discrimination within 180 days after the alleged act of discrimination occurred. (In states like Illinois with their own civil rights enforcement agencies, a charge must be filed within 300 days.) In Ledbetter's case, the alleged original act of discrimination – a negative performance evaluation which led to lower raises – occurred more than a decade before Ledbetter filed her charge of discrimination. She argued that she should nevertheless be permitted to maintain her lawsuit because, as a direct result of the negative performance evaluation, she received lower pay throughout the remainder of her employment and continued to feel the effects of the original discriminatory act within the 180-day filing period. Rejecting this argument, the Supreme Court held that an act of discrimination "occurs" when a discriminatory decision is made, not when its effects are felt.

Congress responded swiftly to the Supreme Court's decision by introducing the Lilly Ledbetter Fair Pay Act of 2007. However, the 2007 legislation never gained needed support in Congress and expired without being passed. Following this defeat, the Act became a top priority for labor and women's rights groups. With the recent transition in Congress, supporters reintroduced the Act and quickly received strong, albeit mostly partisan support in both houses of Congress.

Although Lilly Ledbetter's lawsuit was brought only under Title VII, the Act's reach extends beyond Title VII to other anti-discrimination laws. It amends the Age Discrimination in Employment Act, the Americans With Disabilities Act, and the Rehabilitation Act, as well as Title VII. The Act provides that with respect to discrimination in compensation, an act of discrimination occurs when the compensation decision was made or practice was adopted, when an individual becomes subject to the decision or practice, or when an individual is affected by the decision or practice, including each time wages, benefits, or other compensation is paid. Thus, every paycheck the amount of which is allegedly based on a discriminatory act starts anew the 180-day statute of limitations.

The Act's effect is retroactive, and applies to all claims of pay discrimination pending on or after May 28, 2007. If, however, such a claim has been the subject of a final judgment, the same claim cannot now be re-filed.

The Act does not affect the remedies available to pay-discrimination plaintiffs. A prevailing plaintiff may still receive a maximum of two years of back pay, including prejudgment interest; compensatory and punitive damages; and attorneys' fees and costs.

Remedies, however, are the subject of another piece of legislation currently moving through Congress. The Paycheck Fairness Act seeks to expand remedies available to pay-discrimination plaintiffs. The Paycheck Fairness Act was attached to the Lilly Ledbetter Fair Pay Act of 2009 but was separated last week by the Senate due to stiffened opposition to expanded remedies. The Senate has not yet approved the Paycheck Fairness Act and leadership is expressing reservations with the legislation in its current form.

The Lilly Ledbetter Fair Pay Act of 2009 will open the door to many claims of pay discrimination that would previously have been time-barred. Early litigation likely will focus on the breadth of the Act's coverage. For example, it remains to be seen whether the Act will be interpreted to apply to failure to promote claims that may have had an impact on an employee's pay.

Further, because the Act will allow employees to challenge employment decisions that occurred many years ago, the claims allowed by the new law may be particularly difficult for employers to defend, as witnesses and documentation may no longer be available. Accordingly, employers must take the Act into account when documenting pay practices and the decisions leading to those practices, keeping in mind that the practices may now be challenged many years in the future.

The text of the legislation and other information can be found on the Library of Congress' website.

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