Legal Updates

The Fair Pay Act May Not Be So Fair To Employers

The recently enacted Lilly Ledbetter Fair Pay Act (the “Act” or “Fair Pay Act”) has already resulted in court decisions that are alarming employers.

The Act amends federal anti-discrimination statutes to clarify that the limitations period for suing over allegedly discriminatory compensation decisions commences “each time compensation is paid.”  This essentially means that an employee whose compensation was established pursuant to an allegedly discriminatory decision maintains the right to sue for as long as he or she is on the payroll.

The following summary of a few of the first published decisions to apply the Fair Pay Act illustrates how employees are using this new law against their employers.

• In Bush v. Orange County Corrections Department, the United States District Court for the Middle District of Florida held that an allegedly race-based demotion that occurred 16 years ago supported claims to recover money damages for the pay disparity that has persisted to the present day.

• In Gilmore v. Macy’s Retail Holdings, the United States District Court for the District of New Jersey clarified that employees whose discrimination claims have been revived by the Fair Pay Act may recover back pay for any persisting pay discrimination over a two-year “look back” period.  In this case, the plaintiff claimed that her race had been the basis of a decision to deny her the opportunity to fill in for absent coworkers in lucrative sales departments, resulting in a persisting pay disparity.
  

• In Gentry v. Jackson State University, the United States District Court for the Southern District of Mississippi held that the plaintiff could proceed with a gender-discrimination claim based on the defendant’s denial of tenure and a corresponding salary increase.  Even though the denial of tenure occurred outside the limitations period, the court ruled that it created an ongoing pay disparity that brought the claim within the Act’s coverage.

In light of such decisions, employers are encouraged to audit their compensation policies and practices to determine whether any employees may be experiencing pay disparities based on prior decisions that may be viewed as discriminatory by today’s standards.  By making any necessary adjustments, employers may reduce, and perhaps ultimately eliminate, their exposure to liability for ongoing pay disparities under the Act.

For a more detailed discussion of the Fair Pay Act, see President Obama Signs The Ledbetter Fair Pay Act Reversing The U.S. Supreme Court, which appeared in the February 2009 edition of our Labor and Employment Law Update, and is available on the Firm’s website.

If you are confronted with litigation seeking to revive stale discrimination claims by application of the Fair Pay Act, or if you need assistance in auditing your compensation policies and practices, please do not hesitate to contact us for assistance.