The U.S. Supreme Court ruled that Ms. Ledbetter’s claims were time-barred because the time limits for filing a charge of discrimination begin to run when an employer makes an allegedly discriminatory compensation decision, not every time an employee receives an allegedly discriminatory paycheck.
This new law, however, expands the statute of limitations period in which individuals are allowed to file charges alleging discrimination in compensation by stating that an “unlawful employment practice” occurs:
- When a discriminatory compensation decision or other practice is adopted;
- When an individual becomes subject to a discriminatory compensation decision or other practice (e.g., at the time of hiring); or
- When an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice.
Other important points to note about the LLFPA:
- Under the LLFPA, each individual paycheck (or other compensation alleged to be discriminatory) restarts the statute of limitations period.
- The broad language of the LLFPA means that this new paycheck rule could apply to any employment action that impacts compensation in any way (e.g., decisions on employee benefits, hiring, evaluations and transfers).
- The LLFPA allows “aggrieved persons” to obtain back pay for up to two years preceding the filing of the charge where the past violations are “similar or related” to those that occurred during the charge period.
- The LLFPA takes effect as if enacted on May 28, 2007, and applies to all claims of discrimination in compensation under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990 and the Rehabilitation Act of 1973, that are pending on or after that date. The LLFPA therefore applies to claims based on race, color, religion, sex, national origin, age and disability.
What to Do: In light of these changes, we recommend employers take the following steps as soon as possible:
- Develop written, objective, uniform criteria for the implementation of compensation decisions;
- Ensure you are maintaining sufficient documentation to support compensation decisions (e.g., specifics regarding job performance);
- Significantly extend the period of time in which you maintain compensation documentation (electronic record-keeping may make this action more realistic/efficient); and
- Analyze your current compensation data/structure to ensure there are no unjustified pay disparities across protected classes (e.g., race, color, religion, sex, national origin, age or disability).