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JUNE 1, 2009

This article is reprinted with permission from the Daily Business Review. © 2009

P resident Obama made a number of promises during his campaign

about changes he wanted to see in labor and employment laws, including pay discrimi-nation based on any protected characteristic.

In pursuit of his promises, the very first bill he signed was the Lilly Ledbetter Fair Pay Restoration Act of 2009, which overturned a 2007 U.S. Supreme Court decision limiting the time period for employees to sue for alleged discriminatory pay practices.

Inside the Beltway, many believe the Ledbetter Act is just the first of many forth-coming statutory changes. With potentially more pay dis-crimination legislation in the pipeline, employers should act now to ensure their pay-setting policies and practices are not discriminatory, will survive legal scrutiny and are adequately documented.

How has the Obama ad-ministration altered the legal landscape of pay discrimina-

tion law?The Ledbetter Act has

greatly extended the time for employees to bring suit for pay discrimination. In Ledbetter v. Goodyear Tire & Rubber Co., the Supreme Court ruled an employee’s time to file a charge of pay discrimination started from the date of purported dis-criminatory pay decision. Applying the rule, if a Florida employer decided to not give an employee a raise Jan. 1 on account of her gender, she would have had only 300 days to file a discrimina-tion charge. That has now changed.

Now, every time an em-ployee receives a paycheck that reflects a discriminatory decision, the employee’s time to bring a charge starts anew. The Ledbetter Act broadly applies to all types of pay dis-crimination claims including those based on disability, age, national origin and race dis-crimination.

The Ledbetter Act is ret-roactive to the day before the Supreme Court decision on May 28, 2007. It applies to all claims pending on or after May 28, 2007. This could mean that untimely claims have been revived. The Ledbetter Act also on its face applies to other practices

that relate to discrimination in pay, not just pay-setting decisions. Accordingly, some have argued that a claim al-leging the denial of a promo-tion or transfer many years in the past, for example, could be revived if an employee’s paycheck continued to reflect discrimination based on the past employment decision. However, an employee could recover for only two years of back pay even if the decision at issue happened more than two years ago.

Beyond the impact of the Ledbetter Act, employers should track the progress of the bill known as the Paycheck Fairness Act, which if passed would overhaul the Equal Pay Act. The PFA was introduced in the Senate in January. Among its provi-sions, the bill would forbid an employer from retaliating against an employee who shares pay information with co-workers, remove caps on compensatory damage awards and allow punitive damages against employers even for unintentional viola-tions.

The measure also would substantially limit the de-fenses available to employers. In a gender bias claim, em-ployers would need to prove some bona fide factor other

than gender caused the pay differential and the decision was consistent with business needs. Under this standard, an employer could be liable for a pay differential, even one unrelated to gender, if an employee could show an alternative pay policy would further the same business practice without resulting in the pay differential. Finally, the bill would allow employ-ees to compare themselves to similarly situated workers at different locations operated by the same employer.

What steps should employ-ers take?

Employers should expect an increase in pay discrimina-tion lawsuits as a result of the passage of the Ledbetter Act and the potential passage of other employment laws. This means employers must apply hindsight to ensure all past decisions were well-reasoned and well-documented and, at the same time, apply fore-sight to ensure pay decisions are not based on a protected characteristic and support for decisions is well-documented.

April Boyer is a partner and Robert Leitner is an associate in K&L Gates’ Miami office, where they counsel and represent em-ployers on Florida and federal employment law.

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