Lilly Ledbetter Fair Pay Act Is Now Law
Employers: Review And Document Your Compensation Decisions
Employers: Review And Document Your Compensation Decisions
February 2, 2009
The media has been abuzz with the news of the first bill signed by the President, the Lilly Ledbetter Fair Pay Act. Championed by its supporters as necessary in the fight for pay equity, the Act is certain to create future headaches and litigation for companies already financially strapped by the current economic conditions.
Compensation Decisions May Be Challenged Decades After They Are Made
The Act allows individuals to challenge a decision affecting compensation years after the decision is made. The Act provides that an unlawful employment practice with respect to compensation occurs when (1) a discriminatory compensation decision or practice is adopted; (2) an individual becomes subject to a discriminatory compensation decision or practice; or (3) an individual is affected by application of a discriminatory compensation decision or practice, including each time wages, benefits or other compensation is paid.
Consider this scenario: a male employee and a female employee both begin employment making $40,000. The male employee receives a 5% raise. The female receives a 3% raise. Thereafter, for the next 10 years, they each receive a 5% raise. The female employee can bring a wage discrimination claim challenging the initial raise at any point after that initial decision as long as she is still receiving a paycheck that is affected by that decision. The Act all but obliterates the statute of limitations for compensation decisions, but limits back pay recovery to the two year period preceding the filing of a charge with the EEOC.
The Act Is Retroactive
The Act applies to all claims of discrimination under Title VII, the Age Discrimination in Employment Act, the Americans With Disabilities Act and the Rehabilitation Act that are pending on or after May 28, 2007. The retroactive effective date is designed to reinvigorate Lilly Ledbetter’s own claim, which had been denied by the United States Supreme Court as untimely on May 29, 2007.
What Should Companies Do To Combat The Negative Effects Of This New Law? Compensation systems are going to come under increasing attack and scrutiny. Employers need to adopt a proactive approach, including:
But preventing discrimination from occurring is not enough. Because compensation decisions may be challenged years later, accurate and detailed recordkeeping is crucial. Multiple factors can go into setting and adjusting an employee’s pay: experience, market conditions, performance, etc. Trying to explain the reason for a particular compensation decision 5 or 10 years later, particularly if the supervisor involved is no longer employed, may prove to be a difficult task without adequate documentation supporting the reasons for the decision. Developing good paperwork procedures and retention policies to support compensation decisions may be key to defending against future lawsuits.
The Taft labor and employment attorneys can assist in reviewing or improving your compensation practices or answering any questions you might have about this new law.
Compensation Decisions May Be Challenged Decades After They Are Made
The Act allows individuals to challenge a decision affecting compensation years after the decision is made. The Act provides that an unlawful employment practice with respect to compensation occurs when (1) a discriminatory compensation decision or practice is adopted; (2) an individual becomes subject to a discriminatory compensation decision or practice; or (3) an individual is affected by application of a discriminatory compensation decision or practice, including each time wages, benefits or other compensation is paid.
Consider this scenario: a male employee and a female employee both begin employment making $40,000. The male employee receives a 5% raise. The female receives a 3% raise. Thereafter, for the next 10 years, they each receive a 5% raise. The female employee can bring a wage discrimination claim challenging the initial raise at any point after that initial decision as long as she is still receiving a paycheck that is affected by that decision. The Act all but obliterates the statute of limitations for compensation decisions, but limits back pay recovery to the two year period preceding the filing of a charge with the EEOC.
The Act Is Retroactive
The Act applies to all claims of discrimination under Title VII, the Age Discrimination in Employment Act, the Americans With Disabilities Act and the Rehabilitation Act that are pending on or after May 28, 2007. The retroactive effective date is designed to reinvigorate Lilly Ledbetter’s own claim, which had been denied by the United States Supreme Court as untimely on May 29, 2007.
What Should Companies Do To Combat The Negative Effects Of This New Law? Compensation systems are going to come under increasing attack and scrutiny. Employers need to adopt a proactive approach, including:
- Scrutinize compensation practices;
- Analyze, both statistically and otherwise, the results of those practices;
- Make sure job titles, grades and bands are accurate and that individuals within each are performing similar duties and receiving similar pay (or that pay differences are justified by differences in quantity or quality of work or other legitimate factors);
- Provide standards and guidelines to managers making compensation decisions;
- Establish a formal review process for compensation decisions by someone other than the decisionmaker to ensure that there is no discrimination and that the decision can be justified, if necessary in court.
But preventing discrimination from occurring is not enough. Because compensation decisions may be challenged years later, accurate and detailed recordkeeping is crucial. Multiple factors can go into setting and adjusting an employee’s pay: experience, market conditions, performance, etc. Trying to explain the reason for a particular compensation decision 5 or 10 years later, particularly if the supervisor involved is no longer employed, may prove to be a difficult task without adequate documentation supporting the reasons for the decision. Developing good paperwork procedures and retention policies to support compensation decisions may be key to defending against future lawsuits.
The Taft labor and employment attorneys can assist in reviewing or improving your compensation practices or answering any questions you might have about this new law.
