President Obama signed the Lilly Ledbetter Fair Pay Act on Jan. 29, making it easier for women and others to sue for pay discrimination that may date back decades.
Drafted in response to a 2007 U.S. Supreme Court decision that said employees had at most 300 days to file pay discrimination complaints, the new law counts each unfairly low paycheck as a fresh discriminatory act. It caps damages at $300,000 and retains current limits on back pay to two years’ worth.
Critics predict the Ledbetter Act, the first legislation Obama signed into law, will spur more pay discrimination lawsuits. It goes into effect immediately, and is retroactive to May 2007.
Also likely to be signed into law shortly: the Paycheck Fairness Act, which would lift caps on money damages due from employers with discriminatory pay policies.
Quick congressional action
The 111th Congress wasted no time signaling its intention to enact employment law legislation that dramatically favors employees.
Just days after taking their oaths of office on Jan. 5, members of the House of Representatives passed the Lilly Ledbetter Fair Pay Act and the Paycheck Fairness Act. The Senate quickly passed the Ledbetter Act too, sending it on for the president's signature.
The Senate is expected to vote on the Paycheck Fairness Act within days. A strong Democratic majority in the Senate makes passage likely, and Obama has said he will sign it.
Lilly Ledbetter Fair Pay Act
The Ledbetter Act was a congressional response to the U.S. Supreme Court’s landmark 2007 Ledbetter v. Goodyear Tire & Rubber decision. It liberalizes statutes of limitations on when employees can file pay discrimination lawsuits.
In Ledbetter, the Supreme Court affirmed a Title VII provision requiring employees to file pay discrimination complaints within 180 days of the alleged discriminatory act (300 days in cases covered by a state or local anti-discrimination law).
Lilly Ledbetter argued that each low paycheck she received over the years constituted a new discriminatory act. But the court said the discriminatory act happened decades earlier, when Goodyear first hired her at a pay rate below that of male employees. Since more than 180 days had passed since then, the court said Ledbetter could not sue her employer.
The Ledbetter Fair Pay Act amends Title VII to make clear that each allegedly unfair paycheck shall be considered a fresh incident of discrimination.
What the critics said: According to the Society for Human Resource Management (SHRM), “By making the time clock start over upon the issuance of each successive paycheck or retirement benefit, the Ledbetter bill would allow individuals to bring discrimination claims years or even decades after an alleged act of discrimination occurred.”
Paycheck Fairness Act
The Paycheck Fairness Act would amend the Equal Pay Act of 1963, which mandates equal compensation for jobs requiring comparable functions, skills, effort and responsibility in similar working conditions.
The bill would limit an employer’s ability to justify paying different salaries to workers based in different locations with different costs of living. It would lift the caps on compensatory or punitive damages for which employers would be liable, in addition to current liability for back pay. These damage penalties would apply to even unintentional pay disparities.
What the critics say: SHRM says the Paycheck Fairness Act restricts legitimate pay practices. It “would make it significantly more difficult for an HR professional to use legitimate factors, such as education, training or experience, as a component of an organization’s pay system. Moreover, the legislation may altogether prohibit an employer’s use of local market rates and prior salary history in setting compensation,” according to a SHRM statement.
The group also says the bill would foster class-action suits and, because of the risk of higher compensatory and punitive damages, lead employers to settle suits even when they have done nothing wrong.
SHRM is urging its members to write their senators to urge them to vote against the bill.