Though it was only signed a few weeks ago, the Lilly Ledbetter Fair Pay Act has already caused big legal problems for some companies.
Signed by President Obama on January 29, the Ledbetter Act gives employees more time to sue when they believe they’re victims of pay discrimination. The Supreme Court had previously ruled pay bias suits had to be filed within 180 days of the discriminatory decision.
But the new law gives employees a new 180-day window to sue every time they receive a paycheck in which they claim they are discriminated against.
The act was effective immediately — and applies retroactively to lawsuits still pending as of May 28, 2007, the day before the Supreme Court’s decision.
It’s already made it tougher to prevent discrimination suits:
In one case, three women sued their employer, claiming they were unfairly demoted because of their gender.
The demotions occurred in 1990 — so the company argued the employees missed out on the statute of limitations.
But the court issued a ruling on February 2 — four days after the Ledbetter Act was signed. And, since the demotions resulted in a loss of pay that continued to the present day, the court ruled the new law applied to their lawsuit.
The judge noted that just a week earlier, the case would have been tossed on those grounds. But not anymore.
Eventually, the case was thrown out because the company proved the demotions were based on non-biased factors (Cite: Bush v. Orange Counry Corrections Dept.).
In another recent case, an employee believed he was being paid less than his colleagues based on his race and gender. He sued.
The company tried to have the case dismissed because his pay was set several years before — well outside the statute of limitations. But the judge let the case go forward, applying the Ledbetter Act to his claims (Cite: Rehman v. State University of New York at Stony Brook).
What can HR do now?
Given the law’s immediate impact, what steps can HR take now to prevent lawsuits based on decisions that occurred far in the past?
Some experts recommend conducting a self-audit to uncover anything that could look like pay discrimination.
First, examine company policies on starting salaries and raises. Many companies don’t have a formal policy, giving individual managers wide discretion in pay decisions — which could turn out to be a liability under the new law.
Next, consider analyzing pay data to make sure no employees have been harmed by unfair decisions that violated your policy. Then, your company can remedy the situation without having to go to court.