Article

The First 100 Days: Expanding Pay Discrimination Laws

January 01, 2009

The Obama administration is just a week old, but already we are seeing changes for employers. Over the coming weeks, we will be sending short summaries of the legislation being considered by Congress. Our goal is to provide you with practical steps that your business can take to mitigate the additional liability that might otherwise arise from these changes.

This Week: Expanding Pay Discrimination Laws

Next Week: The Employee Free Choice Act

Summary

Our first legislative update focuses on two bills: the Lilly Ledbetter Fair Pay Act and the Paycheck Fairness Act. Each statute on its own makes it easier for plaintiffs to claim pay discrimination. Together, these two statutes have the potential to drastically increase the number of pay discrimination claims being filed - and to increase the cost of these claims. The Lilly Ledbetter Fair Pay Act was signed into law by President Obama on January 29, 2009. The Paycheck Fairness Act passed the House of Representatives and is currently working its way through the Senate, where it is likely to meet with resistance from Republican lawmakers.

Action Items

  • Review compensation policies and procedures to ensure that they are not discriminatory - either on their face or in their application.
  • Consider how your company documents decisions relating to pay and how long this documentation is retained. Additional documentation and longer retention of pay-related documentation could help fend off pay discrimination claims.
  • Audit current employee compensation - both within job classifications and between job classifications - with an eye toward identifying differences in pay that could be viewed as discriminatory.
  • Do not simply increase pay based on current pay (for instance, by a percentage) without first considering whether the employee's current rate of pay appropriately reflects his or her contributions to the employer, or if, instead, pay should be increased by a larger margin to account for past decisions that could be viewed as discriminatory.
  • Where compensation is determined based on subjective performance factors, analyze the performance criteria and the relevant decision makers' reviews and recommendations to expose trends that could be viewed as discriminatory.
  • Train managers who play a role in employee merit reviews and compensation recommendations to spot differences or trends that could be viewed as discriminatory, and challenge those responsible for pay decisions to provide explanations.

Discussion

The Lilly Ledbetter Fair Pay Act: The Lilly Ledbetter Fair Pay Act, which President Obama signed into law this morning, expands the time during which someone may file a claim regarding unequal pay. Under this reversal of a pro-employer Supreme Court decision, discrimination is deemed to occur (and the statute of limitations renews) each time an individual is affected by a decision relating to compensation, including every time wages, benefits, or other compensation is paid. Thus, a female employee who claims that her current pay is lower because she was given a smaller raise than a man 15 years ago would be able to file a discrimination claim relying on her most recent paycheck as the date from which the statute of limitations is measured. Likewise, a retired employee who claims to have suffered a discriminatory pay determination 30 years ago that resulted in smaller contributions to a company pension, could file a claim of discrimination because each pension payment she receives would renew the statute of limitations.

The Paycheck Fairness Act (PFA): The Equal Pay Act (EPA) is unique among discrimination statutes because it only requires proof that pay discrimination occurred - an EPA plaintiff need not establish that the employer intended to discriminate. The PFA expands the EPA - and makes it more "plaintiff-friendly" - in four ways:

  • Replaces the EPA's "factor other than sex" affirmative defense with the PFA's "bona fide factor other than sex" affirmative defense, significantly limiting the employer's ability to assert as a defense that the reason for the difference in pay was something other than the complaining individual's gender.
  • Enhances the EPA's retaliation provisions so that any complaint regarding disparate pay, and any discussion of pay rates, may be considered protected activity.
  • Opens the door to compensatory and punitive damages (rather than simply a multiple of back-pay), which will increase employers' exposure if a case is filed and give plaintiffs' attorneys more of a reason to solicit and undertake these types of claims.
  • Allows for opt-out class actions (where currently only opt-in collective actions are permitted), which will increase the size of EPA cases and, in turn, make such claims more attractive to plaintiffs' attorneys and significantly more expensive for defendants.

If the PFA's plaintiff-friendly procedural and damages provisions become law, we expect to see a rise in EPA cases brought by plaintiffs (and plaintiffs attorneys) who would welcome class action status and compensatory and punitive damages, without the need to prove discriminatory intent.

If you would like more information regarding either of these statutes, or any of the upcoming or expected labor and employment legislation, please contact Laura Friedel (312-476-7510) or any member of Levenfeld Pearlstein's Labor & Employment Service Group.

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