LABOR & EMPLOYMENT NEWSLETTER - The Ledbetter decision: How It May Ultimately Harm Employers Defending Pay Discrimination Claims

Just a few weeks ago, the United States Supreme Court issued its Ledbetter v. Goodyear decision,¹ holding that an employee cannot rely on time-barred, allegedly discriminatory acts to support claims for unequal pay. Although the Court explained that its decision turned significantly on plaintiff Lily Ledbetter’s choice of allegations and evidence and that the decision aligned with the Court’s prior Title VII time limitations decisions, the media and certain interest groups have nonetheless characterized it as a new roadblock for employees seeking redress for pay discrimination. This public outcry has already led Congress to initiate new legislation designed to circumvent Title VII’s limitations periods in relation to unequal pay claims. Thus, while Ledbetter initially appears to aid employers defending pay discrimination claims, it could very well end up causing employers to lose a significant defense against such claims.

Background:

Lilly Ledbetter worked for Goodyear from 1979 until November, 1998. Under Goodyear’s policies, performance evaluations dictated whether, and in what amount, employees would receive pay raises. Ledbetter claimed that: (1) her supervisors gave her poor evaluations based upon her gender; (2) these poor evaluations negatively impacted her pay raises; and (3) her lower pay raises resulted in her salary falling below similarly-situated male colleagues.

In March 1998, Ledbetter submitted a questionnaire to the EEOC alleging acts of sex discrimination based upon the pay disparity and in July 1998, she filed a formal charge of discrimination. Following her retirement, she sued Goodyear for pay discrimination under Title VII and the Equal Pay Act (EPA). The trial court granted Goodyear’s motion for summary judgment as to the EPA claims, but allowed the Title VII claims to proceed to trial, where Ledbetter ultimately obtained a favorable jury verdict, backpay and damages.

On appeal to the 11th Circuit, Goodyear argued that the Title VII claims were time-barred as to any conduct occurring before September 26, 1997 – 180 days prior to Ledbetter filing the EEOC questionnaire² - and that no discriminatory conduct had occurred after September 26, 1997. The 11th Circuit agreed and reversed the trial court’s order.

Ledbetter then appealed to the U.S. Supreme Court to determine “Whether …[and how] a plaintiff may bring a [Title VII lawsuit] alleging illegal pay discrimination when the disparate pay is received during the limitations period, but is the result of intentionally discriminatory pay decisions that occurred outside the limitations period.” In other words, Ledbetter herself characterized the pay decisions occurring within the limitations period as merely the result of prior, intentionally discriminatory acts occurring outside of the limitations period.

Decision:

The Court emphasized that Title VII itself established the limitations period for discrimination claims, requiring that the unlawful employment practice at issue have occurred within 180 days of filing an EEOC charge.³ Thus, any acts that Ledbetter alleged to have been intentionally discriminatory had to have occurred within that time frame. To this end, the Court emphasized that Ledbetter did not claim that Goodyear intentionally discriminated against her when it issued paychecks to her during the 180-day limitations period or when it denied her a raise in 1998. Instead, Ledbetter merely said that her paychecks would have been larger, and she would have received a raise in 1998, if evaluations occurring prior to the 180-day limitations period had not been discriminatory.

The Court rejected Ledbetter’s “continuing effects” or “carry forward” argument as being “squarely foreclosed by our precedents,” namely United Airlines, Inc. v. Evans (1977),⁴ Delaware State College v. Ricks (1980),⁵ Lorance v. AT&T Technologies, Inc. (1989)⁶ and National Railroad Passenger Corp. v. Morgan (2002).⁷ As noted by the Court, these cases exemplified its longstanding instruction that “current effects, alone, cannot breathe life into prior uncharged discrimination” and that plaintiffs cannot “shift” the discriminatory intent required by Title VII from prior acts to current acts.

Ledbetter tried to distinguish these cases by arguing that pay discrimination cases are treated differently. She relied on Bazemore v. Friday, a 1986 Supreme Court opinion which held that each week’s paycheck that paid less to a minority than to a similarly-situated non-minority is an actionable wrong under Title VII. But, Bazemore involved a facially discriminatory pay structure (a “white branch” and a “Negro branch”) which the employer intentionally retained and used during the limitations period, even if it had been adopted outside of the period. Moreover, unlike Ledbetter, the Bazemore plaintiffs alleged that the employer intentionally discriminated against them with each paycheck. Ledbetter also argued that Title VII pay discrimination claims should be examined similarly to compensation-based claims under the EPA and Fair Labor Standards Act (FLSA). The Court summarily rejected this argument by pointing out that, unlike Title VII, the EPA and FLSA do not require proof of intentional discrimination and do not require an EEOC charge. The Court also rejected any suggestion that Ledbetter’s pay discrimination claims were akin to hostile work environment claims that are “based on the cumulative effect of individual acts” which create an “environment” of harassment. Instead, Ledbetter alleged a series of discrete, discriminatory acts, each of which could have been actionable if timely charged.

In sum, the Court held that, in accordance with prior precedent, a plaintiff alleging Title VII pay discrimination claims must allege and prove that the intentionally discriminatory acts supporting the claim occurred within the statutorily-mandated time period.

Immediate effect:

Employers defending against Title VII discrimination claims will be able to use the Ledbetter decision to buttress existing limitations defenses. As is always the case, solid and timely documentation of employment events will help set up these limitations defenses. Employers will also have more ammunition to seek dismissal of Title VII claims if they can show that the plaintiff has no competent evidence of intentional discrimination during the limitations period and is, instead, trying to rely on a theory similar to the “continuing effects” or “carry forward” arguments rejected by the Ledbetter Court. Conversely, however, plaintiffs and their counsel will be more savvy in their allegations and proof, being sure to allege that all alleged discriminatory conduct was performed intentionally and during the limitations period. It is also possible that plaintiffs claiming unequal pay will file more EPA claims to avoid Title VII’s time periods and evidentiary burdens.

Possible long term effect:

After years of precedent that apparently flew under the radar, Ledbetter could end up being the decision that “broke the camel’s back,” so to speak.

On June 27, 2007, by a vote of 25-20, the House Education and Labor Committee introduced the “Lily Ledbetter Fair Pay Act.” In a press release issued by the Committee, California Representative George Miller, chairman of the committee, stated that “The Supreme Court’s ruling in Ledbetter v. Goodyear was a painful step backwards for civil rights … [t]he Court’s misguided decision – if allowed to stand – has harmful consequences far beyond Ms. Ledbetter’s case. It has far-reaching implications for an individuals’ right to be compensated fairly for an honest day’s work, regardless of their sex or race or religion. We must not allow this ruling to stand.” According to the press release the Lilly Ledbetter Fair Pay Act would apply to workers who file claims of discrimination on the basis of race, sex, color, national origin, religion, age, or disability. The Act would clarify that every paycheck or other compensation resulting, in whole or in part, from an earlier discriminatory pay decision constitutes a violation of the Civil Rights Act. As long as workers file their charges within 180 days of a discriminatory paycheck, their charges would be considered timely. The legislation would also clarify that, once a worker files a charge, he or she needs not keep filing new charges with each new paycheck.

If passed, this Act may arguably allow employees to call into question their entire compensation history with the employer based solely upon paychecks recently received. As such, this Act clearly disregards the principles served by Title VII’s time limitations, which, as acknowledged by the Ledbetter court, protect the right to be free from “stale claims” and alleviate burdens of “defending claims arising from employment decisions that are long past.” Because employers may very well find themselves having to justify pay decisions made two, five or even ten years earlier, employers should become even more circumspect in their pay decisions, and to establish and maintain more documentation supporting such decisions.

¹ Ledbetter v. Goodyear Tire & Rubber Co., __ U.S.__, 127 S.Ct. 2162 (May 29, 2007).

² Although Ledbetter did not file her EEOC Charge until later, it was assumed for the sake of argument that the filing of the questionnaire, rather than the formal charge, triggered the 180- day limitations period.

³ The Court noted that in states (such as Texas) which allow a plaintiff to file a discrimination charge either with the EEOC or the state’s EEOC-equivalent agency, the limitations time period extends to 300 days.

⁴ 431 U.S. 553 (1977).

⁵ 449 U.S. 250 (1980).

⁶ 490 U.S. 900 (1989).

⁷ 536 U.S. 101 (2002).