The United States Supreme Court’s opinion in Ledbetter v. The Goodyear Tire & Rubber Company, Inc. clarified when the limitations period for filing administrative charges with the Equal Employment Opportunity Commission (“EEOC”) regarding unequal pay claims begins to run. The Court held that where a discriminatory pay decision occurs, each subsequent paycheck does not constitute a new or continuing violation such that a claim is timely filed from the date any one of such payments is made. Rather, the initial discriminatory pay decision starts the clock ticking.

The Ledbetter decision arguably was the most controversial employment law opinion the Court issued during the 2006 Term. Opponents of the decision believe the ruling is a significant setback to civil rights efforts. They are concerned that Ledbetter will deprive employees of the time needed to discover and eliminate systematic pay discrimination in their workplaces. On the other side of the debate, supporters fear that a “rolling” statute of limitations would require employers to piece together defenses based on allegedly discriminatory decisions that may have occurred years or decades before the employee finally filed a claim.

Both sides turn to compelling statistics to advance their respective positions. Those advocating a legislative response to the decision cite studies showing significant pay disparities between men and women. For example, one such study conducted in 2007 found that women one year out of college earn 80 percent of their male colleagues’ salaries; 10 years later, women earn only 69 percent of the amount earned by males. Advocates of legislative intervention argue that a truncated limitations period will only perpetuate these sex-based disparities.

Supporters of the decision rely on statistics of their own. Employer advocates say that “unwarranted litigation is already an issue under current discrimination laws.” For example, the EEOC received over 75,000 charges of discrimination in its fiscal year 2006, but found “reasonable cause” in only 5.3 percent of them. They further emphasize that over 60 percent of the charges (45,500) resulted in “no cause” findings. A study of previous years’ statistics yielded similar results. Those on this side of the debate wish to preserve the Court’s holding to avoid encouraging even more “stale claims and frivolous litigation” in an already overwhelmed court system.

The debate Ledbetter engendered includes the participation of political, legislative and judicial players. Lower courts, the House of Representatives, even the Executive Office of the President have weighed in. Below is a synopsis of some of the fall-out resulting from the decision.

How Did Lilly Ledbetter Take Her Case All the Way to the Supreme Court?

Lilly Ledbetter worked for The Goodyear Tire & Rubber Company, Inc. at a plant in Gadsden, Alabama. She was employed from 1979 until her retirement in 1998. For most of those years, Ledbetter worked as an Area Manager, a position largely held by men. Although Ledbetter’s salary initially aligned with the salaries of men performing substantially similar work, her pay slipped over time in comparison to males with equal or less seniority. By the end of 1997, Ledbetter was the only woman working as an Area Manager. The pay discrepancy between Ledbetter and her 15 male counterparts was substantial. Ledbetter was paid $3,727 per month, while the lowest paid male area manager received $4,286 per month and the highest paid male was paid $5,236.

In March 1998, Ledbetter filed a charge with the EEOC alleging that Goodyear had discriminated against her in violation of Title VII, by paying her a lower salary because of her sex. A jury ruled in her favor. Goodyear moved for judgment as a matter of law, arguing the discrimination claim was barred due to Ledbetter’s failure to timely exhaust her administrative remedies with the EEOC. Under Title VII, an employee generally must file an EEOC charge within 180 (or 300) days after the discriminatory act occurs.

The trial court denied Goodyear’s motion, and Goodyear appealed. The Eleventh Circuit Court of Appeals reversed the trial court’s decision. Ledbetter had been permitted to introduce evidence at trial spanning her 19-year career. She essentially argued that her charge was timely because the pay disparities she experienced over time constituted a continuing violation. Goodyear argued Ledbetter’s claims were limited to any discriminatory decisions that took place within 180 days of the date she filed her charge, and she could not go back any further. The Court of Appeals agreed that the setting of Ledbetter’s pay was a “discrete” act, triggering Ledbetter’s obligation to file a charge within 180 days of its occurrence. The court noted, however, that management reviewed Ledbetter’s compensation at one point during the limitations period, rendering timely Ledbetter’s challenge to that particular decision.

Ledbetter then took her case to the United States Supreme Court, which affirmed the Eleventh Circuit’s ruling. The Supreme Court’s majority opinion stated: “The EEOC charging period is triggered when a discrete unlawful practice takes place. A new violation does not occur, and a new charging period does not commence, upon the occurrence of subsequent nondiscriminatory acts that entail adverse effects resulting from the past discrimination.” The Court rejected Ledbetter’s argument that each paycheck was a new discriminatory act, because she did not establish that the new paychecks were caused by discriminatory decisions occurring during the limitations period.

The majority opinion gathered 5 votes. Justice Ruth Ginsberg wrote the dissenting opinion, joined by Justices Souter, Stevens, and Breyer. Justice Ginsburg asserted in her opinion that the majority’s interpretation of Title VII was “cramped” and incompatible with the statute’s broad remedial purpose. The dissent argued that pay decisions are more analogous to hostile environment harassment claims, which may be actionable as a “continuing violation” under the Court’s decision in AMTRAK v. Morgan, than discrete acts such as discharge, refusal to promote, or demotion.

Will Legislation Revive Lilly Ledbetter’s Suit?

Justice Ginsberg in her dissent noted “the ball is in Congress’ court” to rectify and correct the Court’s “parsimonious reading of Title VII.” Congress quickly obliged. On June 22, 2007 äóñ less than one month after the Ledbetter opinion issued äóñ Representative George Miller (D-CA) and other top House Democrats introduced the Lilly Ledbetter Fair Pay Act (“Act”) also known as “H.R. 2831.” In essence, the Act would reverse Ledbetter, and adopt a continuing violation rule allowing each paycheck resulting from a discriminatory pay decision to be a separate violation and, therefore, the basis for an EEOC charge. Here is a summary of the proposed legislation:

  • The bill would amend four federal statutes äóñ Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act and the Rehabilitation Act.

  • An individual would be able to bring a claim of discrimination where he or she alleges to have been the victim of a “discriminatory compensation decision or other practice” at any of the following times: (a) the time the decision or practice is adopted; (b) the time the individual becomes “subject to” the decision or practice; or (c) the time an individual is “affected by” application of the decision or practice, “including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice.”

  • An “aggrieved person” who files a charge of discrimination would be authorized to challenge “similar or related instances” of discrimination that occur after the filing of the initial charge, without having to file a subsequent charge with the EEOC.

  • An aggrieved person could obtain damages and relief, including recovery or back pay for up to two years preceding the filing of a charge with the EEOC, where discrimination that occurred during the charging period was “similar or related to” claims of discrimination.

  • H.R. 2831 would apply retroactively to all cases that were pending on May 28, 2007, the day before the Supreme Court ruled against Lilly Ledbetter. Thus, if enacted, Lilly Ledbetter’s claims would be revived.

The House of Representatives passed H.R. 2831, but President Bush has promised a veto. Still, state legislatures may act to overturn the effect of the court’s decisions under their own anti-discrimination laws.

Arguments in Favor of and Against Overturning Ledbetter

H.R. 2831’s opponents’ primary concern is that the bill “virtually eliminates the statute of limitations with respect to almost every claim of discrimination available under federal law.” They warn that, as worded, the Act allows employees to bring discrimination claims even decades after an adverse salary decision is made. They also urge that damages under the bill would extend well beyond the employment years, to the extent that pensions and other retirement monies are tied to stale employment decisions claimed to have been discriminatory.

Those against amending Title VII further claim the Act encourages employees to intentionally “sleep on [their] rights for years, or even decades, before raising a claim of discrimination” as a strategy for gaining an unfair litigation advantage. They argue this approach would leave employers virtually defenseless because of the passage of time and resulting unavailability of witnesses and other evidence.

The potential reach of H.R. 2831 further concerns its critics. Opponents argue that the Act goes far beyond the mere reversal of Ledbetter. They claim the bill “potentially broadens the scope and application of civil rights laws to entirely new fact patterns, practices and claims.” For example, the undefined “other practice” language in the bill could encompass nearly every conceivable adverse employment action – no matter how discrete of an act äóñ that potentially affects pay.

Demotions and transfers, for example, could be subject to continuing violation protections merely because they affect an employee’s salary. H.R. 2831 conceivably could create new theories of liability. If an employee leaves his or her position with Employer A, takes a job with Employer B and receives a salary from Employer B that is based on the discriminatory salary he or she last earned with Employer A, can Employer A be held liable for the salary disparities continued into the new employment? Also, given that the Act does not expressly provide an “intent” requirement,” could Employer B be held liable for perpetuating the discriminatory salary basis caused by the prior employer, albeit unintentionally?

Proponents of the bill, such as The National Women’s Law Center, opine that Ledbetter ignores “the reality of pay discrimination, . . . cripples the law’s intent to address it, and undermines the incentive for employers to prevent and correct it.” The National Partnership for Women & Families described the decision as a “painful and costly step backward for the nation and a deep disappointment to those . . . who want to see strong measures in place to give all workers meaningful protections against discrimination.”

The bill’s advocates are primarily concerned about the practical difficulty of timely detecting pay discrimination absent a continuing violations rule. They argue that employees typically do not have access to salary information, other than their own. Proponents add that one-third of private sector employers have adopted specific rules prohibiting employees from discussing their wages with co-workers. Moreover, only one in 10 employers has adopted an open policy regarding wage discussion. These circumstances substantially interfere with an employee’s ability to discover pay-related discrimination before the statute of limitations runs.

Proponents of H.R. 2831 also argue that discriminatory pay decisions may be transparent to an employee under certain circumstances. For example, discrimination may occur not because a female employee receives a lower pay raise than a male peer, but because the male peer receives a raise and the female receives none at all. In this instance, the female employee would not even have information that a pay event had occurred, let alone discrimination of any sort.

Advocates for overturning Ledbetter argue the decision is contrary to the EEOC guidelines and established precedent adopting the “paycheck rule.” In some jurisdictions, this rule previously permitted employees to challenge continuing pay discrimination as long as one resulting paycheck fell within the limitations period.

H.R. 2831’s supporters also are not satisfied by the suggestion that victims of sex-based pay discrimination may bring claims dating back two years under the Equal Pay Act (“EPA”). They point out that protection under the EPA is limited to sex-based disparities. Unlike Title VII, employees who are discriminated against because of race, color, national origin, religion, age or disability have no recourse under the EPA. Opponents also argue that Title VII’s remedies are significantly broader than remedies allowed under the EPA. The EPA limits recovery to two years of back pay, three if the conduct is willful. Title VII permits two years of back pay, compensatory damages and punitive damages.

How Are the Lower Courts Interpreting Ledbetter?

Unless or until Congress acts to overturn Ledbetter, the Supreme Court’s decision is the law of the land. The decisions following Ledbetter reveal that the opinion is no bar to recovery when the plaintiff introduces independent evidence of discrimination occurring during the limitations period. But when the only discriminatory act pre-dates the period for timely filing a charge, the discrimination claim is barred.

For example, the United States District Court for the District of Connecticut in Osborn v. Home Depot U.S.A., Inc. distinguished Ledbetter. The court held that the employee’s EEOC charge was timely filed, despite that the initial discriminatory pay decision had been made about one and one-half years prior to when the complaint was filed. The court cited to evidence that the employee had repeatedly complained about unequal pay and requested salary adjustments during the limitations period, giving the Company a chance to review its compensation. Even when Home Depot adjusted Osborn’s salary, she made less than her male counterparts. As such, the company’s conduct or lack thereof amounted to a discrete act falling within the limitations period, permitting her claim to proceed as timely.

However, even a plaintiff who complains within the limitations period is time-barred if she sits on her rights. For example, in Mikula v. Allegheny County of Pennsylvania, an employee became aware of an allegedly discriminatory pay disparity in March 2004. She asked for an adjustment which was denied in September 2004. In 2006, she filed an internal complaint about the pay disparity, followed by a charge filed with the EEOC. Like in Osborn, she argued her complaint was timely because she raised concerns in 2006, within the limitations period. The district court disagreed.

Relying on Ledbetter, the court decided the limitations period began to run in 2004, when the plaintiff admittedly became aware of alleged discrimination. The court rejected the plaintiff’s contention that a new statute began to run when she complained about the same issue in 2006. The court explained: “to find otherwise would mean that each time plaintiff requested a salary increase she would effectively toll the statute of limitations anew.” Of note, the court’s approach to the limitations period was based on “discovery” of discrimination, not when it actually “happened.”

Finally, in Peterson v. State of California Department of Corrections and Rehabilitation, an employee argued his EEOC charge had been timely filed because the adverse salary decision at issue had been communicated to him within the limitations period. The United States District Court for the Eastern District of California disagreed. The court wrote that the United States Supreme Court in Ledbetter had not held that “a discriminatory act plus communication of it to an aggrieved employee is necessary to trigger the EEOC charging period.” Tolling instead begins “when the discriminatory act occurs.” Therefore, the district court rejected Peterson’s argument that his claims were timely.

Conclusion

In the absence of Congressional action, the lower courts will continue to interpret Ledbetter and refine the statute of limitations analysis. It may be that, as in the Mikula case, the “discovery rule” will be more frequently applied to allegations of discriminatory conduct occurring before the limitations period. Until more courts weigh in, it remains to be seen whether Ledbetter results in dismissal of claims that previously would have been timely. The early signs are that courts will continue to recognize as timely claims that include affirmative acts of alleged discrimination occurring within the limitations period. However, when only the effects of a stale decision fall within the limitations period, the claims will be held untimely.

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