Pay equity, diversity and inclusion
Ledbetter Act Applies to Equal Pay Act, Appeals Court Rules
By now, many are familiar with Lilly Ledbetter and her fight for equal pay. Nonetheless, her story continues to have renewed relevance by dent of its impact on the U.S. legal landscape. Recently, a U.S. Court of Appeals ruled that the Lilly Ledbetter Fair Pay Act, and its paycheck accrual rule, apply to the Equal Pay Act of 1963.
But first, some history on the paycheck accrual rule. For nearly two decades, Ms. Ledbetter worked at Goodyear. Shortly before her retirement, someone left an anonymous note in Ms. Ledbetter’s work mailbox. This note identified the salaries of men performing the same work–all of whom earned more than Ms. Ledbetter.
In a legal fight that went all the way to the Supreme Court of the United States, the highest court in the land ruled in Ledbetter v. Goodyear (2007) that her sex-based pay discrimination claim was time-barred by Title VII of the Civil Rights Act. The Court reasoned in a 5-4 opinion that the law only provides a 180-day statute of limitations period from the date the discriminatory decision is made. Ms. Ledbetter, according to the Court, was too late.
Despite this setback, in 2009, President Obama signed the Lilly Ledbetter Fair Pay Act, which restarts the clock on the statute of limitations with every new, discriminatory paycheck. This is the paycheck accrual rule. Sadly, the law did not cause Ms. Ledbetter to be made whole by Goodyear. As her website indicates, “Ledbetter will never receive restitution from Goodyear, but she said, ‘I’ll be happy if the last thing they say about me after I die is that I made a difference.’”
Now, twelve years after the passage of the Ledbetter Fair Pay Act, the Seventh Circuit Court of Appeals has ruled that the paycheck accrual rule applies not only to Title VII (the statute upon which Ms. Ledbetter based her sex-based wage discrimination claim) but also extends to the Equal Pay Act. The Seventh Circuit Court of Appeals has jurisdiction over federal cases from Indiana, Wisconsin, and Illinois. In a recent decision, Kellogg v. Ball State University, the Court went out of its way to clarify that the Ledbetter Fair Pay Act’s paycheck accrual rule includes all allegations of unlawful pay discrimination:
“Even so, we take this opportunity to clarify that the paycheck accrual rule does apply to EPA claims… because the Ledbetter Act legislatively removed the Supreme Court’s decision eschewing the paycheck accrual rule in [Ledbetter v. Goodyear], it removed the Ledbetter decision as an obstacle to following our earlier precedents, which recognized the paycheck accrual rule for all allegations of unlawful discrimination in employee compensation.”
(Internal quotations and citations omitted; emphasis in the original).
In clarifying the Ledbetter Fair Pay Act’s expansive reach, the Seventh Circuit issued a stern warning to employers in Wisconsin, Indiana, and Illinois (where, consequently, stringent new amendments to the state equal pay act were recently enacted). With each new pay period, a new statute of limitations period begins on employee claims for pay discrimination.
Now, more than ever, employers should assess the liabilities housed in their compensation systems, which may include decades-old discriminatory pay decisions. States across the country are enacting salary history bans aimed at combating the gender and racial wage gap and the Biden administration is pushing to create additional protections for employees. Overall, the pay equity landscape is changing but nonetheless, employers should not rely on enforcement from local and federal governments to achieve pay equity. Instead, they should approach the conversation proactively.
The best place for employers to start on their pay equity journey is through a comprehensive Equal Pay Risk Assessment. Such an analysis will help your business understand what your company is doing right, and where it can improve before employee complaints, lawsuits, or regulatory issues arise. If you’re new to pay equity, download our whitepaper; Designing a Successful Pay Equity Policy for Your Organization to learn more.
Organizations that conduct a pay equity audit must communicate their progress and achievement along the way. To help you faciliate discussions around compensation, we created the Pay Equity Communications Planner.