February 10, 2009Client Alert

The Lilly Ledbetter Fair Pay Act Becomes Law; Paycheck Fairness Act Awaits Vote in Senate

The Lilly Ledbetter Fair Pay Act amends Title VII, the Americans with Disabilities Act, the Age Discrimination in Employment Act, and the Rehabilitation Act to clarify that a discriminatory practice or pay decision under these laws occurs each time an employer issues a paycheck or provides other compensation resulting from an earlier discriminatory pay decision. As a result of the amendment, deadlines for filing a charge of discrimination are now recalculated every time an employee is compensated as a result of an allegedly discriminatory pay decision, regardless of when the pay decision was actually made.

President Obama signed the bill into law on January 29, 2009. The bill is effective retroactively as if enacted on May 28, 2007, the day before the U.S. Supreme Court decided Ledbetter v. Goodyear Tire & Rubber Co., the court decision that the law was designed to overturn.

The Paycheck Fairness Act would amend the Equal Pay Act of 1963, which itself amended the Fair Labor Standards Act. Both the Equal Pay Act and the proposed Paycheck Fairness Act were designed to promote gender pay equity. The Paycheck Fairness Act includes numerous provisions designed to enhance the enforcement of the Equal Pay Act.

For example, the Paycheck Fairness Act would modify the current exception to the Equal Pay Act that permits gender pay disparities under limited circumstances when the payment is made pursuant to a differential based on “any other factor other than sex.” Under the Paycheck Fairness Act, this exception would be further limited to include only payments made pursuant to a differential based on “a bona fide factor other than sex, such as education, training, or experience.” This so-called “bone fide factor defense” is only available if the employer demonstrates that the factor is not based on gender, is job-related with respect to the position in question, and constitutes a “business necessity.” If the employee demonstrates that an alternative employment practice exists that would serve the same business necessity without the gender pay disparity and the employer refused to adopt the alternative practice, the bone fide factor defense is not available.

Other provisions of the Paycheck Fairness Act include allowing successful claimants to recover compensatory and punitive damages, permitting aggrieved employees to bring class action law suits, clarifying and expanding what the law means by men and women working in the “same establishment,” prohibiting retaliation against employees for discussing their wages with other employees, and requiring the Department of Labor to create a program that would give grants for “negotiation skills training” for girls and women.

The Paycheck Fairness Act passed the House on January 9, 2009. As of January 29, 2009, the Senate had not voted on the bill. If passed by the Senate, President Obama is expected to sign the bill into law. The bill would take effect six months after it is enacted.

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