New England Biz Law Update
A recent U.S. Supreme Court decision that the statute of limitations on a Title VII disparate pay claim is triggered when the original decision on salary is made – and no new violation occurs each time a paycheck is issued – is already making waves.
A group of Senate Democrats have introduced a bill that would reverse the impact of the decision, and a companion measure has been introduced in the House.
ABA President Karen J. Mathis recently lauded these efforts in a statement, saying the court’s decision makes Title VII “almost useless in combating pay discrimination.”
The court held – in a 5-4 decision written by Justice Samuel Alito Jr. – that “[a] new violation does not occur, and a new charging period does not commence … upon the occurrence of subsequent non-discriminatory acts that entail adverse effects resulting from the past discrimination.” (Ledbetter v. Goodyear Tire and Rubber Co., Inc., Docket No. 05-1074.)
As a result, plaintiffs will now have to file a disparate pay charge within 180 days, as required under federal law, or 300 days, under some state employment statutes, from the date the pay decision was made and “communicated” to them.
Management attorneys are hailing the decision for rejecting a result that would have required them to defend stale claims.
Companies need to “be able to defend claims while they are ripe,” said Rae Vann, general counsel of the Equal Employment Advisory Council in Washington, D.C. which filed an amicus brief in the case.
Neal Mollen, a management lawyer who practices with Paul Hastings in Washington, D.C. and wrote an amicus brief on behalf of the U.S. Chamber of Commerce, added: “It’s not fair to tell somebody you can wait years to bring up an issue like this.” The manager who made the pay decisions in the case before the court had died by the time of trial.
But plaintiffs’ lawyers complain the ruling will make it extremely difficult to bring a Title VII disparate pay claim.
“For employees who may be compelled to bring cases challenging inequitable pay individually, it’s an enormous setback,” said Joseph Sellers, who practices with Cohen Milstein Hausfeld & Toll in Washington, D.C. and wrote an amicus brief in the case for the National Employment Lawyers Association.
Rush to file
Sellers and others predict the ruling will cause a rush of employees to file suit before they have a chance to determine if their claims have merit.
“People will have to file a complaint with the EEOC if they have any inkling they have a disparate pay claim,” said Washington, D.C. attorney Kevin Russell, who argued the plaintiff’s case before the court. “The message from the court is that you have to complain early and often at every paycheck or decision, or else it may be too late.”
Some of those claims may be filed before an employee or his lawyer has a chance to complete a thorough investigation.
“The value of having an employee engage in a careful investigation of the foundation of a claim before bringing it is going to be severely diminished,” said Sellers.
In an angry dissent she announced from the bench, Justice Ruth Bader Ginsburg argued the majority had ignored the realities of pay discrimination cases.
“Pay disparities often occur … in small increments; cause to suspect that discrimination is at work develops only over time. … Small initial discrepancies may not be seen as meet for a federal case, particularly when the employee, trying to succeed in a nontraditional environment, is averse to making waves,” Ginsburg wrote.
She urged Congress to act. “The ball is in Congress’ court. As in 1991, the legislature may act to correct this Court’s parsimonious reading of Title VII.”
180 days
Lilly Ledbetter was a manager at a Goodyear plant in Alabama. She sued the company under Title VII, claiming it had paid her 15 percent to 40 percent less than her male counterparts for 20 years.
A federal jury awarded her $3.8 million.
On appeal, Goodyear claimed Ledbetter’s recovery should be limited to acts of discrimination that took place within the 180-day period prior to her filing a charge with the EEOC.
She countered by arguing her paychecks would have been larger if she was fairly evaluated before the 180-day time period, and the fact that discriminatory acts before that time had continuing effects during that time was enough to meet the 180-day filing requirement.
The 11th Circuit disagreed, reversing the jury verdict and granting the employer judgment as a matter of law.
The Supreme Court affirmed.
“The [plaintiff] makes no claim that intentionally discriminatory conduct occurred during the charging period or that discriminatory decisions that occurred prior to that period were not communicated to her,” Alito wrote for the majority. “Instead, she argues simply that [the employer’s] conduct during the charging period gave present effect to discriminatory conduct outside of that period. … But current effects alone cannot breathe life into prior, uncharged discrimination. …
“[The plaintiff] should have filed an EEOC charge within 180 days after each allegedly discriminatory pay decision was made and communicated to her. She did not do so, and the paychecks that were issued to her during the 180 days prior to the filing of her EEOC charge do not provide a basis for overcoming that prior failure.”
Salary at the water cooler
Plaintiffs’ lawyers emphasized the difference between pay claims and other discrimination claims – where disparate treatment is much more visible.
“Pay decisions are quiet,” said Russell. “A woman can be hired and then find out a year later her starting salary was lower than a man’s starting salary doing the same job.”
Sellers agreed.
While promotions, discipline and discharge decisions are readily apparent, “in virtually every place of work employees aren’t readily told what their co-workers are paid and there are rules prohibiting that disclosure,” he said.
The ruling might lead to more people talking around the water cooler about their salaries and raises, plaintiffs’ lawyers said.
“The decision may promote an exchange of pay information much more readily than employers hope workers would have,” said Sellers, predicting that employees could make comments like, “‘I’ll tell you what I am paid if you tell me what you are paid.’”
But Russell noted that, as a practical matter, workers are not “going to start interrogating co-workers” when they first start a job.
And employers are likely to conceal any information about salary, said Deborah Brake, a professor at the University of Pittsburgh School of Law who wrote an amicus brief in the case on behalf of the National Partnership for Women and Families.
According to a footnote in the decision, one important question remains open: whether the discovery rule applies to Title VII disparate pay cases.
If it does apply – which is the case for many other employment discrimination claims – the limitations period wouldn’t begin to run until the employee knew or should have known about the disparate pay.
“If I were a plaintiffs’ lawyer, I’d be pushing in the lower court that there has to be a discovery rule, and pushing for a very broad interpretation of the kind of knowledge it takes to put a plaintiff on notice about discrimination,” said Brake.
In future litigation, a question may also arise as to what has to be “communicated” to an employee to start the limitations period running.
“How do you know that a 4 percent raise is discriminatory until you know what anyone else got?” asked Brake.
Equal Pay Act
Employees will now be more likely to assert Equal Pay Act claims in pay discrimination cases whenever possible.
One benefit of an equal pay claim is that the “paycheck accrual rule” applies – each new paycheck constitutes a separate violation. And there is a two-year statute of limitations under the Act, not a 180- or 300-day limitations period. For willful misconduct, the statute of limitations is three years.
There are several drawbacks to Equal Pay Act claims.
For one thing, the Act only applies to gender discrimination cases.
“For racial, national origin, religious, age and other forms of pay discrimination, the employee is stuck with this Ledbetter rule,” said Brake.
And equal pay claims are tough to prove even in gender cases.
“The Act requires a plaintiff to come up with someone with the same job and of the opposite sex who is paid more, even though a lot of times a woman will have the only job of a certain kind in the workplace and still might have salary discrimination,” said Brake.
Also, there is an easier defense under the Equal Pay Act than exists under Title VII.
“As long as you can show there is some other reason that at least partly explains the disparity, then you have an absolute defense,” said Sellers.
Furthermore, the plaintiff can only recover lost earnings, except where there is evidence of willful conduct, in which case damages can be doubled.
“There is no right to compensatory or punitive damages,” Sellers noted.
In addition to equal pay claims, Sellers said that the case doesn’t seem likely to affect plaintiffs’ ability to bring class actions for a pattern and practice of pay discrimination.
