President Barack Obama signed his first new statute, the Lilly Ledbetter Fair Pay Act, on Jan. 29, extending the statute of limitations for when employees can sue for equal pay.
Also known as the Ledbetter Act, this statute amends Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act and the Rehabilitation Act, so it applies to race, color, religion, sex, national origin, disability and age discrimination.
Now, a charge of employment discrimination based upon any of those laws may be filed within 300 days of each paycheck that is paid due to a discriminatory compensation determination or other practice.
The 300-day charge-filing period begins when a discriminatory decision concerning pay is first made, and when each paycheck pursuant to that decision is paid. If a discriminatory compensation decision or other practice is made years before an employee or retiree learns of it, the individual has 300 days from the date they learn of it to file a charge, challenge pay-related decisions and seek to recoup lost compensation.
This law opens claims of discrimination based upon wages, salaries, pensions and other benefits. The phrase "other practice" most likely will be interpreted as all types of employment decisions affecting compensation, including starting pay, promotions, job assignments, and raises or lack thereof. The amount of lost revenue a team member is able to regain can only go back two years before the person filed the discrimination claim. However, the employee also may obtain compensatory and punitive damages.
The Ledbetter Act is likely to trigger a surge in pay discrimination claims, especially in the nation's current economic climate, with employers mandated to defend actions and choices made years or decades ago.
Organizations should take steps to reduce the risks and expenses of noncompliance with pay-equity laws. Evaluate all compensation-related policies, procedures and programs. Perform an internal audit of all job classifications to ascertain if any pay differentials exist. If they do, either document the rationale or correct the error. For better protection, outsource the project to an attorney or professional human resource consultant. Enterprises with the most exposure are those who have not been vigilant in documenting the justification for pay and promotion decisions, as well as merit pay increases based upon performance evaluations. Train managers in preparing and conducting performance reviews. Create a system to assess all pay decisions, including merit-based determinations from performance appraisals.
Begin documenting the rationale for pay decisions, especially if associates received higher or lower pay, benefits or appraisals than similarly situated co-workers. Remember, documentation is the key to defending a pay discrimination claim, which, as a result of this legislation, may be based upon almost every personnel action. Be sure managers sign a document acknowledging understanding of pay adjustments based upon performance appraisals.
Include an internal complaint mechanism in the employee handbook so the corporation has the ability to rectify the problem and possibly prevent the filing of a claim. Review record retention protocol and ensure information necessary to defend a claim is accessible and preserved. Keep complete personnel files indefinitely.
Hang onto your hats and watch for approximately 26 additional employment-related initiatives from President Obama. These are expected to significantly impact corporations and previous federal laws, such as various whistle-blowing laws, as well as the Employee Retirement Income Security Act, the Family and Medical Leave Act, the Fair Labor Standards Act and the Worker Adjustment and Retraining Notification Act.
Lynne Haggerman, M.S., is president/owner of Lynne Haggerman & Associates LLC, a Springfield firm specializing in management training, retained search, outplacement and human resource consulting. She can be reached at lynne@lynnehaggerman.com.
