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Practice Management > Compensation and Fees

Obama Signs Wage Discrimination Bill

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President Obama has signed his first bill, the Lilly Ledbetter Fair Pay Act of 2009.

The bill, S. 181, reverses a Supreme Court decision that limited workers’ ability to sue employers in connection with allegations of wage discrimination.

Members of the Senate voted 61-36 to pass the bill, and members of the House passed it by a vote of 250-177.

The president danced at an inaugural ball with Lily Ledbetter, the named plaintiff in the 2007 Supreme Court decision. The court held that Ledbetter was not entitled to sue over allegations of wage discrimination.

The court found that Ledbetter was ineligible to sue because she had not filed her claim within 180 days of “the alleged unlawful employment practice.”

President Obama made opposition to the Supreme Court decision a key part of his presidential election campaign.

Wage discrimination is “by no means a women’s issue, it is a family issue,” Obama said at the signing. “Signing this bill today is to send a clear message that making our economy work means making sure it works for everybody.”

Under the provisions of the new act, workers have at least 180 days after they get what they believe to be discriminatory paychecks to bring charges.

Every paycheck or other compensation resulting, in whole or in part, from an earlier discriminatory pay decision or other practice would constitute a violation of Title VII, which prohibits discrimination on the basis of race, sex, color, national origin, and religion, act drafters say.

Each discriminatory paycheck would, in effect, restart the clock for filing charges, the drafters say.

Under the old law, employers could avoid liability if they could prove that the alleged discrimination comparison was a result of any factor other than sex.

Under the new act, employers can rely on the affirmative defense only when the factors other than sex are job-related or serve a legitimate business interest.

Additionally, the act states that, for the purpose of demonstrating discrimination, a plaintiff can use compensation comparisons of employees who do not work at the same physical place of business as the plaintiffs. Courts have not construed the old Equal Pay Act so broadly.

The act prohibits employers from retaliating against employees who share salary information; increases civil penalties against employers who violate the act; makes it easier to bring class actions; and authorizes the secretary of Labor to seek additional compensatory or punitive damages.

The American Benefits Council, Washington, which represents large employers, won a provision in the act designed to ensure that the act is not intended to change the old-law treatment governing when pension distributions are considered paid.

James Klein, president of the council, has expressed concerns that the act still could be interpreted to allow an individual who has been retired for many years to file a charge or sue based on acts that occurred during his or her active service, but when few, if any, people involved in the alleged discrimination are available to discuss the facts and circumstances of the case.

Christine Bonavita, a lawyer in the Philadelphia and Cherry Hill, N.J., offices of Blank Rome L.L.P., says the law will take effect as if it were enacted May 28, 2007, and applies to all compensation discrimination claims that were pending on or after that date.

Employers should review their compensation plans, benefit programs, payroll practices and wage information, to ensure that the plans do not have a disparate impact upon individuals in a protected class, Bonavita says.

“Any disparities should be based on legitimate non-discriminatory justifications such as seniority,” Bonavita says. “Employers definitely need to retain their compensation records, as well as their bonus plans, and employment performance reviews. They should make sure that performance evaluations are accurately completed so that they support any subsequent employment decisions.”


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