Kaz Kikkawa
5.30.07

Client Bulletin #373 - For PDF version of this Client Bulletin, click here

In a 5-4 decision yesterday, the United States Supreme Court sharply limited the time period for filing Title VII charges related to pay discrimination.  At issue were a number of allegedly discriminatory pay decisions made in the past whose effects were continuing to be felt in the present.

The Court actually handed employers two victories.  In addition to interpreting Title VII’s administrative filing requirements narrowly in favor of employers, the Court also gave employers some certainty by resolving a split that various federal circuit courts of appeal had taken on this issue.

The case was Ledbetter v. Goodyear Tire and Rubber Company.  Lilly Ledbetter worked for Goodyear for 19 years.  As a salaried employee, her pay raises were based on her supervisors’ evaluations of her performance.  At her trial, Ledbetter introduced evidence showing several of her supervisors had given her poor evaluations because of her sex.  Her poor evaluations and relatively low pay raises compounded over time.  As a result, she was earning significantly less than her male counterparts toward the end of her career. A jury believed Ledbetter’s pay discrimination allegations and awarded her more than $3 million.  The trial court judge subsequently reduced the verdict to $360,000 to conform to Title VII’s monetary limits on recovery. Goodyear then appealed, arguing that Ledbetter should get nothing at all.

Specifically, Goodyear argued that Ledbetter’s claims were time-barred because none of the discriminatory evaluations or pay increases were completed within the 180-day period preceding the filing of her EEOC charge.  (An individual wishing to challenge an employment act as discriminatory under Title VII must first file a charge of discrimination with the EEOC no later than 180 days after the act. In “deferral” states, the individual has 300 days from the discriminatory act.) The U.S. Court of Appeals for the Eleventh Circuit (Florida, Georgia, and Alabama) agreed with Goodyear, and Ledbetter appealed to the Supreme Court.

Using the logic that some courts of appeal had adopted, Ledbetter argued that Goodyear engaged in a discrete discriminatory act each time it gave her a paycheck that gave her less money than a similarly-situated man. Therefore, she argued, there were discriminatory acts that had occurred within the 180-day charge-filing period. Ledbetter also argued that the Court should treat pay discrimination claims differently from other types of discrimination because pay discrimination is difficult for employees to immediately detect.

The Supreme Court did not buy any of Ledbetter’s arguments. In an opinion written by Justice Alito and joined by Chief Justice Roberts and Justices Scalia, Kennedy, and Thomas, the Court said the discriminatory acts were the relatively poor evaluations and the decisions to give her smaller raises. Therefore, Ledbetter should have filed EEOC charges 180 days after each of those discriminatory evaluations and pay decisions was made and communicated to her.  Contrary to what some federal courts of appeal have said, the Supreme Court said the fact that those past discriminatory acts had discriminatory effects continuing into the 180-day filing period did not render her charge timely. Justice Ginsburg, joined by Justices Stevens, Souter, and Breyer, dissented. For a copy of the Supreme Court’s decision, click here.

How does this “lingering effects” discrimination work?  As an example, a woman may have been denied a lucrative mechanical job in a plant, or denied a promotion to supervisor, in the 1970’s because of her sex. In the 1980’s, she is promoted to supervisor and receives a percentage increase based on her hourly pay. All other things being equal, and assuming the employer never gives her a pay “bump” to make up for the past discrimination, this hypothetical woman supervisor will always be paid less than similarly situated men who were promoted from mechanic’s positions or who were supervisors longer. This phenomenon is not uncommon with women or minority employees who have very long service and were promoted through the ranks.

What Ledbetter means for employers.  The Court’s decision will be very helpful to employers who have long-term employees who may have faced actual discrimination in the distant past, the lingering effects of which are still felt today. The lesson of this case is that the clock can be an employer’s best friend.  Therefore, employers should be sure to keep accurate records of why and when hiring, promotion, pay increase, pay decrease, transfer, demotion and termination decisions are made and also when they are communicated to employees.  It also underscores the importance of keeping reliable records of when internal complaints of “unfairness” or “discrimination” are made.

That said, when an employer determines that a woman or a minority employee is being paid less now because of discrimination that occurred in the past, it is a good idea – to prevent costly litigation and as a simple matter of fairness – to try to make things right. It should also be noted that the Supreme Court’s decision does not affect pay discrimination claims brought under the Equal Pay Act. Indeed, Justice Alito specifically noted, “If Ledbetter had pursued her EPA claim, she would not face the Title VII obstacles that she now confronts.” (The EPA prohibits pay discrimination based on sex and has a two-year/three-year limitations period similar to that under the Fair Labor Standards Act.) In addition, the Office of Federal Contract Compliance Programs monitors pay equity issues for employers who are federal contractors.

If you have a question about this case, or need help assessing pay equity in your company or properly documenting important personnel decisions, feel free to contact any member of Constangy’s litigation practice group or the Constangy attorney of your choice.

Constangy, Brooks & Smith, LLC has counseled employers, exclusively, on labor and employment law matters since 1946. The firm represents Fortune 500 corporations and small companies across the country. More than 100 lawyers work with clients to provide cost-effective legal services and sound preventive advice to enhance the employer-employee relationship. Offices are located in Georgia, South Carolina, North Carolina, Tennessee, Florida, Alabama, Virginia, Missouri, and Texas. For more information about the firm's labor and employment services, visit www.constangy.com, or call toll free at 866-843-9555.

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