In a first impression case by the Third Circuit Court of Appeals, the court holds that the Lilly Ledbetter Fair Pay Act of 2009 does not apply to the decision to deny an employee a promotion. The case settles the controversy over what "other practices" apply to the Act's "paycheck rule", which begins the statute of limitations for filing a claim for pay discrimination with the receipt of the last paycheck.
In this case, the employee alleges that he was denied a promotion because of his national origin and that similarly situated white employees received more favorable treatment. The denial occurred in the spring of 2003. In 2005, the employee filed a charge to the Equal Employment Opportunity Commission (EEOC), who issued a right to sue letter. Under federal law, a charge to the EEOC must be filed within 300 days of the discriminatory action, or forever be time barred. While the charge was filed well after 300-day requirement, the employee argued that since the denial of the promotion resulted in lower pay, the Fair Pay Act extended the limitations period and the charge survived because it was filed within 300-days of receiving his last paycheck. The Court disagreed, holding that a promotion decision was not the same as a pay decision.
Congress passed the Fair Pay Act in response to the U.S. Supreme Court's decision in Ledbetter v. Goodyear Tire & Rubber Co., Inc., which held that "pay-setting" was a discrete act and therefore the period for filing an EEOC claim commences when the unlawful act occurs.
The Fair Pay Act amended Title VII of the Civil Rights Act and other federal discrimination laws by adding the following section:
An unlawful employment practice occurs, with respect to discrimination in compensation in violation of this subchapter, when a discriminatory compensation decision or other practice is adopted, when an individual becomes subject to a discriminatory compensation decision or other practice, or when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice.
The Third Circuit first addressed the issue of whether the employee pleaded a compensation discrimination claim covered by the Act. Although on appeal he characterized the employer's failure-to-promote decision as "refusing to give [him] a raise," the Third Circuit found that he failed to make this argument before the district court. His complaint did not allege that he was denied equal pay for equal work, and the fact that white co-workers who were promoted received more pay than he did does not transform his failure-to-promote claim into a discrimination-in-compensation claim, the court said.
Further, following decisions in other federal circuits, the Court held that the Fair Pay Act does not apply to a discriminatory failure to promote an employee because it does not constitute a "discriminatory compensation decision or other practice," the court held, quoting the statute. The words "other practice" must relate to a pay disparity, the court noted, adding that courts universally treat pay-setting and failure-to-promote claims as different causes of action. Had Congress intended for the act to cover employment discrimination claims apart from pay discrimination claims, it would have done so explicitly, the court reasoned. Noel v. Boeing Co.
What this case means: Until this decision, employment lawyers advised clients that the Fair Pay Act could extend the paycheck rule beyond pay decisions to include any decision or "other practice" affecting compensation "in whole or in part" that may have influenced compensation received. Therefore, the paycheck rule could be applied to any employment action -- including decisions on employee benefits, hiring, employment transfers and/or evaluations -- that impacts compensation in any way. This reasoning appeared sound considering that in Ledbetter, the employee claimed that the pay discrimination arose from performance evaluations that reflected discriminatory bias resulting in smaller wage increases than to similarly situated male counterparts. Thus, employment decisions made years before could have been challenged as long as the claim was brought within 300-days of receiving the last paycheck. However, it is now clear that at least in New Jersey, courts will treat compensation-related claims and failure-to-promote claims as distinct grievances that are not coextensive.
Case Law Summary October 2010
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Salary or Wage Discrimination: Fair Pay Actby lawinfo752 views
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