by Teresa A. Cheek
The Third Circuit Court of Appeals recently issued a decision applying the Lilly Ledbetter Fair Pay Act — the first bill signed into law by President Barack Obama in January 2009.
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Facts
Mary Lou Mikula was hired by the Allegheny County Police Department as its grants coordinator in 2001. In September 2004, she wrote a memo to the police superintendent asking him to change her title to “grants and project manager” and make her salary equal to or greater than that of a male colleague whose title was “fiscal manager.” The fiscal manager made $7,000 a year more than Mikula at the time. The county didn’t respond to her request. In October 2005, she resubmitted her request for a raise, but again, the county did not respond.
In March 2006, Mikula filed an internal complaint alleging gender and age discrimination. She stated she was paid $7,000 a year less than a comparable male colleague and that the pay discrepancy went back to her hire date. She then filed a lawsuit in federal district court alleging that her rights under the Equal Pay Act had been violated. In August, the county’s HR department notified Mikula that it had completed its investigation of her complaint and disagreed with her allegations.
The ‘timeliness’ argument
In April 2007, Mikula filed a discrimination charge with the Equal Employment Opportunity Commission (EEOC) alleging pay discrimination based on sex under Title VII of the Civil Rights Act of 1964. When she received a right-to-sue letter, she added the claim to her federal court case. The county asked the court to dismiss the Title VII claim because she had waited too long to file it.
Under Title VII, claimants in most states have 300 days from the alleged discriminatory act to file a claim. The county argued that the pay decision was made in 2001 when Mikula was hired, and that even if the court allowed an extension until 2004, when she found out about the pay difference, she had still waited more than 300 days before filing her charge. Mikula argued that the HR department’s August 2006 decision on her internal complaint was itself a pay decision and that she had filed a charge within 300 days of receiving the determination.
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Application of Ledbetter decision
On May 28, 2007, the U.S. Supreme Court held in Ledbetter v. Goodyear Tire & Rubber Co., Inc., that the time period during which a pay discrimination claim may be filed begins to run on the date of the allegedly discriminatory decision. The Court rejected the argument that each time a new paycheck is issued, a new act of discrimination takes place and the statute of limitations is retriggered. The district court, applying the Ledbetter analysis, held that Mikula’s claim for pay discrimination was untimely because she had not filed it within 300 days after the date (September 2004) she learned she was being paid $7,000 less than the male fiscal manager.
Mikula appealed the district court’s decision. While the appeal was pending, Congress passed the Lilly Ledbetter Fair Pay Act, which amended Title VII as follows:
For purposes of this section, an unlawful employment practice occurs, with respect to discrimination in compensation . . . 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 Fair Pay Act applies retroactively to all cases that were pending on the date of the Ledbetter decision. However, the Third Circuit initially decided that the Act didn’t save Mikula’s claim because she hadn’t argued that each allegedly discriminatory paycheck was a new unlawful employment practice.
Third Circuit’s decision
Mikula then filed a petition for a new hearing, which the court granted. Several organizations (the American Civil Liberties Union (ACLU), the ACLU of Pennsylvania, the National Partnership for Women and Families, and the Women’s Law Project on Mikula’s side, and the Equal Employment Advisory Counsel and the Chamber of Commerce of the United States of America on the county’s side) filed briefs in support of either side.
On reconsideration, the court held that the county’s failure to respond to Mikula’s 2004 and 2005 requests for raises were discriminatory compensation decisions or practices because the result was the same as if the request had been expressly denied. (The decision seems to be a logical interpretation of the Fair Pay Act but difficult to apply since the triggering event — failure to respond to her request — wasn’t tied to a specific date that could trigger the statute of limitations.)
The court rejected Mikula’s argument that the HR department’s rejection of her August 2006 pay discrimination claim was itself a discriminatory compensation decision or practice, explaining that although the decision arguably affected her compensation, to hold otherwise would encourage employers to ignore such complaints.
Finally, the court held that Mikula’s claim was timely in terms of the paychecks she received after June 20, 2006, which was the 300th day before she filed her April 2007 discrimination charge. Although the court didn’t mention it in the decision, the Fair Pay Act also states that the back-pay period extends to two years before the filing of the charge.
The police department will have to defend the merits of a pay decision it made in 2001, with possible liability for back pay beginning in 2004. If the case were to go to trial tomorrow and the employee won, the back-pay award would exceed $35,000 ($7,000 per year times five years).
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Bottom line
You should note the extension of the statute of limitations and take care not to destroy any compensation-related records. Employers that are interested in reducing the amount of space consumed by paper employment files that must now seemingly be preserved indefinitely should seriously consider converting all paper files to PDF format with text recognition so they can be searched for relevant information. You should also consider adopting a practice of documenting the basis for your compensation decisions, particularly when disparities in pay among employees who are performing the same job could be attributed to differences in gender or any other legally protected characteristic.