On January 29, 2009, President Obama signed the Lilly Ledbetter Fair Pay Act (“Fair Pay Act” or “Act”), an act that makes it much more difficult for employers to defend against discriminatory pay claims.

The Fair Pay Act is a response to a 2007 Supreme Court ruling that rejected a $360,000 award to Lilly Ledbetter, an employee of Goodyear Tire & Rubber Co. Ms. Ledbetter claimed in her lawsuit that over the two decades preceding her lawsuit, she received pay that was unequal to her male counterparts. Although Ms. Ledbetter did not learn that she was receiving unequal pay until 1997, the Court stated that the law required her to file a discrimination claim within 180 days of the initial date that she began receiving unequal pay.

The Act states that if an employee is receiving unequal pay due to his or her sex, race, color, religion, national origin, age or disability, the 180-day clock for filing a discrimination claim restarts every time the employee is “affected” by a discriminatory compensation decision, including every time the employee receives a paycheck. Although this Act protects those employees who do not discover their unequal compensation until more than 180 days after the initial discriminatory decision, it goes much further than that.

The Fair Pay Act makes life difficult for employers by permitting employees to file unequal pay claims long after the alleged initial discriminatory act. This poses a challenge where the decision-makers and other witnesses familiar with the allegedly discriminatory compensation practices have left their employment, and/or where those witnesses no longer have any recollection of the reasons behind the compensation decisions. Moreover, employees who believe they are receiving unequal pay may wait to file a claim of discrimination until they have a tactical advantage.

Sensing that the Act would unduly burden employers, Senator Kay Bailey Hutchison of Texas introduced an alternative bill that required employees to file a discrimination claim within 180 days of the date that they would have reasonably been expected to know that they were being discriminated against. Although this bill would have corrected the perceived injustice caused by the 2007 Supreme Court Ruling, it was defeated by a vote of 55 to 40.

It will take effect as if enacted on May 28, 2007, thereby complicating existing discrimination claims filed after that date. To learn how to protect your business from liability under the Lilly Ledbetter Fair Pay Act, please be sure to contact your employment counsel at Smith, Gambrell & Russell, LLP.