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Sunday, April 19, 2009

Ledbetter Complaints

Pay Discrimination: Are You Protected Against Ledbetter Complaints?
Reprint - Opelika & Auburn News, Sunday, April 19

Being able to prove that your compensation practices do not discriminate based on gender, race, age, or another protected characteristic is more important than ever. The recently enacted Lilly Ledbetter Fair Pay Act has amended Title VII, the Age Discrimination in Employment Act (ADEA), the Americans with Disabilities Act (ADA), and the Rehabilitation Act to clarify that a discriminatory compensation action occurs each time a discriminatory paycheck is issued.
With more legal challenges being brought based upon pay discrimination, it is time to review/audit your company's compensation practices to: (1) identify pay differences between similarly situated individuals of a different gender, (2) then to identify whether the reason for the disparity is based on a valid business reason, and (3) to adopt a written Comprehensive Compensation Plan to show how you objectively support the difference.
The Ledbetter EffectUnder the Act, the Fair Pay Act (EPA) has a retroactive effective date of May 28, 2007, and applies to claims of discriminatory compensation pending on or after that date. There is already an increase in litigation in the form of class action litigation. Post-Ledbetter there is a longer time period to aggregate employees who might be affected and there is an opportunity to get greater class litigation. A claim that was typically filed under the Equal Pay Act (EPA) is now more attractive under Title VII because compensatory and punitive damages are now available, and there are attorney's fees available, which really seems to attract plaintiff's attorneys. Also, we are seeing an increase in news stories of gender wage disparity.
What are Lawful Differences In Pay?According to the U.S. Census Bureau, in 2007 (the latest figures released), for every dollar a man earns, a woman earns 78 cents. The law before Ledbetter and the law after Ledbetter does not require that you pay people the same wage. If you have a department of all men, you are not going to pay them the same as each other, and if you have a department of all women, you're not going to pay them all the same as each other. The fact that you have men and women working side by side does not mean they all have to get paid the same for the same job. The EPA, for example, permits employers to pay wages to employees at a rate less than the rate at which the opposite sex is paid for comparable work if the employer can prove the difference in the rate of pay is based on any of the following:
  1. Seniority system
  2. A merit system
  3. A system that measures earnings by quantity and quality of production: or
  4. A differential based on any factor other than gender (e.g., an individual's experience, salary history, or salary negotiations during the hiring process; market conditions; the salary of other new hires that year).
The Department of Labor’s Women’s Bureau suggests employers ask these questions:
  1. Industry competitiveness.
    Do you have a method to determine the market rate for any given position?
    How do you ensure that market rates are applied consistently?
  2. New hires.At what grades or positions do men, women, and minorities typically enter your company?
    Within those grades and positions, are salaries consistent, or do men, women, and minorities enter at different pay levels?
    How does negotiation affect entry-level salaries? Are men able to negotiate higher starting salaries than women or minorities?
    How do new hires compare in salary to those already working in the company in the same grades or positions?
  3. Commissions, bonuses, and employee performance.Are employees assigned projects or clients with high commission potential on an objective basis?
    Are employees with similar levels of performance awarded bonuses on a consistent basis? Do they receive bonuses of similar monetary values?
    Is there a consistent method of evaluating performance for all employees?
    Do employees receive consistent raises based on similar performance standards? (i.e., Are all workers with outstanding evaluations awarded the same percentage increases? If not, what are the reasons for the difference?
  4. Employee training, development, and promotion opportunities.How are employees selected for participation in training opportunities or special projects that lead to advancement?
    Is it possible that a reasonable jury could conclude that selection criteria are based on race, gender, national origin, age, or other protected characteristic?
Practical Counsel: All compensation plans should be reviewed/audited to avoid being caught in the “Ledbetter Effect”.

Tommy Eden is a Lee County native, an attorney with the local office of Constangy, Brooks & Smith, LLP and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at or 334-246-2901. Blog at