With Congress on the brink of passing legislation that would make significant changing to the Equal Pay Act and Title VII's Compensation Discrimination case law, I thought it would help to post several blogs explaining the changes and how Tennessee employers can be prepared for the changes that seem likely. Of course, until legislation is finally enacted, this is tentative.
Most of Congress wants to change two aspects of compensation discrimination law. First, they want to overturn the perceived effect of Ledbetter v Goodyear Tire & Rubber Co. Inc. which had held an employee's claim was filed too late because she could not (and made no effort to) show that a discriminatory decision was made within the limitations period. Second, Congress would amend the Equal Pay Act to change what an employer must show to prove a factor other that sex was the reason for a pay difference. This bill would also increase the damages and penalties an employee would receive if pay discrimination is proven.
I could write much on how Congress perceives inequities. There are significant faults in the rationale members of Congress and the supporters of this legislation give as the necessity for these bills (especially the part that would change the effect of Ledbetter). This is not really the place for having an extended discussion of those faults.
The better and more interesting discussion would be whether the changes Congress seems poised to make will help in solving the problems they have identified. Study after study, as reported in the media and the Internet, proclaim that women are paid less than men for the same work. (So says a GAO Report from 2004 - reporting from 1983 to 2000, women earned 21 percent less, a figure the GAO said was diminishing. The worst "studies" are those, such as one reported last year in Crane's which draws conclusions based upon whether people perceive themselves to be underpaid.) Broadly defined statistics that cover multiple jobs in different companies are unreliable in forecasting whether individual employers permit pay disparities. Since I have no empirical basis for disputing that (and am not so naive as to think that all pay disparities everywhere have been eradicated), I take it as a given for purposes of the present discussion.
Pending now are two bills (HR 11 and S.181). HR 11 passed the House on January 9, 2009. It consists of two parts (each part responds to one of the concerns listed previously).
Part I would change the outcome in Ledbetter and let employees sue for pay discrimination (if the difference is caused by sex, race, age, disability, national origin or religion) for as long as the disparity in pay continues. Backpay would, however, be capped at two years prior to the filing of the charge (a cap that currently exists). So, where Ledbetter held a discriminatory pay decision made decades earlier could not be a timely discriminatory act, the intent of this legislation would be to let the lower paid employee sue and recover for a few years of the disparity so long as the improperly motivated pay disparity continues to exist. The employee could also recover other damages as already allowed by Title VII and the ADA (but the ADEA does not authorize compensatory or punitive damages).
The Senate will probably vote on its bill (S.181) as early as Wednesday, January 21, 2009, though several Republican senators (including both from Tennessee) have sponsored an amendment which, to my thinking, could be worse, as it would create uncertainty as to when the time for filing a charge (on any action, not just compensation claims) starts and eliminate the existing requirement that employees must act diligently in determining whether they have been discriminated against. Right now, S.181, only addresses the effect of the Ledbetter decision.
How would these changes affect Tennessee employers? Depending on what is passed, they might not notice much of a change at all. A few years ago, the Tennessee Supreme Court held employees could sue for present and past damages so long as the employee can show they are presently being paid less than their peers and the reason for the difference is prohibited (the THRA, of course, prohibits much the same things as Title VII, the ADEA and ADA). Tennessee law thus, in this way, goes further than what Congress would authorize.
How can an employer protect themselves from suits over decisions made years earlier? One change was sanctioned by a 2004 Sixth Circuit decision which held that employers and employees may contract for shorter (or longer) time periods in which to sue than allowed by law. An employer that does this, should observe several precautions designed to increase the chance the clause will hold up in court:
Most of Congress wants to change two aspects of compensation discrimination law. First, they want to overturn the perceived effect of Ledbetter v Goodyear Tire & Rubber Co. Inc. which had held an employee's claim was filed too late because she could not (and made no effort to) show that a discriminatory decision was made within the limitations period. Second, Congress would amend the Equal Pay Act to change what an employer must show to prove a factor other that sex was the reason for a pay difference. This bill would also increase the damages and penalties an employee would receive if pay discrimination is proven.
I could write much on how Congress perceives inequities. There are significant faults in the rationale members of Congress and the supporters of this legislation give as the necessity for these bills (especially the part that would change the effect of Ledbetter). This is not really the place for having an extended discussion of those faults.
The better and more interesting discussion would be whether the changes Congress seems poised to make will help in solving the problems they have identified. Study after study, as reported in the media and the Internet, proclaim that women are paid less than men for the same work. (So says a GAO Report from 2004 - reporting from 1983 to 2000, women earned 21 percent less, a figure the GAO said was diminishing. The worst "studies" are those, such as one reported last year in Crane's which draws conclusions based upon whether people perceive themselves to be underpaid.) Broadly defined statistics that cover multiple jobs in different companies are unreliable in forecasting whether individual employers permit pay disparities. Since I have no empirical basis for disputing that (and am not so naive as to think that all pay disparities everywhere have been eradicated), I take it as a given for purposes of the present discussion.
Pending now are two bills (HR 11 and S.181). HR 11 passed the House on January 9, 2009. It consists of two parts (each part responds to one of the concerns listed previously).
Part I would change the outcome in Ledbetter and let employees sue for pay discrimination (if the difference is caused by sex, race, age, disability, national origin or religion) for as long as the disparity in pay continues. Backpay would, however, be capped at two years prior to the filing of the charge (a cap that currently exists). So, where Ledbetter held a discriminatory pay decision made decades earlier could not be a timely discriminatory act, the intent of this legislation would be to let the lower paid employee sue and recover for a few years of the disparity so long as the improperly motivated pay disparity continues to exist. The employee could also recover other damages as already allowed by Title VII and the ADA (but the ADEA does not authorize compensatory or punitive damages).
The Senate will probably vote on its bill (S.181) as early as Wednesday, January 21, 2009, though several Republican senators (including both from Tennessee) have sponsored an amendment which, to my thinking, could be worse, as it would create uncertainty as to when the time for filing a charge (on any action, not just compensation claims) starts and eliminate the existing requirement that employees must act diligently in determining whether they have been discriminated against. Right now, S.181, only addresses the effect of the Ledbetter decision.
How would these changes affect Tennessee employers? Depending on what is passed, they might not notice much of a change at all. A few years ago, the Tennessee Supreme Court held employees could sue for present and past damages so long as the employee can show they are presently being paid less than their peers and the reason for the difference is prohibited (the THRA, of course, prohibits much the same things as Title VII, the ADEA and ADA). Tennessee law thus, in this way, goes further than what Congress would authorize.
How can an employer protect themselves from suits over decisions made years earlier? One change was sanctioned by a 2004 Sixth Circuit decision which held that employers and employees may contract for shorter (or longer) time periods in which to sue than allowed by law. An employer that does this, should observe several precautions designed to increase the chance the clause will hold up in court:
- Have the employee sign the document or application in which the limitation exists. The Sixth Circuit decision and other similar decisions are based upon principles of contract law, and the failure of the employee to sign may result in a missing element of a contract -- mutuality or mutual assent (that is, a signature showing agreement to the terms).
- Make sure the time period to which the limitation has been reduced is reasonable. It is strongly suggested that any reduced limitations period not be less than six months in the employment context.
- Do not attempt to limit an employee’s right to file suit against the company, file a charge of discrimination with any federal or state agency, or to limit the type of actions that an employee may bring. Prospective waivers of substantive rights are not only frowned upon they are invalid. Worse still, you could end up being sued by the EEOC which takes the position that Title VII (ADEA, ADA etc.) is violated if an employer merely presents an employee with a contract that limits the employee's ability to participate in commission proceedings, though on this last point, it lost the lawsuit because the employee never signed and the employer never enforced the document in question.
These are not the only changes an employer can (and should) make. Limiting the time for suit only goes so far. In coming posts, I will address other practices an employer can adopt that would help identify and eliminate unexplainable pay disparities that might lead to a lawsuit.
For procedural reasons, even if the Senate adopts S.181, as it presently exists, the differences with HR.11 would have to be resolved before any bill could be presented to the President. Those differences (right now) are primarily how the "Fair Pay Act" (Part II of HR.11) would amend the Equal Pay Act. In the next post, I'll focus on those changes, though if Congress adopts one of the Republican Amendments, I would necessarily devote the post to explaining more about that.
For procedural reasons, even if the Senate adopts S.181, as it presently exists, the differences with HR.11 would have to be resolved before any bill could be presented to the President. Those differences (right now) are primarily how the "Fair Pay Act" (Part II of HR.11) would amend the Equal Pay Act. In the next post, I'll focus on those changes, though if Congress adopts one of the Republican Amendments, I would necessarily devote the post to explaining more about that.
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