Showing posts with label Lily Ledbetter. Show all posts
Showing posts with label Lily Ledbetter. Show all posts

Friday, January 23, 2009

Preparing for Fair Pay Legislation - Part 3

As this has made the national news and all the labor reports, I won't dwell again on the effect of S.181. I will simply amplify a few points some I made previously. S.181, officially titled the Lily Ledbetter Fair Pay Act of 2009 passed without amendments. That means several things.

Title II of HR 11, which would have changed the Equal Pay Act and dramtically affected pay setting decisions, was not voted on by the Senate. It wasn't even considered. (Don't assume that is the final word on this, however.) Before S.181 can be presented to the President (who has said he will sign it), the House must vote and approve S.181. Look for that to happen next week.

The Senate vote was pretty much along party lines with all Democrats present (Clinton having resigned without an appointed successor, Franken not being certified and Kennedy not being present) voting for and most Republicans, except for Hutchison, Snow and Murkoswski, voting against passage. Both Tennessee senators voted against passage.

I have already addressed the impact of S.181 (at least as it appeared in Title I of HR 11). It gives employees (not just females) the right to sue for discriminatory pay no matter when the actual pay setting decision was made. So long as one discriminatory pay setting decision was made that continues to affect an employee's compensation within the 300 day (as it is in Tennessee) limitation period for filing a charge, that pay setting decision can be challenged. As I said in a prior post, the employee's back pay recovery is limited to two years prior to the charge. But in theory (and the reality, as in Ledbetter's lawsuit) employers could be faced with defending pay decisions that are quite old and long since forgotten.

More importantly, the bill specifies that it "takes effect" on May 28, 2007, the day before the Supreme Court issued the Ledbetter decision and applies to claims pending on that date. (In Ledbetter's case (or any other person whose lawsuit was legally final) should she try to reopen it, that move raises very interesting constitutional problems.)

I should also mention one other point about S.181. It permits an employee to challege any "other practice" that causes discriminatory pay. In addition to the actual pay setting decision, if a performance appraisal has an effect on pay setting, the ratings on the appraisal could be challenged as well. The important point is that the phrase "other practice" doesn't actually mean any "other practice" can be challenged. In urging the Senate to reject an amendment that would strip the "other practice" language from S.181, Senator Mikulski (the floor sponsor of S.181) explained: "The bill specifically says that it is addressing ‘‘discrimination in compensation.’’ That limiting language means that it already only covers such claims—nothing more, nothing less."

I still intend to addres what employers can do, in light of S.181 (assuming it passes) and even if Title II of HR 11 were to pass, to help protect themselves from compensation discrimination claims (stale or otherwise). I will close this post, however, by quoting the no doubt, well-meant, but utterly naive statement by Senator Mikulski made in urging the Senate to reject an amendment by Senator Hutchison. "I say to the private and nonprofit sector: If you don’t want to be sued, don’t discriminate. That is the best way to go. If you don’t want to be sued, don’t discriminate."

If only it were so easy.

Wednesday, January 21, 2009

The Problem with Relying on Legislative History

I made a mistake. The last post (which has been corrected) cited to a statutory provision that did not exist. It was an honest mistake but one I shouldn't have made.

The "provision" was 42 U.S.C. 2000e(0). Section 2000e is the statute that defines terms for the equal employment provisions in Title VII of the Civil Rights Act of 1964. So while 2000e does exist, subsection (o) - which I said defined "business necessity" does not, at least not in any reputable source I examined.

I was misled by statements in the legislative history (House Report 110-783, page 29) from the 110th Congress about HR 1338, the Paycheck Fairness Act (as it was called by the 110th Congress). HR 1338 is pretty much the same as Title II of the Lily Ledbetter Fair Pay Act (HR 181) that I discussed in the prior post. The legislative history quotes "42 U.S.C. 2000e(o)(1)(B) as being added as part of the Civil Rights Act of 1991. While the 1991 amendment certainly codified the idea that business necessity was part of the disparate impact analysis, it did not define "business necessity." In my own defense, I have never seen a published legislative history cite to a statute that does not exist.

I don't normally try to address my mistakes but the fundamental point I think this makes is that the current spate of well-intentioned laws that are supposed to redress compensation discrimination are not well-planned. Citing to a statute that does not exist is only one example of this. Not defining "business necessity" is another. It is quite sloppy to use a phrase ("business necessity") that is now part of Title VII (which is in a different title of the U.S. Code) and its caselaw without at least referring to Title VII or its cases to define the phrase. And it is an especially poor practice if the drafters think it is OK to rely upon legislative history from a prior Congress. That will only lead to confusion and frustration in trying to apply the new statute. No one, certainly not the persons the statute is designed to help, benefits from confusion.

Don't misunderstand me. Something needs to be done to address the pay disparity between the sexes and the races. I don't doubt that exists at some jobs. I doubt, however, whether the poorly-drafted pending legislation will help in erradicating it without also causing more problems than it resolves. This problem deserves a better solution.

Sorry for the mistake. I was fooled once. Not again.

Preparing for Fair Pay – Part 2

This is the second part of a discussion about expected changes in the compensation discrimination laws. The first post addressed how Congress will likely change the statute of limitations under Title VII for compensation discrimination claims. This post will focus on proposed changes to the Equal Pay Act. Unlike the statute of limitations legislation, these changes are not part of the Senate bill that is expected to be voted on this Wednesday (Jan. 21, 2009). It is part of the bill the House passed and sent to the Senate. Obviously, the final vote and conference, we won't know what, if anything, will be passed.

For these reasons, I will refer only to the House bill (HR 11).Part II of HR 11 would change the Equal Pay Act ("EPA"), a 45 year-old statute which regulates sex-discrimination in compensation. The Equal Pay Act was passed in 1963, a year before the Civil Rights Act of 1964 (which included what we now call "Title VII"). Because there was no then-existing provision, the EPA was added to and became part of the Fair Labor Standards Act ("FLSA") and the damages available for violations of the FLSA (lost backpay and liquidated damages) have been adopted to redress EPA violations.

To understand the changes HR 11 would make, understand how the law current works as it applies to Tennessee employers (so bear with me while I quote passages from court decisions). Under the EPA, an employee must demonstrate that an employer pays "different wages to employees of opposite sexes 'for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.'" EEOC v. Romeo Cmty. Schs., 976 F.2d 985, 987 (6th Cir. 1992). The job functions of two individuals need not be identical to be considered "equal work," Beck-Wilson v. Principi, 441 F.3d 353, 359 (6th Cir. 2006), there need only be a "substantial equality of skill, effort, responsibility, and working conditions." Odomes v. Nucare, Inc., 653 F.2d 246, 250 (6th Cir. 1981)).

If an employee proves equal jobs and a pay difference (more on that in a later post), the employer must prove that the difference is justified by one of four affirmative defenses: (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; or (4) any factor other than sex. The focus of the pending legislation is on the fourth defense so we can ignore the first three, for now. As the Sixth Circuit interprets it, the final defense "does not include literally any other factor, but a factor that, at a minimum, was adopted for a legitimate business reason." EEOC v. J.C. Penney Co., Inc., 843 F.2d 249, 253 (6th Cir. 1988). Much could be written about how the "legitimate business reason" came to be a requirement, but since one court has addressed this, I won't go into it further.

The beef Congress has with the fourth defense is that the way some courts (including the one linked to above) have interpreted it. These courts hold that the "'factors other than sex' need not be business-related or even related to the particular position in question" (at least according to what was said in legislative history from a prior Congress). This factor should, the same legislative history says, "be job-related, not derived or based upon a sex-based differential, and consistent with business necessity." The evil identified in the legislative history is when some court decisions interpret "any other factor other than sex" as letting employers base starting salaries on "market forces." That is bad, Congress concludes, because the "market" historically underpays females.

Market forces, the criticized decisions say, legally justifies a pay difference such as when employers hire a person into a job paying that person $X.XX whereas it paid (at some point) a person of the opposite sex $Y.YY (Y being less than X in this example). This perpetuates lower pay for females, concludes Congress, because: "While market forces may be a legitimate basis for determining pay, market forces tainted with sex discrimination are not."

So, to change the effect of these decisions, the legislation passed by the house would redefine the "any other factor other than sex" to apply "only if the employer demonstrates that such factor: (i) is not based upon or derived from a sex-based differential in compensation; (ii) is job-related with respect to the position in question; and (iii) is consistent with business necessity. Such defense shall not apply where the employee demonstrates that an alternative employment practice exists that would serve the same business purpose without producing such differential and that the employer has refused to adopt such alternative practice."

This change would not only adopt the "legitimate business reason" already imposed on Tennessee employers by the Sixth Circuit, it would require employers to go further and show the factor is "consistent with business necessity." This is very different from the "legitimate non-discriminatory business reason" employers are used to in the typical discrimination claim. It refers to a "business necessity" apparently meaning to have this phrase interpreted as it is used Title VII. To be sure, the legislative history from the prior Congress' thought "business necessity" meant that the practice (or factor) bears "a significant relationship to a business objective of the employer." The phrase, however, is not defined in the statute (or proposed statute) and the Supreme Court has not consistently defined the term (saying it meant "related to job performance" in one case and that it must be "necessary to safe and efficient job performance" in another).

So, far from simply adopting the Sixth Circuit standard, the pending bill would force employers to re-evaluate every factor used in pay setting or pay increase decisions. To give an example of the kind of concerns this would raise, look at a decision criticized by the legislative history. There, the employer paid males higher wages because they worked in the more profitable men's clothing department. The court held this legitimate, a decision criticized because "the products sold by the women were of lesser quality and cost less than the goods sold in the men's department." So, any factor, even a neutral one, that can be identified as causing – even in part - a sex-based pay difference will need to be examined to ensure it will not lead to EPA liability. Several suggestions on how to do this will be addressed in later posts.

The EPA is sort of a statute lost in the weeds of other, more "popular" discrimination statutes. To some, the EPA serves a different purpose from Title VII because the EPA does not require a showing of discriminatory intent. In practice, however (at least around here), courts make no meaningful distinctions between Title VII and EPA claims and Title VII already prohibits "unintentional" discrimination (disparate impact). Given that Title VII already prohibits sex-based disparate impacts including those affecting compensation, a legitimate argument could be made that the EPA even as amended merely duplicates existing statutes and should be repealed to eliminate confusion for both employees and employers. That would be, of course, politically inopportune to say the least so don't count on it happening.

The next post will focus on other changes HR 11 would make to EPA claims. Those changes are designed to make EPA claims much more financially attractive to those who want to bring a lawsuit over perceived pay differences.

Sunday, January 18, 2009

Preparing for Fair Pay Legislation - Part 1

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:
  • 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.