A relatively new law that all but eliminates the statute of limitations on equal pay lawsuits for women brings yet more employment law concerns administrators need to be aware of.
It’s the Lilly Ledbetter Fair Pay Act.
Employers can expect an upswing in claims that their female employees are underpaid, says Denise Murphy, an employment law attorney with Rubin and Rudman in Boston.
And not always without good reason, she notes. Recent statistics show that women make from 73 cents to 77 cents on the dollar compared to what men make, even when they have the same job title, responsibilities, education, and experience.
180 days from the last paycheck
The new law came as an amendment to the Civil Rights Act of 1964.
Previously, an employee had 180 days after the first act of unfair pay to file an equal-pay lawsuit, though some states extended that to 300 days.
But whatever the time frame, after a certain number of days “women were out of luck,” Murphy says. If a female employee found out that she had been getting less pay than her male peers for the past two years, she could not file a complaint. It was too late.
The Lilly Ledbetter law changed that. Under its provisions, the statute of limitations begins on the date of the most recent discriminatory paycheck – not on the first.
And that gives a woman 180 (or 300) days after she finds out she’s being underpaid to file a suit.
2 years back pay multiplied by ???
The damages in fair pay claims are significant. The employee can collect up to two years of back pay plus legal fees. So if Ms. Employee was paid $40,000 a year to do the same job Mr. Employee was doing for $60,000, the damages could come to two years at $20,000 each, or $40,000.
But the real damages happen when the pay challenge is made by a group, perhaps all the women in a large accounting department. There, the damages are multiplied by the number of women affected.
What about the next employee?
That applies whether the woman and man are working at the same time or not, Murphy says.
She gives the example of terminating Employee Male who makes $60,000 and replacing him with Employee Female who has the same qualifications at $40,000.
Unless the employer can show a strong, legitimate business reason for the lower pay, perhaps that the business structure has changed, that’s discrimination. The employer “hired a woman knowing she was cheaper.”
The law also applies to insurance benefits, vacation time, and retirement contributions. If the benefits package “only allows the boys in,” it’s discriminatory and subject to the law.
Here had better be a reason
To keep the firm safe from fair pay claims, Murphy’s advice is to audit the pay scales of the male and female employees in similar jobs.
For example, if there are two accounts payable clerks and the man makes a higher salary, see if there a legitimate business reason for the difference, and if there is, “document it and explain why there’s a disparity,” perhaps that Employee Male has X years’ more experience and produces a Y% greater amount of work than Employee Female.
And a word of caution: put the documentation in a separate file, not in the personnel file of either of the employees.
The reason is if an employer puts anything in an employee’s file “that in any way, shape, or form shows some type of employment action,” the employer has to tell the employee about it within 10 days, and doing that “could incite litigation needlessly.”
How to sidestep a violation
What if there’s a violation and a woman’s lower salary is, in fact, discriminatory?
One remedy is simply to admit the mistake, give the woman two years’ of back pay, and raise her salary to whatever the man is getting. That at least avoids the legal fees of defending a suit, because now the damages are paid and there’s nothing more to claim.
Or the firm could raise the woman’s salary and also give her a bonus and hope she doesn’t find out there was a pay difference to begin with.
“That stops the bleeding, because the pay will be fair from that day forward.”
It can also ward off a suit, because the statute of limitations starts on the date of the most recent unfair paycheck, and if 180 (or 300) days pass after that check, the employee no longer has a claim.
Waiver? No
Another question is whether the office should offer the woman a bonus in exchange for an agreement not to sue for the back pay.
And the answer, Murphy says, is no. EEOC rights cannot be waived. The EEOC can still come in and investigate and require that the office give the back pay.
What’s more, asking for a waiver will only alert the woman that the office is trying to avoid having to pay what it owes her.
Murphy’s final recommendation: be careful of retaliation claims.
Don’t take any adverse employment action against an employee who has claimed back pay unless it is both justified and documented.