Last Thursday, President Barack Obama signed his first bill into law, the Lilly Ledbetter Fair Pay Act. This new law loosens the restrictions under which pay discrimination lawsuits can be filed.
The Ledbetter Act is named after an Alabama woman that sued Goodyear – claiming she was paid substantially less than men in similar positions over the course of her 19 year career at the company. A jury ruled in her favor but in 2007, a 5-4 Supreme Court decision tossed out her claim. The justices ruled that Ledbetter should have filed her lawsuit within 180 days of the first time the company paid her less than her peers.
The new law effectively restarts that 180-day clock after each paycheck a worker receives. Plus, workers will be able to sue for up to two years of back pay. “That’s a pretty nice window they get,” said Philadelphia-based employment law attorney Christine Bonavita.
Employment lawyers like Bonavita say now is a good time to re-examine compensation practices. “Being in compliance with the law may take some work and extra resources,” comments Cleveland employment attorney Keith Ashmus.
Both Bonavita and Ashmus recommend small businesses take the following steps to avert or better handle a discrimination lawsuit.
* Evaluate compensation figures, ranging from salaries, bonuses, merit raises, cost of living increases and benefits. Individuals with similar jobs and qualifications need to be paid at the same rate.
* Be able to clearly demonstrate any business reasons for differences in compensation.
* Train supervisors on what the law requires.
* Update company policies and handbooks to clearly state discriminatory pay practices are not
* Review insurance policies and make changes if necessary to ensure claims from ex-employees regarding events in the past are covered.
* Retain all payroll records, periodic performance reviews and any other documentation indefinitely.
Above all, documentation is the most important according to Bonavita, including correspondence between the employee and HR manager and owner. This can be invaluable in defending against a lawsuit.
Ashmus also suggests it may be safer to offer bonuses rather than merit raises since the 180-day rule does not apply to them.
And if it makes sense, an employee should be immediately notified of decisions to change their compensation and why. “Once they know, once they have the information, it’s a little harder for them to justify waiting 30 more years to file a lawsuit,” Ashmus says.
And, of course, that conversation should be documented.