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EMPLOYMENT LAW 5/31/07

Divided Supreme Court rules that effects of past disparate pay not actionable

The US Supreme Court, in a 5-4 split, held that employees cannot bring Title VII disparate pay claims that allege discrimination occurring outside the 180-day statutory limitations period, even when a paycheck is received during that same period. "Treating pay discrimination as a discrete act, limited to each particular pay-setting decision," the Court explained that the unlawful employment action at issue is the employer's decision regarding the pay differential, not the subsequent issuance of paychecks reflecting that differential. In so holding, the Court emphasized the distinction between past acts of disparate pay (which occur when employers make adverse pay decisions) and the present effects of those acts (which are found in employees" paychecks), when concluding that the Petitioner, Lilly Ledbetter, should have challenged Goodyear's alleged intentionally discriminatory pay decision within 180 days of the decision itself. (Ledbetter v Goodyear Tire & Rubber Co, Inc, USSCt, 89 EPD 42,827)

In its May 29 decision, the Court split with Justice Alito delivering the opinion of the Court, in which Chief Justice Roberts and Justices Scalia, Kennedy and Thomas joined. Justice Ginsberg, who read a summary of her dissent from the bench, filed the dissenting opinion in which Justices Stevens, Souter and Breyer joined. In its holding, the Supreme Court declined to address whether Title VII suits were amenable to a "discovery rule" tolling the limitations period until employees discover their employer's unlawful pay decision.

Background. Ledbetter, a 19-year Goodyear employee, sought review of an Eleventh Circuit Court of Appeals decision (88 EPD 42,411) that reversed her $360,000 jury award. She alleged that Goodyear paid her an "unequal salary because of her sex," giving her merit increases between fifteen and forty percent lower than her male counterparts. In its decision, the circuit court held that Ledbetter may only challenge pay decisions within the applicable limitations period making up her EEOC charge. She could not go back and challenge pay decisions that occurred during her 19-year career. For its holding, the Eleventh Circuit relied on the Supreme Court's decision in National RR Passenger Corp v Morgan (82 EPD 41,042). The circuit court explained that unlike hostile work environment claims, which encompass more than a single unlawful employment practice, if an employee is "denied a raise, given a pay cut, or hired at a deflated pay grade," like a discharge, nonpromotion, denial of transfer or refusal to hire, each allegedly discriminatory act is independently actionable it is merely the ramifications of those acts (i.e., the paycheck) that cumulate over time. Reviewing then, what Ledbetter could present as evidence of disparate pay, the Eleventh Circuit found that she failed to rebut as pretext her employer's proffered, nondiscriminatory reason for failing to provide her with a raise poor job performance.

Ledbetter filed a petition for a writ of certiorari but did not seek review of the Eleventh Circuit's holding regarding the sufficiency of her evidence, instead she sought review of: "[w]hether and under what circumstances a plaintiff may bring an action under Title VII of the Civil Rights Act of 1964 alleging illegal pay discrimination when the disparate pay is received during the statutory limitations period, but is the result of intentionally discriminatory pay decisions that occurred outside the limitations period." The Court granted certiorari in light of disagreement among the circuit courts as to the proper application of the limitations period in Title VII disparate pay cases.

Majority decision. The Supreme Court affirmed the Eleventh Circuit's holding, concluding that "the later effects of past discrimination d[id] not restart the clock for filing an EEOC charge." The Court held the EEOC charge period is triggered when a discrete unlawful practice takes place. "A new violation does not occur, and a new charging period does not commence, upon the occurrence of subsequent nondiscriminatory acts that entail adverse effects resulting from the past discrimination." But if an employer engages in a series of new, separately actionable intentionally discriminatory acts, "then a fresh violation takes place when each act is committed."

Ledbetter's pay discrimination claim was time barred with respect to all pay decisions made prior to the 180 days before she filed her March 1998 EEOC questionnaire, held the Court. Because she did not timely file a charge with the EEOC over those earlier pay decisions, Ledbetter's Title VII action was based solely on two specific timely filed adverse action allegations: (1) paychecks that were issued to her during the EEOC filing period (the 180-day period preceding the filing of her EEOC questionnaire), each of which she contended was a separate act of discrimination; and (2) Goodyear's 1998 decision denying her a raise, which she argued was "unlawful because it carried forward intentionally discriminatory disparities from prior years."

As to those adverse decisions, Ledbetter failed to show that the relevant Goodyear decisionmakers acted with actual discriminatory intent either when they issued her checks during the EEOC charge period or when they denied her a raise in 1998. She simply contended that the paychecks were unlawful because they would have been larger if she had been evaluated "in a nondiscriminatory manner prior to the EEOC charge period." In so arguing, Ledbetter sought to give present effect to "prior, uncharged acts of discrimination," explained the Court.

Instead, the Court found that although the statutory time period is "short by any measure" Ledbetter should have filed an EEOC charge within 180 days after each allegedly discriminatory pay decision was made and communicated to her. Her attempt to shift forward the intent associated with prior discriminatory acts to the 1998 pay decision was unsound, because it shifted intent away from the act that "consummated the discriminatory employment practice to a later act not performed with bias or discriminatory motive, imposing liability in the absence of the requisite intent." Nothing in Title VII supports treating the intent element of Ledbetter's disparate treatment claim any differently from the employment practice element of the claim, explained the Court. Because she made no showing of discriminatory intent as to those two pay decisions except for her rejected claim that they served to extend the alleged prior discrimination Ledbetter's disparate pay claim failed.

Bazemore consistent with Court's progeny. The High Court also held that its decision in Bazemore v Friday (40 EPD 36,199), which allowed African-American claimants to sue for present-day pay differentials based on pre-1965 segregated pay scales, was entirely consistent with its line of cases ending with Morgan. Bazemore's rule is that an employer violates Title VII and triggers a new EEOC charging period whenever that employer issues paychecks using a discriminatory pay structure. It was not, as Ledbetter contends, a "paycheck accrual rule" under which "each paycheck, even if not accompanied by discriminatory intent, triggers a new EEOC charging period during which the complainant may properly challenge any prior discriminatory conduct that impacted that paycheck's amount, no matter how long ago the discrimination occurred." Because Ledbetter failed to provide evidence that Goodyear initially adopted its performance-based pay system in order to discriminate based on sex, or that it later applied the system to her within the charging period with discriminatory animus, Bazemore could not help her.

Dissent. Reading part of her dissent from the bench, Justice Ginsberg believed that disparate pay cases must be analyzed differently. In Ginsberg's view: "each payment of a wage or salary infected by sex-based discrimination constitutes an unlawful employment practice; prior decisions, outside the 180-day charge-filing period, are not themselves actionable, but they are relevant in determining the lawfulness of conduct within the period." Disparate pay claims were more analogous to hostile work environment claims, which built up in small increments over time. Pay disparities are significantly different from the other Morgan adverse actions "such as termination, failure to promote. . .or refusal to hire,' all of which involved fully communicated discrete acts that are "easy to identify" as discriminatory, she wrote. Moreover, Ginsberg noted that eight circuit courts "in tune with the realities of wage discrimination" have applied Bazemore's holding that "paychecks perpetuating past discrimination. . .are actionable not simply because they are related to a decision made outside the charge-filing period, but because they discriminate anew each time they issue."

She further wrote that "allowing employees to challenge discrimination "that extend[s] over long periods of time. . .does not leave employers defenseless" against unreasonable or prejudicial delay. Disadvantaged employers can use various defenses such as waiver, estoppel, and equitable tolling "to allow us to honor Title VII's remedial purpose without negating the particular purpose of the filing requirement, to give prompt notice to the employer."

Critical of the majority's view, Ginsberg wrote that "Congress never intended to immunize forever discriminatory pay differentials unchallenged within 180 days of their adoption." In addition, she stated that the majority view could likely impede many racial and other minorities from gaining similar relief for past discrimination. "The Court's approbation ofthese consequences is totally at odds with the robust protection against workplace discrimination," wrote Ginsberg, explaining that Congress never intended to immunize forever discriminatory pay differentials unchallenged within 180 days of their adoption."

"Once again, the ball is in Congress" court, concluded Ginsberg. "As in 1991, the Legislature may act to correct this Court's parsimonious reading of Title VII."

In its decision, however, the Court left open the question of whether Title VII suits are "amenable to a discovery rule" that would toll the limitations period until employees learn or should have learned of the alleged pay disparity. Such a rule could potentially lessen the affects of the Supreme Court's decision.

For more information on this and other topics, consult CCH Employment Practices Guide or CCH Labor Relations.

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