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Supreme Court Clarifies Title VII Limitations Period for Discriminatory Pay Claims

On May 29, 2007, employers earned a major victory when the United States Supreme Court rejected as untimely a discriminatory pay claim where the alleged discriminatory decision occurred prior to Title VII’s 180-day limitations period, even though the effects of that decision continued during the limitations period. In Ledbetter v. Goodyear Tire & Rubber Co., Inc., No. 05-1074, 550 U.S. __, 127 S. Ct. 2162, 2007 U.S. LEXIS 6295 (2007), by a narrow 5-4 vote, the Court reasoned that a pay-setting decision is a “discrete act,” and, therefore, the 180-day period (or 300 days in many states) for filing a charge with the Equal Employment Opportunity Commission (“EEOC”) begins when that decision happens rather than at the time of the issuance of each paycheck during the limitations period. The Court thereby rejected a contrary rule proposed by the plaintiff under the Court’s prior ruling in Bazemore v. Friday, 478 U.S. 385 (1986). In that case, the Court found that an employer violated Title VII and triggered a new charging period where the employer used a pay system that was intentionally discriminatory on its face and issued paychecks during the limitations period using that intentionally discriminatory pay system.

In Ledbetter, the Court resolved a split in the circuit courts of appeals that had developed regarding the applicability of Bazemore to cases predicated on pay decisions made and communicated to the complainant prior to the limitations period, but where pay checks affected by those decisions were delivered during the limitations period. Compare Goodyear Tire & Rubber Company v. Ledbetter, 421 F.3d 1169 (11th Cir. 2005) (claim based on pre-limitations pay decision time barred) aff’d No. 05-1074, 550 U.S. __, 127 S. Ct. 2162 (2007) with Forsyth v. Federation Employment & Guidance Serv., 409 F.3d 565, 573 (2d Cir. 2005) (claim based on pre-limitations pay decision not time barred); Shea v. Rice, 409 F.3d 448 (D.C. Cir. 2005) (same). Accordingly, Ledbetter has reversed the governing rule in a number of circuits and district courts across the country, and has narrowed the availability or scope of relief available to Title VII plaintiffs.

In this article, we analyze the Court’s Ledbetter decision. We also describe the legislative activities that already have begun in an effort by some members of Congress to reverse Ledbetter.

Procedural Background

Lily Ledbetter worked as a salaried employee for Goodyear from 1979 through 1998. During most of Ledbetter’s time at Goodyear, Goodyear relied upon supervisors’ performance evaluations in determining whether to grant or deny pay increases. In 1998, Ledbetter filed a charge of discrimination with the EEOC claiming sex discrimination and later that year filed suit in the United States District Court asserting pay discrimination claims under Title VII and the Equal Pay Act. Ledbetter argued that several of her supervisors had given her poor evaluations because of her sex, and, as a result, Goodyear did not increase her pay as it would have if her supervisors had evaluated her fairly. Goodyear denied Ledbetter’s allegations and countered that the evaluations at issue had been nondiscriminatory. After filing suit, Ledbetter dropped her Equal Pay Act claim, and chose to advance her Title VII claim only. At trial, the jury found for Ledbetter and awarded her backpay plus punitive damages of more than $3 million.

Goodyear appealed this decision to the Eleventh Circuit Court of Appeals, contending that Ledbetter’s claims with respect to discriminatory decisions made before the 180-day limitations period were time barred, and that she asserted no claim based on discrimination in pay during the limitations period. The Court of Appeals agreed with Goodyear and reversed. The Court held that a Title VII pay discrimination claim cannot be based on events that occurred before the charge-filing period. The Court noted that Ledbetter had failed to adduce any evidence that Goodyear had acted with discriminatory intent during the 1997 or 1998 pay periods, which were the only two pay periods that fell within the 180-day charge-filing period.

After the Supreme Court granted her petition for a writ of certiorari, Ledbetter argued that she received disparate pay during the applicable 180-day period that resulted from intentional discrimination that occurred before the limitations period. Id. at *10-11.

Supreme Court’s Analysis

The Supreme Court affirmed the decision of the Eleventh Circuit Court of Appeals and held that Ledbetter’s claim was untimely because the continuing effects of past discrimination do not restart the clock for filing an EEOC charge. Writing for the majority, Justice Alito explained that the time for filing a charge of discrimination with the EEOC for any discrete act of discrimination (such as termination, failure to hire, failure to promote, and denial of transfer) begins at the time the discriminatory act occurs. Id. at *7 (citing Nat’l R.R. Passenger Corp. v. Morgan, 536 U.S. 101, 114 (2002)). The Court determined that a “pay-setting decision is a discrete act that occurs at a particular point in time,” and, as a result, it rejected Ledbetter’s contention that pay discrimination cases differ from other types of discrimination and should be governed by different rules. Id.

Pay-Setting Decisions Are Discrete Acts

Drawing from its prior decisions, the Court found support for the idea that current effects alone cannot “breathe life into prior, uncharged discrimination.” Id. at *14-21 (referencing United Airlines v. Evans, 431 U.S. 553, 558 (1977); Delaware State College v. Ricks, 449 U.S. 250 (1980); Lorance v. AT&T Technologies, Inc., 490 U.S. 900, 907-08 (1989); and Morgan, 536 U.S. at 114). Following these decisions, the Court held that the EEOC charging period is triggered when an unlawful “employment practice” takes place, and a new violation does not occur and a new charging period does not commence upon the occurrence of “subsequent non-discriminatory acts that entail adverse effects resulting from past discrimination.” Id. at *19.

The Court found that Ledbetter’s argument - that paychecks she received during the charge filing period and the 1998 raise each violated Title VII and triggered a new charging period - could not be reconciled with its decisions in Evans, Ricks, Lorance, and Morgan. Id. The Court rejected Ledbetter’s argument that Goodyear’s conduct during the charging period gave present effects to past discrimination and instead found that Ledbetter should have filed an EEOC charge within 180 days after each allegedly discriminatory pay decision was made and communicated to her. Id. at *20. She did not do so, and the paychecks that were issued to her during the 180-day period prior to filing her charge did not help her overcome that failure. Id.

The Court next explained that Ledbetter’s argument attempted to circumvent the need to prove discriminatory intent during the charging period by attempting to rely on intent associated with other people made at other times. Id. at *21. The Court described Ledbetter’s argument as “unsound” and found that shifting the intent from one act to a later act that was not performed with bias or discriminatory motive would impose liability in a disparate treatment case without establishing the requisite intent. Id.

The Court observed that the standard proposed by Ledbetter, if adopted by the Court, would not only eliminate the defining element of her disparate treatment claim - intent - it further would distort Title VII’s “integrated, multistep enforcement procedure” as set forth by Congress. Id. at *22. The Court reiterated that it had refused to extend or lessen any deadlines or limitations periods Congress has implemented, and the “EEOC filing deadline protect[s] employers from the burden of defending claims arising from employment decisions that are long past.” Id. at *23 (citing Ricks at 256-57). The Supreme Court further acknowledged that the 180-day charge-filing period is short, but by choosing short deadlines, Congress intended to encourage the prompt processing of all charges of employment discrimination. Id. The Court further reasoned that Title VII’s short filing deadline reflects Congress’ strong preference for the prompt resolution of employment discrimination allegations through voluntary conciliation and cooperation. Id.

Justice Alito stated that in disparate treatment cases based on pay discrimination, the employee’s pay and the related pay-setting decisions will almost always be documented and will not normally even be in dispute. Id. at *24. Conversely, “the employer’s intent is almost always disputed, and evidence relating to intent may fade quickly with time.” Id. The key issue in a case involving a long-past performance evaluation will often be whether the evaluation was so far off the mark that a sufficient inference of discriminatory intent can be drawn. Id. This determination is often subtle, and a lapse in time may diminish the ability of the parties and the fact finder to reconstruct what actually happened. Id.

Strict Interpretation of Bazemore

The Court next addressed Ledbetter’s arguments relying on a broad interpretation of Bazemore. Ledbetter argued that in Bazemore, the Supreme Court adopted a “paycheck accrual rule” under which every paycheck received, even if unaccompanied by discriminatory intent, triggers a new EEOC charging period during which the complainant may challenge any prior discriminatory conduct that impacted the amount of that particular paycheck - regardless of how long ago the discrimination occurred. Id. at *28. In sum, Ledbetter contended that Bazemore stood for the proposition that the current effects of past discriminatory pay practices allowed for the filing of a timely charge.

The Supreme Court rejected Ledbetter’s interpretation of Bazemore as being “unsound.” Id. While Bazemore stated that “[e]ach week’s paycheck that delivers less to a black than a similarly situated white is a wrong actionable under Title VII, regardless of the fact that this pattern was begun prior to the effective date of Title VII,” the Ledbetter Court clarified that the Bazemore decision was limited to those situations where an employer adopted a facially-discriminatory pay structure and intentionally retained that pay structure without remedying the discrimination. Id. at *28-30. Justice Alito further explained that in that situation, an employer who retains a facially-discriminatory pay structure can be regarded as intending to discriminate so long as that pay structure is used. Id. at *30. While Ledbetter attempted to argue that Bazemore allowed present effects of past discrimination to be actionable, the Court reasoned that her argument ignored the fact that Bazemore involved a present violation, as the employer’s pay system at issue was a mere continuation of an intentionally discriminatory pay structure in effect before Title VII’s enactment in 1965. Id. at *30-31. The Court reinforced its reasoning by relying on the Morgan decision, where it had explained, “[t]he existence of past acts and the employee’s prior knowledge of their occurrence . . . does not bar employees from filing charges about related discrete acts so long as the acts are independently discriminatory and charges addressing those acts are themselves timely filed.” Id. at *32 (citing Morgan, 536 U.S. at 113).

The Court further clarified that a new Title VII violation does not occur and a new charge filing period is not triggered when an employer issues paychecks pursuant to a system that is “facially nondiscriminatory and neutrally applied.” Id. at *34 (citing Lorance, 490 U.S. at 911). Ledbetter adduced no evidence that Goodyear adopted its performance-based pay system to discriminate on the basis of sex or that it later applied this pay system to her within the charging period with any discriminatory animus. Id.

The Dissent

Justice Ginsberg wrote a sharply-worded dissent attacking several arguments advanced by the majority. First, Justice Ginsburg argued that a pay-discrimination claim should be treated like a hostile work environment claim because of “cumulative effect of individual acts.” Id. at *53. Second, Justice Ginsburg explained that Ledbetter’s salary initially was in line with the salaries of men performing substantially the same work, but over time, her salary fell 15-40 percent behind her male counterparts after successive evaluations and percentage-based pay adjustments. Id. at *54. Justice Ginsburg reasoned that Ledbetter alleged and proved the “repetition of pay decisions undervaluing her work gave rise to the current discrimination of which she complained. Though competent acts fell outside the charge-filing period, with each new paycheck, Goodyear contributed incrementally to the accumulating harm.” Id.

Justice Ginsburg went on to explain that the realities of the workplace demonstrate why compensation claims do not fit within the category of singular discrete acts. Id. at *55. Unlike denials of promotions or transfers, which are known immediately and are generally public events known to co-workers, Justice Ginsburg stated that compensation decisions are often hidden from sight. Id. The dissent explained that it is not uncommon for management to decline to publish employee pay levels or for employees to keep their own salaries private. Id. Justice Ginsburg found that this problem is exacerbated when the pay disparity arises “not because the female employee is flatly denied a raise but because male counterparts are given larger raises.” Id. at *56. Justice Ginsburg further explained that the female employee who received a pay increase is unlikely to discern that she has experienced an adverse employment decision, and she may have no reason to suspect discrimination. Id.

Justice Ginsburg ended the dissent by noting that “[t]his [was] not the first time that the Court had ordered a cramped interpretation of Title VII, incompatible with [Title VII’s] broad remedial purpose. Once again, the ball is in Congress’ court. As in 1991, the Legislature may act to correct this Court’s parsimonious reading of Title VII.” Id. at *75-76 (citations omitted).

Legislative Response

Almost immediately after the Supreme Court rendered the Ledbetter decision, Congress began drafting legislation aimed at overturning (or at least altering) the impact of the Ledbetter decision. On June 12, 2007, the Education and Labor Committee of the United States House of Representatives held a hearing on the Ledbetter decision and Lily Ledbetter, herself, testified during that hearing. See http://www.edworkforce.house.gov (describing hearing and Ledbetter testimony). The Education and Labor Committee announced that it was considering legislation, to be introduced by Chairman George Miller, to reverse the Supreme Court’s decision by making clear workers’ rights under federal employment discrimination law. Id. See Press Release, Committee on Education and Labor, House of Representatives, “Congress Must Act to Rectify Supreme Court Decision on Pay Discrimination, Witnesses Tell Labor Committee” (June 12, 2007) (available at: http://www.house.gov/apps/list/speech/edlabor_dem/RelJune12Ledbetter.html).

On June 27, 2007, less than one month after the Supreme Court rendered its opinion in Ledbetter, the House Education and Labor Committee passed proposed legislation - the Lily Ledbetter Fair Pay Act (H.R. 2831) - by a slim 25-20 vote. See http://www.edworkforce.house.gov (describing proposed legislation and vote). The proposed legislation would impact Title VII, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the Rehabilitation Act, and, if passed, it would clarify that:

every paycheck or other compensation resulting, in whole or in part, from an earlier discriminatory pay decision constitutes a violation of the Civil Rights Act. As long as workers file their charges within 180 days of a discriminatory paycheck, their charges would be considered timely. The legislation would also clarify that, once a worker files a charge, he or she needs not keep filing new charges with each new paycheck.

See Press Release, Committee on Education and Labor, House of Representatives, “House Labor Committee Passes Lilly Ledbetter Fair Pay Act” (June 27, 2007) (available at: http://www.house.gov/apps/list/speech/edlabor_dem/rel062707ledbetter.html ); see also House Committee Approves “Ledbetter” Bill Intended to Overturn Supreme Court Ruling, BNA Daily Labor Report, June 29, 2007, at A-1.

The debate surrounding the proposed legislation has sparked strong statements and led to opposing positions from many members of the Committee on Education and Labor. Rep. George Miller (D-Calif.), the Committee Chairman, stated that “[u]nless Congress acts, employers who have made discriminatory pay decisions more than 180 days ago will be allowed to lawfully continue discriminating against employees with every paycheck without any legal consequence.” See BNA Daily Labor Report, June 29, 2007, at A-1. Rep. Miller further explained that “[d]iscrimination occurs both when an employer decides to discriminate and then when the employer actually discriminates - by example, paying you less because you are a woman, or African-American, or older than the other employees.” Id.

Conversely, Rep. Howard P. “Buck” McKeon (R.-Calif.) criticized the proposed legislation as being “ill-considered and hastily written,” and he further rejected the view that the bill was a narrow response to the Ledbetter decision. Id. Rep. McKeon stated that the proposed legislation “guts the statute of limitations and [EEOC] charging requirements contained in current law” and “effectively would allow an employee to bring a claim against an employer decades after the alleged initial act of discrimination occurred.” Id. He further argued that “such a loophole conceivably could allow a retiree to seek damages against a company now led by executives who had nothing to do with the initial act of alleged discrimination.” Id.

The decision in Ledbetter continues to be a topic that generates strong opinions both in the courts and in Congress. While the Lily Ledbetter Fair Pay Act has been passed in the Committee, only time will tell whether it is enacted into law.

Legalese