Pay Discrimination – It Hurts More than Just Employees

Pamela Kingsley,

Lilly, a female supervisor at a Goodyear Tire and Rubber plant in Alabama from 1979 to 1998, held a position typically held by men. See Ledbetter v. The Goodyear Tire & Rubber Co., Inc., 550 U.S. 616, 643,127 S.Ct. 2162, 2178 (2007). Although at first her salary was in line with theirs, her pay later slipped in comparison — significantly.

Lilly complained, initially arguing before the EEOC that Goodyear had underpaid her because she was female. See 42 U.S.C. S 2000e-(a)(1) – it is unlawful for an employer “to discriminate against any individual with respect to [her] compensation … because of such individual’s … sex.” Then, a jury found for Lilly, and the trial court awarded her back pay, damages, counsel fees, and costs. The Eleventh Circuit Court of Appeals reversed, finding that Lilly had not been timely in making her claim. See Title VII, which provides that a charge of discrimination “shall be filed within [180] days after the alleged unlawful employment practice occurred.” 42 U.S.C. S 2000e-5(e)(1). It held the district court should have ruled for Goodyear as a matter of law. The U.S. Supreme Court accepted review, and ultimately agreed with the Court of Appeals in favor of Goodyear.

Noting that it had previously held the time for filing an EEOC charge of employment discrimination begins with the “[d]iscrete ac[t]” of discrimination, the Court went on to apply that concept to pay-setting decisions. Each year, when Lilly received her salary increase at substantially less than her male counterparts, it was “incumbent on [her] to file her charges.” Because she had not, she lost — in a 5-4 decision, with one vote making the difference.

The case is fact specific; as all are by the time they make it up the administrative and judicial ladders. The purpose of this article is to alert you to certain issues, so you can avoid the consequences even “winners” like Goodyear endure.

First, Title VII addresses unlawful employment practices. There are two categories for the actions.

There are “discrete acts” that are easy to identify as discriminatory. They include “termination, failure to promote, denial of transfer, or refusal to hire.” These occur the day of the act.

The second category, unlawful employment practices alleged in hostile work environment claims, is for recurring individual acts that are cumulative in impact. They involve repeated conduct over days or perhaps years. The persistence of the discriminatory conduct indicates management should have known of its existence and produces a cognizable harm.

The treatment of the two categories can, as in Lilly’s case, make all the difference. Claims for discrete acts must be filed with the EEOC within 180 days of occurrence. Claims falling under hostile work environment, category two, do not.

Lilly argued, and the dissenting four justices agreed, that she could assert a compensable claim for illegal pay discrimination as disparate pay had been received during the statutory limitations period as the result of intentionally discriminatory pay decisions that had occurred outside the limitations period. Because earlier decisions regarding pay ultimately meant she received less compensation (Goodyear had not made up the disparity, even when it started to apply like-kind increases), the continued impact on the amount of her pay placed her in the second category; not the first. Each paycheck implemented a prior decision.

Lilly argued that a Circuit Court had adopted a “paycheck accrual rule”: each paycheck, even if not accompanied by discriminatory intent, triggered a new EEOC charging period, no matter how long ago the discrimination had occurred.

The five prevailing justices drew a distinction and stuck to it:

[A] new Title VII violation does not occur and a new charging period is not triggered when an employer issues paychecks pursuant to a system that is “facially nondiscriminatory and neutrally applied.” (Citation omitted) The fact that precharging period discrimination adversely affects the calculation of a neutral factor (like seniority) that is used in determining future pay does not mean that each new paycheck constitutes a new violation and restarts the EEOC charging period. Ledbetter, 550 U.S. at 637, 127 S.Ct. at 2174.

One lesson derives from the fact the other four justices would have ruled differently. And, with slightly different facts, Goodyear would have being paying damages, attorneys fees, and costs. As it was, it likely paid hundreds of thousands of dollars for its own fees and costs.

Title VII provides just one of the avenues employees can pursue for pay discrimination. Lily might have prevailed under one of the others. Consider that fact together with the lessons taught here should your company treat employees differently based on sex or any other statutorily protected class.