Supreme Court Limits Employees' Equal Pay Claims

Mary Elizabeth Davis

On May 29, 2007, the U.S. Supreme Court made it significantly easier for employers to defend against Title VII workplace discrimination claims based on past salary and raise decisions.  In a 5 to 4 decision in the case of Leadbetter v. Goodyear Tire and Rubber Co., the Court found that employees claiming they received disparate treatment based on gender or race must do so within 180 days (300 for most Virginia employees) of the original discriminatory action, not within 180 days of their last paycheck.  Title VII of the Civil Rights Act prohibits discriminatory pay practices on the basis of sex.  The charge filing period under Title VII begins to run when an allegedly discriminatory pay decision is made and communicated to the employee. 

Leadbetter, a manager at the Goodyear plant in Alabama, claimed that she was paid 15 to 40 percent less than her male counterparts.  Leadbetter submitted a questionnaire to the Equal Employment Opportunity Commission ("EEOC") in March 1998 and a formal EEOC Charge in July 1998.  After her November 1998 retirement, she filed suit asserting, among other things, a sex discrimination claim under Title VII.  The District Court allowed her Title VII pay discrimination claim to proceed to trial.  At trial, Leadbetter testified that several supervisors had given her poor evaluations because of her sex and that, because of the discriminatory conduct, her pay had not increased as much as it would have if she had been evaluated fairly.  Her counsel argued that by the end of her employment Leadbetter was earning significantly less than her male colleagues.  Goodyear maintained that the evaluations had been non-discriminatory.  Nevertheless, a jury found for Leadbetter and awarded her $223,000 in back pay and $3,000,000 in punitive damages.

On appeal, Goodyear argued that the pay discrimination claim was time barred with regard to all pay decisions made before September 26, 1997, 180 days before Leadbetter filed her EEOC questionnaire.  The Company asserted that the evidence showed no discriminatory act relating to her pay occurred after that date.  The Appellate Court agreed with Goodyear and dismissed the case.

The opinion was appealed to the U.S. Supreme Court.  The Supreme Court agreed with the Appellate Court and ruled that Leadbetter's claim was time barred.  Justice Samuel Alito, Jr., writing for the majority, found that "the EEOC charging period is triggered when a discreet and unlawful practice takes place.  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 the past discrimination."  Alito said that the narrower reading of the deadline was compelled by court precedent and by Congress itself, which wanted discrimination claims to be handled quickly.  Justice Ruth Bader Ginsburg, author of the Dissent, implored Congress to correct the Court's reading of Title VII.

As a result of this decision, a plaintiff will have to show that a pay decision is within the charge filing period.  A plaintiff can no longer argue that as a result of a discriminatory decision regarding her starting pay made years ago, that any paycheck thereafter continues the discrimination.  This holding should apply not only to sex discrimination claims, but to discrimination claims of all types under Title VII.  The same reasoning may also be applied to claims asserting age and disability discrimination, which arise under different statutes but are often decided under Title VII principles.  It is expected that this protection for employers may be short-lived.  Other statutes also prohibit discrimination.  For example, the Equal Pay Act prohibits gender discrimination even when pay inequities are unintentional.  Because the statute of limitations under the Equal Pay Act can be long as three years, it is likely that employees will sue under the Equal Pay Act as well as Title VII.  Employers will also see a rise in claims under 42 U.S.C. § 1981 alleging discrimination on the basis of color, race, ethnicity or religion.  This statute prohibits intentional discrimination and has a four-year statute of limitation.  As expected, a number of lobbying groups have heeded Justice Ginsburg's call and are seeking to have Congress legislatively overrule Leadbetter.  Employers who structure compensation based on incremental increases or decreases may derive the greatest protection under Leadbetter, in the short term.  In the long term, however, Leadbetter may have its greatest impact on the way in which plaintiffs plead their cases.

For more information regarding employees' equal pay claims or other employment law issues, please contact Mary Elizabeth Davis.