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Companies will have to add yet another step in their due diligence when buying or merging with a new company, because of the Ledbetter Fair Pay Act. That law permits employees to sue for wage discrimination, even many years after the fact.

Twenty years after going to work for Goodyear Tire and Rubber Company, a woman by the name of Lilly Ledbetter learned through an anonymous tipster that she was making less money for doing the same job as her male coworkers.

Lilly Ledbetter calculated that she had lost $200,000 in pay compared to the men, not to mention the lost Social Security benefits and pension funds. Ledbetter sued over the issue, but was blocked by rulings that she had not met the 180-day deadline for filing her petition. She took the matter to the Supreme Court, which upheld lower court rulings in a split decision.

Now, as a way of rectifying situations like hers, the U.S. Senate has passed, and President Obama  has signed into law, the Lilly Ledbetter Fair Pay Act of 2009. The new Act allows for discrimination suits beyond the old 180-day deadline. The Senate vote was 61 in favor and 36 against.

This means that employers must retain records on the basis of compensation decisions far longer, to defend against a possible lawsuit.

When a company is bought out by another, the new owners also purchase any liability for discrimination or other unfair labor practices. Prospective owners need to assess the risk of the company’s employee compensation packages and compensation system, before making a final purchase decision. 

The President, in signing it one week later, said Ledbetter had not planned to become a household name when she took on Goodyear. “She was just a good hard worker who did her job – and she did it well – for nearly two decades before discovering that for years, she was paid less than her male colleagues for doing the very same work,” President Obama said.

He added that he intended (more…)

The U.S. House of Representatives recently passed the Ledbetter Fair Pay Act. In doing so, the House Democrats acted quickly to fulfill a 2008 campaign promise.

The Ledbetter Fair Pay Act, also known as HB 11, will overturn a decision by the U.S. Supreme Court that employees have only 6 months to file a claim for pay discrimination against an employer.

The law is named after Lilly Ledbetter, an Alabama woman who was paid less than her male colleagues for the same work at Goodyear Tire and Rubber Company, for more than 20 years. The Supreme Court ruled that since Ledbetter did not file a complaint during the first 6 months she was employed, the discrimination was legal. This was true, although Ledbetter had no reason to believe for several years that she was the target of discrimination.

Votes for the Ledbetter Fair Pay Act were split according to party lines, with the overwhelming majority of Republicans voting against the bill. Republican business leaders say that the measure will increase the number of employment and pay discrimination claims against employers. They point out that even when such a claim is unfounded, it is expensive for an employer to fight the claim in court. Winning can carry a high price tag, including attorney’s fees in excess of $100,000. 

Many Democrats supported the Ledbetter Fair Pay Act. Many pointed out that the law will help eliminate discrimination in pay based on gender, race, color, national ancestry, age, etc. Proponents point out that women still earn only 78% of the wages earned by men holding the same jobs.

This law makes it even more crucial that every employer have an anti-discrimination policy and training in place. Employers should also review wages to ensure that they can be justified by objective criteria such as the employee’s qualifications and performance evaluations.

A similar bill passed the House in July 2007, but faced still opposition by Republicans in the Senate. Then-president George W. Bush also vowed to veto the bill, if it was passed by the Senate.

President Obama has said repeatedly that he supports the measures, and vowed to sign it if passed. With Democrats now holding 57 Senate seats, it seems likely that this bill will be passed and signed into law in 2009.

The AARP, formerly known as the American Association of Retired Persons supports the bill. Business groups including SHRM, the Society of Human Resource Management and the U.S. Chamber of Commerce, oppose the bill. They argue that a strict interpretation of the bill could result in companies being unable to pay different salaries based on geographical area. If an employer paid a manager in New York City more than a manager in Birmingham, Alabama for example, the employer could be sued. Because the cost of living in New York is almost twice that of Birmingham, employers have long had to pay higher salaries in such metro areas to attract equally qualified candidates in both regions.