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The 7th Circuit Court of Appeals recently ruled that the Lilly Ledbetter Fair Pay Act applies to the Equal Pay Act, and not only to Title VII of the Civil Rights Act of 1964, which it had amended. This decision potentially allows many more employees to bring claims of unfair pay who otherwise would have been time-barred.
The Ledbetter Act was passed in 2009 to ensure that the 180-day statute of limitations would be reset with each paycheck that reflects discriminatory bias, instead of counting down from the initial discriminatory decision to pay somewhere unfairly. This means that if an employee realizes she has been consistently paid less for 5 years, the statute of limitations did not end 180 days after her first paycheck, but rather restarts with each subsequent paycheck.
The case of a teacher hired by a residential high school affiliated with Ball State University occasioned the court’s ruling. The school director offered the new hire a starting salary of $32,000 and told her, “You don’t need any more [pay], because I know your husband works at Ball State, so you would have a fine salary.” For 12 years the teacher suffered the effects of this “outdated and improper approach to her starting pay,” and was paid less than her similarly situated male colleagues. Unsatisfied with the school’s explanations that her wages were based on “wage compression” and had increased more than her colleagues, the teacher sued under the Equal Pay Act and Title VII.
Despite evidence of “unequivocal discrimination,” the teacher lost in federal district court, which granted summary judgment to the school because it provided gender-neutral explanations for the pay differential: pay compression and qualification differences. The lower court was persuaded that the school could not be held liable for the director’s remark because it had occurred 12 years prior.
The 7th Circuit held the lower court’s decision was “not correct” because the teacher’s testimony about the director’s statement at the time of her hire disputed the school’s gender-neutral explanations. There was a legitimate disagreement as to the facts of the case, and therefore granting summary judgment was improper.
The Court was not persuaded by the school’s claim that the director’s explanation for the starting salary was a “stray remark” with no real link to the teacher’s pay. The remark was a straightforward explanation provided during salary negotiations.
The Court also held that, for evidentiary purposes, it did not matter when the director’s statement was uttered, because otherwise time-barred acts can support a timely claim. In this instance, the director’s 12-year-old statement could be used to show biased intent underlying the ongoing pay disparity. And the teacher’s unequal pay claim is timely because a new cause of action arises every time an employee receives a paycheck resulting from an earlier discriminatory compensation practice, even one that occurred outside the statute of limitations window.
The school argued that the Ledbetter Act did not amend the Equal Pay Act, and therefore the paycheck accrual rule did not apply. The 7th Circuit clarified that the paycheck accrual rule applies to all allegations of unlawful discrimination in employee compensation, including the Equal Pay Act.
The ruling is good news for plaintiffs under the 7th Circuit’s purview, which includes Illinois, Indiana, and Wisconsin, as they will be able to bring claims under the Equal Pay Act and use evidence outside the statute of limitations to support them. The 7th Circuit’s ruling should serve as a reminder to employers to regularly audit their pay practices and ensure that bias has not affected compensation decisions.