By Nancy Diekmann and Linda Herman (an Optimum HR Systems Associate)
Ledbetter submitted a questionnaire to the EEOC in March, 1998 and a formal charge in July of that year. However, she did not file a lawsuit until November, 1998 after she retired. The court invalidated Ledbetter’s claim because the original incident of wage discrimination occurred when she first began working for Goodyear almost 20 years before filing the complaint. The jury in the lower courts found for Ledbetter, awarding back pay and damages. However, Goodyear appealed, claiming her suit was not within the 180-day statute of limitations. This decision was upheld by the Supreme Court on May 29, 2007.
The Ledbetter Act broadens the definition of unlawful employment actions for purposes of initiating a pay discrimination claim. An unlawful practice occurs when:
- A discriminatory compensation decision or other pay practice is adopted
- An individual becomes subject to a discriminatory compensation decision or other practice
- An individual is affected by application of such practice, including each time wages, benefits or other compensation is paid.
The provisions of the Ledbetter Act establish recovery of back pay for up to two years preceding filing of the claim of unlawful employment practices. Although signed into law in 2009, the Ledbetter Act’s effective date is May 28, 2007. The law covers “anyone affected by an unlawful employment practice”, but this is not defined. Also, the term “other compensation” is not defined – so future court cases or legislation may need to clarify the full range of this law.
The Ledbetter Act opens the door for more pay discrimination actions. Employers should take steps to minimize the risks and costs of noncompliance. Some actions that help your organization be proactive are:
1. Maintain detailed records on pay decisions and performance appraisals that affect pay and job classification decisions. Extend the retention timetable on those records so you have the required information to defend a possible pay discrimination claim.
2. Have a well-documented compensation philosophy. Having a solid compensation strategy that ties to your overall HR and business strategies can be an effective justification for pay levels.
3. Review and monitor compensation related policies and practices. Identify the factors that influence compensation such as education, responsibility, location, business unit, type of work function, experience, etc. The trend is for uniformity and less discretion in pay determinations.
4. Have a reliable internal system where employees with perceived pay inequities can direct their complaints. Use training sessions to communicate that this process exists and make sure employees know how it works.
5. Conduct a pay audit to determine whether there is a defensible rationale for pay differences.
b. Review jobs that are held predominantly by women or an ethnic group
c. Conduct statistical analyses to determine disparate treatment or disparate impact of the current pay system
6. Educate managers and supervisors on pay policies. Ensure managers and supervisors know how to conduct objective, fair and well-documented performance appraisals. Ongoing training and communication can help reinforce the importance of pay equity issues and emphasize the risks associated with inconsistent compensation decisions.
More legislation on fair pay is pending. The Paycheck Fairness Act, if passed in its current form, would amend the Equal Pay Act and impose harsher penalties for pay equity violations. This will also bring increased attention and exposure to compensation practices. The business goal is to attract and retain highly qualified employees through the use of competitive pay programs. Now is a good time to ensure your compensation system can deliver both pay equity and business results.
About Nancy Diekmann
Nancy is a consultant in Stanton Group’s compensation consulting & surveys practice. She specializes in helping clients create the right compensation solutions to meet their business objectives, including base pay programs and annual incentive plans to support business strategy.
Prior to joining Stanton Group in 2008, Nancy spent eight years at Merrill Corporation working in compensation and training. She has experience holding key finance and organizational development positions, including management positions at Mesaba Airlines, Financial Education Services, Inc., and Land O’Lakes, Inc. Nancy also serves as an adjunct faculty member for Concordia University in St. Paul, teaching classes for the bachelor’s and master’s human resources programs.
Nancy earned her MBA from the University of St. Thomas, in St. Paul, and her bachelor’s degree from the University of Wisconsin-Eau Claire. She is a certified compensation professional and a member of WorldatWork Total Rewards Association, Twin Cities Compensation Network and Toastmasters International.
About Linda Herman
Linda Herman is a principal consultant in Stanton Group’s compensation consulting & surveys department. She develops compensation programs ranging from non-exempt salary structures to executive compensation programs. Linda’s experience and skills also extend to developing programs in executive on-boarding, performance management, and organizational development.
With over 25 years of experience as a leader in compensation roles, Linda understands the challenges of leading compensation in organizations of all sizes. A former director of Stanton Group’s compensation consulting & surveys practice, Linda rejoined Stanton Group in 2007. Her corporate leadership background includes senior level roles at Fortune 500 companies, including Thrivent, Ameriprise, and Best Buy. Her consulting experience includes working in a wide variety of industries, including health care, engineering, manufacturing, casinos, financial services, grocery chains and many employee-owned organizations. Linda is able to leverage her depth and breadth of experience to develop customized, common sense solutions for each client.
Linda holds a bachelor’s degree in education from the University of Wisconsin-Oshkosh and a master’s degree in business administration from the University of St. Thomas. She is a member of WorldatWork, the Society for Human Resources Management (SHRM), and the Twin Cities Compensation Network.
Great information on such an important topic. Nice reminder to review procedures and make sure we're on track. Thanks!
Posted by: goshery | June 09, 2009 at 08:50 AM