New Wage Suit Bill Could Impact Insurers

WASHINGTON–House legislation that would expand the time period for bringing wage discrimination cases could seriously increase the liabilities of insurers and employers, according to an attorney who has studied the measure.

The bill in question, which recently won committee approval, would reverse a recent U.S. Supreme Court decision. It also would affect pension plans, according to a benefits group.

The legislation, H.R. 2831, the Lilly Ledbetter Fair Pay Act, would reverse a 5-4 Supreme Court decision on May 29 in Ledbetter and establish a paycheck rule for filing wage discrimination cases under the Civil Rights Act.

The legislation would consider each paycheck to be a separate discriminatory act if the paycheck is less than it otherwise would have been due to the employee's sex, race, color, religion or national origin, according to Debra Friedman, a lawyer in the Philadelphia office of Cozen & O'Connor.

The bill was passed, 27-20, by the House Education and Labor Committee on June 27. It is unclear when it will be considered by the full House. But a committee official said Sen. Edward Kennedy, D-Mass., chairman of the Senate Health, Education, Labor and Pensions Committee, plans to introduce similar legislation soon.

Ms. Friedman said the bill would allow employees to file a pay discrimination claim many years after a discriminatory pay decision was made. The Supreme Court ruling has set a short time limit for bringing such actions.

Ms. Friedman also said the bill would extend this protection to employees filing pay discrimination claims under federal law on the basis of age or disability.

She said that proponents of the legislation claim it addresses the realities of pay discrimination by broadening the time period for filing a claim.

“If passed, the potential implications for employers and insurers are serious,” Ms. Friedman said. “The legislation essentially eliminates the statute of limitations for pay discrimination claims in many circumstances, thereby increasing the pool of potential claims that can be made.”

She explained that when those claims are filed, employers must defend stale claims. “Witnesses may be hard to locate in our mobile workforce, and given the passage of time, may have died,” Ms. Friedman said. “Likewise, employer records that may shed light on the reasons for old pay decisions may have been destroyed or lost.

“As a result, passage of this legislation may create a great boon for plaintiff's attorneys but most certainly would present challenges for employers and insurers,” Ms. Friedman added.

The American Benefits Council sent a letter to the House panel a day before the vote asking for a delay while the implications and potential unintended consequences for pension plans were studied, raising concerns that Ms. Friedman also voiced.

The letter, signed by James Klein, ABC president, made clear that the trade group neither supports nor opposes the bill.

But the letter did say that it “could possibly raise very serious retirement plan issues.”