House-Passed 'Paycheck' Bill A Potential Headache

WASHINGTON--The House narrowly passed legislation Tuesday that detractors say would go well beyond reversing a May Supreme Court decision severely limiting the time span employees have to file wage discrimination suits.

An industry lawyer cautioned that the bill, if enacted by Congress, "has far more serious implications for employers," and by extension, insurers.

Debra Friedman, a lawyer in the Philadelphia office of Cozen & O'Connor, said the bill not only goes beyond the Supreme Court's May 29 decision in "Ledbetter," but was quickly drafted "without any significant input from the employer community."

The legislation (H.R. 2831, the Lilly Ledbetter Fair Pay Act) would reverse a 5-4 Supreme Court decision 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, Ms. Friedman said.

The bill passed the House 225-199.

The administration issued a veto threat on the measure July 27, but House passage ensures that if Democrats sought to include the provision in another must-pass measure, such as the Defense Appropriations Act, the administration might be forced to accept it.

The bill was passed by the House Education and Labor Committee June 27.

It is expected that Sen. Edward Kennedy, D-Mass., chairman of the Senate Health, Education, Labor and Pensions Committee, plans to introduce similar legislation soon.

The House action seeks to reverse the Supreme Court decision, which interpreted the 1960s-era Civil Rights Act as saying that pay discrimination claims must be brought within 180 days of a discriminatory pay decision.

Because it eliminates any time barrier to suit filing, "no matter how far in the past the underlying act of discrimination allegedly occurred," the White House said the president would veto the bill if it made it through Congress.

"As a result, this legislation effectively eliminates any time requirement for filing a claim involving compensation discrimination," the White House said in its veto letter. "Allegations from 30 years ago or more could be resurrected and filed in federal courts.

"Moreover, the bill far exceeds the stated purpose of undoing the Court's decision in Ledbetter by extending the expanded statute of limitations to any 'other practice' that remotely affects an individual's wages, benefits, or other compensation in the future," the White House said. "This could effectively waive the statute of limitations for a wide variety of claims (such as promotion and arguably even termination decisions) traditionally regarded as actionable only when they occur."

"This narrow bill supports a broad principle," Rep. Rob Andrews, D-N.J., floor manager of the bill, said in closing debate on the measure. He termed the legislation, "Restoring this strong tool against discrimination."

But Rep. Howard "Buck" McKeon, R-Calif., ranking minority member of the House Education and Labor Committee, called it a "major, fundamental change in civil rights law," adding that "trial lawyers are salivating at the possibility of this law."

Ms. Friedman agreed with Rep. McKeon that enactment of the law would be "disastrous."

She said the legislation permits employees to file discrimination claims many years after a discriminatory compensation decision was made.

The bill, she added, not only covers wages but also vacation benefits, pensions and all other forms of employee compensation. Ms. Friedman noted that the bill extends these rights to employees filing compensation discrimination claims under the Age Discrimination in Employment Act, the Americans with Disabilities Act and the Rehabilitation Act.

"The bill puts an unrealistic burden on employers to pinpoint and eradicate the effects of discriminatory actions that employers may not be aware of and doesn't account for the difficulties employers will face in defending stale claims--that could date back years or even decades," she said.

Regardless of whether this bill becomes law, employers should take a range of steps, from implementing facially neutral performance evaluation systems to training employees conducting performance evaluations, Ms. Friedman said.

"The most important action for companies to take is communicating with employees being evaluated about the basis for all compensation decisions," she said.