Ledbetter Act: What it Means for Small Business

Feb 4, 2009

Few employers make compensation transparent, and discussion of salaries is among the last office taboos. However, with President Barack Obama's first bill, the Lilly Ledbetter Fair Pay Act signed into law on Jan. 29, the issue of employee compensation just got a bit trickier and a lot riskier for employers.

The Lilly Ledbetter Fair Pay Act loosens the statute of limitations under which workers can sue employers for pay discrimination based on characteristics such as gender, race, age or disability.

Enactment of the Lilly Ledbetter Fair Pay Act is likely to spark many employees’ interest in possible pay discrimination. The measure will remove obstacles to lawsuits on the issue by reversing a 2007 Supreme Court ruling that refuted pay-discrimination charges by Lilly Ledbetter, a supervisor at a Goodyear Tire and Rubber plant in Alabama. The high court had rejected Ms. Ledbetter’s claim because it wasn’t filed within the 180-day statute of limitations from the first occurrence of pay discrimination. The new legislation marks each paycheck as the beginning of a new 180-day window during which lawsuits can be filed.

That makes each paycheck a potential violation of the law - not just the first one. In practical terms, the change allows a worker many years to bring a lawsuit against a longtime employer for pay discrimination. Additionally, a worker can sue to recover up to two years in back pay. The new law is in effect now, and actually was extended retroactively to any charges of pay discrimination filed since Sept. 28, 2007.

So what does the Lilly Ledbetter Fair Pay Act mean for small businesses? For starters, small-business owners will need to meticulously document pay decisions and retain detailed employment records, legal experts say, to ward off discrimination suits. In this respect, small companies may be at a disadvantage as few have access to the attorneys and human-resources professionals that will help larger businesses comply with the newly expanded law.

While NSBA believes that all workers deserve a fair wage it should not come at the expense of potentially putting a small business out of business.

Click Here to learn more about the Lilly Ledbetter Fair Pay Act.

Click Here to learn more about NSBA's stance on compensatory wage laws.