In a decision favorable to employers, on May 29, 2007, the United States Supreme Court ruled that the limitations period for filing a disparate treatment discrimination charge under Title VII of the Civil Rights Act based on a pay decision is triggered by the alleged discriminatory decision or act itself — and not by the later issuance or receipt of pay checks incorporating the effects of that decision. In its 5-4 decision, the Court clarified that employees must file a discrimination charge with the Equal Employment Opportunity Commission ("EEOC") within 180 or 300 days, depending on the state, after each allegedly discriminatory pay decision, or else will lose the claim. Ledbetter v. Goodyear Tire and Rubber Co., Inc.

Plaintiff Lilly Ledbetter was employed at a Goodyear plant at which employees were given or denied raises based upon performance evaluations. After retiring in November 1998, she filed a suit against Goodyear, alleging, among other things, that several supervisors had given her poor evaluations because of her sex in violation of Title VII, and that as a result, her pay throughout her employment had not increased as much as it would have if she had been evaluated fairly. At trial, the jury found for Ledbetter on her Title VII claim and awarded her backpay and damages.

On appeal to the 11th Circuit Court of Appeals, Goodyear argued that Ledbetter's claim was time-barred with respect to decisions made before September 26, 1997 — 180 days before Ledbetter filed her EEOC claim, and since no discriminatory decision was made during that period, her claim must fail. Ledbetter asserted that the clock for filing a charge restarted each time she received a paycheck affected by past discriminatory conduct, regardless of how long ago the discriminatory decision impacting the amount of her salary occurred. The 11th Circuit Court of Appeals reversed the district court, and the Supreme Court granted certiorari to address whether a plaintiff can bring a Title VII action alleging discriminatory pay when the disparate pay received during the limitations period is the result of discriminatory pay decisions that occurred outside the limitations period.

In its decision affirming the 11th Circuit's reversal of the district court, the Supreme Court noted, as held in previous cases, that "current effects" of prior discrimination cannot give life to a charge for past disparate treatment. Disparate treatment claims require two elements: 1) an employment practice, such as a pay decision; and 2) discriminatory intent or bias. According to the Court, Ledbetter's attempt to take the discriminatory intent from prior pay decisions and shift it to later acts performed without bias — such as the issuance of a paycheck — would impose liability where there was no discriminatory intent, thus eliminating the key element of a disparate treatment claim.

The Court distinguished past precedent in which it found that an employer had engaged in intentional discrimination with each pay check issued, where the employer's pay structure was facially discriminatory and put certain employees on a lower scale due to their race. In such situation, the Court noted, each paycheck was in fact a "present violation" of the law. Here, Ledbetter had not shown that Goodyear adopted its performance-based pay system in order to discriminate on the basis of sex, and had not shown that Goodyear applied it to her during the charging period with any discriminatory animus. Goodyear's pay structure was nondiscriminatory and neutrally applied, and thus Ledbetter needed to have filed timely EEOC charges relating to any claimed past discrimination in order to maintain a suit based on that discrimination. The Court also noted that unlike a hostile work environment claim, which is based on the cumulative effect of individual acts, a disparate treatment claim such as Ledbetter's was based upon "discrete" acts of discrimination — i.e., independently identifiable pay decisions. As such, a timely EEOC charge needed to be filed with respect to each discrete alleged violation in order to state a claim under Title VII.

This case is useful for employers in that it confirms that the EEOC charging period is triggered by a discriminatory employment decision, not by a later neutral decision which gives effect to past uncharged discrimination. However, it also serves as an important reminder that even facially neutral pay structures can give rise to claims when applied with bias or discriminatory intent. Companies employing a performance-based pay structure should assess their pay practices to ensure that they are not being applied in a manner which could give rise to a claim of discriminatory bias.

We will be monitoring how the courts and the legislature respond to this decision, and will keep you informed of any major developments on this topic. Please contact any member of Schiff Hardin's Labor and Employment Group for additional information about this case or for more information regarding potential liability under Title VII.