In what will be the first employment-related bill to reach President Obama’s desk, the Lilly Ledbetter Fair Pay Act of 2009 (S. 181) cleared the Senate yesterday by a vote of 61 to 36. If signed – as pledged by President Obama and indicated by the presence of the bill’s namesake on President Obama’s train ride to Washington for his inauguration – this legislation will likely lead to an increase in the number of wage discrimination claims filed against employers and make it more difficult to defend against such actions.

The bill effectively overrules the U.S. Supreme Court case Ledbetter v. Goodyear Tire & Rubber Co., which rejected the argument that the statute of limitations for filing a wage discrimination claim is reset every time the employee receives a paycheck or other compensation that was initially based on a discriminatory act or decision. The Ledbetter Act, among other things, amends Section 706(e) of the Civil Rights Act of 1964 by deeming that an unlawful employment practice occurs when (a) a discriminatory compensation decision or other practice is adopted; (b) an individual becomes subject to a discriminatory compensation decision or other practice; or (c) when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice.

Liability accrues and an aggrieved plaintiff may recover back pay for up to two years preceding the filing of the charge, where the unlawful employment practices that have occurred during the charge filing period are similar or related to unlawful employment practices with regard to discrimination in compensation that occurred outside the time for filing a charge.

This bill would take effect as if it was enacted on May 28, 2007 – the day before the Supreme Court’s Ledbetter decision – and apply to all claims of compensation discrimination under Title VII, the Age Discrimination in Employment Act, and Title I and Section 503 of the Americans with Disabilities Act, and Sections 501 and 504 of the Rehabilitation Act. This bill is less expansive than the version passed by the House (H.R. 11), which incorporated provisions of the Paycheck Fairness Act (H.R. 12), a bill that, among other things, would limit an employer’s affirmative defense in wage discrimination cases and allow for the award of potentially unlimited compensatory and punitive damages.

The practical result of this bill for employers is that wage discrimination claims will dramatically increase and such claims may be exceedingly difficult to defend against. As written, this bill enables an employee or former employee to allege that an act of discrimination affecting compensation occurred years earlier – perhaps when the current supervisor, CEO, or other decision-maker was not even in the company’s employ. Most of the criticism surrounding this bill focused on the fact that the statute of limitations would be left open-ended, encouraging litigation of discriminatory compensation claims. According to Senate Minority Leader Mitch McConnell (R-Ky), "[t]his bill is about effectively eliminating the statute of limitations on pay discrimination."

A number of amendments to this bill were either tabled or rejected during consideration. The Senate handily dismissed by a vote of 40-55 an amendment in the nature of a substitute (SA 25) introduced by Sen. Kay Bailey Hutchinson (R-Tex.). This amendment would have applied a “known or should have known” standard when enforcing the statute of limitations. In other words, the applicable 180- or 300-day statute of limitations would have started when a litigant had or would have been expected to have had a reasonable suspicion that discrimination had occurred. Additionally, this amendment would have precluded allegations of unlawful employment practices relating to the provision of a pension or pension benefits. Under the current version of S. 181, an unlawful employment practice occurs when, among other things, an individual is “affected” by the application of a discriminatory compensation decision or other practice.

Sen. Arlen Specter (R-Pa.) submitted an amendment (SA 26) that would have permitted an employer to assert a defense based on waiver of right, estoppel, or the doctrine of laches. He also offered an amendment (SA 27) that would have eliminated the clause “or other practices” in the section defining what constitutes an unlawful employment practice under the act, thus limiting the application of the bill to discriminatory payroll decisions, as opposed to things such as negative performance evaluations.

Sen. Mike Enzi (R-Wyo.) submitted two amendments to the act (SA 28 and SA 29) which would have clarified standing and restored the Supreme Court’s interpretation of the statute of limitations for most types of employment discrimination.

Sen. Johnny Isakson (R-Ga) sought to change the effective date of the act from a retroactive date of May 28, 2007, to the actual day of enactment.

Sen. Jim DeMint (R-SC) attempted to include a number of right-to-work provisions in the bill. Similarly, Sen. David Vitter (R-La) sought to include provisions attempting to prevent the government from adopting union-only rules for contractor companies.

None of these amendments made their way into the final bill.