3d Circuit Revives Claim of Pennsylvania Worker With Lilly Ledbetter Fair Pay Act

Mikula v. Allegheny County of Pennsylvania is a new decision from the Third Circuit Court of Appeals, interpreting the Lilly Ledbetter Fair Pay Act (“the Act”).

Facts of the Case

Plaintiff Mary Lou Mikula was hired by Allegheny County Police Department as its grants coordinator in 2001. In September 2004, Mikula wrote a memo to the Police Superintendent asking him to change her title to “Grants and Project Manager” and make her salary equal to or greater than that of a male colleague whose title was “Fiscalmoney_in_piggy_bank_3 Manager.” The fiscal manager was making $7,000 a year more than Mikula at that time. The county did not respond to Mikula’s request. In October 2005, Mikula renewed her request for a raise. The county again did not respond.

In March 2006, Mikula filed an internal complaint alleging gender and age discrimination, stating that she was paid $7,000 a year less than a comparable male colleague and that the pay discrimination had started when she was hired. She also filed a lawsuit in federal district court alleging that her rights under the Equal Pay Act had been violated. In August 2006, the County’s Human Resources department notified Mikula that it had completed its investigation of her complaint and did not agree with her allegations of discrimination.

The Timeliness Argument

In April 2007, Mikula filed a discrimination charge with the U.S. Equal Employment Opportunity Commission alleging pay discrimination based on sex under Title VII of the Civil Rights Act of 1964 (“Title VII”). When she received a right-to-sue letter, she added the claim to her federal court case. In response, the County filed a motion arguing that the Title VII claim should be dismissed because Mikula had waited too long to assert the claim.

Under Title VII, claimants in most states must file their discrimination charges within 300 days of the allegedly discriminatory act. The County argued that the pay decision had been made in 2001 when Mikula was hired, and that even if the court allowed an extension of time until 2004, when Mikula found out about the difference between her pay and the fiscal manager’s pay, she had still waited more than 300 days before filing a charge. Mikula argued that the Human Resources department’s decision in August 2006 on her internal complaint of discrimination was itself a pay decision and that she had filed a charge within 300 days after receiving the decision.

Application of Ledbetter

On May 28, 2007, the U.S. Supreme Court held, in Ledbetter v. Goodyear Tire & Rubber Co., Inc., that the time period during which a claim of pay discrimination could be filed began to run on the date of the allegedly discriminatory decision. The Court rejected the argument that each time a new paycheck was issued, a new act of discrimination took place that re-triggered the statute of limitations on the claim.

The district court, applying the Ledbetter decision, held that Mikula’s claim for pay discrimination was untimely because she had not filed it within 300 days after the date, in September 2004, that she learned that she was being paid $7,000 less than the male fiscal manager.

Mikula appealed from the district court’s decision. While the appeal was pending, Congress passed the Act, which amended Title VII to say:

For purposes of this section, an unlawful employment practice occurs, with respect to discrimination in compensation . . . when a discriminatory compensation decision or other practice is adopted, when an individual becomes subject to a discriminatory compensation decision or other practice, or 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.

The Act applies retroactively to all cases that were pending on the date of the Ledbetter decision. However, the Third Circuit initially decided that the Act did not save Mikula’s claim, since she had not argued that each allegedly discriminatory paycheck was a new unlawful employment practice.

The 3d Circuit’s Decision

Mikula then filed a petition for rehearing, which the court granted. Several organizations (American Civil Liberties Union, the American Civil Liberties Union of Pennsylvania, the National Partnership for Women and Families, the Women’s Law Project, on Mikula’s side, and the Equal Employment Advisory Counsel and the Chamber of Commerce of the United States of America on the County’s side) filed “friend of the court” briefs in support of Mikula’s petition.

On reconsideration, the court held that the County’s failure to respond to Mikula’s 2004 and 2005 requests for raises were discriminatory compensation decisions or practices because the result was the same as if the request had been expressly denied. (This decision seems to be a logical interpretation of the Act, but difficult to apply, since the triggering event (failure to respond to a request) does not itself have a definite date that could trigger the running of a statute of limitations.)

The court rejected the argument that the HR department’s rejection of Mikula’s claim of pay discrimination in August 2006 was itself a discriminatory compensation decision or practice, explaining that although the decision arguably affected Mikula’s compensation, to hold otherwise would encourage employers to ignore such complaints.

Finally, the court held that Mikula’s claim was timely as to the paychecks that she received after June 20, 2006, which was the 300th day before she filed her April 2007 discrimination charge. Although the court did not mention it in the decision, the Act also states that the back pay period extends to two years before the filing of the charge.

Lessons for Employers

The employer will now be defending the merits of a pay decision it made in 2001, with possible liability for back pay beginning in June 2004. If the case were to go to trial tomorrow and the employee were to be successful, the employee’s back pay award would exceed $35,000 ($7,000 per year times five years).

Employers should take note of the extension of the statute of limitations and take care not to destroy any compensation-related records. Employers who are interested in reducing the amount of space consumed by paper employment files that must now seemingly be preserved indefinitely should seriously consider converting all paper files into text-searchable PDF files so they can be searched for relevant information.

Employers may also wish to consider adopting a practice of documenting the basis for compensation decisions, particularly where disparities in pay among employees who are performing the same job could be attributed to differences in gender or any other legally protected characteristic.

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