On January 29, 2009 President Obama signed into law the Lilly Ledbetter Fair Pay Act.  This act overrules the U. S. Supreme Court’s decision in the Ledbetter v. Goodyear Tire & Rubber Company, Inc. opening the door for employees file claims at a much later date than originally ruled.

 This act raises many questions for employers that have yet to be addressed or answered.  Let’s first talk about the areas of this law that we do know about.  First, this law is retroactive to May 28, 2007 meaning that employees that have been, or may have been, discriminated against since this date can file a claim.  Congress believed the previous decision unduly restricted the time period an employee had for filing pay discrimination claims.

 Under Ledbetter an unlawful employment practice occurs when:

• The discriminatory pay decision is made
• An individual becomes subject to the discriminatory pay decision, or
• An individual is affected by the discriminatory compensation decision or other practice.

In short, what this means to employers is that each time an employee receives a wages, benefits or other compensation tainted by the discriminatory pay decision the deadline starts over.

Now, let’s talk about the questions that Ledbetter brings up.  What records should a company examine and retain?  How long should they be retained?  Should they do a self audit?

Since this is a new law there are no court cases or rulings on any of these questions.  However, initial analysis by most law firms says you should retain pertinent records indefinitely.  Outside of the IRS regulations on record retention the only real guidance comes out of federal contracting regulations which require that all records be retained for a period of 2 years for companies with over 150 employees and 1 year for companies fewer than 150 employees.  However, there is no evidence that these regulations will be used in governing Ledbetter.

With this in mind companies may consider conducting a self audit of their records.  There are no provisions under Ledbetter where a company avoids penalties due to accidental, unintentional or uncovered violations.  A violation is a violation.

Self audits would involve an examination of written policies relating to pay decisions in starting pay, promotional pay and merit pay increases.  For companies without a formal pay structure this could particularly dangerous under Ledbetter since managers would have wide discretion in setting pay.