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Lilly Ledbetter Fair Pay Act: What You Need to Know

Jen Dewar
Jan 29, 2020 2:45:58 PM

The Lilly Ledbetter Fair Pay Act of 2009 was signed into law 11 years ago, allowing workers to file wage discrimination lawsuits within 180 days of their last discriminatory paycheck.

Lilly Ledbetter spent 19 years working at Goodyear tire factory. Toward the end of her employment, she received an anonymous note saying she was earning thousands less per year than men in her position. The Civil Rights Act of 1964 prohibits employment discrimination based on race, color, religion, sex and national origin. She filed and won a sex discrimination case against Goodyear, but lost on appeal and in the Supreme Court. It was ruled that she should have filed the lawsuit within 180 days of her first unequal paycheck.

The Supreme Court decision was nullified on January 29, 2009, when President Obama signed the Lilly Ledbetter Fair Pay Act into law. The law clarifies that workers can file suit up to 180 days after the last pay discrimination violation.

This is a compensation law you don’t want to overlook.

The Lilly Ledbetter Fair Pay Act is still very relevant today

It’s the year 2020, and the pay gap persists. Overall, women earn 82 cents for every dollar earned by men. Black men earn 73 cents for every dollar a White man earns, and Latino men earn 69 cents for every dollar a White man earns. Latinas earn 54 cents for every dollar a White man earns, and need to work all of 2019 and most of 2020 (through November 2) to earn what a White man earned in 2019.

Only 21 percent of employees feel they are paid fairly. Sixty one percent of women have discovered they’re being paid less than a male peer in the same role. Sixty nine percent of them found out about the pay discrepancy by having a conversation around salary with a peer. Your employees are talking, and they’re bound to find out if your company has unfair compensation practices. This can be an enormous liability, even if you unknowingly have a pay gap.

But despite this liability, as well as the legal and moral obligation to offer equal pay for equal work, employers aren’t acting. Only 28 percent have planned to conduct a pay equity analysis. Without this, they may be caught off-guard by a pay discrimination lawsuit.

Use your raise cycles to offer strategic compensation adjustments

Ninety percent of HR leaders want to be more strategic, but 49 percent don’t know how to start. How about compensation?

A compensation strategy will guide you toward fair pay and help you communicate your compensation decisions with managers and employees. This reduces your risk of pay discrimination lawsuits, while also improving employee engagement and retention. Invest the time to think through job levels and corresponding salary bands. Focus your job levels on impact and responsibility, as things like a degree don’t justify a higher salary when it’s not needed to perform the job duties. Update your salary bands once or twice a year to remain competitive in the candidate market and retain your existing employees.

Your annual compensation cycles are a great time to ensure that employee pay is aligned with your compensation strategy, and make adjustments where needed. Remember that pay equity is more than salary, and look at both cash and stock. Budget for salary increases when you see employees below-band, and start planning for promotions when employees are nearing the top of their salary bands. Communicate these changes with employees so they know what’s coming, and trust that you’ve made thoughtful and fair compensation decisions.

Make pay equity a priority year-round

With the Lilly Ledbetter Fair Pay Act, each pay cycle resets the deadline for an employee to file a pay discrimination lawsuit. And the longer you wait before correcting a pay gap, the more you could owe in retroactive pay.

Make pay equity a year-round priority, instead of relying on annual compensation adjustments alone. Ensure every candidate offer and employee increase align with your compensation strategy. Keep an eye on compensation metrics, such as compa distribution and average salary by gender and ethnicity, to watch for pay inequity trends by group.

Compensation management software, like Compaas, can provide these insights to guide fair compensation practices and help you stay compliant with legal regulations.

Final thoughts on the Lilly Ledbetter Fair Pay Act

Pay equity needs to be a priority, or it’ll cost you. If not in expensive litigation, it will cost you through low employee engagement (which is directly related to productivity and profitability) and high employee turnover (an estimated 33 percent of each departing employee’s base pay).

Go beyond compliance to make compensation your strategic advantage to attract and retain top-tier talent. Make it a point to pay all employees fairly, build diversity and inclusion at all levels of your organization, and effectively communicate with your employees about compensation. It’s not enough to appear to be compliant, you need to continue doing the work to prioritize fair pay across your organization.

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