In a recent decision that is one of the first appellate cases to interpret the Lilly Ledbetter Fair Pay Act of 2009 (the LLA or the Act), the US Court of Appeals for the DC Circuit ruled that the Act does not affect the statute of limitations on a claim that an accounting firm employee was not promoted to partner in 1999 and 2000 because of his age, a promotion that would have resulted in increased compensation. Schuler v. PricewaterhouseCoopers LLP, No. 08-7115 (DC Cir. 2/16/10).

PricewaterhouseCoopers (PwC) is a partnership based in New York that provides accounting, auditing, and other services to clients worldwide. It has more than 20,000 employees and more than 2,000 partners in the United States. The partnership agreement provides that each partner shall retire upon reaching age 60 but in extraordinary circumstances a partner may delay retirement until he reaches age 62. The structure of the compensation and benefits package provided to a new partner makes it financially undesirable for most employees over the age of 55 to become partners.

Harold Schuler commenced employment at PwC in 1988, and was considered for, but denied a promotion to, partner in his practice group in 1999 at the age of 55. He was also not promoted in 2000, but a colleague in the group who was 37 was promoted. PwC proposed no one for partnership in 2001. Schuler sued PwC for age discrimination under the Age Discrimination in Employment Act (ADEA), the District of Columbia Human Rights Act and the New York Human Rights Law. That case was dismissed because Schuler failed to file a timely administrative charge with the Equal Employment Opportunity Commission (EEOC) prior to bringing suit. After he was denied a partnership promotion in 2004, Schuler filed another lawsuit in 2005. The district court granted summary judgment for PwC on the ADEA claim.

On appeal, Schuler did not dispute that in 2004 the district court correctly dismissed as untimely his ADEA claims for 1999 and 2000. He maintained, however, that the LLA, which applies by its terms to claims of “discrimination in compensation” pending on or after May 28, 2007, made his claims timely. Section 4 of the LLA provides, in relevant part:

[A]n unlawful practice occurs, with respect to discrimination in compensation in violation of [the ADEA], when a discriminatory compensation decision or other practice is adopted, when a person becomes subject to a discriminatory compensation decision or other practice, or when a person is affected by application of a discriminatory compensation decision or other practice....

Schuler argued that the decision not to promote him was an “‘other act’ ... intertwined with a discriminatory compensation decision” because as a result of that decision he received significantly less remuneration than he would have received as a partner. PwC distinguished between an employee's claim that he was paid less than another employee for doing similar work and Schuler's claim that he should have been promoted to a higher paying position. According to PwC, the former is clearly discrimination in compensation and covered by the LLA; but the latter is not.

The appellate court agreed with PwC: “[I]n employment law the phrase ‘discrimination in compensation’ means paying different wages or providing different benefits to similarly situated employees, not promoting one employee but not another to a more remunerative position.” The court observed that “a discriminatory failure to promote is actionable regardless whether it affects an employee's compensation.” In context, therefore, the court did not understand the phrase “compensation decision or other practice” to refer to the decision to promote one employee but not another to a more remunerative position.

The DC Circuit reasoned that its interpretation of the LLA is fully consistent with the intent of Congress to overrule the Supreme Court's decision in Ledbetter v. Goodyear Tire & Rubber Co., 550 US 618 (2007). The plaintiff there claimed she was the victim of discrimination because, based upon allegedly discriminatory performance reviews, she “was being paid significantly less than any of her male colleagues,” and the Supreme Court repeatedly referred to her claim as one of “pay discrimination.” The Court held Ledbetter's claim was untimely because she filed an administrative charge too long after the decisions about her compensation were made. In the LLA, Congress characterized Ledbetter as having “significantly
impair[ed] ... protections against discrimination in compensation” and
“ignore[d] the reality of wage discrimination.” Reviewing this legislative history, the Schuler court concluded as follows: “[T]hat the Congress drafted and passed the LLA specifically in order to overturn Ledbetter strongly suggests the statute is directed at the specific type of discrimination involved in that case and not to other unspecified types of discrimination in employment.”

The court denied that its interpretation of the phrase “discriminatory compensation decision or other practice” read “other practice” out of the Act. “We need look no further than Ledbetter itself for an example of a discriminatory ‘other practice,’ viz., giving an employee a poor performance evaluation based upon her sex (or any other unlawful criterion) and then using the evaluation to determine her rate of pay.” The court thus concluded that “the decision whether to promote an employee to a higher paying position is not a ‘compensation decision or other practice’ within the meaning of that phrase in the LLA and Schuler's failure-to-promote claim is not a claim of ‘discrimination in compensation.’” The LLA therefore did not revive his claims under the ADEA.

The Schuler court’s somewhat narrow interpretation of the LLA provides some hope to employers who were concerned that the Act would be construed broadly to effectively preclude a statute of limitations defense in many employment discrimination cases. It will be interesting to see if other courts adopt the same approach.

The Arent Fox Employment Law Group regularly advises clients on pay, age and other employment discrimination issues, and defends them in courts and agencies across the country. If you have any questions about the Schuler case, or if we can help you in any other way, please feel free to contact us.

Michael L. Stevens
stevens.michael@arentfox.com
202.857.6382