Implications of the Fair Pay Act for Statistical Analysis in Wage Discrimination Suits

12 March 2009
Dr. Denise Neumann Martin and Dr. Elizabeth Newlon, et al.

On 29 January 29, 2009, President Barack Obama signed into law the Lilly Ledbetter Fair Pay Act. The bill was drafted to reverse a mid-2007 US Supreme Court decision that had denied Ms. Ledbetter back pay for an allegedly discriminatory series of evaluations that had taken place decades earlier. Using a discrete decision that impacted compensation as the tolling event, the Court concluded that her claim was barred because she failed to point to a discriminatory act that occurred during the six-month statutory period (the "charge filing period") for filing an Equal Employment Opportunity Commission ("EEOC") claim. The Fair Pay Act reverses that conclusion, codifying that even in situations where the decision causing the discrimination was made prior to the 180-day window, each newly issued paycheck or other payment that embodies the effects of that discriminatory decision violates Title VII of the Civil Rights Act and triggers a new charge filing period.

Numerous commentators have predicted that the Fair Pay Act itself, along with the associated publicity, will increase the number and type of discrimination suits and hence increase the exposure that companies face in this area. Against that backdrop, it is prudent for companies to take a fresh look at comparative pay statistics, as well as statistics on factors that can affect pay outcomes (such as qualifications, performance evaluations and promotion histories). In this NERA paper, the authors review in more detail the circumstances that gave rise to the Fair Pay Act, as well as its key provisions and expected impact. The authors then discuss why the Fair Pay Act does not change the economic approach to the assessment of alleged discrimination, which generally draws on regression analysis. Finally, the authors provide examples that show why such analyses must be conducted carefully and rigorously if they are to provide reliable information to companies about the equity of historical decisions and the potential need for any remedial action.