Monday, October 4, 2010

Third Circuit Rejects Application of Fair Pay Act To Failure-To-Promote Claims

On October 1, 2010, in the case of Noel v. The Boeing Company, No.: 08-3877, the Third Circuit Court of Appeals held, in a case of first-impression, that the provisions of the Lilly Ledbetter Fair Pay Act of 2009 (FPA) do not apply to discrimination claims under Title VII, even when an alleged failure to promote an employee results in lower compensation being paid to that employee as a consequence.

By way of background, Congress passed the FPA in direct response to the U.S. Supreme Court's decision in Ledbetter v. Goodyear Tire & Rubber Co., Inc., in which the Court held that an employer's alleged discriminatory decision that resulted in an employee's pay being set at a certain rate, constituted a "discrete act" of discrimination under Title VII, which triggered the running of the statute of limitations. In Ledbetter, for example, Ms. Ledbetter had been employed at Goodyear from 1979 until 1998. At trial, she proved that throughout her employment, her supervisors evaluated her poorly because of her sex, which resulted in her receiving lower pay than if her evaluations had been free of discrimination. She also proved that these discriminatory pay decisions affected her pay throughout the course of her employment, resulting in a salary that was less than her male peers. In dismissing her case as barred by Title VII's statute of limitations, the U.S. Supreme Court held that her claims for sex discrimination began to run when Goodyear made the alleged discriminatory evaluations. The Court rejected Ms. Ledbetter's argument that a distinct and seperate claim against Goodyear actually accrued each time she received a paycheck that was less than it should have been because of the discriminatory decisions she complained about.

In direct response to this decision, Congress passed the FPA, which amended Title VII. Now, each paycheck that stems from an alleged discriminatory compensation decision or pay structure constitutes a "tainted, independent employment-action that commences the administrative statute of limitations." In other words, if an employee is not receiving "equal pay for equal work," as a consequence of an employer's discriminatory employment decision or policy, then each paycheck received by the employee constitutes a discrete discriminatory action that carries with it its own administrative statute of limitations.

In Noel, the Third Circuit was asked to apply the provisions of the FPA to an employee's claims that his employer discriminated against him by failing to promote him to a position for which he was qualified. Specifically, Noel claimed that his employer's failure to promote him because of discriminatory reasons occurred in July and September of 2003. But, Noel did not file an administrative claim with the EEOC until March of 2005, well after the exhaustion of his 300-day administrative statute of limitations period. Noel argued on appeal that the district court improperly dismissed his case because the provisions of the FPA operated to renew his claims for failure-to-promote everytime he received a paycheck that was lower than it should have been as a consequence of that non-promotion.

The Third Circuit disagreed and affirmed the dismissal of Noel's claims. First, the Court held that Noel was pursuing a failure-to-promote claim, as opposed to a discrimintation-in-compensation claim. The Court noted that Noel did not allege a nexus between his employer's decision not to promote him and any resultant disparate compensation, nor did he allege that he received less pay than his white peers for work performed at the same grade level. Noel simply argued that he was denied his promotion for discriminatory reasons; but, had he received that promotion in the absence of discrimination, he would have received more pay. In other words, Noel never argued that he did not receive "equal pay for equal work."

The Court also looked to a decision from the D.C. Circuit Court of Appeals, and held, as a matter of law, that the FPA does not apply to failure-to-promote claims. The Court determined that the intent of Congress in passing the FPA was to address a particular type of discriminatory compensation decisions, which are often concealed and not discovered until long after Title VII's 180 or 300-day limitations period has expired. Promotion decisions, on the other hand, are discrete employment actions in and of themselves, which are readily ascertainable eitehr at the time they are made, or shortly thereafter. And, because the FPA was passed in direct response to the U.S. Supreme Court's decision in Ledbetter, the Court saw no reason to expand the scope of the FPA beyond claims for disparate compensation.

A copy of the Third Circuit's full opinion in Noel can be found here: