Connecticut Employment Law Blog : Connecticut Employment Lawyer & Attorney : Daniel Schwartz : Stamford, Hartford New Haven, CT

As those who have been following my tweets know, I have been at the American Bar Association's House of Delegates and midyear meetings. There's lots of substance to these meetings and you can certainly follow along with the ABA Journal.

Among the topics discussed today, was the Paycheck Fairness Act now pending in Congress. If you are not familiar with it, you should be because by all accounts, it's moving front and center this year as an important piece of legislation for the Obama Administration and others.  Rep. Rosa DeLauro of Connecticut is the primary sponsor of the bill in the House of Representatives.

John Phillips reported on this recently. As a result, employers should take stock of their compliance programs and certainly begin a review (if it is not done regularly) of your current compensation procedures.

What does the bill do? John has a good summary but some of the key changes would be to revise the remedies for sex discrimination in the payment of wages by permitting uncapped punitive and compensatory damages and limit employers’ ability to defend against EPA claims. The bill would also prohibit an employer from retaliating against an employee who inquires about, discusses, or discloses his/her own wage or that of another employee unless the disclosing employee has access to that wage information as part of his/her essential job function. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

If you should never judge a book by its cover, you can never judge a legislative bill from its title.

After all, you would think that a bill about "Penalties for Violations of Certain Personnel Files Statutes" (H.B. 6185) would actually be a bill about those violations.

While that may have been in the original bill, a Senate amendment to that bill -- which passed both chambers yesterday -- makes some of the most sweeping changes we have seen in some time to the state's laws banning employers from discriminating based solely on gender in the amount of compensation paid to employees. (The amendments' provisions are mainly lifted from Senate Bill 362 (S.B. 362).)

This bill -- which now moves on to the Governor for signing -- will be effective October 1, 2009 if and when signed.

Summary of Key Provisions

The key provisions of the measure:

• allow employees to go directly to court to file gender wage claims;
• expand possible employer defenses against gender wage claims;
• permit, rather than requires, a court to order awards when an employer is found to violate the law;
• extend the period to make a claim of discrimination (the statute of limitations) from one to two years following a violation (or in some cases, three years);
• expand the whistleblower protections to include those who testify or assist in a gender wage proceeding;
• permit possible compensatory and punitive damages for violations of the whistleblower protections; and

The Office of Legislative Research has a thorough summary here.  Among other provisions that employers may find interesting, the bill also allows employees to ask the court for legal or equitable relief, but the labor commissioner will not have that option. The bill allows employees to seek attorney's fees and costs (but eliminates the labor commissioner's ability to seek such fees.) 

Of course, there is still a provision in there about violating the personnel files act. Employers who violate the provisions of that act are subject to a $300 civil penalty for each violation. 

In some ways, the bill is a codification of some of the changes that were made at a federal level under the Ledbetter Fair Pay Act. For example, under this bill, the starting of a statute of limitations period would be relaxed.  It would occur::

when a discriminatory compensation decision or practice is adopted, when an individual is subject to a discriminatory compensation decision or practice, or when an individual is affected by application of a discriminatory compensation decision or practice, and shall be deemed to be a continuing violation each time wages, benefits or other compensation is paid, resulting in whole or in part from such a decision or practice.

What Does This Mean For Employers and What Defenses Are Available?

For employers, the bill is definitely a mixed bag. On the one hand, it greatly expands the type of claim and the time for bringing a claim for employees and adds a great deal more gravitas to the state's wage discrimination laws. On the other hand, it does provide some additional defenses for employers to use, which, in turn, allows employers to plan their business in a way that is in compliance with the law.

What are those defenses to a claim of wage discrimination? According to the bill, an employer must demonstrate that such differential in pay is made pursuant to "(1) a seniority system; (2) a merit system; (3) a system which measures earnings by quantity or quality of production; or (4) a differential system based upon a bona fide factor other than sex, such as education, training or experience."

The last category of a "bona fide factor defense" will only apply if the employer demonstrates that the factor  (A) is not based upon or derived from a sex-based differential in compensation, and (B) is job-related and consistent with business necessity.

And even then, the employee can overcome the "bona fide factor defense" if he or she can demonstrate that an alternative employment practice exists that would serve the same business purpose without producing such differential and that the employer has refused to adopt such alternative practice.

I'll continue reviewing the bill (which was just passed in its current form last night) and will post  details on an upcoming program recapping this bill soon.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

There's a relatively new children's book out now entitled, "The Wolf Who Cried Boy". It's a humorous take on the old fable and I read it outloud one evening this week at home.  

I can't help but be reminded of both the classic and new story, reading all of the hyperbole and hype of the last 24 hours regarding the new Ledbetter Fair Pay Act and those who are quick to predict that the floodgates of employment litigation are now open. 

Let's clarify a few issues up front: 

• Is the Ledbetter Fair Pay Act important for employers to understand? Sure, just as all changes to employment laws are important. 
  .
• Does it dramatically change the law? Not really.  Before this law, employers still weren't allowed to engage in pay discrimination; it's just that the time frames for bringing suit under some pay discrimination claims had been defined narrowly by the U.S. Supreme Court in 2007.   This Act extends the time frame for bringing suit by treating each new paycheck as a basis for a discrimination lawsuit, rather than just the original decision to discriminate. 
   
• Will this lead to a dramatic upturn in pay discrimination lawsuits? The jury is definitely still out on this one.  

Here's the greater perspective.  Before the U.S. Supreme Court decision in 2007, women could bring pay discrimination lawsuits under both Title VII's overall scheme, or the Equal Pay Act.  For reasons that are still not fully known (though discussed by National Journal's Stuart Taylor here (H/T Point of Law)) , Ms. Ledbetter did not pursue her Equal Pay Act claim on appeal after it was dismissed on the merits (effectively forfeiting it).  The U.S. Supreme Court ruled only that for pay discrimination claims brought under Title VII, a 180-day statute of limitations applied to pay discrimination decisions.. 

Thus, after Ledbetter, if the employer's discriminatory pay decision occurred in 2007, the employee was out of luck now to sue under Title VII.  Each new paycheck was not an "act" of discrimination. 

The new law treats each paycheck as a new "act" of discrimination, effectively re-starting the statute of limitations each time a paycheck is issued.

But here's why the fuss about the new act is overblown. The employee still could sue under the Equal Pay Act. Indeed, employers should be much more concerned about the Equal Pay Act -- which was unaffected by the Fair Pay Act --  when it comes to pay discrimination claims.  

Unlike Title VII pay discrimination claims, employees do not need to file their Equal Pay Act claims with the EEOC, and claimants have two years in which to file their claim under the Act (three years if the violation is willful).

But here's the kicker for Equal Pay Act claims: The employee does not need to prove discriminatory intent, unlike Title VII.  In fact, the Equal Pay Act focuses on disparity in pay for substantially similar work; contrast that with Title VII which focuses on a discriminatory action that causes a disparity in pay.  So, when the employee is paid less than similarly situated employees of the opposite sex, an Equal Pay Act claim can arise without showing that the employer intended to discriminate. 

Does this mean that employers have no reason to be concerned about the Ledbetter Fair Pay Act? Of course not. The act has the potential of opening of employers to older claims of discrimination against managers and supervisors who have long since gone. But remember, employees will still need to show that the employer intended to discriminate -- a burden that is not insignificant.  And former employees are not going to be able to revive a claim of pay discrimination without a recent "paycheck" to go along with it. 

It's difficult to get exact numbers of pay discrimination claims and look at the numbers of claims filed both before and after the Ledbetter decision came out, but a cursory review of the statistics published by federal agencies under the No Fear Act doesn't seem to reflect a big downturn in the numbers of pay discrimination claims after Ledbetter.  In fact, the United States Postal Service reports more pay discrimination claims being made in 2008 (after Ledbetter), than 2007.  Thus, with Ledbetter effectively being overturned, it's hard to believe that the Act will impact the numbers of claims significantly. 

There is another bill that would change the underlying law that employers should follow closely -- the Paycheck Fairness Act (H.R. 12). The Paycheck Fairness Act would limit an employer’s ability to justify paying different salaries to workers based in different locations with different costs of living. The bill would lift the caps on compensatory or punitive damages for which employers would be liable, in addition to current liability for back pay. These damage penalties would apply to even unintentional pay disparities.

The House passed that bill as part of the Ledbetter Fair Pay Act bill, but the U.S. Senate did not take that up.  Backers of that bill, including Rep. Rosa DeLauro of Connecticut, will continue to press on. 

For employers, the Ledbetter Fair Pay Act should just be another reminder to be vigilant in the monitoring of your compensation practices.  The EEOC's Compliance Manual (H/T Moore) gives some suggestions on the issues that employers can review to determine their compliance with the applicable laws.  

There's little reason for employers to cry "wolf" or "boy" over this latest Act. Stay focused and use this current annual review season to ensure that your pay practices are supported by accurate data and are fair. 

• Email This
• Print
• Comments
• Trackbacks (1)
• Share Link

Earlier today, President Obama welcomed Lilly Ledbetter to the White House and signed the Lilly Ledbetter Fair Pay Act.  You can find the text of the act here and even leave your comments on it. You can read the President's remarks here. And you can find the White House blog entry on the subject here.

In signing the bill, the President said:

So signing this bill today is to send a clear message: that making our economy work means making sure it works for everybody; that there are no second-class citizens in our workplaces; and that it's not just unfair and illegal, it's bad for business to pay somebody less because of their gender or their age or their race or their ethnicity, religion or disability; and that justice isn't about some abstract legal theory, or footnote in a casebook. It's about how our laws affect the daily lives and the daily realities of people: their ability to make a living and care for their families and achieve their goals.

Ultimately, equal pay isn't just an economic issue for millions of Americans and their families, it's a question of who we are -- and whether we're truly living up to our fundamental ideals; whether we'll do our part, as generations before us, to ensure those words put on paper some 200 years ago really mean something -- to breathe new life into them with a more enlightened understanding that is appropriate for our time.

I've covered the bill extensively in prior posts, which you can find here, but some final remarks on this new law for now are worth mentioning:

• The final version of this bill does NOT contain provisions relating to the Paycheck Fairness Act. That bill -- which was originally part of the House version -- did not make it into the Senate version. Thus, the Senate will take that measure up separately, perhaps later this year. 
• The bill is retroactive to May 28, 2007, but as the SCOTUS Blog is quick to remind us, it does not "revive" claims that have already been dismissed with a final judgment: 

The new law, because it would apply to cases still pending that were filed the day before the Court’s ruling, or thereafter, it has the specific effect of overturning the Ledbetter decision. It cannot alter any case that has been finally decided, however. Congress had the authority to overturn the Ledbetter ruling because that was based only on the Court’s reading of a statute, and not a constitutional provision.

• The bill's main purpose is to extend statute of limitations on compensation decisions. But the effect of the bill will be to allow for a potential look back on compensation decisions for several years -- and perhaps much, longer.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

To the surprise of absolutely no one, the U.S. House of Representative overwhelmingly passed two employment law bills addressing compensation issues.  

The Lilly Ledbetter Fair Pay Act, HR 11, pretty much split among party lines 247-171. The Paycheck Fairness Act, HR 12, passed 256-163.  

The bills now move on to the Senate, where the vote is expected to be closer.  

• Email This
• Print
• Comments
• Trackbacks
• Share Link

One of the more interesting television shows out there now is the Emmy award-winning  "The Amazing Race". At the start of the show, the host shouts, "Ready, Set, Go!" and off the contestants go on a race around the world places as yet unknown.

That, in essence, is what 2009 is shaping up to be in employment law: a race to change things as fast as you can with the final destination (and pitstops) as yet unknown.

This week, for example, two employment-law bills are on the fast-track for passage in the U.S. House, but it's being done so quickly that you may have a tough time catching up. 

Several Washington, D.C.- based blogs (including the Washington Labor & Employment Wire) are reporting this site that two pay-related bills are on the fast-track for consideration by Congress, perhaps in an effort to get them on to President-Elect Obama's desk by the time inauguration rolls around.

From the Washington D.C. Employment Law Update:

...House Majority Leader Steny Hoyer (D-Md.) announced that two employment-related bills will reach the House floor later this week. Both the Paycheck Fairness Act (H.R. 1338) and the Lilly Ledbetter Fair Pay Act (H.R. 2831) were introduced and easily passed the House during the last Congress, but stalled in the Senate due primarily to Republican opposition and a presidential veto threat. It is noteworthy that both bills are being sent directly to the House floor instead of being vetted through the committee process....

The Paycheck Fairness Act [version that]... will reach the House floor this week aims to do the following:

• Amend the Fair Labor Standards Act (FLSA) to allow victims of pay discrimination to potentially recover more remedies than those currently provided in the FLSA

• Enforce a new concept of “equal pay for comparable work”

• Prohibit employers from reducing other employees’ wages to achieve pay equity

• Require employers to disclose job categories and pay scales as needed to enforce the law

• Prevent employers from relying on the “factor other than sex” affirmative defense in wage discrimination cases; instead, employers must additionally prove that such factor is “job related” and serves a “legitimate business purpose.” An employee could rebut this claim by showing that an “alternative employment practice” exists that could achieve the same business purpose

• Entitle employees to unlimited punitive and compensatory damages, regardless of whether the wage discrimination was intentional.

You can view some of my earlier posts about the Paycheck Fairness Act starting here.  As I said then, this bill will re-emphasize to employers the importance of documenting pay decisions. 

On the Lilly Ledbetter bill, I summarized it and discussed the issues related to it in posts such as this one.   My comments then are fairly relevant to today as well:

The issue in Ledbetter case was, in many ways, a technical question of how far back an employee should be able to go to challenge past pay practices -- in other words, about deadlines and "statute of limitations". The Supreme Court said that the 180-day deadline found in the statute should apply. Should the statute of limitations remain at 180 days? 1 year? 2 years? 5 years? 20 years? I don't suggest to know what the right answer is. Ultimately, the answer to that question will help shape the Paycheck Fairness Act bill's final outcome and it should be the one that the politicians focus on.   Employers would certainly like shorter statute of limitations and have good arguments that because supervisors leave, short statute of limitations prevent stale claims from being brought. But employees have decent arguments that a longer statute of limitations should apply because discriminatory pay practices are often learned of only after they occur.
 

For employers, the debate over the Paycheck Fairness Act is one worth paying attention to because the real-world consequence of the bill's passage (whether now or next year) will be to increase the importance of documenting pay practices and to give employers another reason to preserve such documents for future litigation.

Hopefully, as the bill progresses, we'll see more debate on the pros and cons on having longer deadlines to file suits.

With the bills on the fast-track, i doubt we'll see much substantive debate on the bills, which is unfortunate. In the election, the concept of "change" was thrown about. This week is the first real sign that, for employment law issues, change is here.

• Email This
• Print
• Comments
• Trackbacks (1)
• Share Link

UPDATED 12/8/08

I must confess that every once in a while there's an employment law issue that pops up that makes me scratch my head at first.  Today's issue is one of them and introduces the concept of a "pay period leap year".

Michael Moore, of the Pennsylvania Labor and Employment Blog, first posted about this today.  Moore notes that 2009 is one of those strange years with 27 bi-weekly paydays instead of 26.  The issue arises because bi-weekly pay programs pay employees in 14-day increments resulting in a 364 day annual pay cycle. And so, every five years or so, there is a calendar year with 27 pay periods instead of the typical 26.

Moore adds that this is mainly an issue for salaried employees and suggests two approaches:

The 27 pay periods for 2009 create a compensation issue for salaried employees. Bi-weekly pay is typically calculated by dividing annual salary by 26 and employees are accustomed to a payroll amount based on this division. Continuing this practice in 2009 will result in an "extra" paycheck in 2009, but the normal 26 pay periods will resume in 2010. Some commentators have characterized this as a "timing issue". It is not. There are never years with only 25 pay periods to offset the years with 27.

Employers approach this situation in two ways. Some employers adjust salaried employee bi-weekly compensation for the 27 pay period years by dividing the stated annual salary by 27 rather than 26 resulting in a lower pay for each pay period in the year. Salaried employees are paid the same gross salary in smaller increments. However, this approach can cause problems with automatic deductions. Other employers allow the extra pay check and inflated compensation, not wanting to mess with the largely automated payroll system. Both approaches will require employee communication and may be influenced by an employer's past practice. Legal issues can arise from reducing the bi-weekly salary amount.

Some employer may think about moving to a semi-monthly pay period.  This causes issues for hourly workers because it may change the calculations of weekly overtime. 

Before Connecticut employers start changing payroll periods, however, employers must be aware that Connecticut requires that employees be paid on a weekly basis (though employers can get a waiver and pay on a bi-weekly basis through submission of a form available here.) For employers seeking to pay employees on a semi-monthly basis, additional papers are required to be filed with the Connecticut Department of Labor; it is far from certain that such a request will be granted either absent strong circumstances.

So, give thanks to the notion that you have a few weeks to think about this issue and make sure you have a plan of action for 2009 if you pay your employees on a bi-weekly basis. 

UPDATE: One commenter noted that the issue will arise primarily for those employers with pay dates on a Thursday (with employers with a Friday paydate facing the issue in 2010). That is true, though there are some employers that will pay their employees the day before a holiday if it falls on a Friday.  In any event, each HR person should evaluate their calendar to determine what will be the specific impact will be on his or her employer.

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

The Connecticut Supreme Court today ruled (in a decision that will be "officially released" on June 24, 2008) that an agreement between an employer and his employees to defer an employee's past wages until the employer receives revenue sufficient to pay those wages, is contrary to public policy , therefore, an invalid defense in a criminal prosecution for failure to pay wages.

The case, State of Connecticut v. Lynch (available here) is somewhat unusual because there are not very many criminal prosecutions of a failure to pay wages. Most cases arise in the civil context. But not here.  Here, the employer failed to pay wages for several pay periods and then tried to get employees to agree that their back wages and future wages would be contingent on future revenue of the company.

You may recall a case a few months ago  Ravetto v. Triton Thalassic Technologies (discussed in this earlier post)  which held than an agreement to defer accural of wages in the future does not violate public policy.  Indeed, back then, the court noted:

We cannot conclude as a matter of law, however, that an employer experiencing financial hardship that honestly informs employees that it cannot meet payroll and that does not promise them that future payment will be made is acting unreasonably when it allows employees to continue to work with the hope of future payment. This is particularly true where the employees are experienced business people and members of management who choose to continue working in the hope that their services to the employer will improve the financial status of the company. We can imagine circumstances in which such a choice by employees may inure to their benefits particularly when the financial hardship is short-lived and the financial status of the company ultimately improves. In the present case, we recognize that Triton ultimately did pay the plaintiffs the wages that were due them.

So, what's the difference here? Here, the Court says that the Agreement at issue applied by prospectively but also retroactively and as such, violated public policy. In fact, at the time that the employer proposed this "agreement", the employer had already missed several payroll periods.  Thus, the Court said that an agreement to postpone accural of wages violates public policy when applied retroactively.  In the absence of an agreement on when wages accrue, it's safe to assume that they accrue when the employee performs work.

What's the takeaway for employers from this case? First and foremost, keep up with obligations of payroll.  In the extreme case, the Connecticut Department of Labor can and will file criminal charges against employers that fail to keep up. Failure to pay wages is not one of those "grey" areas. Set up a payroll system and stick to it.

But if the company begins getting cash flow problems, it may consider setting up agreements with employees that may make payment future wage payments contingent on revenue.  This often happens in small, start-up ventures where the work is being done ahead of revenue coming in the door. 

These agreements will be heavily scrutinized so getting sound legal advice on this issue (as many others) should help ensure that the agreement will hold up later on.  The Court took great pains to note that agreements on when the employee accrues wages may be okay, but employers should still tread carefully because of the important public policy of paying employees wages "on time".

• Email This
• Print
• Comments
• Trackbacks
• Share Link