Blameless Ignorance? The Ledbetter Act and Limitations Periods for Title VII Pay Discrimination Claims

Jeremy A. Weinberg

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In Ledbetter v. Goodyear Tire & Rubber Co. 1 the Supreme Court rejected the argument that under Title VII of the Civil Rights Act of 1964 (Title VII),2 a new act of discrimination occurred and a new limitations period arose each time an employer issued a paycheck to an employee that reflected some past, uncharged discrimination. This argument, known as the “paycheck accrual rule,” had previously been accepted by many courts, which used it to determine whether a pay discrimination claim was timely filed.

Without the paycheck accrual rule, many commentators feared that victims of pay discrimination would be unable to investigate, uncover, and charge discrimination against their employer within Title VII’s short limitations period. Justice Ginsburg dissented in Ledbetter, arguing that the Court’s rule would prove disastrous for victims of pay discrimination, who will frequently fail to file a timely charge because they are unaware of the fact that they have been victimized.3 She called upon Congress to take the lead and correct what she called the majority’s “parsimonious reading of Title VII.”4 Congress accepted that challenge and passed the Lilly Ledbetter Fair Pay Act (Ledbetter Act), which amended Title VII to codify the paycheck accrual rule.5

This Editorial examines the problems inherent in the Ledbetter Act and argues that either of two alternative approaches—(1) an injury discovery rule or (2) the application of equitable tolling for cases of fraudulent concealment—would be superior to the Ledbetter Act’s paycheck accrual rule.

 
I.
Problems with the Ledbetter Act’s Paycheck Accrual Rule

The Ledbetter Act’s paycheck accrual rule suffers from several shortcomings. First, it makes the limitations period for a particular class of discrimination cases dependent on a factor completely divorced from the discriminatory intent that gives rise to the claim. The act of paying wages to an employee does not, on its own, suggest that an employer is engaging in discrimination; yet under the Ledbetter Act, this is precisely what determines the relevant limitations period. This leaves today’s management responsible for the sins of its predecessors, about which it might not have been aware or acquiescent. While in some cases it may be beneficial for new management to investigate the pay disparities that it inherited from prior management in order to ferret out past discrimination, the game might not be worth the candle. New managers will have to mine through years of data and reports in order to second guess the motivations of their distant predecessors. Far removed in time from the relevant events, they will likely be in a poor position to determine which pay decisions were legitimate and which were discriminatory.

Second, the paycheck accrual rule seriously undermines the societal interest in repose embodied in statutes of limitations. The rule gives little credence to this interest because it renews the limitations period for pay claims with each paycheck, meaning that some plaintiffs will be able to bring claims about pay decisions made decades in the past.

Third, the paycheck accrual rule only benefits a select number of victims of discrimination—a group that prima facie is no more deserving of protection from harsh limitations periods than other victims of discrimination. It does nothing to help plaintiffs who want to bring claims alleging discrimination in employer decisions about, for example, bonuses or firings. Even the employee who suffered from past discrimination and only learns of it long after she has left the discriminator’s employ finds no solace in the Ledbetter Act, having received no “tainted” paychecks within the limitations period.

Fourth, the paycheck accrual rule gives a windfall to many undeserving plaintiffs. The Ledbetter decision generated uproar because of the perception that it created unfairness for plaintiffs who were unaware that they had been victimized, yet the Ledbetter Act’s more generous limitations period is not contingent on a plaintiff’s ignorance of the discrimination against her. Even those who are fully aware that they have been discriminated against receive a new limitations period each time they are paid, raising the concern that plaintiffs will unfairly use the more generous limitations period to their advantage, long after learning of the discrimination.

Finally, the paycheck accrual rule reduces employees’ incentives to seek out and discover pay discrimination—an important objective of statutes of limitations.

 
II.
Alternative Approaches to the Paycheck Accrual Rule

In light of the shortcomings of the Ledbetter Act’s paycheck accrual rule, it is worth considering alternatives that could address the problem of time-barring plaintiffs who were unaware, through no fault of their own, that they had been victimized. This Part argues that two such alternatives—(1) a so-called “injury discovery rule,” in which the limitations period begins only when the plaintiff becomes aware that she has been injured, and (2) the doctrine of equitable tolling for cases in which an employer’s fraud disguised the presence of pay discrimination—are both superior to the paycheck accrual rule. 

 
A.     The Injury Discovery Rule

A discovery rule gives extra filing time to a plaintiff who, because of blameless ignorance of facts vital to her case, does not bring her claim until long after the complained-of conduct has occurred. Such a rule protects employees from having their suits time-barred when they do not know they have been victimized.

One type of discovery rule—the “injury discovery rule”—triggers the limitations period when the plaintiff discovers or should reasonably have discovered that she has been injured. An injury discovery rule, if applied to Title VII, would protect deserving plaintiffs and better address the concerns Justice Ginsburg raised in her Ledbetter dissent, without the drawbacks of the paycheck accrual rule.

An injury discovery rule is preferable to the paycheck accrual rule because it encompasses more deserving claims, including those of employees who experienced discrimination in the distant past that does not affect their wages today (for example, victims of discriminatory bonuses). An injury discovery rule would also prevent differential treatment of the victim who continues working for the discriminatory employer and the victim who does not. Furthermore, unlike the paycheck accrual rule, an injury discovery rule bars knowing plaintiffs from sleeping on their rights and bringing claims years later, at a time when the deterioration of evidence has disadvantaged the defendant’s ability to defend itself.

 
B.     Equitable Tolling/Fraudulent Concealment

Another option that would give deserving pay discrimination plaintiffs sufficient time to file while avoiding the unfairness inherent in the paycheck accrual rule is the use of equitable tolling. Equitable tolling halts the running of the limitations period when, through an act of fraud, the defendant prevents the plaintiff from filing a claim in a timely manner. If an employer, through “fraud or concealment of the existence of a claim,” prevents an employee from discovering pay discrimination, the doctrine of equitable tolling allows for suspension of the limitations period “until the fraud or concealment is, or should have been, discovered.”6 Equitable tolling is also superior to the paycheck accrual rule in addressing Justice Ginsburg’s concern that rigid limitations periods keep deserving but blamelessly ignorant plaintiffs out of court.

The doctrine of equitable tolling protects deserving plaintiffs who are diligent about their rights but face obstacles to bringing suit without, as the paycheck accrual rule does, rewarding plaintiffs who sit on their rights. This provides the right incentives to plaintiffs by encouraging them to investigate and protect their rights, since a failure to do so could lead a court to find their claim time-barred, even if they were unaware that they had been injured. At the same time, equitable tolling does not subject employers to endless limitations periods. An equitable tolling regime, unlike a paycheck accrual system, allows an employer who does not engage in fraud to achieve repose as to events falling outside the limitations period.

 
III.
Equitable Tolling and Pay Secrecy Rules

In the context of pay discrimination, plaintiffs might assert that employers have committed fraud by covering up the fact that an employee was paid less due to her race, color, religion, sex, or national origin. Increasingly, information about pay discrimination is hidden from employees by policies that bar them from discussing their pay with coworkers.7 Though the National Labor Relations Board and courts have struck down workplace pay secrecy rules as violations of employees’ rights under the National Labor Relations Act, these rules persist.

Such workplace rules effectively prevent employees from discovering that they have been the victims of pay discrimination. As such, the Title VII limitations period for employees subjected to pay discrimination in workplaces with such pay secrecy rules should be tolled until the employees discover (or reasonably should discover) that they have been victimized. Unlike the Ledbetter Act’s paycheck accrual rule, this doctrine could reach any employee who was discriminated against and whose employer took steps to block her from discovering that fact.

Section 550 of the Restatement (Second) of Torts recognizes a claim for fraudulent concealment.8 As comment (b) of section 550 notes, one of the common ways in which fraudulent concealment is effectuated is “when the defendant successfully prevents the plaintiff from making an investigation that he would otherwise have made, and which, if made, would have disclosed the facts; or when the defendant frustrates an investigation.”9

For example, when an employer tells an employee that she cannot discuss her salary nor inquire about how much other employees earn on pain of reprimand or discharge, the employer prevents the employee from making an inquiry and keeps her from discovering that she earns less than her male counterparts. Such information is undoubtedly material for an individual trying to determine if her rights have been violated by discriminatory pay decisions. This analysis does not suggest that an employer commits fraud—and that the limitations period is therefore tolled—every time it engages in pay discrimination and fails to inform the employee thereof. Rather, the employer perpetrates fraud when it “frustrates [the employee’s] investigation”10 by placing roadblocks in the way of her efforts to uncover pay discrimination.

The equitable tolling doctrine therefore protects the most worthy plaintiffs (those who are diligent about protecting their rights) against the stringency of Title VII’s short limitations period, without creating the problems of the paycheck accrual rule. While equitable tolling on its own does not cover all victims of pay discrimination, it helps those most in need without incentivizing the stale suits that will likely accompany the Ledbetter Act’s paycheck accrual rule. 

 
Conclusion

The paycheck accrual rule, which resets the limitations period for pay discrimination claims with each paycheck an employee receives, is a poor solution to the problem highlighted by the Supreme Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co.: the difficulty that victims of pay discrimination face in detecting discrimination and bringing suit within Title VII’s limitations period. Specifically, the paycheck accrual rule gives inadequate weight to the societal interest in repose and protects select victims of pay discrimination without offering anything to other victims who are equally, if not more, deserving of extended filing time. Either application of an injury discovery rule or the use of equitable tolling for cases of fraudulent concealment would do a better job of providing access to justice for people who are blamelessly ignorant of the fact that they have been discriminated against, while still preserving the principle of repose.

Acknowledgments:

Copyright © 2010 NYU Law Review.

Jeremy A. Weinberg received his J.D. from New York University School of Law in 2009.

  1. 550 U.S. 618 (2007), superseded by statute, Lilly Ledbetter Fair Pay Act of 2009, Pub. L. No. 111-2, 123 Stat. 5 (codified as amended in scattered sections of 29 U.S.C. and 42 U.S.C.).
  2. 42 U.S.C. §§ 2000e to e-17 (2006). Title VII is the federal law that bars discrimination in employment. The primary substantive provision of the law states: “It shall be an unlawful employment practice for an employer . . . to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin . . . .” 42 U.S.C. § 2000e-2(a)(1).
  3. See Ledbetter, 550 U.S. at 649–50 (Ginsburg, J., dissenting) (discussing problem of concealed pay discrimination).
  4. Id.
  5. Lilly Ledbetter Fair Pay Act of 2009, 123 Stat. at 6 (legislating that unlawful employment act occurs “when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice”).
  6. Iavorski v. INS, 232 F.3d 124, 134 (2d Cir. 2000).
  7. See Leonard Bierman & Rafael Gely, “Love, Sex and Politics? Sure. Salary? No Way”: Workplace Social Norms and the Law, 25BERKELEY J. EMP & LAB. L. 167, 168 (2004) (noting that one-third of private sector employers have adopted such pay secrecy rules); Adrienne Colella et al., Exposing Pay Secrecy, 32 ACAD. MGMT. REV. 55, 57 (2007) (same).
  8. RESTATEMENT (SECOND) OF TORTS § 550 (1977) (“One party to a transaction who by concealment or other action intentionally prevents the other from acquiring material information is subject to the same liability to the other, for pecuniary loss as though he had stated the nonexistence of the matter that the other was thus prevented from discovering.”).
  9. Id. § 550 cmt. b.
  10. Id.

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