Almond v. Unified school District #501, No. 10-3315 (10th Cir. Nov. 29, 2011); Schwartz v. Merrill Lynch Co., No. 10-0826 (2d Cir. Nov. 30, 2011)

| Nov 30, 2011 | Daily Developments in EEO Law |

The Lilly Ledbetter Fair Pay Act of 2009 righted an injustice to employees whose discriminatory compensation results from numerous, cumulative and small decisions that are not separately actionable under Title VII and other statutes. By that Act, Congress abrogated the unpopular 5-4 decision, Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618, 622 (2007), placing a short deadline on filing such claims. But the Act is not a cure-all for everything ailing employees, as two decisions this week by the Second and Tenth Circuits demonstrate.

Almond v. Unified school District #501, No. 10-3315 (10th Cir. Nov. 29, 2011): The Tenth Circuit takes on the issue of whether the Act extends the deadline for the filing of a charge of age discrimination in a demotion case, where one of the consequences was a reduction in pay.

In this case, two employees (in 2003 and 2004) had their jobs eliminated by the school district and were offered the opportunity to trade down to lower-paying jobs, although they would be allowed to preserve their current salaries for two years. In 2006, when the two years had expired, both employees filed EEOC charges alleging pay discrimination under the ADEA. Because the employees filed their charges outside the limitations period of 300 days of when they learned of their demotions, the district court entered summary judgment against them. The district court revisited the issue in light of the Ledbetter Act, but ultimately still ruled against the employees.

The Tenth Circuit affirms, holding that the Act applies only in cases where an employee claims that she “receives less pay than similarly situated colleagues – that is, unequal pay for equal work.” Even if a demotion cause the employee to be paid less, the demotion is a tangible act that falls outside of the Ledbetter Act’s purview.

The panel analyzes the claims under the pre-existing law and then considers the Act. It reaffirms that anti-discrimination claims accrue when the employee learns (or with reasonable diligence, should have learned) about an adverse employment action. “[C]onsistent with the general federal rule, an employee who discovers, or should have discovered, the injury (the adverse employment decision) need not be aware of the unlawful discriminatory intent behind that act for the limitations clock to start ticking.” Based on that principle, the panel finds that the two employees were aware as early as 2003 and 2004 that their salaries would eventually be diminished, and the clock commenced running then. 

The panel then considers whether the Act might apply to rescue the same claims from being time-barred. Construing the operative term “discrimination in compensation,” 29 U.S.C. § 626(d)(3), the panel holds that this section applies only to claims of unequal pay, and not claims of other discrete acts (such as denial of promotion, or demotion) that incidentally result in less pay. The panel holds:

“Neither is the phrase ‘discrimination in compensation in violation of this chapter’ some Rorschach inkblot to which we may ascribe whatever meaning springs to mind. It is instead a clear cross-reference to a specific term of art with a settled legal meaning. ‘This chapter,’ namely the ADEA, contains a particular prohibition on compensation discrimination in § 623(a)(1). To prove such a claim, it isn’t enough for an employee to show that a discriminatory practice somehow affected his or her pay. Instead, the employee must show a discriminatory pay disparity between himself or herself and similarly situated but younger employees. . . .In other words, ‘discrimination in compensation’ requires not just any effect on pay, but one of a particular kind: unequal pay for equal work.”

Although the Act refers to “discriminatory compensation decision or other practice,” the panel cuts this phrase down to size by showing that it refers not to the type of claim presented, but to the accrual of the limitations period, instead.

“. . . . the question remains what work does the second statutory phrase on which the plaintiffs seek to rely do? The answer has nothing to do with which claims the Act covers but with when those claims accrue. After the first phrase of the Act defines which claims it affects (discrimination in compensation claims), the second phrase goes on to tell us when those claims accrue for limitations purposes. As a matter of plain linguistic direction, the second phrase tells us compensation discrimination claims accrue for limitations purposes ‘when a discrimination in compensation decision or other practice’ is ‘adopted,’ or ‘when’ someone becomes ‘subject to’ or ‘affected by’ its application.”

Schwartz v. Merrill Lynch & Co., No. 10-0826 (2d Cir. Nov. 30, 2011): The employee Schwartz was a former Merrill Lynch financial assistant (FA) whose claims of sex discrimination in compensation during 2000-2005 – fostered by, inter alia, a history of inequitable account distribution – were subject to a voluntary arbitration agreement (the Employment Dispute Resolution Program, or EDR). In the background, years previously, there had also been a Title VII class settlement of similar claims approved by another court, which – for purposes of Ms. Schwartz’s case – settled and released all claims prior to April 2, 2001.

The arbitration panel refused to consider evidence of claims of pay discrimination dating prior to the April 2001 release, but allowed Schwartz to “offer evidence of events that occurred shortly before that date if they were relevant to her claims of discrimination on or after that date.” Then, before the arbitration panel entered an award against Schwartz, the Ledbetter Act became law and Schwartz argued that the panel was compelled to consider pre-release events as evidence of discriminatory intent. The arbitration panel refused to reconsider its position. The district court then affirmed the award against Schwartz under the Federal Arbitration Act (FAA) § 10.

On appeal, Schwartz renewed her argument that the arbitration panel award must be vacated for “manifest disregard” of the law under the FAA, because the arbitration panel barred her from introducing evidence of pre-release acts of sex discrimination that conceivably gained in relevance when Congress reset the limitations period for unequal pay claims.

The Second Circuit nonetheless affirms, holding that the evidentiary issue was not governed by the Ledbetter Act, but by the arbitration agreement and release itself, and that the arbitration panel’s decision was a valid interpretation of the standing law:

“The record in the present case provides no basis for vacating the Panel Award denying Schwartz’s claims. None of the grounds articulated in FAA § 10(a) is applicable. A final decision was reached by the Panel; Schwartz has presented no evidence of fraud, corruption, or use of undue means to reach that decision; and she has pointed to no evident partiality, corruption, misconduct, or misbehavior on the part of the arbitrators. Although Schwartz contends that the Panel should have considered all of her pre-April 2001 evidence as to discriminatory practices by Merrill Lynch, the temporal limitation imposed by the arbitrators was based on their interpretation of the Release, in which Schwartz expressly relinquished any claims ‘related to’ her employment with Merrill Lynch prior to the April 2, 2001 date on which she signed the Release. Further, the Panel did not rigidly exclude all evidence of conduct by Merrill Lynch prior to April 2, 2001; rather it allowed the introduction of evidence as to events that occurred as much as six months before that date.”

Because of these circumstances, the panel holds that “we need not decide in this case whether a retroactive change in governing law is a ground for vacatur of an arbitration award under an agreement that guarantees the protection of applicable law, because the Panel did not limit the presentation of evidence on the basis of Ledbetter. The Panel simply ruled that Schwartz had released claims of discrimination based on events that occurred prior to the date on which she signed the Release.”

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