Case Law Medley: U.S. Supreme Court And Pay Discrimination, Sufficient Notice For Medical Leave, Wrongful Termination Based On Reporting Potential Violence In The Workplace, And An Unconscionable Arbitration Agreement

The month of May brought an array of California state and federal decisions that emphasize the need for all employers to properly train managers and supervisors regarding employment policies and the importance of implementing preventive employment practices in the workplace.

Federal Court Decisions

Ledbetter v. Goodyear Tire & Rubber Co., __ S. Ct. __ (May 29, 2007)

U.S. Supreme Court Restricts Statute of Limitations for Pay Discrimination Claims

Introduction: The U.S. Supreme Court recently decided the question of whether, and under what circumstances, a plaintiff may bring an action under Title VII of the Civil Rights Act of 1964 alleging illegal pay discrimination when the discriminatory pay decision occurred outside the limitations period. In Ledbetter v. Goodyear Tire & Rubber Co., __ S. Ct. __ (May 29, 2007), the Court held in a 5-to-4 decision that an employee could not maintain a pay discrimination suit based on prior discriminatory evaluations and pay adjustments because "later effects of past discrimination do not restart the clock for filing an Equal Employment Opportunity Commission (EEOC) charge."

Factual and Procedural Background: Lilly Ledbetter was a supervisor at Goodyear Tire Rubber Company's (Goodyear) plant in Gadsden, Alabama, from 1979 until her early retirement in November 1998. Ledbetter worked as an area manager for the plant for most of those years, a position that was largely occupied by men. During that time, salaried employees at the plant were granted or denied raises based on their supervisor's evaluation of their performance. Ledbetter's salary was initially in line with the salaries of the men performing substantially similar work. Yet over time, her pay began to decrease in comparison to the pay of the male area managers with equal or less seniority. By 1997, Ledbetter was the only woman area manager at the plant, and her pay was 15 to 40 percent less than the pay of her fifteen male counterparts after successive evaluations and percentage-based pay adjustments.

In July 1998 Ledbetter submitted a claim to the EEOC alleging certain acts of pay discrimination based on sex under Title VII of 1964 and the Equal Pay Act of 1963. The district court granted summary judgment in favor of Goodyear on several of Ledbetter's claims, including her Equal Pay Act claim, but allowed her Title VII pay discrimination claim to proceed to trial. During trial, Ledbetter submitted evidence attempting to prove that during the course ofher employment, several supervisors had given her poor evaluations because of her sex. Due to these evaluations, Ledbetter alleged that her pay was not increased as much as it would have been if she had been evaluated fairly, and that she was being paid significantly less than all of her male colleagues. Ledbetter ultimately alleged that the past pay decisions continued to affect the amount of her pay throughout her employment at Goodyear. Although Goodyear maintained that its evaluations of Ledbetter were nondiscriminatory, the jury found for Ledbetter and awarded her backpay and damages. Goodyear appealed and won, and then Ledbetter appealed to the Supreme Court.

Legal Analysis: Justice Alito delivered the five-member majority opinion of the Court. He began by restating the rule that the EEOC charging period is triggered when a "discrete unlawful practice" takes place. This rule applies to any "discrete act" of discrimination, including discrimination in "termination, failure to promote, denial of transfer, and refusal to hire." In the case of Ledbetter, a pay-setting decision is a "discrete act"; therefore, the period for filing an EEOC charge begins when the act occurs. The Court reasoned that the statute of limitations period runs from the date the employer makes a "pay-setting decision," and not the date the employee actually receives a paycheck with discriminatory wages, even if the effects of the discrimination were not fully apparent to the employee at that time. The Court acknowledged that although there may have been discriminatory intent behind the original decision that established Ledbetter's salary level, the employer had no discriminatory intent in setting her subsequent pay raises or issuing her subsequent paychecks beyond the 180-day limitation period.

Ledbetter first argued that pay disparities have a closer kinship to hostile work environment claims than to charges of a single episode of discrimination. Thus, Ledbetter believed that the discrimination claim should not rest on a particular paycheck, but rather on "the cumulative effect of individual acts." She argued that her paychecks were unlawful because they would have been larger if she had been evaluated in a nondiscriminatory manner prior to the EEOC 180-day charging period. Ledbetter's claims of sex discrimination were largely based on the misconduct of an individual Goodyear supervisor who allegedly retaliated against Ledbetter when she rejected his sexual advances twice. The supervisor also allegedly falsified deficiency reports about her work. However, no testimony was available from the supervisor because he died before trial-an obstacle that the Court believed would have been avoided had Ledbetter filed a timely EEOC charge.

Justice Ginsburg wrote the opinion for the four dissenting justices, stating that the Court's majority opinion "immunize[s] forever discriminatory pay differentials unchallenged within 180 days of their adoption." The dissenters agreed with Ledbetter that pay disparities were different from actions such as "termination, failure to promote . . . or refusal to hire" because they do not involve fully communicated discrete acts that are "easy to identify" as discriminatory. Ginsburg noted that pay disparities occur in small increments and comparative pay information is often not made available to employees. As a result, these small initial discrepancies may not seem sufficient to meet a discrimination case because the discrimination may occur over time. Ginsburg thereafter urged Congress to pass legislation to overturn the majority's holding.

Application for California Employers: The Supreme Court's holding implements the statutory intent to ensure that both employers and employees are promptly dealing with discrimination claims. This prompt filing of a discrimination claim puts the employer on notice of the charge and the possibility of having to defend a future employment discrimination suit. The Ledbetter decision may also give employers a powerful tool in defending against claims of discrimination other than just pay discrimination, because it may apply to other instances where the harm arose from an action that occurred outside the limitations period.

Senators Edward Kennedy (D-Mass.), Tom Harkin (D-Iowa), Hillary Clinton (D-N.Y.) and Barbara Mikulski (D-Md.) introduced a bill to nullify the Supreme Court's ruling and amend Title VII to allow plaintiffs to seek redress in situations similar to Ledbetter's. Representatives Rosa DeLauro (D-Conn.), George Miller (D-Calif.), and Eleanor Holmes Norton (D-D.C.) will introduce companion legislation in the House.

Davis v. O'Melveny & Myers, __ F.3d __ (9th Cir. May 14, 2007)

Law Firm's Arbitration Agreement Found to Be Procedurally and Substantively Unconscionable Under California Law

Introduction: In Davis v....