Conducting HR Audits under the Ledbetter Act of 2009

On January 29, 2009, President Obama signed the Lilly Ledbetter Fair Pay Act into law. The Act amends the statute of limitations for filing a lawsuit (EEOC, ADA, and other labor law based suits) for pay discrimination. The statute now begins to run each time an individual is affected by the application of a discriminatory compensation decision or practice. Accordingly, if someone is alleging that they have been treated unfairly with regard to their salary, they would have a new cause of action each time they are issued a paycheck. The Act applies retroactively to all claims arising on or after May 28, 2007. In order to reduce the risk of potential liability under the Lilly Ledbetter Fair Pay Act of 2009, it is a good idea for employers to conduct

First, any HR audit should include an analysis of starting compensation. An employer should be able to justify all pay and benefits decisions based on business or market conditions. Next, there should be an analysis of bonuses/raises. An employer should develop objective, measurable guidelines for compensation decisions to ensure that decisions are made in a consistent and uniform manner. Employees with similar objective performance measures (experience, education, etc.) should be earning about the same amount regardless of gender, race, disability or other protected class membership. Also, update any policies and procedures addressing compensation, performance evaluations, and promotions. Further, it is wise to evaluate job descriptions, applications, and performance evaluation tools to ensure that they accurately reflect the duties of the employee and that compensation is commensurate with same.

Additionally, it is wise to review manager and supervisor training regarding the proper use of performance reviews and disciplinary actions as these measures can affect an employee’s pay rate. At the same time also review record-keeping procedures to ensure that data is maintained electronically for a period of five years or more which may provide greater protection against what would previously have been “stale” claims. In the same vein, ensure that reasons for all pay decisions are documented and that such documentation is retained in the employee’s personnel file (and perhaps in a secondary location).

Logistically, the audit may be conducted internally by Human Resources personnel. However, if done within the confines of an attorney-client relationship, the privilege protects against making evidence discoverable by others in a subsequent legal claim. Moreover, the attorney work product doctrine may afford some protection for the attorney’s report to the extent there is a threatened or pending claim under the Act.