Pay Equity and the Ledbetter Act

Statutes of limitations reflect a reasonable concern that as time passes, evidence becomes stale and memories fade, so that at some point potentially valid legal claims should be barred. Barring valid claims just because they are old seems harsh, but the legal system has all kinds of rules that penalize people with valid claims who do not act on them promptly and carefully; these rules are needed to keep the system running smoothly. Virtually all civil claims are subject to statutes of limitations, usually in the range of a few years.

Rich says that the Supreme Court erred in the Ledbetter case by deciding that the relatively short statute of limitations begins to run at the time of the initial discriminatory act, such as a decision to give a female employee a low salary because of her sex, rather than restarting with every subsequent payment, when no discriminatory intent exists. Rich argues that the purpose of antidiscrimination laws is not to ban discriminatory intent but to ban discrimination, and discrimination continues even if subsequent bosses do not intend to discriminate but just pay wages on the basis of a pay schedule established by predecessors who did intend to discriminate. Maybe so, but a disparate treatment claim can succeed only if discriminatory intent is proved, which means that the litigation will necessarily involve evaluation of the initial act. If the purpose of the statute of limitations is to ensure that evidence is fresh at the time of trial, and a valid claim depends on proof of discriminatory intent, then the traditional rationale for statutes of limitations implies that the clock should begin at the time of the intentionally discriminatory act, and not be restarted whenever wages are paid.

It is true that it will often be difficult for victims of discrimination to discover the discrimination within 180 days of the initial act. But it is not a sufficient criticism to say that some valid claims will be barred. Courts and legislatures have struggled with this issue for centuries, and while they have developed some rules that take the edge off the harshness of statutes of limitations—for example, equitable tolling of the statute when the victim could not reasonably have discovered the injury, the doctrine of continuous tort when the activity is ongoing, and so forth—these rules are controversial and not applied in all settings because they introduce uncertainty, requiring courts to make case-by-case judgments about what is reasonable and what is not, possibly undermining the administrative values that statutes of limitations are designed to serve.

None of this is to say that the 180-day limit is necessarily correct as a matter of policy. Perhaps Congress should amend the law in order to bring it into line with state statutes of limitation for torts and breaches of contracts, which usually run for a few years. The problems of proof that arise from pay discrimination seem similar to those for a range of fraudulent acts, where an underpayment of some sort is concealed from the victim.  In many states, the clock for a fraud claim does not begin to run until the violation could have been reasonably discovered. Perhaps this approach would work for antidiscrimination law.  But the Ledbetter Act goes farther than this. If I read the law correctly, pay-setting discrimination that occurs when a worker is 20 years old could be litigated 30 or even 50 years later, as the statute of limitations can be restarted by retirement benefits as well as the most recent wage payment.

Opposition to the Ledbetter Act need not be based on sexism, as Dahlia claims , though she is certainly correct to mock the frivolous arguments of many of its critics. The Civil Rights Act balances costs to victims and costs to businesses. Concern for the cost to business can be the only explanation for the unusually short 180-day statute of limitations, which would continue to apply as before to discrete acts like terminations, unaffected by the Ledbetter Act, if it were passed. Presumably, the fear is that if judges and juries second-guess business decisions too closely and frequently, employers will be unwilling to make reasonable hiring, termination, and wage decisions that minimize labor costs but that are hard to justify before third parties who are confronted with claims of sex discrimination.

So one can’t avoid doing a cost-benefit analysis in order to evaluate the Ledbetter Act. Would the gains for pay equity exceed the costs to business? To answer this question, one can’t just say that anyone in favor of pay equity must be in favor of the act. People who care about pay equity and business costs must consider both factors.

With respect to pay equity, notwithstanding the ugly facts of the Ledbetter case itself, there is relatively little solid evidence that the 20 percent to 30 percent pay gap between men and women is due to intentional sex discrimination on the part of employers. The problem is that it is difficult to observe and measure all relevant characteristics that play a role in the setting of pay. A typical study will control for obvious factors such as age, education level, geographic location, and college major. Such a study will show that a 30-year-old female stock analyst with a B.A. in economics earns a wage about 20 percent to 30 percent lower than that of a 30-year-old male stock analyst with a B.A. in economics. Suppose, however, that the woman took time off to have a child in her 20s and stayed home with the child for a couple years before returning to work. If, as a result, she has less experience and is therefore less productive at the age of 30 than the man, it would not be unlawful discrimination to pay her less. Yet most studies cannot control for this possibility because most data sets do not include information about work experience.

A few recent studies have made progress, however. This study analyzes a data set consisting of college-educated men and women, and finds that much of the wage gap is explained by differences in experience; see also this study . Another study I have read (I have lost the link) looks at the wages of men and women who have recently graduated from college—before the experience effect can set in—and finds no difference between the wages of men and women with the same jobs. These studies dovetail with an emerging popular view that, either because of sexism or because of personal choice, women are more likely to take time off from their jobs to care for children than men are; sexism or personal choice also affects such “premarket” factors as the choice of major, and women tend to choose less remunerative majors than men do—English rather than engineering. If employers should pay people according to their qualifications, if taking time off reduces one’s productivity relative to those who do not take time off, and if women are more likely to take time off for childcare than men are, women will continue to be paid less than men. If this conclusion is not acceptable as a matter of public policy, then new laws need to be enacted. The length of the statute of limitations for existing antidiscrimination law is almost completely irrelevant.

What of the costs to business? Unfortunately, these costs are also hard to measure. Businesses claim that they will be overwhelmed with litigation if the Ledbetter Act passes, but the main effect of laws that expand the rights of employees is not to create litigation but to cause businesses to change their behavior in order to avoid litigation. The only legitimate concern is that businesses will start paying workers the same amount even though their productivity differs because they fear that judges and juries will not be able to understand how productivity is determined. This would raise labor costs and hence prices for consumers; but as far as I know, no one has any idea whether these costs are high or low.

Given the tremendous uncertainty on both sides of the equation, the case for the Ledbetter Act is an uncertain one. Certainly, sex discrimination continues to occur, and as long as it continues to occur, it makes sense to give victims a legal remedy. But the implications of this observation for the statute of limitations question are, at best, complicated. If it is true that victims have trouble discovering that their wages are the result of discrimination, and employers are adept at concealing this information, that would be a better argument for equitable tolling than for the provisions in the act.