With perhaps too much fanfare, President Barack Obama signed the Lilly Ledbetter Fair Pay Act in 2009. This law substantially relaxed the deadline to file pay discrimination claims under Title VII and other federal statutes. Some members of the Texas Legislature now want to enact similar legislation in the Lone Star State.

U.S. Supreme Court Applies Restrictive Statute of Limitations to Wage Claims — Congress Reverses the Court   

This issue first gained considerable public attention after the U.S. Supreme Court's decision in Ledbetter v. Goodyear Tire & Rubber Co. In that case, the court held that Ms. Ledbetter's claim for gender and pay discrimination was time-barred because she failed to file an Equal Employment Opportunity Commission (EEOC) charge within 180 days of learning of the discriminatory pay practice. Ledbetter filed her administrative claim upon retirement although the pay disparity between her and her male co-workers had existed for several years. In dissent, Justice Ruth Bader Ginsburg concluded that the receipt of each discriminatory paycheck should have reset the 180-day limitations period. She accused the court of employing a parsimonious interpretation of the statute and publicly invited Congress to act. In response, Congress effectively reversed the Supreme Court by amending federal law to adopt Justice Ginsburg's rationale. Now, the clock for filing a pay discrimination claim under Title VII restarts each time a discriminatory paycheck is received.

Texas Supreme Court Rejects Application of the Ledbetter Act to State Law Wage Claims

This same limitations issue later reached the Texas Supreme Court in a case under the Texas Commission on Human Rights Act, the state's analog to Title VII. Under the TCHRA, a claimant must file a complaint with the Texas Workforce Commission (TWC) “not later than the 180th day after the date an alleged unlawful employment practice occurred.”  The state supreme court — like the court in Ledbetter — held that the unlawful employment practice “occurred” when a discriminatory employment decision is made, not when the effects of that decision become manifest in later events and that in the case of a discriminatory pay rate the act of setting the pay rate is the only act taken with a discriminatory motive. The court also concluded that Ledbetter Act does not apply to state law pay discrimination claims and declined to “make law” absent clear legislative intent. The court then invited the legislature to enact changes to the law as it deemed fit. The Republican-controlled Texas Legislature did so and passed a law substantially similar to the Ledbetter Act, but then-Governor Perry vetoed the bill in 2013.

Texas Legislature Again Considers Adoption of the Ledbetter Act

In the current Texas Legislative session, some lawmakers are again attempting to make changes to the Labor Code that would modify the deadline to bring pay discrimination claims. Specifically, Senate Bill 112 would allow employees subjected to pay discrimination to file a charge of discrimination with the TWC 180 days after the last paycheck reflecting the discriminatory rate of pay. More specifically, this proposal provides that an unlawful employment act occurs each time an employee is “adversely affected by application of a discriminatory compensation decision or other practice,” including each time wages affected by the decision or practice are paid.  So this amendment resets the statute of limitations for discriminatory pay decisions or practices with each paycheck reflecting the decision or practice.

For employers, this statute would mean that there is no effective statute of limitations for wage discrimination claims, as long as an employee continues to receive allegedly discriminatory paychecks. In other words, a claim for wage discrimination would only accrue upon receipt of a final discriminatory paycheck. It is possible that a decision made years or even decades earlier — by former management or supervisors — could become the focus of pay discrimination litigation. Given that the passage of time can have a serious impact on the witnesses and available evidence, these cases would be particularly difficult to defend. This is added incentive for Texas employers to regularly monitor and audit their pay practices to ensure compliance with federal and state law.

There a few other notable features of the proposed legislation. First, it would allow an aggrieved employee to recover back pay for up to two years prior to filing a charge with the TWC even if the discriminatorily motivated decision occurred outside the period for filing a complaint. Second, while pay discrimination is often associated with gender discrimination, the Texas law — like the Ledbetter Act — would modify the statute of limitations for all pay discrimination claims, including those claims that allege pay disparities based on race, color, disability, religion, sex, national origin, or age.

Proponents of Senate Bill 112 contend that it is difficult for employees to discover the discriminatorily motivated acts because of the secrecy of compensation decisions and that passage of this law will further diminish the pay disparity between men and women. While opponents of the bill assert that the proposed change will open the floodgates for wage discrimination claims and permit lawsuits to be filed years after an allegedly discriminatory act occurred. At this point, it is uncertain whether this bill will ultimately be signed into law by Gov. Greg Abbott, but given similar legislation passed a few years ago, Texas lawyers and employers should closely monitor the progress of Senate Bill 112 until the Legislature adjourns on May 27.

Mark A. Shoffner is a partner with Bell Nunnally in Dallas. He can be reached at [email protected], or via the firm's website – http://www.bellnunnally.com.