Do you own a scanner? Good. Get ready to use it. With the passage of the Lilly Ledbetter Fair Pay Act, Congress has extended the time period during which employees can pursue disparate pay claims and claims of intentional wage discrimination under Title VII, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the Rehabilitation Act. The Ledbetter Act provides that the 180-/300-day time period for filing an EEOC charge occurs each time a discriminatory paycheck is issued, not just when the employer makes the original pay decision.
In response to the Act's passage, many employers have considered revising their record retention policies to ensure that they retain documents reflecting decisions about pay rates, raises, and bonuses until the new limitations period has expired. Although, at first glance, such a policy seems sufficient to guard against any potential wage discrimination claims, in many cases it is not enough.
An employer's best defense against a wage discrimination claim is evidence that (1) the employer bases its pay decisions on work performance, seniority, and/or an otherwise permissible business consideration, and (2) the employer treats similarly situated employees the same. The EEOC looks for comparables. Therefore, when an employee files a charge of discrimination, the EEOC customarily requires the employer to provide evidence that the employer has applied both its pay scale and bonus policies equally among similarly situated employees. This evidence comes from payroll and other personnel records reflecting the employer’s basis for the pay decision.
Why a longer retention period?
Consider the following scenarios:
A 15-year minority employee who files a wage discrimination charge could potentially allege that he was forced to start at a lower salary than coworkers who were hired in at the same time. Some of the coworkers may have left the company over the years, and without their payroll records, the employer would not be able to provide the EEOC with evidence of the necessary comparable employees.
A 25-year employee is frustrated that, during her tenth year with the company, she did not receive a merit bonus. The human resources professionals that determined who should receive the bonus are no longer with the company and, in fact, are no longer living. Without personnel records of both the claimant and similarly situated employees who worked with the company that year, the employer would not be able to effectively demonstrate that it had applied its bonus policy in a nondiscriminatory matter.
The long and short of it is this: Employers need to keep their records longer. That's where the scanner comes into play.
How long should I keep my records?
In light of the potential document retention minefields created by the Ledbetter Act, the length of time an employer should retain personnel and payroll records has significantly increased. However, the Act does not provide guidance regarding how long an employer must keep those records. Thus the decision rests on a variety of factors including, but not limited to, the role that management discretion plays in the company’s wage and bonus policies versus policies that are more seniority based, the employer's comfort level with regard to exposure to potential Ledbetter claims, as well as many other factors. Most employers will prefer to err on the side of longer retention periods, with many employers opting to retain personnel and payroll records indefinitely.
Ready, set, scan!
The best time to consider your company's personnel and payroll record retention policies is now. Please contact a member of the Warner Norcross & Judd Labor and Employment Law Practice Group to get started. And, in the meantime, practice using your scanner.