Since its passage in January, the Lilly Ledbetter Fair Pay Act has caused concern for employers and we’re routinely asked - “how long do I need to keep compensation records on file?”

The Act resulted from Ledbetter’s claim against Goodyear Tire Company. She sued and claimed that her salary increases over a 20-year period had been based more on her gender than her work performance, in violation of federal law.

She was victorious in her jury trial, but the 11th Circuit Court of Appeals reversed. Ultimately, the US Supreme Court agreed after finding that the discrimination had happened too long ago to be the basis for a claim.

Because their finding was based on the statutory 180-day time limit after the discrimination occurred, the Court issued a challenge to Congress to rectify the wording of Title VII, asking Congress to reconsider which events could trigger the time limit.

The Ledbetter Act solidifies the position that discrimination actually recurs with each discriminatory paycheck. Thus, the period of time during which an employee or other affected person can file a lawsuit begins when the discriminatory practice is adopted; when the individual becomes subject to the decision or practice; or when the individual is affected by the application of the decision or practice. As a result, the issuance of each paycheck falls within the new definition, so the statute of limitations begins anew with each subsequent discriminatory paycheck.

So what does this mean for your records retention policies?

Under Ledbetter, decisions you make today can be reviewed well into the future, even after the people making policy and reviewing decisions are long gone. As a result, you need practices in place that help you defend how decisions are made and compensation levels are set.

4 Tips to Ensure Compensation Record Retention Compliance

Tip 1: Assess Your Compensation Practices

Take time to make good decisions about pay and maintain records that document the consideration given to such decisions. Do you have enough documentation supporting how and why your people are paid what they’re paid? Is the documentation maintained in such a way that someone representing the company 10 or 20 years down the line can easily access and then utilize the material for a successful defense of those decisions?

Tip 2: Maintain Those Records

Indefinitely? Well, with the technology available today and the discovery rules currently in effect, electronic archiving is the way to go and it ensures that, yes, documents can be maintained indefinitely, if necessary. Make sure you’ve got an IT department to help set things up appropriately.

Tip 3: Review Past Decisions

Like Tip 1, careful review of compensation decisions helps ensure compliance. If the practice of your company is to have one manager or supervisor make decisions on pay, review that practice to determine whether it is defensible. Consider adopting a compensation review system that allows decisions to be reviewed with the same kind of scrutiny used in a termination or disciplinary scenario. Committee oversight, or at the very least, an additional set of eyes reviewing those decisions may be critical.

Tip 4: Train Decision Makers

Ensure that whoever is making pay decisions for your company understands the implications of their actions – the decisions made on compensation today can now be challenged years down the line. Appropriate decisions and proper documentation supporting those decisions are vital when it comes to the future defense of same so it’s important that your compensation decision makers understand this and are trained appropriately.

More than anything, the Ledbetter Act serves as a reminder of the importance of thinking ahead. Whether it’s a termination decision, a disciplinary decision, or a compensation decision, always keep in mind how you (or a future management team) will support and defend those decisions later.