CASE STUDY 9.1: Pay Inequity at Goodyear Tire and Rubber
One evening when she came to work to start the night shift, Lilly Ledbetter found an anonymous note in her mailbox at the Goodyear Tire & Rubber plant in Gadsden, Alabama. She had worked for Goodyear for 19 years as a manager and was shocked at what she read. On the note, her monthly pay ($3,727) was written along with the pay (which ranged from $4,286 to $5,236) of three of her male colleagues who started working for Goodyear the same year that she did and did the same job. Ledbetter (2012) stated, “My heart jerked as if an electric jolt had coursed through my body.” She filed a gender pay discrimination lawsuit under the 1964 Civil Rights Amendment and was awarded $3 million in back pay and other benefits she lost due to pay discrimination (e.g., contributions to her retirement).
Lilly’s case was appealed to the U.S. Supreme Court, which ruled against Ledbetter. In the case of Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007), the U.S. Supreme Court decided that the statute of limitations for presenting an equal-pay lawsuit begins on the date that the employer makes the initial discriminatory wage decision, not at the date of the most recent paycheck. Lilly became famous after she lost the Supreme Court case. While she did not win the case, it did result in new legislation regarding when an equal-pay lawsuit can be filed. This court decision ultimately led to the Lilly Ledbetter Fair Pay Act of 2009 (Pub.L. 111–2, S. 181), which states the 180-day statute of limitations for filing an equal-pay lawsuit resets with each new paycheck affected by discrimination. The act is a federal statute and was the first bill signed into law by President Barack Obama in 2009. Lilly’s website states the following:
For 10 years, Lilly Ledbetter fought to close the gap between women’s and men’s wages, sparring with the Supreme Court, lobbying Capitol Hill in a historic discrimination case against Goodyear Tire and Rubber Company. . . . Ledbetter will never receive restitution from Goodyear, but she said, “I’ll be happy if the last thing they say about me after I die is that I made a difference.” (www.lillyledbetter.com)
The Lilly Ledbetter case shows that employees care a great deal about the rewards they receive from an organization, and these rewards must be fair. Lilly learned of the pay disparity with her male coworkers after a number of years on the job. She experienced a sense of moral outrage and filed a lawsuit to address the unfairness. As you learned, fairness is one of the guidelines for the effective implementation of reward systems in organizations. Employees pay attention to rewards—particularly what they are paid. Pay inequity may cause employees to feel undervalued by the organization and may reduce motivation. As seen in this case, unfair pay practices may also result in litigation. The federal statute based on Lilly’s case is clear that pay discrimination lawsuits may be based on every paycheck that a person receives throughout their employment. Equal pay for equal work is a concept that individuals in the same workplace be given equal pay for doing the same work. This concept is most commonly applied with respect to the gender pay gap—it was once estimated that women are paid 77.5% of men’s earnings (U.S. Census Bureau, 2008). On the seventh anniversary of the passage of the Lilly Ledbetter Fair Pay Act, the Council of Economic Advisors81 published an update on the wage gap between men and women. In 2014, median earnings for a woman working full-time all year in the United States totaled only 79% of the median earnings of a man working full-time all year. Phrased differently, women earned 79 cents for every dollar that men earned. The gender wage gap has many causes and contributors, including differences in education, experience, occupation and industry, and family responsibilities. But even after accounting for these factors, a gap still remains between men’s earnings and women’s earnings. Organizations should be proactive in examining their pay policies to ensure equal pay for men, women, and minorities. Employers must design reward systems that are fair and follow organizational justice guidelines to avoid litigation—but also because it is the right thing to do.
1. What are the implications of the Ledbetter case for the performance management system?
2. Explain Lilly Ledbetter’s reaction to learning she was being paid less than her coworkers based upon pay dispersion.
3. How do you feel about Ledbetter never receiving compensation from Goodyear for her lower wages for 10 years?
4. Referring back to Chapter 7, relate this case to what you learned about organizational justice. What type(s) of justice does the case illustrate?