President Barack Obama hands a pen used to sign the Lilly Ledbetter Fair Pay Act to Ledbetter, second from left.


To comply with the new act, businesses will want to take a close look at their compensation decisions - and at how those decisions are documented.

The issue of compensating your employees just got a bit trickier.

President Barack Obama's first bill, the Lilly Ledbetter Fair Pay Act he signed into law on Thursday, loosens the statute of limitations under which workers can sue employers for pay discrimination based on characteristics such as gender, race, age or disability.

To ward off discrimination suits, companies will need to meticulously document pay decisions and retain detailed employment records, legal experts say. In this, small companies may be at a disadvantage - few have access to the attorneys and human-resources professionals that will help larger businesses comply with the newly expanded law.

"This will affect [small companies'] legal and compliance costs... and potentially make them reluctant to hire additional employees," said Elizabeth Milito, senior executive counsel of the National Federation of Independent Business. "There's also the potential for one lawsuit that goes south to put a small business out of business."

The Ledbetter Act is named after the Alabama woman who sued Goodyear after discovering male colleagues in similar positions were paid substantially more than she was over the course of her 19-year career there. A jury ruled in Ledbetter's favor, but in 2007 the U.S. Supreme Court tossed out her claim. In a 5-4 decision, the justices ruled Ledbetter should have filed suit within 180 days of the very first time Goodyear paid her less than her peers. Having missed that window, Ledbetter had no grounds to sue, according to the court.

The Ledbetter Act essentially restarts the 180-day clock every time a worker receives a paycheck. That makes each paycheck a potential violation of the law - not just the first one. In practical terms, the change allows a worker many years to bring a lawsuit against a longtime employer for pay discrimination. And under existing law, a worker can sue to recover up to two years in back pay. read more