AT&T Class Action Defense Cases–AT&T v. Hulteen: Supreme Court Holds Employer Does Not Violate Pregnancy Discrimination Act By Paying Pension Benefits Calculated Under Pre-PDA Accrual Rule Giving Less Retirement Credit For Pregnancy Than Medical Leave

May 20, 2009 | By: Michael J. Hassen

Class Action Failed to Allege Discrimination Against Employer that Calculated Pension Benefits under Pre-Pregnancy Discrimination Act (PDA) Rules, Lawful at the Time, that Gave Less Retirement Credit to Pregnancy Leave than for Medical Leave Supreme Court Holds

Plaintiffs filed a class action against AT&T alleging violations of Title VII of the Civil Rights Act of 1964; the class action complaint asserted that defendant discriminated against employees on the basis of sex and pregnancy by providing pension and other benefits on a seniority system that treated pregnancy differently from other medical conditions. AT&T Corp. v. Hulteen, 556 U.S. ___ (May 18, 2009) [Slip Opn., at 1-3]. AT&T has provided pension and other benefits to employees since 1914 “based on a seniority system that relies upon an employee’s term of employment, understood as the period of service at the company minus uncredited leave time.” Id., at 1-2 (footnote omitted). According to the allegations underlying the class action, from 1960s until the mid-1970s, AT&T gave employees full service credit for “disability” leave but a maximum of 30 days of credit for “personal” leaves of absence, and the company treated pregnancy leave as “personal” rather than disability. Id., at 2. AT&T modified this program in 1977 “entitling pregnant employees to disability benefits and service credit for up to six weeks of leave”; however, leave beyond 6 weeks was still treated as “personal” leave. Id. Both plans were lawful at the time they were in use, id. But in 1978 Congress enacted the Pregnancy Discrimination Act (PDA), which made it unlawful to “treat pregnancy-related conditions less favorably than other medical conditions.” Id., at 3 (citation omitted). AT&T again modified its procedures to comply with the PDA, but it did not “make any retroactive adjustments to the service credit calculations of women who had been subject to the pre-PDA personnel policies.” Id. In the Ninth Circuit (where plaintiffs’ class action had been filed), case law held that “calculation of service credit excluding time spent on pregnancy leave violates Title VII,” id., at 4(citation omitted); in the Sixth and Seventh Circuits, case law held that “reliance on a pre-PDA differential accrual rule to determine pension benefits does not constitute a current violation of Title VII,” id. (citations omitted). The Supreme Court granted certiorari to resolve this conflict.

The Supreme Court defined the issue presented as “whether an employer necessarily violates the Pregnancy Discrimination Act (PDA), 42 U.S.C. §2000e(k), when it pays pension benefits calculated in part under an accrual rule, applied only prior to the PDA, that gave less retirement credit for pregnancy leave than for medical leave generally.” AT&T, at 1. The Supreme Court held “there is no necessary violation; and the benefit calculation rule in this case is part of a bona fide seniority system under §703(h) of Title VII of the Civil Rights Act of 1964…which insulates it from challenge.” Id. We do not discuss the opinion in greater detail. We note only that Justice Ginsburg filed a dissenting opinion, joined by Justice Breyer, arguing in essence that properly paying women today for service credit that should have been earned pre-PDA, is not a retroactive application of the law. Accordingly, AT&T’s conduct constitutes a “current violation of Title VII when, post-PDA, it did not totally discontinue reliance upon a pension calculation premised on the notion that pregnancy-based classifications display no gender bias.” AT&T, at 4 (Ginsburg, J., dissenting).

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