Employer Groups Watch AT&T Pregnancy Discrimination Case

December 4, 2008 (PLANSPONSOR.com) - Employers' groups are watching a pending U.S. Supreme Court case that could decide whether federal mandates for protections against pregnancy discrimination - including in pension issues - should be applied retroactively.

That is a key issue presented in AT&T versus Hulteen   (07-543), which is scheduled for a December 10 oral argument before the high court justices consider an appeal from an August 2007 decision from the 9 th  U.S. Circuit Court of Appeals.

The case features a longstanding battle by former employees over the level of their pension benefits, which they say illegally did not properly count their pregnancy leaves as active company service. The issues could potentially affect thousands of female workers, retired or about to retire, as well as company pension plans, according to the National Law Journal.

With 15 circuit judges hearing the case together, the panel pulled back a March 2006 ruling by a three-judge 9 th  Circuit panel that came down in favor of the employer (See  Pregnancy Discrimination Act not to be Applied for Service Retroactively ) and ruled instead that the plaintiffs deserved the retroactive protection they sought under thePregnancy Discrimination Act (PDA) of 1978.

The revised 9 th Circuit decision asserted that AT&T’s post-PDA decision to award benefits based on a “discriminatory” service calculation was the “relevant, actionable” event.   The court claimed that the women were affected by pregnancy discrimination anew – after the PDA – when AT&T calculated their retirement benefits under its old system and deprived them of benefits received by those not “affected by pregnancy.”

The PDA, which amended Title VII, became effective in 1979. Each of the plaintiffs in the high court case took pregnancy leaves between 1968 and 1976, and each received less than full service credit because the times off were treated as personal leave.

Legal Issues

According to a Supreme Court document on the Hulteen case, the issues justices will consider include:

  • Whether an employer engages in a current violation of Title VII when, in making post-PDA eligibility determinations for pension and other benefits, the employer fails to restore service credit that female employees lost when they took pregnancy leaves under lawful pre-PDA leave policies.
  • Whether the 9 th Circuit’s finding of a current violation of Title VII in such circumstances gives impermissible retroactive effect to the PDA.

According to the National Law Journal, attorney Caroline Brown, representing the ERISA Industry Council, warns the justices that the “adverse consequences” of the 9th Circuit’s decision extend “well beyond AT&T, the telecommunications industry, and companies that have not applied the PDA retroactively.”

Plan sponsors, she argued, rely on the effective date in legislation as the point at which they should modify their behavior going forward.

“A decision by this Court holding that they cannot rely on the rules used to measure employee service or compensation before an act’s effective date would be inconsistent with Congress’s intent, would require plan sponsors to recalculate employees’ prior service or compensation, and could cause plans to be underfunded,” Brown asserted in a document filed with the court.

For its part, the telecommunications giant argued that by holding it liable now for "lawful" benefits calculation decisions, the 9 th Circuit gave the PDA an impermissible retroactive effect. An AT&T spokesman told the National Law Journal: "We simply do not believe the law should be applied retroactively."

"Before the PDA was enacted, AT&T's denial of service credit for pregnancy leaves was lawful," wrote AT&T attorney Carter G. Phillips in Supreme Court papers. "Because Congress did not make the PDA retroactive, AT&T's post-PDA reliance on lawful, pre-PDA service credit awards cannot violate Title VII. Even if AT&T's earlier service credit awards are now deemed to have been unlawful, the limitations period for challenging these decades old decisions expired long ago, and this Court has repeatedly held that Title VII is not violated anew whenever an employer gives present effect to no longer actionable acts of discrimination."

The 9th Circuit ruling is available  here .

More information about the case from the ERISA Industry Committee is available  here .