May 18, 2009

Supreme Court Decides AT&T Corp. v. Hulteen

On May 18, the Supreme Court decided AT&T Corp. v. Hulteen, No. 07-543. The case resolves a split between the U.S. Court of Appeals for the Ninth Circuit and the U.S. Court of Appeals for the Sixth and Seventh Circuits relating to employers' continued application of rules implemented before the enactment of the Pregnancy Discrimination Act (PDA), which differentiate on the basis of pregnancy, in calculating pension benefits.

For nearly 100 years, AT&T has provided pensions and other benefits under a seniority system that depends on an employee's period of service at the company minus uncredited leave time. Before 1977, AT&T employees on disability leave received service credit for the entire period of absence, but those on personal leave received a maximum service credit of 30 days. A pregnancy leave was treated as personal leave. In 1977, AT&T changed that rule and began affording pregnant employees up to six weeks of disability benefits and service credit. Employees on other disability leaves continued to receive service credit for the full duration of their leave. This approach was held to be lawful in General Electric Co. v. Gilbert, 429 U.S. 125 (1976).

In 1978, Congress amended Title VII by enacting the PDA, superseding Gilbert. On April 29, 1979, the effective date of the PDA, AT&T adopted a new plan that provides service credit for pregnancy leave on the same basis as leave taken for other temporary disabilities. AT&T did not make any retroactive adjustments to the service credit calculations of women who had been subject to the pre-PDA rules.

Noreen Hulteen and the three other individual plaintiffs each took pregnancy leaves before April 29, 1979, but claimed pension benefits after that date. Each woman's service credit was calculated according to the pre-PDA rules, and each woman's pension benefit would have been increased if those rules had not been applied to them. The individual plaintiffs and their collective-bargaining representative filed charges of discrimination with the Equal Employment Opportunity Commission (EEOC), alleging this differential treatment constituted discrimination on the basis of sex and pregnancy in violation of Title VII. The EEOC issued a notice of right to sue. The district court granted the plaintiffs' motion for summary judgment, relying on Ninth Circuit precedent finding a Title VII violation where post-PDA retirement eligibility calculations incorporated pre-PDA accrual rules that differentiated on the basis of pregnancy. The Ninth Circuit affirmed.

In reversing the Ninth Circuit, the Court first noted that there is "no question" that the payment of pension benefits in this case is a function of a seniority system. As a result, § 703(h) of Title VII applies, and benefit differentials produced by a bona fide seniority system are permitted unless they are the result of an intent to discriminate.

The Court concluded that AT&T did not have the requisite intent to discriminate. AT&T's intent when it adopted the pre-PDA pregnancy rule was to give differential treatment that, as a matter of law and as announced in Gilbert, was not gender-based discrimination. Although the PDA would have made it discriminatory to continue the accrual policies of the old rule, AT&T amended that rule as of the effective date of the PDA.

The Court stated that the only way to conclude that AT&T's system was discriminatory would be to read the PDA retroactively to recharacterize the pre-PDA policies as having been unlawful when they were in effect, despite the ruling in Gilbert. After examining the legislative history of the PDA, the Court found no intent that the PDA should be applied retroactively. Thus, the Court held that the challenged feature of AT&T's seniority system was neither discriminatory when adopted, nor intentionally discriminatory in violation of Title VII.

Justice Souter delivered the opinion of the Court, in which Chief Justice Roberts and Justices Stevens, Scalia, Kennedy, Thomas and Alito joined. Justice Stevens filed a concurring opinion. Justice Ginsburg filed a dissenting opinion, in which Justice Breyer joined.

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