Labor & Employment Law — 12/15/08

Supreme Court hears arguments on retroactive PDA liability

The Supreme Court on December 10, 2008, took up the question of whether employers violate Title VII by failing to restore pension service credits to female employees when calculating benefits for pregnancy leaves taken prior to the passage of the Pregnancy Discrimination Act (PDA). At issue in the case is whether AT&T’s past pension and retirement policies result in a current violation of the PDA. (Hulteen v AT&T Corp, Dkt No 07-543)

Background. AT&T Corp and its predecessor companies had given full service credit for pregnancy leave under the companies “Net Credited Service” (NCS) employee benefits program since the PDA was enacted. From August 7, 1977, until then, however, the companies allowed only 30 days credit for leave before delivery and six weeks after delivery of a child. Prior to that, the companies gave a maximum of 30 days credit for pregnancy leave, even though other forms of medical leave (i.e., temporary disability leave) were not similarly limited.

Four female employees and their bargaining unit (plaintiffs) challenged AT&T’s use of its service credit policy to calculate employee pension and retirement benefits, alleging that the policy was facially discriminatory. They contended that during the relevant time period, some female employees were forced to take pregnancy leave before the onset of pregnancy disability, even though other employees, who anticipated a temporary disability, could delay their leave until the onset of the disability. Also, if an employee suffered a nonpregnancy-related disability while on pregnancy leave, she could not claim credit for the period of disability, while other employees who suffered new disabilities while on leave could receive credit for the entire period of disability.

In the en banc decision, a divided Ninth Circuit affirmed a district court’s grant of summary judgment in favor of the plaintiffs, concluding that AT&T “adopted a policy that calculate[d] pregnancy leave differently than other temporary disability leave, and it engage[d] in intentional discrimination each time it applie[d] the policy in a benefits calculation for an employee affected by pregnancy, even if the pregnancy occurred before the enactment of the PDA.”

Question presented. In granting certiorari, the Supreme Court agreed to address: (1) “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;” and (2) “Whether the Ninth Circuit’s finding of a current violation of Title VII in such circumstances gives impermissible retroactive effect to the PDA.”

AT&T’s contention. In its brief on the merits, AT&T asserts that the Ninth Circuit’s conclusion that AT&T engaged in current Title VII violations by relying on the decades-old service credit awards conflicts with well-settled Supreme Court precedent. First, in holding the company liable because it relied on pre-PDA denials of service credits that were lawful, the appeals court necessarily gave the PDA impermissible retroactive effect. Second, the company urges that even if the credit awards are now determined to have been unlawful, the limitations period for challenging these old decisions expired long ago, and the Supreme Court has often held that Title VII is not violated anew when employers give present effect to acts of bias that are no longer actionable. Third, section 703(h) of Title VII “codifies this very principle where, as here, past acts of discrimination are given present effect through an otherwise lawful seniority system,” AT&T wrote in its brief. “None of the reasons cited by respondents or the en banc majority below justifies the Ninth Circuit’s refusal to follow these dispositive principles.”

Oral arguments. AT&T’s lawyer cautioned the Justices against finding the company liable for its past policies, partially because of the stale nature of the claims. Company records may be incomplete and memories faulty. “We have no way of knowing whether these were maternity leaves or not maternity leaves,” Carter G. Phillips told the court. Noting that AT&T’s plan was lawful before enactment of the PDA, Phillips warned against retroactively imposing liability. “These are present effects of past discriminatory acts. We should be loath to interfere with…that seniority scheme under these circumstances.” The federal government entered the case on behalf of AT&T. Assistant Attorney General Lisa S. Blatt echoed Phillips’ argument. “Nothing in the PDA indicates that retroactive liability should be imposed,” Blatt said.

The employees’ lawyer, Kevin Russell, argued that AT&T’s policy is facially discriminatory. “The question is whether the system as a whole discriminates on its face, whether it’s intentionally discriminatory.” Russell maintained that the way AT&T calculates its retirement payments to Hulteen and the other workers is a present discriminatory act. “Every act that implements a facially discriminatory system constitutes a fresh act of that intentional discrimination,” Russell told the court.

The High Court is expected to issue a decision sometime before the end of June.

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