Supreme Court Holds Pregnancy Discrimination Act Is Not Retroactive
By Candice Boyd
In a 7-2 decision, the U.S. Supreme Court ruled in Hulteen v. AT&T that AT&T did not violate the Pregnancy Discrimination Act (PDA), by paying pension benefits calculated in part under an accrual rule that, prior to the enactment of the PDA, gave less retirement credit for pregnancy leave than for medical leave generally. The Court also ruled that the benefit calculation rule is part of a bona fide seniority system under § 703(h) of Title VII - a system that has no discriminatory terms, which insulates it from challenge. In reaching its decision, the Court stated that Congress intended for the PDA to be applied prospectively, not retroactively.
AT&T employees were eligible for pensions and other benefits that were based on an employee's term of employment - the period of service time at AT&T minus uncredited leave time. In the 1960s and early to mid-1970s, AT&T employees on "disability" leave got full service credit for the entire absence, but those who took "personal" leaves of absence received a maximum service credit of 30 days. Pregnancy leave was considered personal leave.
In 1977, AT&T instituted its Maternity Payment Plan (MPP), which entitled pregnant employees to disability benefits and service credit for up to six weeks of leave. If the absence went beyond six weeks, it was treated as personal leave, i.e., no further benefits or credit could be earned. The contrasting treatment of pregnancy leave between the pre-1977 plan and the MPP was legal. In General Elec. Co. v. Gilbert, 429 U.S. 125 (1976), the Supreme Court ruled that a disability benefit plan excluding disabilities related to pregnancy was not sex-based discrimination within the meaning of Title VII.
In 1978, Congress amended Title VII by passing the PDA, which superseded Gilbert so as to make it "clear that it is discriminatory to treat pregnancy-related conditions less favorably than other medical conditions." Newport News Shipbuilding & Dry Dock Co. v. EEOC, 462 U.S. 669, 684 (1983).
On April 29, 1979, the effective date of the PDA, AT&T adopted its Anticipated Disability Plan which replaced the MPP and provided service credit for pregnancy leave on the same basis as leave taken for other temporary disabilities. AT&T did not, however, make any retroactive adjustments to the service credit calculations of women who had been subject to the pre-PDA personnel policies.
Noreen Hulteen and three additional female respondents (collectively, "Hulteen") along with the Communications Workers of America (CWA), the collective-bargaining representative for the majority of AT&T's nonmanagement employees, filed charges of discrimination with the Equal Employment Opportunity Commission (EEOC), alleging discrimination on the basis of sex and pregnancy in violation of Title VII. If her total term of employment had not been decreased due to her pregnancy leave, each respondent would be entitled to a greater pension benefit. All but one of the respondents have retired from AT&T. The EEOC issued a notice of right to sue to Hulteen and the CWA. Hulteen filed suit in the United Sates District Court for the Northern District of California.
The District Court held itself bound by a prior Ninth Circuit decision, Pallas v. Pacific Bell, 940 F. 2d 1324 (1991), which found a Title VII violation where post-PDA retirement eligibility calculations incorporated pre-PDA accrual rules that differentiated on the basis of pregnancy. In contrast, the Sixth and Seventh Circuits have ruled that reliance on a pre-PDA differential accrual rule to determine pension benefits does not constitute a current violation of Title VII. The U.S. Supreme Court granted certiorari in order to resolve the split.
This decision may affect thousands of women who took pregnancy leaves decades ago and are now headed toward retirement. Employers should seek legal counsel regarding their pension plans and other benefits programs in order to ensure they are in legal compliance.