AT&T Corp. v. Hulteen (07-543)

Oral argument: Dec. 10, 2008

Appealed from: United States Court of Appeals for the Ninth Circuit (Aug. 17, 2007)

PREGNANCY DISCRIMINATION ACT, PREGNANCY LEAVE, TITLE VII, CIVIL RIGHTS ACT OF 1964, SEX DISCRIMINATION

In 1987, Congress passed the Pregnancy Discrimination Act (“PDA”) to address the gap left by Title VII of the Civil Rights of 1964 (“Title VII”), which prohibits employers from discriminating on the basis of sex. Prior to passage of the PDA, AT&T’s seniority system treated pregnancy leaves as different from disability leaves: women who took time off for pregnancy lost net service credit (“NCS”), which, among other things, was—and still is—the principal factor used to calculate pensions. Following passage of the PDA in 1978, AT&T immediately ceased reducing the NCS of women who had taken pregnancy leaves. However, AT&T did not restore service credits to female employees who took pregnancy leaves prior to the PDA’s enactment. Hulteen et al., all female employees who took pregnancy leaves prior to the passage of the PDA, sued AT&T. The Ninth Circuit held that AT&T violated Title VII’s prohibition of sex-based discrimination by failing to restore service credits to female employees who took pregnancy leaves prior to the PDA’s enactment. Petitioners, AT&T, argue that this reading impermissibly gives retroactive effect to the PDA.

·        [Question(s) presented]

·        [Issue(s)]

·        [Facts]

·        [Discussion]

·        [Analysis]

Question(s) presented

Before the passage of the Pregnancy Discrimination Act of 1978 (“PDA”), it was lawful to award less service credit for pregnancy leaves than for other temporary disability leaves. Gilbert v. Gen. Elec. Co., 429 U.S. 125 (1976). Accordingly, the questions presented are:

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.

2. Whether the Ninth Circuit’s finding of a current violation of Title VII in such circumstances gives impermissible retroactive effect to the PDA.

top

Issue(s)

Does the Pregnancy Disability Act of 1978 (“PDA”), which prohibits discrimination on the basis of pregnancy, apply retroactively, and therefore, does an employer violate Title VII of the Civil Rights Act of 1964 by failing to restore service credits to female employees who took pregnancy leaves prior to Congress’ enactment of the PDA?

top

Facts

Title VII of the Civil Rights of 1964 (“Title VII”) prohibits employers from discriminating on the basis of sex. When enacted, however, Title VII did not expressly prohibit discrimination on the basis of pregnancy. The U.S. Supreme Court considered this issue in two cases, holding that an employer does not violate Title VII by failing to confer a benefit, such as pregnancy disability coverage, to pregnant women, see General Electric Co. v. Gilbert, 429 U.S. 125, 145–46 (1976), but does violate Title VII by imposing a burden, such as eliminating job seniority, see Nashville Gas Co. v. Satty, 432 U.S. 136, 142 (1977).Congress responded to the Supreme Court’s decisions by enacting the Pregnancy Discrimination Act of 1978 (“PDA”), which amended Title VII to prohibit discrimination on the basis of pregnancy.

Prior to the PDA’s enactment, Pacific Telephone and Telegraph (“PT&T”), “a Bell System operating company” (“Bell”) and subsidiary of defendant AT&T, defined pregnancy leave as a personal leave and accordingly, granted employees who took pregnancy leaves a maximum of 30 days service credit. Conversely, employees who took temporary, non-pregnancy-related, disability leaves received full service credit. Following the PDA’s enactment, PT&T adopted an Anticipated Disability Plan, which granted service credits for pregnancy and temporary disability leaves on equal terms. PT&T, however, did not adjust the net service credits (“NCS”) of female employees who had taken pregnancy leaves prior to the plan’s adoption. AT&T maintained this policy when it divested itself of Bell, and PT&T employees became employees of AT&T. NCS determine benefits including, “amount of pension payments; eligibility for early retirement; qualification for certain voluntary termination packages; job bidding; shift preference; [and] seniority for layoffs,” among others.

This case arises from the plaintiffs’ allegation that AT&T violated Title VII’s prohibition of sex-based discrimination by failing to restore service credits to female employees who took pregnancy leaves prior to the PDA’s enactment. The plaintiffs are Noreen Hulteen, Eleanora Collet, Linda Porter, and Elizabeth Snyder, former PT&T employees who took pregnancy leaves between 1968 and 1976, prior to the PDA’s enactment. Hulteen, Collet, and Snyder no longer work for AT&T due respectively to a reduction in the work force, early retirement, and voluntary termination, but Porter still does. Plaintiffs (“Hulteen”) allege that their benefits and dates of retirement would have been more favorable if PT&T or AT&T had restored part or all of the service credits from their pre-PDA pregnancy leaves. Furthermore, Hulteen alleges that AT&T’s failure to restore service credits constitutes a breach of its fiduciary duty under the Employee Retirement Income Security Act (“ERISA”).

At trial, both parties motioned for summary judgment on Hulteen’s Title VII and ERISA claims. The U.S. District Court for the Northern District of California granted Hulteen’s motion for summary judgment on the Title VII claim, holding that AT&T had violated Title VII by failing to restore service credits, and granted AT&T’s motion for summary judgment on the ERISA claim, dismissing the claim for lack of timeliness. The U.S. Court of Appeals for the Ninth Circuit (“Ninth Circuit”) granted AT & T’s interlocutory appeal on the Title VII claim. An interlocutory appeal is an appeal granted in the midst of an ongoing trial to decide “a controlling question of law . . . with respect to which there is a substantial ground for difference of opinion.” The Ninth Circuit reversed the District Court’s decision on the Title VII claim, holding that the PDA does not apply retroactively and furthermore, that Hulteen’s claim is time-barred. But on rehearing en banc, the Ninth Circuit reversed itself and affirmed the District Court’s grant of summary judgment for Hulteen on the Title VII claim.

On June 23, 2008, the U.S. Supreme Courted granted AT&T’s petition for certiorari to decide whether the PDA applies retroactively, and therefore, whether an employer violates Title VII by failing to restore service credits to female employees who took pregnancy leaves prior to the PDA’s enactment.

top

Discussion

Does the Pregnancy Discrimination Act of 1978 (“PDA”), which prohibits discrimination on the basis of pregnancy, apply retroactively, and, therefore, does an employer violate Title VII of the Civil Rights of 1964 (“Title VII”) by failing to restore service credits to female employees who took pregnancy leaves prior to enactment of the PDA? The Supreme Court’s decision in this case will resolve this issue, and, in so doing, will resolve an interpretative conflict between the Sixth and Seventh Circuits, on the one hand, and the Ninth Circuit, on the other. The Court’s decision will potentially impact the future stability and solvency of pension plans and the determination of a multitude of corporate benefits.

Respondents Hulteen et al. (“Hulteen”) argue that the Ninth Circuit did not apply the PDA retroactively because this case involves AT&T’s present pension-setting decisions. Brief for Respondent Hulteen et al. (“Hulteen”) in Opposition of Writ of Certiorari at 10. Furthermore, Hulteen argues that, even if the Ninth Circuit did apply the PDA retroactively, it did not err in doing so because Congress intended for plaintiffs to be able to challenge employers’ maintenance of past-discriminatory net service credit (“NCS”) systems. See id. at 14. In support of this argument, Hulteen notes that Congress is considering the Lily Ledbetter Fair Pay Act, which would amend Title VII by clarifying that a discriminatory compensation decision occurs upon each payment of that compensation and unequivocally allowing claims such as that involved here. See id. at 16–17.

Conversely, petitioner AT&T Corp. and amici curiae, the United States and the Equal Employment Advisory Council (“EEAC”), assert that Congress intended the PDA to be prospective, not retroactive. In support of this argument, AT&T observes that the PDA did not take effect for the first 180 days following its enactment. The United States adds that Hulteen could have challenged PT&T’s pregnancy leave policies decades ago, when the PDA was first adopted, but did not do so. Furthermore, amicus EEAC argues that “requiring retroactive granting of service credit to reverse the effect of long-extinct lawful policies would impose an undue burden on employers to defend against stale claims” contrary to congressional intent. Brief for EEAC at 21–26.

In addition, amicus United States argues that requiring employers to restore service credits to female employees who took pregnancy leaves prior to the PDA’s enactment would impose a new liability on employers. See Brief for United States at 10. According to the ERISA Industry Committee (“ERIC”) and EEAC, imposing such liability could lead to inadequately funded pension plans, reduced stability and future benefits, limited enrollment, and even the insolvency and termination of pension funds. ERIC adds that applying the PDA retroactively would force employers to redetermine decades old service credits, resulting in “enormous costs and administrative burdens” for employers. Furthermore, there is no indication that requiring restoration of service credits would encourage AT&T’s greater compliance with the PDA because PT&T amended its pregnancy leave policy immediately after the enactment of the PDA. Finally, amicus EEAC notes that upholding the Ninth Circuit’s decision would have broad implications on a multitude of corporate benefits, including “promotions, severance pay, holidays, sick leave, group life and health and welfare plans, selection for layoffs and priority for rehiring, shift preference, distribution of overtime work, transfers, vacation privileges, and selection of days off.” Brief for EEAC at 19.

Conversely, Hulteen replies that there is “no overriding company policy or principle of law that would preclude AT&T from giving its retiring employees full credit for their pre-PDA pregnancy disability leaves.” Indeed, Hulteen observes that the number of female employees affected by pre-PDA leave policies is necessarily limited and declining with time and, therefore, that any negative impact of the Ninth Circuit’s decision on employers would likewise be limited and declining. Furthermore, contrary to amici ERIC’s and EEAC’s assertion, Hulteen contends that few employers would actually be impacted by the Ninth Circuit’s decision to apply the PDA retroactively. In support of this argument, Hulteen notes that within the past sixteen years, federal courts have only decided five cases involving the issue in this case, and, of those, all five have involved employers in the telecommunications industry.

The Supreme Court’s decision in this case will resolve a conflict between the Sixth and Seventh Circuits, on the one hand, and the Ninth Circuit, on the other hand, and potentially impact the stability and solvency of pension plans and the determination of a multitude of corporate benefits.

top

Analysis

AT&T, the petitioner, argues two basic points: firstly, that the Ninth’s Circuit’s interpretation impermissibly gives retroactive effect to the Pregnancy Discrimination Act (“PDA”) and, secondly, even if the PDA were somehow applicable to pre-PDA pregnancy leaves, any claim against AT&T is untimely, as AT&T immediately ceased its pregnancy leave policy after passage of the PDA in 1978.

Retroactivity

With regard to retroactivity, AT&T, firstly contends that its earlier policy of denying full service credit for time spent on pregnancy leaves was lawful at the time that it was operational (that is, up to Congress’ passing of the PDA in 1978). . With the passing of the PDA, AT&T adjusted its policy accordingly, giving full disability credit to women taking maternity leave. Indeed, AT&T notes that the Ninth Circuit itself held that, prior to the PDA, “the law did not require employers to treat pregnant women like temporarily disabled men.” . Moreover, AT&T dismisses the suggestion that discrimination based on pregnancy has always been barred by Title VII by looking to Gilbert, which held that “an exclusion of pregnancy from a disability-benefits plan providing general coverage is not a gender-based discrimination at all.”

Hulteen argues that Title VII in fact does apply to AT&T’s policy. Specifically,Hulteen claims that AT&T overlooks a subtle distinction between those claims that are based on current discriminatory practices and those based on currently neutral practices but which perpetuate past discrimination. AT&T’s service policy belongs in the latter grouping, according to Hulteen.Quoting Bazemore v. Friday, Hulteen notes that a discriminatory policy adopted “prior to the time it was covered by Title VII does not excuse perpetuating that discrimination after [it] became covered by Title VII.”  Thus, Hulteen argues that AT&T’s service policy illegitimately perpetuates discrimination. AT&T responds by saying that Bazemore does not, in fact, govern because the AT&T policy is facially neutral, unlike the policy in Bazemore, where disparate wages were paid to similarly situated black and white workers, a policy which is actionable under Title VII. By contrast, AT&T’s seniority system does not treat employees differently. Moreover, unlike AT&T’s seniority system, the unlawful conduct indicted in Bazemore was continued by the employer after the enacting of Title VII.

Secondly, AT&T insists that its seniority system is not “facially discriminatory,” as respondents and the Ninth Circuit contend, and that the system can only be understood as “facially discriminatory” by retroactively applying the PDA. AT&T argues that the Ninth Circuit’s construal of the PDA was to “create[] a new obligation” by applying the law to earlier policy, rather than simply ceasing and correcting that earlier policy. . AT&T points out that, as a general rule, a statute shall be given retroactive effect only when there is explicit language saying as much, or when it must apply by necessary implication. There is no such language, instruction, or implication in the PDA. Indeed, the language of the PDA indicates that it is to be applied prospectively. Moreover, AT&T points out that the PDA has been held to apply prospectively by every court of appeals that has considered the issue to date, including the Ninth Circuit in Pallas. AT&T goes on to stipulate that, as its seniority system is bona fide—that is, one that is “facially neutral and lacking in discriminatory intent”—then it is not “an unlawful practice” for it to incidentally perpetuate any previous sex-based discrimination.

Hulteen counters that AT&T’s system is in fact “facially discriminatory” because it discriminates between “female employees who took leave prior to 1979 due to a pregnancy-related disability and employees who took leave prior to 1979 for other temporary disabilities.” The Supreme Court considers a “disparate-treatment claim [under Title VII]” to exist when there is “an employment practice, and discriminatory intent.” Hulteen argues that AT&T’s discriminatory act occurred at the moment when AT&T, in calculating respondents’ retirement benefits, excluded earlier pregnancy leave from their calculations. Moreover, respondents contend that “AT&T’s argument misapprehends how pension benefits operate and distorts the Ninth Circuit’s reasoning.” While seniority may have a disparate impact during an employee’s tenure, it is not until she retires that her pension will be impacted. . Thus, by relying on pre-PDA figures, AT&T carries the discrimination forward to present-day pension-setting decisions, which is illegal under the post-PDA regime. . As such, the Ninth Circuit’s ruling does not “create[] a new obligation” as AT&T contends. .

AT&T returns that there was no holdover act of discrimination that occurred at respondents’ retirement. Instead, AT&T’s denial of service credit was a “denial of a particular term, condition or privilege of employment,” and that the consequences were no longer actionable. Moreover, AT&T argues that its actions were not conditional or precursory, but that the date adjustments that affected respondents’ seniority and pensions were taken upon return from pregnancy leave.  As such, AT&T argues that respondents were not discriminated against at the time of their retirements.

Untimeliness

AT&T further argues that, even if its handling of pre-PDA pregnancy leaves was unlawful prior to the passing of the PDA, any claim against AT&T is untimely. Looking to United Air Lines v. Evans and its progeny, AT&T notes that “present-day effects of past discrimination do not give rise to a new Title VII claim.” AT&T also looks to Lorance v. AT&T Technologies, Inc., where the Court held that a plaintiff must sue in a timely fashion, and, failing to do so, later “cannot complain of a continuing violation.”

Respondents contend that their claims are not untimely.Moreover, respondents argue that the Ninth Circuit did not seek to evade Evans, as AT&T suggests. Hulteen distinguishes this case from Evans by noting that, although Evans was fired for a sex-related issue (thus giving rise to a mature disparate-treatment claim), her suit was not over her hiring but with regard to the resetting of her employment clock following rehiring. In Evans’ case, the company’s neutral seniority policy mandated the resetting of her employment clock, thus impacting Evans immediately; by contrast, Hulteen argues that the discriminatory impact of AT&T’s tallying of workdays was not immediately tangible. As further support, Hulteen also notes that, in Lorance,the Court has also noted that a seniority system which is facially discriminatory is challengeable at any time. Finally, respondents note that Ledbetter allows that there may be times when the assembling of the necessary elements that form to create the cause of action takes more than 180 days.

Furthermore, Hulteen argues § 112 of the Civil Rights of Act of 1991, which applies to uniquely to cases of discriminatory seniority systems, provides that an intentionally discriminatory seniority system may be challenged “when the seniority system is adopted, when the individual becomes subject to the seniority system, or when a person aggrieved is injured by the application of the seniority system or provision of the system.” Hulteen, agreeing with the Ninth Circuit, understands this suit to be the very sort of cases that Congress meant to keep viable.

AT&T responds that reliance on § 706(e)(2) is doubly mistaken. Firstly, in order for recourse to be had under this statute, the challenged system must have been adopted “with the intent of for the purpose of discriminating against women.” There is no evidence of such intent, and respondents do not attempt to argue that such intent exists. Secondly, in Hughes Aircraft Co. v. United States ex rel. Schumer, the Supreme Court has made it clear that a statute that lengthens the permissible period for bringing a case may not be applied retroactively so as to revive a plaintiff’s claim.

top

Conclusion

Discrimination has been recognized as an evil detrimental to both individuals and to society. In an attempt to correct this social ill, Congress passed the Title VII of the Civil Rights of 1964 (“Title VII”), which prohibits employers from discriminating on the basis of sex. However, Title VII does not address pregnancy discrimination. Fourteen years later, Congress closed this gap with the Pregnancy Discrimination Act (“PDA”). The problem in this case arises from the fact that, over the course of the intervening fourteen years between the passages of the two respective pieces of legislation, a large number of women took pregnancy leaves. While AT&T ceased to implement its legally discriminatory seniority system immediately after passage of the PDA, it did not restore service credits to those female employees who took pregnancy leaves prior to the PDA’s enactment. Now, as many of these women retire, or prepare to retire, they are receiving reduced pensions. Hulteen et al., all female employees who took pregnancy leaves prior to the passage of the PDA, allege that AT&T is unlawfully perpetuating its discriminatory, pre-PDA policy by not granting them those credits that they were then-legally shorted for pregnancy leaves. This case exhibits the extent to which corrective legislation can have divergent yet legitimate interpretations and will resolve an interpretative conflict between the Sixth and Seventh Circuits and the Ninth Circuit.  Moreover, the future stability and solvency of pension plans, not to mention a multitude of corporate benefits, hang in the balance in this decision.

top

Authors

Prepared by: Conrad Daly and Lauren Jones

Edited by: Joe Hashmall

Additional Sources

·       Wex: Law about the Civil Rights Act of 1964

·       Wex: Law about ERISA

·       The Equal Employment Opportunity Commission: Pregnancy Discrimination

·       SCOTUS Blog on AT&T v. Hulteen

top

Edited by