Chalk Up One for Employers – No Retroactive Application of the Pregnancy Discrimination Act to Pension Calculations
Wendy J. Lario, Lindsay Sorin
On May 18, 2009, the U.S. Supreme Court reversed a Ninth Circuit decision in favor of Noreen Hulteen and three other women who claimed they were due additional pension benefits after their employer AT&T denied full service credit for pregnancy leaves taken between 1968 and 1976. When the company calculated their benefits decades after their leaves in a manner that provided them less credit for their pregnancy leaves than that granted employees who had taken other forms of disability leave, the women sued arguing that AT&T violated Title VII by not fully restoring service credit for pregnancy leaves taken before the 1978 passage of the Pregnancy Discrimination Act (PDA).
AT&T argued that its benefit calculation rule is protected by §703(h) of Title VII, which provides that an employer may “apply different standards of compensation … pursuant to a bona fide seniority … system … provided that such differences are not the result of an intention to discriminate because of … sex.” The Court agreed.
Justice Souter wrote that because differential treatment of pregnancy leave was not gender-based discrimination when these employees took their leaves, and since Congress did not make the PDA retroactive, AT&T could not have intended to discriminate on the basis of gender. In turn, given the protection of §703(h), an employer does not necessarily violate the PDA by paying pension benefits that were partially calculated under a pre-PDA rule, even if such calculation allocated less service credit for pregnancy leave than for other forms of disability leave.
The Court also rejected Hulteen’s argument that AT&T’s failure to give post-PDA credit to pre-PDA pregnancy leave was facially discriminatory, holding that §703(h) would never apply if the mere choice to rely on a favorable statute turned every past differentiation into contemporary discrimination.
This decision is certainly an administrative victory for employers, who would have been required to recalculate the pensions of the effected women had the Court upheld the Ninth Circuit’s holding.
On balance, the High Court’s ruling is a thoughtful, careful analysis of the PDA and the legislative action, language, and intent. While it undoubtedly has a tangible negative effect on women now reaching retirement age who labored in the era before the creation, recognition, and enforcement of statutory and constitutional rights of gender equality, the 1978 enactment of the PDA ensures equality for women from that point forward.