Thursday 04 December 2008
by: Marcia Coyle, The National Law Journal
The federal Pregnancy Discrimination Act has helped to change the nation's mindset about childbearing and working moms. (Photo: SuperStock)
In the 30th anniversary year of the federal Pregnancy Discrimination Act, the "second generation of pregnancy discrimination" has arrived at the U.S. Supreme Court, say some civil rights and women's rights lawyers, in a case that could affect thousands of female workers, retired or about to retire, as well as company pension plans.
The Pregnancy Discrimination Act treats discrimination on the basis of pregnancy, childbirth or related medical conditions as unlawful sex discrimination under Title VII of the Civil Rights Act of 1964, the nation's major job bias law.
The act has helped "to change the nation's mindset about childbearing and working moms, and it continues to provide significant civil rights protections for women," said Linda D. Hallman, executive director of the American Association of University Women, adding it also has helped "to pave the way for a generation of working women and strengthened the American work force in the process."
But it is not the generation of women who entered the workforce post-PDA who are now before the Supreme Court in AT&T v. Hulteen, No. 07-543, which will be argued on Dec. 10. The four women at the center of this high court case entered the work force and took maternity leaves before the PDA was enacted. They received less "service credit" for their maternity leaves than did employees at Pacific T&T - now part of AT&T Inc. - taking leave for other disability conditions. And now, as they have retired or prepare to retire post-PDA, AT&T has calculated their pensions using the earlier discriminatory service credits.
"It was a wrong-headed policy before the PDA and it continues to be one," said Judith E. Kurtz of San Francisco's Law Offices of Judith E. Kurtz, counsel of record in the high court. "They're just continuing the discrimination these women faced years and years ago. And these women are the most loyal employees. We're talking about women who have worked there for 30 years."
But AT&T, which lost in the 9th U.S. Circuit Court of Appeals (pdf), contends that its pre-PDA denial of service credits for the maternity leaves was lawful. By holding it liable now for those "lawful" decisions, the telecommunications giant argues, the appellate court gave the PDA an impermissible retroactive effect. An AT&T spokesman said, "We simply do not believe the law should be applied retroactively."
Noreen Hulteen, whose 30-year employment was terminated in 1994 through a reduction in force, and her three colleagues have drawn support from the National Employment Lawyers Association, AARP, legal scholars and civil rights organizations.
Besides its importance to, by some counts, an estimated 15,000 women, the case will be an important piece in the debate over whether this Supreme Court interprets and applies employment discrimination laws in a formalistic or realistic way, said Melissa Hart of the University of Colorado School of Law, amicus counsel to the National Women's Law Center and 35 other organizations supporting Hulteen.
"If AT&T wins and the Court ignores the reality of what these women experienced, it really is taking a pretty formalistic view of discrimination law and not thinking about how discrimination affects people in the real world," she said.
AT&T is supported by amicus briefs from the Bush administration - but not the Equal Employment Opportunity Commission - as well as the ERISA Industry Committee and the Equal Employment Advisory Council.
"We represent a broad range of companies," said Rae T. Vann, general counsel to the Equal Employment Advisory Council. "At the end of the day, it appears [Hulteen] is arguing for a rule that enables claims of discrimination based on actions long past and lawful when they were taken. It creates huge problems in terms of requiring employers to defend stale claims."
And, she added, from a public policy perspective, "If the Court were to affirm the 9th Circuit, I think that decision would potentially disrupt existing pension plan funds and jeopardize benefits to former, covered employees."
Hurt Twice
For nearly 100 years, AT&T has used a system known as the Net Credited Service to quantify each employee's seniority or term of employment. Under that system, an employee's first day on the job becomes her NCS date. The earlier the date, the better positioned an employee is for service-related decisions, such as competitive job bidding, layoff determinations, vacation time and retirement benefits.
Before the PDA, AT&T classified pregnancy leaves as personal leaves, not as disability leaves. For personal leaves, employees were paid, and received service credit, for only the first 30 days of leave. For disability leaves, employees received service credit for the entire period of their paid disability leave. Today, there is no distinction.
Each of the women in the high court case took pregnancy leaves between 1968 and 1976, and each received less than full service credit for these leaves because they were treated as personal leaves. As a result, the term of employment used to calculate their pension benefits was not as long as it would have been had they received full service credit for their pre-PDA leaves. For example, when Hulteen retired in 1994, she had "210 days of uncredited pregnancy leave that resulted in reduced pension benefits."
After receiving a "letter of determination" from the EEOC finding reasonable cause that AT&T violated Title VII, the women and their union - the Communications Workers of America - sued in district court. That court, ruling for the women on their Title VII claim, relied on an earlier 9th Circuit decision - Pallas v. Pacific Bell, 940 F.2d 1324 (1991).
Pallas was decided on "virtually identical" facts as those in Hulteen and was resolved with a 1998 settlement of more than $25 million that included pension adjustments for thousands of women affected by the policies. Hulteen's counsel, Kurtz, was one of the lawyers in the Pallas case.
"We thought once we won the Pacific Bell case, AT&T would change its plan," she said. "We're actually shocked they have fought so long and hard."
On appeal in the Hulteen case, AT&T argued that Pallas was no longer good law because of subsequent Supreme Court decisions involving retroactivity and accrual of pay discrimination claims, such as Ledbetter v. Goodyear Tire (pdf), 127 S. Ct. 2162 (2007).
Disagreeing, the en banc majority held that AT&T's post-PDA decision to award benefits based on a discriminatory NCS date was the "relevant, actionable" event. Hulteen and the other women were affected by pregnancy anew when AT&T calculated their retirement benefits according to the adjusted NCS date and deprived them of benefits received by those not "affected by pregnancy," said the majority.
Lawful Bias?
In the Supreme Court, AT&T, represented by veteran high court litigator Carter G. Phillips, a partner at Sidley Austin, argues: "Before the PDA was enacted, AT&T's denial of service credit for pregnancy leaves was lawful. Because Congress did not make the PDA retroactive, AT&T's post-PDA reliance on lawful, pre-PDA service credit awards cannot violate Title VII.
"Even if AT&T's earlier service credit awards are now deemed to have been unlawful, the limitations period for challenging these decades old decisions expired long ago, and this Court has repeatedly held that Title VII is not violated anew whenever an employer gives present effect to no longer actionable acts of discrimination," writes Phillips. (AT&T would not give permission for Phillips to discuss the case.)
AT&T and Solicitor General Gregory Garre rely heavily on United Air Lines Inc. v. Evans, 431 U.S. 553 (1977), which holds that Title VII is not violated every time an employment practice, including a seniority system, gives present effect to past discrimination.
"Indeed, the unique feature of this case, compared with Evans and cases in the same line, is that the alleged past discrimination was not proscribed by Title VII when it occurred," argues Garre in his brief. "As in Evans, that past discrimination is 'an unfortunate event in history.'"
Hulteen's attempt to characterize AT&T's post-PDA benefit determinations as a current violation of Title VII "fails under this Court's precedents," he adds.
Another high court veteran, Kevin Russell, a partner at Washington's Howe & Russell, will argue on behalf of the women and their union.
He contends that the high court has "consistently" recognized that a facially discriminatory system discriminates each time it is applied, and therefore gives rise to a new, independently actionable violation with every application.
AT&T's seniority system is facially discriminatory, he said, because it calculates pension benefits in reliance on a measure of service that gives less credit to women who took pregnancy leave but provided the company the same service as others who took identical periods of leave for medical purposes unrelated to pregnancy.
Russell also argues that the 9th Circuit did not give retroactive application to the PDA. It read the PDA to prohibit AT&T from relying on its pre-PDA discriminatory measure of company service in calculating pensions decades after the PDA became effective. A statute that regulates how parties make post-act decisions, he said, has no retroactive effect. Russell also disputes AT&T's claim that its pre-PDA actions were lawful. He argues that Nashville Gas Co. v. Satty, 434 U.S. 136 (1977), made clear that pregnancy discrimination relating to seniority has always been unlawful under Title VII's separate ban against practices having an unjustified disparate impact on the basis of sex.
"It's just sort of shocking they're willing to spend this time and money fighting for the right to discriminate against women who worked for them for decades, solely because they had the temerity to have a baby," said Russell. "Everybody else thought it was easier and that simple fairness required treating these women in the same way as everybody else."
Caroline Brown, a partner at Washington's Covington & Burling, and amicus counsel to the ERISA Industry Council, warns the justices that the "adverse consequences" of the 9th Circuit's decision extend "well beyond AT&T, the telecommunications industry, and companies that have not applied the PDA retroactively."
Plan sponsors, she argued, rely on the effective date in legislation as the point at which they should modify their behavior going forward. "A decision by this Court holding that they cannot rely on the rules used to measure employee service or compensation before an act's effective date would be inconsistent with Congress's intent, would require plan sponsors to recalculate employees' prior service or compensation, and could cause plans to be underfunded."
But Colorado's Hart countered that there would be little impact beyond the telecommunications industry.
"The technical legal arguments AT&T has about retroactivity are so disappointing in light of the spirit of the PDA," she said. "When looking at calculating pensions years later, AT&T should have recognized it wasn't required to perpetuate the discrimination it had engaged in, whether that discrimination was lawful at the time or not."
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