Supreme Court AT&T Decision

U.S. Supreme Court Allows Employer To Accrue Less Pension Benefits For Employees Taking Pregnancy Leave (Pre-PDA Enactment) Than Employees Taking Other Medical Leaves

In AT&T Corp. v. Hulteen, 129 S. Ct. 1962 (2009), the U.S. Supreme Court held that AT&T did not violate the Pregnancy Discrimination Act of 1978 (PDA) by calculating the accrual of pension benefits in a way that gave less retirement credit to employees who took pregnancy leave before enactment of the PDA than to employees who took other types of medical leave during that time period.

Prior to 1978 (and passage of the PDA), AT&T offered pension benefits based on Net Credited Service, which was calculated based on an employee’s date of hire and adjusted for any time the employee was not working, i.e. not earning service credits. Employees, including plaintiffs, were credited a maximum of 30 days for pregnancy leave. In contrast, employees on regular temporary disability had no limit on the days they could remain off work while continuing to accrue service credits. This method of accrual was changed after the PDA went into effect, but not retroactively. As a result, the plaintiffs received smaller pensions than they otherwise would have received had they received full credit for pregnancy leave taken before enactment of the PDA.

In upholding AT&T’s pension benefits calculation, the Supreme Court relied on a provision of Title VII of the Civil Rights Act of 1964 (Title VII), which provides that “it shall not be an unlawful employment practice for an employer to 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 noted that prior to enactment of the PDA, “an exclusion of pregnancy from a disability-benefits plan providing general coverage [was] not a gender-based discrimination at all.” Consequently, the Court reasoned, “the only way to conclude that Title VII does not protect AT&T’s system would be to read the PDA as applying retroactively to recharacterize AT&T’s acts as having been illegal when done. This is not a serious possibility.”

The high court also rejected plaintiffs’ argument based on the Lilly Ledbetter Fair Pay Act of 2009. The Court held that the Act, which made it “an unlawful employment practice … when an individual is affected by application of a discriminatory compensation decision or other practice, including each time … benefits [are] paid, resulting … from such a decision” did not help plaintiffs. AT&T’s pre-PDA decision not to award Hulteen and the other plaintiffs service credit for pregnancy leave was not discriminatory, “with the consequence that Hulteen has not been ‘affected by application of a discriminatory compensation decision or other practice.’”