Today the Supreme Court issued one decision, described below, of interest to the business community.

AT&T Corp. v. Hulteen, No. 07-543 (previously discussed in the June 23, 2008 Docket Report).
In General Electric Co. v. Gilbert, 429 U.S. 125 (1976), the Supreme Court held that a disability-benefit plan that excluded disabilities related to pregnancy did not amount to sex-based discrimination under Title VII of the Civil Rights Act of 1964.  In response to Gilbert, Congress enacted the Pregnancy Discrimination Act of 1978 (“PDA”), which amended Title VII to cover discrimination “because of or on the basis of pregnancy, childbirth, or related medical conditions.”  42 U.S.C. § 2000e(k).  Today, in AT&T Corp. v. Hulteen, No. 07-543, the Supreme Court held that employers need not set current pension benefits to account for a denial of work credit for maternity leave that occurred before the passage of the PDA.

The case before the Court involved an AT&T policy that based pension calculations on a seniority system that relied on years of service minus uncredited leave time.  Prior to the adoption of the PDA, pregnancy leave had counted as personal leave rather than medical leave, and therefore was subject to a cap on the number of days that counted as creditable service.  Although AT&T amended its policy after the passage of the PDA, it did not make any retroactive adjustments to the seniority system.  Together with other current and recently retired AT&T employees, Hulteen sued AT&T to recover the additional pension benefits they would have received if their full pregnancy leave had been applied towards their seniority.  The district court granted summary judgment to the plaintiffs, but a panel of the Ninth Circuit reversed on the ground that such a ruling would improperly apply the PDA retroactively.  On en banc review, the Ninth Circuit reinstated the district court’s judgment, holding that retroactivity was not implicated because a company “engages in intentional discrimination each time it applies the [prior] policy in a [post-PDA] benefits calculation for an employee affected by pregnancy.”  498 F.3d 1001, 1007.

In an opinion by Justice Souter, a seven-Justice majority of the Supreme Court reversed.  The Court held that AT&T’s pension payments were insulated from challenge under Section 703(h) of Title VII, which provides, in relevant part, that it is not unlawful for an employer to apply different standards of compensation, or different terms or conditions of employment, “pursuant to a bona fide seniority * * * system,” as long as “such differences are not the result of an intention to discriminate because of * * * sex.”  42 U.S.C. § 2000e-2(h).  The Court concluded that AT&T’s seniority system was bona fide and not tainted by any intent to discriminate, because the exclusion of pregnancy from a general disability-benefits plan did not constitute gender-based discrimination prior to the PDA.  The Court reasoned that any conclusion that Section 703(h) did not protect AT&T’s system would have to “read the PDA as applying retroactively” so as to “recharacterize the acts as having been illegal when done,” a proposition the Court found to be “not a serious possibility.”  Slip op. 10.  The Court also rejected the contention that AT&T’s subsequent decision not to award Hulteen service credit for her past pregnancy leave constituted present discrimination, noting that,“[i]f a choice to rely on a favorable statute turned every past differentiation into contemporary discrimination, subsection (h) would never apply.”  Id. at 12.
In a concurring opinion, Justice Stevens stated that he was required to accept Gilbert’s pre-PDA interpretation of Title VII, even though he continued to believe that it was wrong.  In a dissenting opinion joined by Justice Breyer, Justice Ginsburg argued that AT&T committed a current violation of Title VII when, post-PDA, it did not “discontinue reliance upon a pension calculation premised on the notion that pregnancy-based classifications display no gender bias.”  Slip op. 4 (Ginsburg, J., dissenting).