AT&T Corp. v. Hulteen

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Authorship: Eliza Presson

Contents

[edit] Briefs and Documents

Docket: 07-543

Issue: Whether employers violate Title VII by not fully restoring service credit for pregnancy leaves taken before the 1978 passage of the Pregnancy Discrimination Act (Disclosure: Howe & Russell co-represents the respondent).

Merit briefs

Amicus briefs

Oral Argument: Transcript

Decision: Reversed in an opinion by Justice Souter

[edit] Pre-Argument Articles

The second case to be heard on Wednesday, December 10 is No. 07-543, AT&T v. Hulteen. At issue in the case is a decision of the Ninth Circuit holding that AT&T’s employment benefits system violated Title VII of the Civil Rights Act, as amended by the Pregnancy Discrimination Act. [Disclosure: Howe & Russell, P.C. and the Stanford Law School Supreme Court Litigation Clinic represent the respondents in the case; Akin Gump is not involved in the case.]

For nearly a hundred years, petitioner AT&T and its predecessors have offered employee benefits based on a “Net Credited Service” (“NCS”) date, which is calculated based on an employee’s hire date and adjusted forward to account for any time in which the employee is not working and therefore not earning service credits. Before 1977, employees who took pregnancy leave were granted a maximum of thirty personal days, with their NCS date adjusted forward for any additional time; by contrast, employees on regular temporary disability had no limit on the days they could continue to accrue service credit.

The individual respondents in the case before the Court are four current and former AT&T and Pacific Bell (AT&T’s predecessor) employees who took pregnancy leaves before the 1977 amendment but retired in the 1990s. After filing charges with the EEOC and receiving a right-to-sue letter, they – along with respondent Communications Workers of America, the union representing non-management AT&T employees – filed this suit in federal district court, arguing that the smaller pensions that resulted from AT&T’s failure to provide them with full credit for pregnancy leaves taken before the effective date of the PDA violated Title VII.

Based on an earlier Ninth Circuit decision, Pallas v. Pacific Bell, the district court granted summary judgment in favor of Hulteen and the other plaintiffs. In Pallas, the court of appeals held that Pacific Bell’s decision to give service credit for all pre-PDA temporary disability leave except by reason of pregnancy when calculating retirement benefits post-PDA violated Title VII. All parties agreed that Pallas was decided on “virtually identical facts” as those in Hulteen. In its judgment, though, the district court acknowledged the “great logical and legal force” of AT&T’s arguments.

On appeal, the Ninth Circuit panel reversed. It held that Hulteen failed to resolve two problems necessary to sustain her Title VII cause of action: those of retroactivity and the statute of limitations. Relying on the Supreme Court’s 1994 decision in Landgraf v. USI Film Products, in which the Court held, absent clear instruction from Congress, that “the default rule” for legislation is “no retroactive application,” the majority held that a ruling in Hulteen’s favor would require either an unlawful retroactive application of the PDA or situating the actionable offence much later, or outside the statute of limitations (when benefits based on an adjusted NCS date were actually awarded). The majority also rejected Hulteen’s argument that the NCS system was “facially discriminatory,” as such an argument again depended on a retroactive application of the PDA.

Judge Rymer dissented. She argued that the reasoning or theory of Pallas was not “so irreconcilable with the reasoning or theory of Landgraf as to give this panel license to overrule it.”

The Ninth Circuit granted rehearing en banc and affirmed the district court’s summary judgment in favor of the respondents, again relying on Pallas. The en banc majority held that no intervening Supreme Court decision overruled Pallas, nor did Pallas give impermissible retroactive effect to the PDA. It was AT&T’s post-PDA decision to award benefits according to an NCS date adjusted for pregnancy leave that was the “relevant, actionable” event. According to the en banc majority, Hulteen and the other respondents 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.” In his dissent, Judge O’Scannlain (joined by three other judges, including Judge Rymer) rejected the majority’s holdings that Pallas remained good law and that the sex discrimination charges in Hulteen were timely: “because Pallas invented a timely Title VII violation where the determination of benefits simply gave present effect to past, unchallenged acts, contrary to Supreme Court authority, it must be overruled.”

[edit] Petition for Certiorari

AT&T first argues that certiorari is warranted because the decision of the en banc court “clearly departs” not only from the holdings of the Sixth and Seventh Circuits, but also from Supreme Court precedent such as United Airlines v. Evans, which was subsequently reaffirmed last term by Ledbetter v. Goodyear Tire. AT&T argues that there is no basis to distinguish its case from Evans, in which the Court held that companies could “treat [a] past act as lawful after respondent failed to file a [timely] charge of discrimination.” Further, AT&T alleges, the en banc majority “sought to escape Evans and Ledbetter by repeatedly labeling the NCS system ‘facially discriminatory.’” However, according to AT&T, its benefit distribution system can be labeled as such only if the PDA is applied retroactively, because prior to the law’s effective date, it “could lawfully deny employees full service credit for time spent on pregnancy leave.” Finally, AT&T argues that the question whether the PDA can be given retroeffective effect is itself an important one warranting the Court’s attention in light of both the frequency with which the question is likely to arise in the future and the disparate results that the Ninth Circuit’s holding will create.

Opposing certiorari, the respondents counter that certiorari is not warranted because the Supreme Court’s decision in Ledbetter “refines a major component of the controlling legal framework” by distinguishing between present compensation discrimination and neutral acts that only incidentally give present effect to past, and therefore unactionable, discrimination. According to respondents, the Ledbetter decision made clear that a “‘disparate-treatment claim [under Title VII] comprises two elements’” – “‘an employment practice[] and discriminatory intent’” – and reaffirmed the Court’s prior decisions holding that if a facially discriminatory pay scale is adopted by an employer, then “‘that employer engages in intentional discrimination whenever it issues a check to one of those disfavored employees.’” In respondents’ view, the setting of an employee’s benefits is precisely the same kind of discrete act as setting her pay; thus, the employment practice and the discriminatory intent were joined – long after the PDA – when AT&T used a facially discriminatory policy to calculate respondents’ pension benefits and, as a result, reduce them in comparison with other similarly situated employees.

Moreover, even if their claims rested upon AT&T’s pre-PDA decision to adjust their NCS date for pregnancy leave, respondents argue that the decision below should still stand based on Lorance v. AT&T Technologies, in which the Court held that if a seniority system is found to be facially discriminatory, it “‘can be challenged at any time,’” and the Civil Rights Act of 1991, which specifically provides for challenges to an intentionally discriminatory seniority system “when a person aggrieved is injured by the application of the seniority system.”

Finally, respondents argue that certiorari is not warranted because the effects of the Ledbetter decision have not been fully fleshed out by either the courts or Congress. The Sixth and Seventh Circuits issued their conflicting decisions before the Ledbetter decision and thus could not have relied on that decision’s “nuances.” It is possible, respondents maintain, that those circuits may reconsider their decisions in light of Ledbetter. And in any event, Congress is currently considering legislation that would cover all claims pending on or before May 28th, 2007.

In late May 2008, the United States – in response to the Court’s late January call for the views of the Solicitor General – filed a brief in which it urges the Court to grant certiorari. First, the government argues, the Ninth Circuit erred in holding that AT&T violated Title VII when, in calculating benefits, it failed to credit pre-PDA pregnancy leave; such a conclusion, the government emphasizes, gave an unintended retroactive effect to the PDA. Second, the government contends that efforts by the Ninth Circuit and respondents to characterize AT&T’s NCS system as facially discriminatory are “seriously flawed,” reasoning that when the petitioner adopted and applied its pre-PDA pregnancy leave policies, there was no law requiring pregnancy leave to be treated like other temporary disability leaves. Consequently, the policy could be discriminatory only if the PDA had retroactive effect, which it clearly did not. Indeed, the government continues, not only was it not retroactive, but the PDA “did not even apply prospectively to benefits programs” until 180 days after its enactment.

The United States next argues that, to circumvent the fact that the PDA did not at the time of its passage require employers to credit employees for pre-PDA pregnancy leave, the Ninth Circuit held that AT&T was nevertheless required to adjust the NCS date to account for pre-PDA pregnancy leave whenever it calculated benefits for any employee who had taken pre-PDA pregnancy leave. However, in the government’s view, “that kind of perpetuation-of-past discrimination claim is” – notwithstanding respondents’ arguments to the contrary – directly foreclosed” by a line of Supreme Court precedent starting with Evans and most recently revisited in Ledbetter. Finally, the United States argues that cert. should be granted because the Ninth Circuit’s decision squarely conflicts with decisions out of the Sixth and the Seventh Circuits. Countering respondents’ arguments that those opinions might be revisited in the wake of Ledbetter, the government asserts that because those circuits relied upon the same Supreme Court precedent that Ledbetter “reaffirmed and reinforced,” there is no reason either for those courts to reconsider their decisions or to believe that the Ninth Circuit will correct its erroneous reading of Ledbetter. Cert. was granted on June 23, 2008.

[edit] Merits Briefs

In its brief on the merits, petitioner AT&T presents three major arguments to support its contention that the en banc Ninth Circuit wrongly held that AT&T violated Title VII when it failed to grant service credit to female employees who had taken pregnancy leaves prior to the passage of the Pregnancy Discrimination Act.

First, AT&T argues that the decision below necessarily grants the PDA impermissible retroactive effect. Prior to Congress’s passage of the Act, the Supreme Court’s holding in Gilbert – that employers were not required to award disability benefits to employees who were out of work on pregnancy leave – was controlling. Yet when Congress passed the PDA, it did not expressly give the Act retroactive effect. Thus, the Ninth Circuit’s decision imposes a new obligation on AT&T, requiring it to recognize previously denied service credits. And by changing the legal consequences of events completed before the Act’s effective date, the decision below plainly gives the PDA retroactive effect.

Second, AT&T contends that even if it had violated Title VII by adjusting respondents’ NCS dates, all claims would now be time-barred under Evans and its progeny, including the Court’s recent decision in Ledbetter. AT&T is entitled to treat respondents’ adjusted NCS dates as lawful because respondents failed to challenge the policies directly following their leaves of absence. There is no merit to the argument (made by the majority below and respondents) that Bazemore, rather than Evans, controls in this instance. AT&T’s pre-PDA NCS policy was, in fact, facially neutral; it treated pregnant employees no differently from other employees taking personal leave. Additionally, AT&T dismisses respondents’ claim that they could not have brought their suit until their retirement benefits were calculated as legally baseless; similarly, the claim that they had been merely advised of their reduced seniority was flatly contradicted by the stipulated facts of the case.

AT&T rejects the Ninth Circuit’s conclusion that respondents’ claim is timely under Section 706(e)(2), which allows challenges against facially neutral but intentionally discriminatory systems to be brought when (1) the system is adopted; (2) an individual becomes subject to it; or (3) when a person is aggrieved by its application. AT&T contends that (e)(2) also cannot be applied retroactively so as to render respondents’ claims timely.

Finally, AT&T concludes its brief by arguing that the decision below is inconsistent with Title VII’s §703(h) protection of bona fide seniority systems, and that the PDA does not invalidate §703(h)’s protections.

Appearing as an amicus in support of AT&T, the United States similarly argues that the Ninth Circuit erred in holding that AT&T violated Title VII. First, echoing AT&T’s briefs, the United States contends that the decision below gives impermissible retroactive effect to the PDA, because Congress “did not obligate employers to grant employees credit for pre-PDA [pregnancy] leave.” Further, the decision in Evans forecloses a “perpetuation-of-past discrimination claim”; the Court’s decision in Bazemore does not compel a contrary result, because there is no “mere continuation” of pre-PDA discriminatory practices – after the PDA was passed, AT&T changed its policy and “came into compliance.” Second, the United States rejects the claim, made both in the decision below and by respondents, that AT&T’s seniority system falls within the purview of Section 706(e)(2) because it could not have been adopted with an intentionally discriminatory intent unless the PDA is given retroactive effect.

The respondents begin by addressing AT&T’s claim that the company fundamentally did not violate Title VII when it reduced their pensions. According to their brief, AT&T does not dispute either that the seniority accrual rule it used before 1978 was discriminatory (since it changed its policy immediately following the passage of the Act) or that the discrimination itself was facial. Thus, respondents argue, their claims must fall not under Evans (in which the seniority system in question was facially neutral), but rather under Bazemore, as applied to seniority systems in Section 706(e)(2). In that 1986 decision, the Court held that an employer’s current pay system was facially discriminatory because it relied upon pre-Title VII discriminatory base salaries to determine post-Act pay. In the same way, even if the pre-PDA service credits were lawful at the time, the post-PDA reliance upon them is a present violation of Title VII.

Respondents reject AT&T’s various assertions that its seniority system is facially nondiscriminatory, arguing that any pension system which relies upon a discriminatory rule for employees to accrue seniority is facially discriminatory and that AT&T’s system cannot be rendered neutral either by its later abandonment of the discriminatory rule (for women who took pregnancy leave post-PDA) or by the fact that only some of its employees (namely, those who took pre-PDA pregnancy leaves) are subject to discrimination. According to respondents, this argument by AT&T – that its system is not facially discriminatory because respondents are not “similarly situated” to other workers – hinges on AT&T being correct on the merits of its retroactivity argument.

Second, respondents dispute AT&T’s claim that they were required to bring a Title VII claim when the company’s discriminatory rule was applied to them to give them credit for their absences. They reason that, in an effort to balance the rights of employees against employers, Title VII prohibits only discrimination that alters an employee’s “‘compensation, terms, or privileges of employment.” For that reason, AT&T’s initial act of discrimination – denying service credit to individual respondents – was not sufficient to establish Title VII liability, and respondents could not have met Congress’s “adverse employment action” threshold. AT&T’s claim that it relied on its NCS dates for purposes other than pension calculation (and, thus, that Hulteen and the other employees should have challenged the altered date before their pensions were calculated) fails both because the record does not show that respondents ever suffered any concrete injury before their pensions were calculated and because, in any event, one foregone opportunity to challenge a discriminatory practice does not preclude a worker from later filing a challenge.

Third, respondents counter AT&T’s argument that the decision below gives the PDA an impermissible retroactive effect. They contend that AT&T was not held liable either for its failure to pay respondents equal disability benefits during their pre-PDA pregnancy leave or for its initial failure to record that leave as credible service. Instead, the Ninth Circuit’s decision understood Title VII to prohibit AT&T from using pre-PDA crediting decisions when the company set respondents’ pensions, years after the PDA took effect. Respondents rebut the “alarming predictions” by AT&T and its amici that a ruling against AT&T would have “substantial deleterious effect” on the solvency of pension funds, explaining that only a relatively small number of women who took pre-PDA pregnancy leaves actually worked for companies with similar vestiges of pre-PDA rules and remained there until their pensions vested. Respondents also argue that the PDA did not change the law, but instead merely codified the Court’s decision in Nashville Gas Co v. Satty, decided one year after Gilbert, in which the Court held that “a policy of denying accumulated seniority to female employees returning from pregnancy leave” has an illegal disparate impact.

Respondents next assert that AT&T’s reliance on Section 703(h) is misplaced because that provision does not protect a facially discriminatory seniority system and because it does not apply to claims of pregnancy discrimination in fringe benefit programs.

Finally, respondents assert that the decision below is in line with the “long-held” and “consistent” views of the agency entrusted by Congress to enforce Title VII – the EEOC.

In its reply, AT&T reasserts its major arguments, stressing that the company’s pre-PDA leave policies were, contrary to respondents’ claim, facially neutral “as a matter of law.” Additionally, it disputes respondents’ classification of its pre-PDA pregnancy leave policies as a part of its NCS seniority accrual rules, claiming that it was instead their personnel policies that determined how leaves were classified. Finally, AT&T emphasizes, “no deference is owed to the views of the EEOC.”

[edit] Oral Argument Recap

The second case argued on December 10, 2008 AT&T v. Hulteen, stemmed from a decision out of the Ninth Circuit in favor of Noreen Hulteen and three other women who were denied full service credit for pregnancy leaves taken from AT&T between 1968 and 1976. When the company calculated their pension benefits decades later, the women and the union who represent them sued under the Pregnancy Discrimination Act (PDA).

Arguing on behalf of petitioner, Carter Phillips tried to persuade the justices that while the women’s claims were actionable when the credit was originally denied, any claim was now stale. To require AT&T to credit the women, decades later, for their absences would upset the “competitive seniority” amongst employees. Justice Ginsburg seemed unconvinced, suggesting that absent a felt application of their loss in seniority, there was “nothing to be done” in the time immediately following the leave. Mr. Phillips emphasized that both Congress and the Supreme Court’s prior decisions have “consistently recognized” the rights of all members of the plan. Phillips faced questions from Justices Ginsburg, Breyer, and Souter when he rejected respondents’ merits briefing classification of the benefits plan as facially discriminatory. Since AT&T immediately changed its plan after the PDA was passed to henceforth credit pregnancy leaves like other temporary disability leaves, he argued that the plan must be in complete compliance and cannot be facially discriminatory. Justices Breyer and Souter both struggled to identify the correct line of cases through which to understand Hulteen – whether to rely upon Bazemore, in which the Court ruled against a company paying unequal wages to black and white employees based on pre-ERA salaries, or instead upon Evans and Ledbetter, in which the Court recently held that “the fact that pre-charging period discrimination adversely affects the calculation of a neutral factor like seniority…does not mean that each new paycheck constitutions a new violation.” Mr. Phillips conceded that there were multiple ways of understanding the case, but that he believed Evans to be the most appropriate lens.

Arguing for the federal government as amicus curiae, Lisa Blatt reiterated that the decision below imposed impermissible retroactive liability on AT&T. Justice Ginsburg immediately pointed out that “the position of the only representative of the United States” in the court below was in fact opposite to the one taken by Ms. Blatt. Citing Ledbetter, Ms. Blatt maintained that the Commission was due “no special deference” on Supreme Court cases. Ms. Blatt voiced concern for the vested rights of other employees in the same pension system if respondents prevailed, describing it as a “zero-sum game.” Justice Souter disagreed, commenting that it did not seem as if, in the case at hand, others’ benefits would be endangered. A series of questions from Justice Stevens and then Justice Kennedy led Ms. Blatt to end her time by characterizing AT&T’s seniority system as facially neutral, affording “seniority to men and women on an equal basis depending on whether they took disability leave or personal leave.” She acknowledged, though, that its pre-PDA leave policy, while legal then, would be unlawful today and facially discriminatory.

Kevin Russell, arguing on behalf of respondents, began by distinguishing Evans from the case at hand as “the difference between discrimination outside of the seniority system which affects an employee’s ability to provide services to the employer, and discrimination within the seniority system itself that gives unequal credit for equal services.” Mr. Russell did not seem eager to indulge the Justices’ questions on the lawfulness of the plan at the time and was concerned more with the argument that, under Section 706(e)(2), which allows challenges against discriminatory seniority systems to be brought when the system is adopted, when an individual becomes subject to it, or when a individual is aggrieved by its application, the more important question is whether the system is intentionally discriminatory. Chief Justice Roberts and Justices Stevens and Scalia, however, pressed him on the pre-PDA lawfulness of AT&T’s benefits system. In response, Mr. Russell characterized the pre-PDA plan as “not unlawful intentional sex discrimination,” but, nevertheless, as having “an unlawful disparate impact on the basis of sex.” After Mr. Russell returned to the question of whether the system today is facially discriminatory, Justice Stevens objected to his reliance on Bazemore and distinguished between paychecks and pension plans. Justice Souter continued the distinction, drawing out what he said to be the difference between unlawful unequal paychecks and a seniority system that was lawful at the time. Justice Kennedy then returned to the risk that in fixed-fund pension plans, employees who were not parties to the action might receive less. Mr. Russell responded that there was very little risk to funds, particularly because the decision would apply to a relatively small number of people and relatively small amounts of money. The Justices then mused over the possible implications that a ruling in favor of respondents might have in other areas and in light of Ledbetter. Mr. Russell maintained that the important difference between Ledbetter and Hulteen is that the discrimination in Ledbetter was entirely outside the seniority system and so 706(e)(2) didn’t apply.

In his rebuttal, Mr. Phillips returned to the Justice Kennedy’s concern over the pension fund, stressing that the most fundamental point “is that you don’t know” what the impact of a decision in favor of respondents would be. The nature of the pension process, he argued, depends upon actuarial assumptions made in far in advance.

[edit] Opinion Analysis

Thirty-odd years after Congress passed the Pregnancy Discrimination Act (PDA) to include differential treatment of pregnancy leave as sex-based discrimination, the Supreme Court on Monday issued its opinion in AT&T v. Hulteen, holding that AT&T is not required to include some pregnancy leaves when calculating pension benefits for its female employees.

The case involved four former and present AT&T employees who took maternity leaves before the PDA was passed and, thus, employers were still permitted to treat pregnancy leave differently from other sorts of medical leave.

Much of Justice Souter’s majority opinion, which was joined by the Chief Justice and Justices Stevens, Scalia, Kennedy and Alito, focuses on § 703(h) of Title VII, which provides protection and special treatment to seniority systems like the one used by AT&T. Under subsection h, benefit differentials within a bona fide seniority system are lawful unless they result from an intent to discriminate. Because differential treatment of pregnancy leave was not gender-based discrimination at all when these employees took their leaves, and AT&T therefore couldn’t have intended discrimination where it didn’t exist, AT&T’s plan is insulated from challenge under subsection h.

The only way, the Court explained, that Section 703(h) could be construed as not supporting AT&T would be to read the PDA as applying retroactively to “recharacterize” the acts as illegal when done. But the opinion dismisses that construction as “not a serious possibility,” reasoning that there was no clear intent on the part of Congress for the Act to have retroactive application.

After rejecting several of employees’ other arguments, including that the decision in the 1990s not to give post-PDA credit to pre-PDA pregnancy leave is facially discriminatory, the Court concludes that Congress intentionally protected bona fide seniority systems, like the one in place at AT&T, with their “predictable financial consequences, both for the employer who pays the bill and the employee who gets the benefit” under § 703(h).

Justice Ginsburg’s dissent, joined by Justice Breyer, remarks that she would not dissent if the Pregnancy Discrimination Act were merely “an ordinary instance of legislative revision” of the Court’s construction of a text. Instead, she forcefully contends, both the text of the PDA and its legislative history make clear both Congress’s view that the Court erred egregiously in GE v. Gilbert and its intention that there be no continuing reduction of women’s compensation as a result of pregnancy leave. AT&T’s conduct, which – contrary to the Court’s opinion – is facially discriminatory, is actionable because it denies equal benefits post-PDA. She chronicles the legislative and judicial history of gender-based discrimination in the workplace and concludes that she would “explicitly overrule Gilbert so that the decision can generate no more mischief.”

Justice Stevens filed a concurring opinion. In it, he notes that his “appraisal of the Court’s decision in Gilbert is the same” today as it was when he dissented in the case thirty years ago. And although he agrees with much of Justice Ginsburg’s dissent, he nevertheless must accept Gilbert as governing until Congress enacted the PDA.

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