Supreme Court Affirms AT&T’s Limitation of Pension Benefits

The issue in AT&T Corp. v. Hulteen, 129 S. Ct. 1962 (May 18, 2009) was whether AT&T miscalculated retirement benefits for employees by not conferring full credit for maternity leaves taken before 1979, when the Pregnancy Discrimination Act (“PDA”) became effective. During that period, the company policy permitted pregnancy leave but granted retirement credit for a maximum of 30 days of pregnancy leave. For periods after the PDA, AT&T recalculated plaintiffs’ pregnancy leaves to give credit for all pregnancy leave time, but for pre-PDA periods AT&T retained the 30-day credit limit.

The Supreme Court, by 7-2 vote, rejected plaintiffs’ arguments, relying on the provision in Title VII that allows employers to make pension calculations based on a “bona fide seniority system.” The plaintiffs had argued that the recently-enacted Lilly Ledbetter Law supported their position since it allows employees whose pay was unlawfully reduced by sex discrimination in the past to sue based on current pay checks that reflected the effect of past discrimination. The Court rejected this argument, finding that AT&T’s actions before 1979 were lawful, and, therefore, the plaintiffs were not affected by a prior unlawful practice. As the Court noted: “Although adopting a service credit unfavorable to those out on pregnancy would violate Title VII today, a seniority system does not necessarily violate the statute when it gives current effect to such rules that operated before the PDA” became effective.

The dissenting opinion of Justice Ginsburg would have found a violation on the theory that AT&T committed a current violation of Title VII by basing pension credits on policies that, although lawful at the time, were unlawful when pension payments began to be made.