Client Bulletins
A Little Bitty Limit on Ledbetter

Client Bulletin #414
May 18, 2009

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Since January 2009, employers and their lawyers have been waiting to see just how dramatic the impact of the Lilly Ledbetter Fair Pay Act will be. Today, in AT&T Corp. v. Hulteen, the Supreme Court limited the application of the Act, but the limitation is unlikely to apply to most employers.

Under the Supreme Court’s 7-2 decision, the Ledbetter Act will not impose a duty on employers to retroactively correct sex-based disparities in benefits under bona fide seniority systems that were legal at the time.

The Hulteen Case

AT&T calculates pension benefits based on an employee’s “service credits.” In the 1960’s and for most of the 1970’s, employees on medical leaves of absence received service credits on the same basis as if they were actively working. However, pregnancy-related leaves were treated the same as personal leaves, and both types of leave received service credits only for the first 30 days of absence. In 1977, AT&T amended its practice by allowing pregnant women to receive service credits for the first six weeks of leave, putting them in a better position than employees on personal leave but still not equal to employees on medical leaves. Based on a 1976 Supreme Court decision, both differentials were lawful and did not violate Title VII’s proscriptions on discrimination on the basis of sex.

In 1978, Congress passed the Pregnancy Discrimination Act, which clearly provided that pregnancy-related leaves had to be treated the same as other types of medical leaves. The PDA took effect on April 29, 1979, and on the same day AT&T amended its severance plan to provide that pregnancy-related leaves of absence would be treated the same as medical leaves for service credit purposes. However, AT&T did not retroactively re-calculate the service credits for women who had taken pregnancy-related leaves of absence before April 29, 1979. As a result, when these women retired, they received lower pension benefits than their counterparts, male and female, who did not take pregnancy leaves before the PDA-compliant amendments were made.

Four female employees and their union, the Communications Workers of America, filed a charge of discrimination with the U.S. Equal Employment Opportunity Commission in the 1990’s, and the EEOC issued a cause determination in 1998. Suit was filed in the U.S. District Court for the Northern District of California, and both sides filed motions for summary judgment. The district court found in favor of the plaintiffs, and the U.S. Court of Appeals for the Ninth Circuit (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington, Guam, and Northern Mariana Islands) affirmed. The Ninth Circuit decision conflicted with decisions from the U.S. Court of Appeals for the Sixth (Kentucky, Michigan, Ohio, and Tennessee) and Seventh (Illinois, Indiana, Wisconsin) circuits, so the Supreme Court granted certiorari to resolve the split.

In a decision written by Justice David Souter, the Court held that AT&T’s policy was part of a bona fide seniority system and did not violate the PDA because during the time that the pregnancy differential was in effect, the Supreme Court had explicitly found that such a differential was legal. Although AT&T had a duty to change its service credit calculation after the PDA took effect, which it did, it was not required to retroactively re-calculate the service credits for the employees who had taken pregnancy-related leave.

The Ledbetter-related discussion appears in a short section at the end of the majority opinion. Justice Souter noted that the plaintiffs contended that they were “affected by application of a discriminatory compensation decision or other practice” when their pension benefits were paid. However, Justice Souter held that the Ledbetter Act could not apply in a case in which the “discriminatory decision” was legal at the time it was made.

Analysis

The Hulteen decision, although favorable to employers, will probably not directly affect many employers because the pension calculations at issue were so old. Moreover, it is reasonable to infer from the decision that the Ledbetter Act could have kept “alive” claims based on decisions made after Congress or the courts had declared them unlawful.

Perhaps the most noteworthy aspect of the decision for anyone other than the parties to the case is the dissent by Justice Ruth Bader Ginsburg, joined by Justice Stephen Breyer. With Justice Souter’s imminent retirement, Justice Ginsburg’s dissent presents a taste of what we can expect from Obama Administration judicial appointments. Although conceding that the PDA was not retroactive in effect, Justice Ginsburg contended that the law protected women “from and after April 1979 . . . against repetition or continuation of pregnancy-based disadvantageous treatment.” Justice Ginsburg continued, “I would hold that AT&T committed a current violation of Title VII when, post-PDA, it did not totally discontinue reliance upon a pension calculation premised on the notion that pregnancy-based classifications display no gender bias.”

After contending that an adverse decision would not have had a severe economic impact on AT&T, Justice Ginsburg concluded with a detailed discussion regarding the way that “[c]ertain attitudes about pregnancy and childbirth, throughout human history, have sustained pervasive, often law-sanctioned, restrictions on a woman’s place among paid workers and active citizens,” citing, among other things, a concurrence in a decision from 1873 stating that “the female sex [is] evidently unfi[t] . . . for many of the occupations of civil life.” (Brackets and ellipsis in original.)

Constangy, Brooks & Smith, LLP has counseled employers on labor and employment law matters, exclusively, since 1946. A “Go To” Law Firm in Corporate Counsel and Fortune Magazine, it represents Fortune 500 corporations and small companies across the country. Its attorneys are consistently rated as top lawyers in their practice areas by publications such as Chambers USA, Super Lawyers, and Top One Hundred Labor Attorneys in the United States. More than 100 lawyers partner with clients to provide cost-effective legal services and sound preventive advice to enhance the employer-employee relationship. Offices are located in Georgia, Florida, South Carolina, North Carolina, Tennessee, Alabama, Virginia, Massachusetts, Missouri, Illinois, Wisconsin, Texas and California. For more information, visit www.constangy.com.