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Joanna L. Grossman

AT&T v. Hulteen: The Supreme Court Deals a Blow to Once-Pregnant Retirees


Tuesday, May 26, 2009

Is it permissible to penalize retiring women for pregnancy-related disability leaves that they took before the law required employers to treat such leaves like all other disability leaves?

Earlier this month, in its 7-2 ruling in AT&T v. Hulteen, the Supreme Court said yes, leaving in place yet another obstacle to workplace equality for women.

Pregnancy and Pensions at AT&T

Hulteen involves a group of female employees who took unpaid leaves for disability related to pregnancy between 1968 and 1974. Pursuant to AT&T’s policies in place at the time, an employee who took "disability" leave from work received full service credit (that is, credit for having worked for the full period during which he or she was disabled), no matter how long the leave. In contrast, an employee who took leave related to pregnancy – even if she was temporarily disabled by the pregnancy– could receive service credit for no more than 30 days. (An uncredited leave resulted in the employee’s "start date" at AT&T being adjusted forward to the extent of the leave.) In 1977, the company adopted a new policy, which entitled employees with pregnancy-related disability to receive both benefits and service credit for six weeks, but neither benefits nor credit thereafter. Again, employees who took other disability leaves were entitled to full service credit.

Like many other companies, AT&T amended its leave policy in 1979 to comply with the newly enacted Pregnancy Discrimination Act (PDA). Prior to the PDA’s enactment, the Supreme Court had ruled, in General Electric Co. v. Gilbert, that Title VII’s ban on sex discrimination in employment did not include pregnancy discrimination. In other words, it had ruled that employers could treat employees differently on the basis of pregnancy without running afoul of Title VII’s broad anti-discrimination mandate.

Women’s rights advocates reacted swiftly to the ruling in Gilbert and pushed, successfully, for the enactment of the PDA. The PDA guarantees eligible employees (those who work for employers with at least fifteen employees) two substantive rights: (1) the right against being treated adversely because of pregnancy; and (2) the right to be treated "the same" as other temporarily-disabled employees with respect to leave, benefits, insurance, and so on.

Under the second clause of the PDA, employers could no longer -- as AT&T had done in the past -- grant less credit and fewer benefits to workers who took pregnancy-related disability leave than it did to those who took leave for other types of disability without violating federal law (though it could freely deny leave to both). AT&T thus amended its policy to provide equal service credit for all disability leaves, including those necessitated by pregnancy.

AT&T did not, however, take any action to pay benefits or restore service credit to women who took pregnancy leaves under the differential system.

AT&T v. Hulteen: The Issue Before the Supreme Court

Four of these women – Noreen Hulteen and three others – sued AT&T. They did not take issue with the decades-old injury they had suffered when they were deprived of benefits extended to others on disability leave. But they did challenge their loss of service credit during their pregnancy leaves, which means, today, they are entitled to lower pensions at retirement.

The four women who sued AT&T alleged that its use of an adjusted start date, which affects, among other things, the level of pension benefits they receive, is discriminatory in violation of Title VII, the main federal antidiscrimination law. The federal trial court ruled in favor of the plaintiffs, holding that post-PDA retirement calculations could not be lawfully based on rules differentiating service credit on the basis of pregnancy from other service credit, whether or not those rules had been lawful at the time. An en banc panel of the U.S. Court of Appeals for the Ninth Circuit agreed and affirmed the judgment, splitting with both the Sixth and Seventh Circuits, which had ruled to the contrary.

The Court’s Decision: Ruling for AT&T Based on Its "Bona Fide Seniority System"

The Supreme Court, however, reversed, and ruled in favor of AT&T. The majority opinion, authored by the retiring Justice David Souter, turns on its determination that AT&T’s pensions were set based on a "bona fide seniority system," and therefore were subject to special protection under Title VII.

Title VII defines an "unlawful employment practice" as discrimination "against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s . . . sex." To challenge an unlawful practice under Title VII, an employee must file a charge with the Equal Employment Opportunity Commission within 180 days of its occurrence.

Hulteen argued that the unlawful discrimination occurred when AT&T used the differential service credits to calculate pensions at retirement. The Court relied, however, on section 703(h) of Title VII (codified at 42 U.S.C. 2000e-2(h)), which immunizes employers’ decisions if they are based upon a "bona fide seniority system," as long as those decisions are not "the result of an intention to discriminate because of race, color, religion, sex, or national origin."

The question before the Court, then, was whether the express exclusion of pregnancy leaves under AT&T’s earlier policies reflected an "intent to discriminate." The majority said no because, at the time when the relevant leaves were taken, (i) pregnancy discrimination was legal (the PDA had not yet been enacted); and (ii) pregnancy discrimination was not considered a form of sex discrimination (thanks to the Court’s ruling in Gilbert). A majority of the Justices thus concluded that AT&T was entitled to exclude pregnancy leaves from service credit calculations in the first instance and, once the company had done so, those calculations could be carried forward as part of a "bona fide seniority system" without triggering future liability.

The majority relied on the Court’s 1977 ruling in Teamsters v. United States, which upheld a seniority system that disproportionately advantaged white employees because the employer had, prior to Title VII’s enactment, favored them in job assignments. Under 703(h), the Court ruled in that case, the seniority system was not tainted by the prior discrimination and was therefore immune from challenge, even though it perpetuated the longstanding disadvantage to minority workers. In the Hulteen majority’s view, AT&T’s system is on par with the one challenged in Teamsters, and therefore is valid.

The Problems with the Reasoning of the Hulteen Majority

The problem with the majority’s reasoning, here, is twofold. First, the discrimination in this case was part of the seniority system itself – the system provided the rules for calculating service credits – rather than the merely reflective of other employment policies or practices. The system thus reflects an "intent to discriminate" that was not present in Teamsters.

Second, section 703(h) does not say that the employer must intend to illegally discriminate in structuring its seniority system – only that the employer must have the "intent to discriminate." It thus should not matter whether pregnancy discrimination was unlawful or not when those policies were in place. Either way, one thing is clear: AT&T did intend to discriminate on the basis of pregnancy, which current law does not permit.

The stickier question is whether the early policies reflected an intent to discriminate on the basis of sex (as opposed to pregnancy). The answer to this question turns on how one reads the effect of Gilbert. The Hulteen majority rules, in essence, that once Gilbert was decided, pregnancy discrimination could not be considered a form of sex discrimination at any time prior to the enactment of the PDA in 1978. (Justice Ginsburg disputes this point in her dissent, which is described in greater detail below.) And the majority also concludes that the "intent to discriminate" must have been present at the time when the service credits were determined, rather than in the present day, when the credits were used to calculate pension benefits.

By its own admission, the Court in Hulteen has permitted employers to continue implementing a seniority system that penalizes classes of workers that are protected by current law. The result is to add insult to injury for the once-pregnant employees, for whom the consequences of an initial instance of unfair treatment will now reverberate throughout the duration of their retirements.

Justice Ginsburg’s Dissenting Opinion: Acknowledging the Harm of Differential Treatment of Pregnant Workers

In Justice Ginsburg’s dissenting opinion in Hulteen, which was joined by Justice Breyer, she disagrees with the majority’s crabbed interpretation of the PDA, which would permit the plaintiffs, and others like them, to be penalized in perpetuity for taking pregnancy-based disability leaves earlier in their careers.

While the PDA did not require employers to compensate women for prior disadvantage on the basis of pregnancy, it does "protect women . . . against repetition or continuation of pregnancy-based disadvantageous treatment." Continuing or repeating such treatment, moreover, would violate the PDA’s "core command" that disadvantageous treatment on the basis of pregnancy in the employment context "must cease." Justice Ginsburg thus concluded that AT&T had committed a current violation of Title VII by using a pregnancy-based classification to set pension benefits post-PDA.

Justice Ginsburg also thought that it was at least arguable that AT&T’s pre-PDA policies were not lawful in the first instance. After all, the EEOC had issued guidelines in 1972 that required employers to treat pregnancy-related disability the same as all other temporary disabilities for all employment-related purposes. In Gilbert, the Court ignored these guidelines, as well as the unanimous view of federal appellate courts that pregnancy-based classifications were a form of sex discrimination. The favorable law pre-Gilbert and Congress’ swift repudiation of the ruling make it at least arguable that AT&T was not entitled even before 1978 to single-out pregnancy-based leaves for disadvantageous treatment.

The dissent’s reasoning has a key leg up on the majority’s: It is developed in context, rather than in a vacuum. Justice Ginsburg interprets the PDA against a long (and in some cases, continuing) history of adverse treatment against pregnant women – treatment that has jeopardized women’s workplace equality more broadly. The Hulteen plaintiffs each suffered only the loss of a few months of service credits because of their pregnancy leaves. But the denial of those credits is just one example of the innumerable ways in which pregnant women’s access to the workplace on equal terms has been – and continues to be – threatened. The adverse treatment of pregnant workers, based often on mistaken assumptions about their capacity to work, has been repeatedly acknowledged by the Supreme Court in prior opinions.

The Likely Effect of the Hulteen Ruling

The unfair treatment of pregnant workers has consequences. As I explored in more detail in a previous column, workplace inequality dooms women to a type of second-class citizenship, which prevents them from capturing the rights and benefits of societal membership. Justice Ginsburg tapped into this concern about equal citizenship in her Hulteen dissent, observing 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."

The ruling in Hulteen may not have broad-ranging consequences, though it surely will have tangible effects on those women now reaching retirement age who labored in the era before a statutory and constitutional right of sex equality. But it is a mistake to interpret statutes without attention to the purpose for which they were enacted. The PDA is an essential component of protecting women’s workplace equality; it should be given its due.

The remedy sought in Hulteen could be granted without unsettling the expectations of other AT&T employees covered by the same seniority system. They seek only equal benefits going forward, for equal work done in the past. This is not too much to ask.

Joanna Grossman, a FindLaw columnist, is a professor of law at Hofstra University. Her columns on family law, trusts and estates, and discrimination, including sex discrimination and sexual harassment, may be found in the archive of her columns on this site.

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