In AT&T Corp. v. Hulteen, the United States Supreme Court was asked to determine whether employers violate Title VII of the Civil Rights Act by not fully restoring service credit for pregnancy leaves taken before the 1978 passage of the Pregnancy Discrimination Act (PDA) for employees who retire post-PDA. The Court recently ruled in favor of the employer and held that maternity leave taken prior to the passage of the 1978 Pregnancy Discrimination Act need not be considered in calculating employee pension benefits.

In 1968, Noreen Hulteen took maternity leave and then was hospitalized for a medical condition requiring post-partum surgery. She missed a total of 240 days of work due to her pregnancy and surgery, but her employer, Pacific Telephone and Telegraph (now AT&T), credited her with only 30 days of paid leave, since under the company’s seniority-based system, her pregnancy leave was considered personal, not disability related. By contrast, had she had been out on disability leave unrelated to pregnancy she would have received credit for the entire absence. As a result, when Hulteen retired in 1994, she received credit for service as originally calculated in 1968, despite the enactment of the PDA in 1978.

In 2001, Hulteen and several other women sued AT&T, alleging that its decision to pay them smaller pensions because of their pregnancy disability leaves constituted an unlawful employment practice under the Pregnancy Discrimination Act, an amendment to Title VII of the Civil Rights Act of 1964, which prohibits discrimination on the basis of pregnancy and allows those on maternity leave the same coverage as other medical leave. AT&T argued that the law cannot be applied retroactively.

The U.S. District Court for the Northern District of California granted summary judgment on behalf of the women, based on a 1992 Ninth Circuit case, Pallas v. Pacific Bell. A three-judge panel of the Ninth Circuit reversed the district court’s holding, contending in its 2-1 ruling that Pallas’ holding gave retroactive effect to the PDA, and that this retroactivity was impermissible in light of the Supreme Court’s 1994 decision in Landgraf v. USI Film Prods. In August, 2007, the Ninth Circuit heard the matter en banc and reinstated the grant of summary judgment in favor of Hulteen and the others.

The Supreme Court granted certiorari to resolve a split in the circuits, in part so that employees in a national pension plan would not receive conflicting decisions depending upon the geographic area in which they litigated the issue. In a 7-2 decision, the Court ruled in favor of AT&T, finding that (l) that the PDA is not retroactive and (2) that AT&T’s benefit-calculation rule is exempt from Title VII of the Civil Rights Act because it is a “bona fide” seniority-based system that did not discriminate intentionally against pregnancy.

Justice Ruth Bader Ginsburg filed a strong dissenting opinion, joined by Justice Stephen Breyer, contending the company committed a current violation of the law by continuing to rely on a pre-1978 calculation of benefits. “It is at least reasonable to read the PDA to say, from and after the effective date of the Act, no woman’s pension payments are to be diminished by the pretense that pregnancy-based discrimination displays no gender bias.”