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Supreme Court Says Pension Plan Does Not Have to Account for Actions Prior to Enactment of Current Law

    Client Alerts
  • May 29, 2009

In January, Congress passed the Lily Ledbetter Fair Pay Act.  This law reversed a U.S. Supreme Court decision by considering each new paycheck that reflects past discriminatory acts to constitute a fresh violation of Title VII.  Last week in AT&T Corp. v. Hulteen, the Supreme Court distinguished the Ledbetter law from a situation involving credit for service under an employer-sponsored pension plan.

In this case, during the 1970s, AT&T did not credit female employees for service under the plan for time away from work due to childbirth.  In 1978, the Pregnancy Discrimination Act made this practice illegal, and the company promptly began providing credit for childbirth leave.  However, AT&T never retroactively credited female employees for service time prior to the effective date of the PDA.  When these employees began to retire decades later, their pension benefits reflected lower payments due to this failure to credit them for the additional service.

The plaintiffs claimed that like Ledbetter, each pension check they receive now constitutes a new and separate violation of the PDA.  In a 7-2 decision, the Supreme Court upheld AT&T’s pension practices.  Neither ERISA nor the PDA requires employers to recalculate seniority based on methods that were legal prior to the passage of new discrimination laws.  At the time these calculations were made, the AT&T pension plan used a legitimate seniority system, protected under ERISA.

The Court distinguished this situation from the new Ledbetter law by noting that in Ledbetter situations, the old discriminatory acts were in fact illegal at the time they occurred.  In the present case, AT&T’s pension calculations that excluded leave for the birth of a child ended once the PDA became law.  While this case only directly affects a small universe of employers and employees, it indicates that the Court will not use Congress’ reaction to its Ledbetter decision to expand retroactive application of discrimination laws.