Overturning a Ninth Circuit decision, a 7-2 U.S. Supreme Court holds that an employer does not necessarily violate the 1978 Pregnancy Discrimination Act when it pays pension benefits calculated pre-PDA that gave less retirement credit for pregnancy than for medical leave generally.

Prior to the PDA, AT&T based pension calculations on a seniority system that relied on years of service minus un-credited leave time, and pregnancy absences were given less retirement credit than other medical leaves. After the Congress prohibited employers from treated pregnancy absences less favorably than other medical leaves, AT&T accordingly changed its plan, but did not make any retroactive adjustments to the pre-PDA retirement calculations. Each of the women in the suit received less service credit for her pre-PDA pregnancy leave than she would have for general disability leave, resulting in a reduction in her total employment term and, consequently, smaller AT&T pensions. The Ninth Circuit found this to be a Title VII violation.

The Supreme Court reverses, stating, “Because AT&T’s pension payments accord with a bona fide seniority system’s terms, they are insulated from challenge under Title VII.” The Court majority points out that Sec.703(h) of Title VII provides: “[I]t shall not be an unlawful employment practice for an employer to apply different standards of compensation . . . pursuant to a bona fide seniority… system… provided that such differences are not the result of an intention to discriminate because of… sex.”

“The only way to conclude that §703(h) does not protect AT&T’s system would be to read the PDA as applying retroactively to recharacterize AT&T’s acts as having been illegal when done. This is not a serious possibility,” the Court says. AT&T v. Hulteen