Blogging Employee Benefits

March 10, 2006

Pregnancy Discrimination Act Not Retroactive for Pension Service Credits

Filed under: Litigation, Pensions — Fuguerre @ 7:57 am

The key is differentiating cause from effect. If an action has the effect of causing a later consequence, and if the action though permissible at the time, is subsequently made impermissible by a change in law, it cannot be the rule that such change will always make the consequences of the original action also impermissible. If that were the rule, every change in law would have retroactive consequences, and Landgraf’s presumption against retroactivity would be meaningless.

Pregnancy leave prior to the 1979 effective date of the Pregnancy Discrimination Act of 1978 (PDA) need not be taken into account for crediting service for purposes of current retirement benefit determinations, according to a divided 9th Circuit ruling reversing district court summary judgment. [Hulteen v. AT&T Corporation, No. 04-16087] The 9th’s ruling rejects its own precedent in Pallas v. Pacific Bell (9th Cir. 1991), on which the district court had relied, finding that the retroactivity principles enunciated by the Supreme Court in Landgraf v. USI Film Prods. (1994) now argue against Pallas, absent ongoing pattern or practice or current continuing violation.

Prior to the PDA, employees were not credited with service during a leave of absence taken for pregnancy, although employees on other temporary disability leave received full service credit toward eligibility for early retirement, determination of retirement benefits, and other employment-related practices. Since the pregnancy-based distinction was made illegal by the PDA, the employer began crediting service for pregnancy leave taken after 1978, but failed to add credited service for pregnancy leave taken prior to 1979. Employees with pre-1979 pregnancy leave filed a class action suit in 1994, joined by the union representing the employees, charging violations of ERISA and Title VII of the 1964 Civil Rights Act as amended by the PDA. Although the district court found the employer’s arguments “compelling,” it felt obligated by Pallas to rule in favor of the employees. The Equal Employment Opportunity Commission, which had earlier issued a Letter of Determination finding reasonable cause of discrimination, filed an amicus brief in support of the employees when the district court’s decision was appealed.

In the 1991 Pallas, similar post-PDA determinations based on pre-PDA pregnancy leave had been judged prohibited discrimination. However, the Supreme Court’s 1994 decision in Landgraf subsequently “concluded a thorough review and restatement of the law governing the retroactivity of congressional enactments,” establishing a presumption against statutory retroactivity absent clear statement of congressional intent to the contrary. Although the court characterizes the employer’s pre-PDA pregnancy leave rules as “objectionable” under current law, those rules had been expressly recognized as legal prior to 1979. Enlightened by Landgraf, the appellate court found that denial of full service credit for pre-1979 maternity leave had not been made illegal retroactively by the PDA, nor did the post-PDA denial of benefit rights based on pre-PDA practice constistute a current violation.

Since no current violation exists, the court further found the filing of complaint in 1994 barred by the statute of limitations.

Dissenting opinion rejected the majority opinion’s reliance on Landgraf to “play ostrich to Pallas.” Reading Landgraf as “refining, rather than sea-changing,” the dissent did not see Pallas‘ focus on current benefits actions as so irreconcilable with the reasoning or theory of Landgraf as to give the appellate court cause for overruling its Pallas precedent.

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