When Noreen Hulteen took pregnancy leave from her position at a telephone company in the 1960s, she didn't think it would affect her decades down the road. But the eight months she was unable to work reduced the amount of service credit toward her pension and related benefits. This decreased the amount Hulteen collected in pension payments when she retired in 1994.

In 2001 Hulteen, along with other female former employees, filed a class action suit against AT&T, which had acquired the company that employed Hulteen, seeking remedies for what they saw as unlawful discrimination based on their pregnancies.

Because Hulteen was pregnant prior to 1979, the year Congress added the Pregnancy Disability Act (PDA) to Title VII of the Civil Rights Act, AT&T argued it did not legally have to treat her pregnancy as a disability equivalent to an injury or illness. Using an argument that proved successful in a previous 9th Circuit case, the plaintiffs countered that the reduction in their pension payments constituted a current act of discrimination, which entitled them to damages and injunctive relief under Title VII.

On March 8, the 9th Circuit Court of Appeals issued a decision in favor of AT&T, holding that ruling for the plaintiffs would require retroactive enforcement of the PDA. The decision clarifies how the courts will view current consequences of past incidents of discrimination that occurred prior to the passage of a protective act.

“This case was essentially an argument about when the discrimination claim became ripe,” says Robert Shwarts, a partner in Orrick, Herrington & Sutcliffe's labor and employment practice. “The plaintiffs were saying the reduction in benefits was a current act of discrimination. The majority, however, ruled that finding in favor of the plaintiffs would mean the court would have to apply the PDA retroactively, which it couldn't do.”

Pregnant Plaintiffs

This debate over when the illegal act occurs–whether at the time of the pregnancy leave or at the time the employee collects pension checks–has been fought in the 9th Circuit before. Last time, however, the court ruled in favor of the plaintiffs.

In the 1991 decision Pallas v. Pacific Bell, which was nearly identical to the facts of Hulteen, the court ruled that denying a woman's seniority benefits due to a pregnancy leave, even if the act occurred prior to the PDA, constitutes a discriminatory practice.

“Pallas is factually on point with Hulteen,” says Michelle Le Mar a partner at Loeb & Loeb in Los Angeles. “It's really apples and apples, not apples and oranges.”

While that may be true, the U.S. Supreme Court's 1994 decision in Landgraf v. USI Film Products has changed the landscape since Pallas. In Landgraf, the Court determined that no law has an assumed retroactivity and that the only time a law can apply retroactively is when Congress includes provisions that explicitly state that the act applies retroactively.

“All three judges agreed in Hulteen that there is a lot of tension with Landgraf,” says Paul Ramshaw, an appellate lawyer for the EEOC, which filed an amicus brief urging a ruling for the plaintiffs. “What they disagreed on was whether Pallas should continue to be the law of the 9th Circuit.”

In the end, the three-judge panel was split. The majority felt Pallas was not a binding decision and that by finding in favor of the plaintiffs, the court would be violating Landgraf. The dissenting judge, however, felt there was no conflict between Pallas and Landgraf and that the alleged act of discrimination in Hulteen was a current act and therefore the court could award damages without applying the PDA retroactively.

“This court didn't overrule the Pallas decision specifically, but it certainly disregards it,” says Tamara Naughton, a partner at Fisher and Phillips.

Discrimination Nation

This ruling's implications extend far beyond Hulteen and the PDA. Now in the 9th Circuit, if employees wish to sue based on current discriminatory repercussions of a past discriminatory act, they will only be successful if the act in question explicitly grants retroactivity. This applies to numerous workplace discrimination laws.

“With respect to employers with seniority systems that look back to times before certain acts were effective, such as other amendments to Title VII, this case is saying because those statutes aren't retroactive, you can't be held liable for a current violation [if the discrimination occurred prior to the law's passage],” Naughton says.

Yet despite the fact that this ruling is beneficial to employers, it does carry with it a message of caution. Although discrimination based on pregnancy status may not have been illegal prior to 1979, it still resulted in costly litigation years later. This may hold true for other forms of discrimination that aren't currently statutorily barred but may be in the future, such as discrimination based on sexual orientation, Le Mar says.

“The best practice would be to look and see if your policies, plans or seniority systems for some reason carve out a certain group of people,” Le Mar says. “And if they do, take the ax now because the last place you want to be 40 years from now is where AT&T was in this case.”