News You Can Use: SCOTUS rules against crediting maternity leave in pension calculations

The Supreme Court ruled yesterday that women who took maternity leave before the enactment of the Pregnancy Discrimination Act of 1978 don’t have a legal claim in requiring employers to apply that leave on pension accruals.

In AT&T Corp. v. Hulteen, the Supreme Court had to decide whether the telecommunication giant was correct in refusing to calculate pregnancy leave incurred prior to 1979 in determining pension benefits.

In 1968, Hulteen took pregnancy disability leave for eight months. However, when she retired in 1994, she realized her pension checks were reduced because the eight months were not calculated as service time toward her pension benefits.

By a 7-2 vote, the Supreme Court overturned a lower-court decision stating that AT&T had violated the PDA by treating pregnancy-related disability leave differently from other disability leaves.

Although PDA requires employers to accord women who take pregnancy leave the same benefit as employees who take other types of temporary disability leave, AT&T argued, in part, that the court could no longer rely on previous case laws on retroactive principles because of a recent Supreme Court decision that limits applying federal statutes retroactively.

The majority of justices agreed. “Congress provided for the PDA to take effect on the date of enactment, except in its application to certain benefit programs, as to which effectiveness was held back 180 days,” Justice David Souter wrote.

Justices Ruth Bader Ginsburg and Stephen Breyer dissented: “Congress did not provide a remedy for pregnancy-based discrimination already experienced before PDA became effective,” Ginsburg wrote. “I am persuaded by the Act’s text and legislative history, however, that Congress intended no continuing reduction of women’s compensation, pension benefits included, attributable to their placement on pregnancy leave.”

Related EBN/BenefitNews.com coverage:
AT&T ordered to credit pregnancy leave in calculating pensions
HR policy high on Washington agenda

Overheard @: Supreme Court to hear discrimination case that could affect hiring

Today, the Supreme Court is expected to hear Ricci v. DeStefano, a case involving reverse discrimination that could change the way companies hire employees.

The case involves a team of firefighters in New Haven, Conn., that took a promotion exam. All of the white firefighters passed, but the city threw out the results because no blacks would have been promoted, saying the exam had a "disparate impact" on minorities that would most likely violate the 1964 Civil Rights Act.

However, the white firefighters claim the action not to promote violated their rights under the Civil Rights Act. And in a related case, the city of Chicago last month paid a $6 million settlement to 75 white firefighters who said they lost promotions when their test scores were tossed out in 1986.

According to an alert from Pepe & Hazard LLP, the case could affect employers' hiring practices -- specifically, questioning whether they need to achieve racial parity be considered legal.

Comment and let me know your thoughts on this case, and the steps you've taken to safeguard your hiring/promotion practices from litigation.

Overheard @: Supreme Court to hear case on 401(k) fees

Stay tuned plan sponsors and providers. Fresh off the news that Sen. Herb Kohl (D-Wis.) was taking up legislation on 401(k) fees, here is more legal froth on fees reported by colleagues at EBN sister publication Money Management Executive:

Last year, the U.S. Court of Appeals for the Seventh Circuit ruled that a case three investors in Oakmark Funds had brought over what they alleged to be excessive fees failed to meet the burden of proof, setting an important precedent that protected fund firms against such cases.

But now, the U.S. Supreme Court will hear the case to determine whether the case set too high a bar.

The investors said Oakmark should charge retail investors the same lower fees that it charges institutional investors, arguing that it provides the same services to both investor classes. The investors further charged that as the firm’s assets rose, Oakmark failed to pass along economies of scale. But Oakmark, and other fund companies in the past, countered that retail investors demand more services than institutional investors.

Tip of the Day: Be careful mixing job, benefits terminations

When it comes to terminating benefits along with jobs, employers must take care to remember the two may not mix -- at least in the eyes of the legal system.

The Massachusetts Supreme Court held last week that Claire Cole, a former secretary for the department of public works in Salem, Mass., should have received full disability benefits after she suffered a heart attack within an hour of hearing she would lose her job in March 2000.

Cole, who died of a separate illness in 2006, previously claimed that past years of job-related stress, in addition to hearing that her position would be eliminated due to budget concerns, caused the attack, leaving her unable to do her job and thereby deserving full disability benefits. The Contributory Retirement Appeal Board later found that the debilitating heart attack was job-related, a finding that was upheld by the Massachusetts Supreme Court.

The two key questions the court answered in the Retirement Board of Salem vs. Contributory Retirement Appeal Board were whether Cole’s heart attack occurred “as a result of and while in the performance of her duties” and whether or not the city is liable for the damages despite conducting a routine management practice.

Countering Cole’s assertions, the Salem Contributory Retirement Board argued that Cole had pre-existing conditions of hypertension and chronic anxiety.

Whether or not these types of claims will become a trend in coming months as more and more workers are expected to be laid off is hard to say. But according to one Salem attorney, this was a highly specialized case.

“If you’re talking about situations where people are being notified that their jobs are being eliminated and they have a reaction to that, if that reaction is purely mental or psychological, they will not recover [benefits],” Alan Pierce told Salem News. “If the reaction is physical, they will recover. But how frequently will someone have a heart attack or stroke upon receiving bad news?”

Is this a legitimate ruling or should her qualification for disability benefits have ended with her job’s imminent termination? Let us know what you think. --Kathleen Koster

Tip of the Day: Make sure employees update their beneficiaries

Although some employees tend to breeze past beneficiary elections, a new Supreme Court ruling may give them pause.

In Kennedy v. Plan Adm. for DuPont Savings, the justices unanimously ruled that a pension plan administrator was in compliance with ERISA when the fund disbursed proceeds to a plan participant's ex-wife, who had waived her rights to the pension in their divorce decree.

"This is a favorable decision for plan administrators. Plan administrators can rely upon the terms of a plan document and do not need to look to various external documents to determine who is entitled to receive a distribution, which in this case was the designated beneficiary," says Carrie Byrnes, a labor attorney in the Chicago office of Bryan Cave LLP.

"Going forward, parties going through divorces should be sure to change beneficiaries, if permitted, after the divorce is final," she adds. Family law attorneys should also be sure to counsel clients to change beneficiaries.