Hulteen v. AT&T Corp. (9th Cir.) Brief as amicus Dec. 23, 2004 No. 04-16087 _______________________________________________________ IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT _______________________________________________________ NOREEN HULTEEN, ELEANORA COLLET, ARMA HORTON, ELIZABETH SNYDER, and COMMUNICATIONS WORKERS OF AMERICA, Plaintiffs-Appellees, v. AT&T CORPORATION, Defendant-Appellant. _______________________________________________________ On Interlocutory Appeal from the United States District Court for the Northern District of California _______________________________________________________ Brief of the Equal Employment Opportunity Commission as Amicus Supporting Appellees and Affirmance _______________________________________________________ JAMES L. LEE Deputy General Counsel LORRAINE C. DAVIS Acting Associate General Counsel VINCENT J. BLACKWOOD Assistant General Counsel PAUL D. RAMSHAW Attorney U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION 1801 L Street, N.W., 7th floor Washington, DC 20507 (202) 663-4737 TABLE OF CONTENTS STATEMENT OF INTEREST. . . . . . . . . . . . . . . . . . . . . .1 STATEMENT OF THE ISSUE . . . . . . . . . . . . . . . . . . . . .1 STATEMENT OF THE CASE. . . . . . . . . . . . . . . . . . . . . .2 1. Proceedings . . . . . . . . . . . . . . . . . . . . . .2 2. Statement of Facts. . . . . . . . . . . . . . . . . . .3 3. Decision Below. . . . . . . . . . . . . . . . . . . . .5 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 THIS COURT'S HOLDING IN PALLAS – THAT AN EMPLOYER VIOLATES TITLE VII WHEN IT CHOOSES TO CONTINUE RELYING ON A SENIORITY SYSTEM THAT FACIALLY DISCRIMINATES ON THE BASIS OF PREGNANCY IN CREDITING PAST SERVICE – IS STILL GOOD LAW. . . . . . . . . . . . . . . . . . . . . . .6 A. Pallas was not Implicitly Overruled by Subsequent Supreme Court Decisions Regarding the Retroactive Application of Statutes. . 10 B. Pallas was not Implicitly Overruled by the Supreme Court's Decision in Morgan Regarding the Limitations Period for Challenging Discrete Acts of Discrimination under Title VII.. . . . . . . . . . . . 16 C. The Pallas Court's Failure to Cite the Supreme Court's Decision in Teamsters does not Provide a Ground for this Panel to Fail to Follow it.. . . . . . . . . . . . . . . . . . . . . . . . . 21 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . 27 CERTIFICATE OF COMPLIANCE PROOF OF SERVICE TABLE OF AUTHORITIES FEDERAL CASES Ameritech Benefit Plan Committee v. Communication Workers of America, 220 F.3d 814 (7th Cir. 2000) . . . . . . . . . . . . 5 Bazemore v. Friday, 478 U.S. 385 (1986) . . . . . . . . . . . . .passim California Brewers Association v. Bryant, 444 U.S. 598 (1980) . . . 25 Carter v. West Publishing Company, 225 F.3d 1258 (11th Cir. 2000) 19-20 Delaware State College v. Ricks, 449 U.S. 250 (1980) . . . . . . .17, 20 International Brotherhood of Teamsters v. United States, 431 U.S. 324 (1977) . . . . . . . . . . . . . . . . . . . 10, 21-25 Landgraf v. USI Film Products, 511 U.S. 244 (1994) . . . . . . .6, 10-14 Lockheed Corporation v. Spink, 517 U.S. 882 (1996) . . . . . . .6, 10-14 Lorance v. AT&T Technologies, Inc., 490 U.S. 900 (1989) . . . . .passim Lyons v. England, 307 F.3d 1092 (9th Cir. 2002) . . . . . . . . . . .19 Martinez v. Potter, 347 F.3d 1208 (10th Cir. 2003) . . . . . . . . . .19 Miller v. Gammie, 335 F.3d 889 (9th Cir. 2003) . . . . . . . . . . . . 7 National Railroad Passenger Corporation v. Morgan, 536 U.S. 101 (2002) . . . . . . . . . . . . . . . . . . . 10, 16-20 Pallas v. Pacific Bell, 940 F.2d 1324 (9th Cir. 1991) . . . . . .passim Raad v. Fairbanks North Star Borough School District, 323 F.3d 1185 (9th Cir. 2003) . . . . . . . . . . . . . . . . . .19 Regions Hospital v. Shalala, 522 U.S. 448 (1998) . . . . . . . . . 14-15 Sharpe v. Cureton, 319 F.3d 259 (6th Cir. 2003) . . . . . . . . . . .19 Spink v. Lockheed Corp., 60 F.3d 616 (9th Cir. 1995), rev'd, 517 U.S. 882 (1996) . . . . . . . . . . . . . . . . . . .13 U.S. v. Hinostroza, 297 F.3d 924 (9th Cir. 2002) . . . . . . . . . . . 7 United Air Lines, Inc. v. Evans, 431 U.S. 553 (1977) . . . . . . .passim DOCKETED CASES EEOC v. Lucent Technologies, No. 04-8168 (C.D. Cal. complaint filed Sept. 30, 2004) . . . . . . . . . . . 1 FEDERAL STATUTES 28 U.S.C. § 1292(b) . . . . . . . . . . . . . . . . . . . . . . . . . 2 Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e et seq . 1 § 703(h) of Title VII, 42 U.S.C. § 2000e-2(h) . . . . . . . .passim Pregnancy Discrimination Act of 1978, 42 U.S.C. § 2000e(k) . . . .passim MISCELLANEOUS EEOC Compliance Manual, ch. 3, "Employee Benefits," (issued Oct. 3, 2000) (available at ). . . . . . . . .26 STATEMENT OF INTEREST The Equal Employment Opportunity Commission is the agency established by Congress to administer, interpret, and enforce Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e et seq., and other federal statutes prohibiting employment discrimination. The Commission therefore has an interest in how this Court decides questions that affect the enforcement of Title VII. The appellant in this case is urging this Court to overrule Pallas v. Pacific Bell, 940 F.2d 1324 (9th Cir. 1991). Pallas involved Pacific Bell's use of a service-crediting system that credited women who took pregnancy leaves before the effective date of the Pregnancy Discrimination Act ("PDA") with less seniority than employees who took leave for other temporary disabilities. The Court held that the defendant's ongoing use of that service-crediting system violated Title VII. The Commission believes that Pallas remains good law, and the agency recently filed a Title VII enforcement action against Lucent Technologies, Inc., in the Central District of California challenging the same service-crediting system at issue in Pallas and in this case. EEOC v. Lucent Technologies, No. 04-8168 (C.D. Cal. complaint filed Sept. 30, 2004). Accordingly, the Commission offers the Court its views. STATEMENT OF THE ISSUE Whether this Court's holding in Pallas v. Pacific Bell that an employer violates Title VII as amended by the Pregnancy Discrimination Act when it chooses to base current decisions about benefits on a service-crediting system that on its face discriminates on the basis of pregnancy is still good law. STATEMENT OF THE CASE 1. Proceedings This is an interlocutory appeal, pursuant to 28 U.S.C. § 1292(b), from an order entered on August 8, 2003, by the United States District Court for the Northern District of California (Jenkins, J.). The order granted plaintiffs' motion for partial summary judgment with respect to liability on their Title VII claims against AT&T. R.88. Plaintiffs filed this action in March 2001, alleging that AT&T has been violating Title VII and ERISA by continuing to rely, in its current decisions about termination and retirement benefits, on a service-crediting system that discriminates on its face on the basis of pregnancy. R.1. The parties filed cross motions for summary judgment in November 2002. R.53-54. The district court entered an order on August 8, 2003, partially granting and partially denying each side's motion. R.88. On August 21, 2003, AT&T asked the district court to amend its order by certifying it under 28 U.S.C. § 1292(b). R.94. The court granted that motion on September 24. R.101. On October 10, AT&T filed a § 1292(b) petition with this Court, which was docketed in this Court as appeal number 03-80107. On February 27, 2004, this Court granted the company's petition and re-docketed the appeal as number 04-16087. 2. Statement of Facts AT&T and its predecessors have used their "net credited service" ["NCS"] system for decades to determine their employees' years of service and seniority for all purposes: both for competitive employment-opportunity decisions like bidding for positions and shifts, and laying employees off and hiring them back; and for determining eligibility for, and levels of, various types of benefits. Excerpts of Record ("ER"), R.58 ("Parties' Joint Stipulation of Facts") ("JSF"), ¶¶ 17, 19. The system keeps track of an employee's term of employment by starting with the employee's first day of work, and then moving that date forward for periods when the employee did not work and did not receive NCS credit. JSF, ¶ 18. Until 1977, AT&T classified pregnancy leave as personal leave. JSF, ¶ 66. Accordingly, no matter how long the pregnancy leave – or the pregnancy-based disability – lasted, the company gave an employee taking pregnancy leave only 30 days of NCS credit, even though it granted employees who suffered non- pregnancy-related disabilities NCS credit for as long as they remained disabled JSF, ¶¶ 67-68. This differential treatment was exacerbated by three related policies or practices: (a) pregnant employees were often forced to go out on leave before they wanted to and before they were disabled by the pregnancy; (b) employees who took pregnancy leave had no guaranteed right of reinstatement once certified as medically fit to return to work; and (c) employees who developed a non- pregnancy-related disability while out on pregnancy leave did not receive any NCS credit for that second disability, even though an employee with that disability would usually receive full NCS credit for it. JSF, ¶¶ 73-74, 81-82, 85-86. In addition, personal leave (including pregnancy leave) was unpaid leave, while employees with non-pregnancy-related disabilities were paid between 50 and 100 percent of their regular salaries (depending on their years of service) while they were disabled. R.59, "Joint Appendix of Evidentiary Materials," Vol. 1, Ex. 7 (Testimony of Therese Pick dated Aug. 1, 1972), pp. 9-10. Starting in August 1977, AT&T ameliorated its original plan slightly by: (a) granting six weeks of NCS credit for pregnancy leave instead of only 30 days; and (b) eliminating forced leaves. JSF, ¶¶ 70, 83. The major change in defendant's treatment of pregnancy leave, however, came in April 1979, when the Pregnancy Discrimination Act became effective. Defendant then adopted its "Anticipated Disability Plan," which is still in effect today. JSF, ¶ 79. Under that plan, AT&T grants service credit for pregnancy-related disabilities on the same basis that the company provides it for disabilities that are not pregnancy-related. JSF, ¶ 79. However, defendant chose to apply these two changes to its pregnancy- leave policy (the 1977 and 1979 changes) only to pregnancy leaves that were taken after the respective policies were put into effect. JSF, ¶¶ 69, 72, 75, 78-79, 84, 88. The plaintiffs in this action are women who worked for defendant during the 1970s, took pregnancy leave before 1979, and either are still working for defendant or continued working for defendant until they recently retired. JSF, ¶¶ 1-2, 33, 44- 45, 54, 64. When they retire, AT&T computes their retirement-benefit levels using their NCS dates. JSF, ¶ 22. Accordingly, the company pays them lower benefits than it pays similarly situated retirees who had non-pregnancy-related disabilities before 1979. JSF, ¶¶ 34, 46, 55, 64-65. 3. Decision Below The district court ruled that this case is clearly governed by Pallas, since the two cases are so similar on their facts, and it accordingly granted plaintiffs partial summary judgment as to liability on their Title VII claims. ER, R.101 at 7-9, 21. The court carefully reviewed both the Pallas decision and AT&T's challenges to that precedent. AT&T argued that: (a) Pallas was wrongly decided, and should have followed Evans instead of Bazemore; (b) Ameritech Benefit Plan Committee v. Communication Workers of America, 220 F.3d 814 (7th Cir. 2000), demonstrates that Pallas was wrongly decided; and (c) intervening decisions by this Court and the Supreme Court implicitly overruled Pallas because it granted the PDA impermissible retroactive effect. Id. at 9-17. Although the court described AT&T's contentions as "interesting and compelling," it rejected them. A district court, the court pointed out, is not free to overrule a decision of its own court of appeals, or to follow a decision from another circuit that disagrees with one from its own. Id. The court also rejected AT&T's reliance on Landgraf v. USI Film Products, 511 U.S. 244 (1994), and Lockheed Corporation v. Spink, 517 U.S. 882 (1996). The court ruled that these decisions were not "sufficiently on point to justify setting aside the clear holding of Pallas." Id. ARGUMENT THIS COURT'S HOLDING IN PALLAS – THAT AN EMPLOYER VIOLATES TITLE VII WHEN IT CHOOSES TO CONTINUE RELYING ON A SENIORITY SYSTEM THAT FACIALLY DISCRIMINATES ON THE BASIS OF PREGNANCY IN CREDITING PAST SERVICE – IS STILL GOOD LAW. The district court held that, under this Court's decision in Pallas, the plaintiffs are entitled to summary judgment on their claims that AT&T violates Title VII when it uses its NCS system to determine their retirement benefits. In this appeal AT&T does not challenge the district court's conclusion that the plaintiffs should prevail under Pallas. Instead they argue that Pallas is no longer good law. Under the law of this circuit, this panel is bound by Pallas unless it has been overruled, either explicitly or implicitly, by a subsequent decision of the Supreme Court or the Ninth Circuit sitting en banc. U.S. v. Hinostroza, 297 F.3d 924, 927 (9th Cir. 2002) ("[O]nly the court sitting en banc may overrule a prior decision of the court."); Miller v. Gammie, 335 F.3d 889, 893 (9th Cir. 2003) (en banc) ("[W]here the reasoning or theory of our prior circuit authority is clearly irreconcilable with the reasoning or theory of intervening higher authority, a three- judge panel should consider itself bound by the later and controlling authority, and should reject the prior circuit opinion as having been effectively overruled."). AT&T's arguments that this panel is not bound by Pallas under this standard are unavailing. In Pallas, the district court had dismissed the plaintiffs' Title VII claims challenging Pacific Bell's decision to use the same NCS system at issue in this case to determine the plaintiffs' eligibility in 1987 for an early retirement program, and this Court reversed. The facts of Pallas are very similar to the facts of this case. Pallas began working for Pacific Bell in 1967 and went out on pregnancy leave in 1972. Under the NCS system she was credited with only 30 days of service for that pregnancy leave, even though employees suffering non-pregnancy-related disabilities received service credit for as long as they were disabled. The company announced an early retirement program in 1987, and Pallas applied for it. The company rejected her application because, due to the abbreviated service credit she had received for the pregnancy leave she took in 1972, she was a few days short of the credit she needed to qualify for the program. Pallas, 940 F.2d at 1326. In dismissing Pallas's Title VII claim, the district court had relied on Lorance v. AT&T Technologies, Inc., 490 U.S. 900 (1989) and United Air Lines, Inc. v. Evans, 431 U.S. 553 (1977), to hold that the NCS system was a seniority system protected by § 703(h) of Title VII, 42 U.S.C. § 2000e-2(h), and that Pallas's Title VII challenge to that system was therefore not timely. Pallas, 940 F.2d at 1326. This Court reversed. It gave two reasons why Lorance and Evans did not govern Pallas's claim. First, Pallas was challenging not the actions the company took in 1972, when Pallas took her pregnancy leave, but the decision the company made in 1987. Id. at 1327 (". . . Pacific Bell is liable for its decision to discriminate against Pallas in 1987 on the basis of pregnancy."). Second, the NCS system was not protected by § 703(h) because it "is not facially neutral. The system used to determine eligibility facially discriminates against pregnant women." Id. Since the NCS system was facially discriminatory, the Pallas court reasoned, the governing authority was not Lorance or Evans, but Bazemore v. Friday, 478 U.S. 385 (1986). The employers in Bazemore had maintained a racially segregated workforce before 1965, and had paid African American employees less than white employees performing the same duties. Starting in 1965, the employers desegregated their workforce and started adjusting the black employees' salaries, but in 1972, when they became subject to Title VII, the employers were still paying black workers less than comparable white workers, at least in part because of the prior segregation. The Fourth Circuit, relying in part on § 703(h) and Evans, held that these post-1972 disparate wages did not violate Title VII. The Supreme Court reversed, holding that the employers violated Title VII by continuing to pay black workers less than white workers after the employers became subject to Title VII. Bazemore, 478 U.S. at 395. The fact that the current disparity may be attributable to past discrimination that was lawful at the time, the Court held, does not provide the employer with a defense for its current pay practices. Id. This Court held in Pallas that just as the employers in Bazemore could not lawfully continue to pay black workers less than white workers after they became subject to Title VII, so Pacific Bell could not lawfully continue, long after it became subject to the PDA, to rely on a service-crediting system that openly discriminates on the basis of pregnancy. Pallas, 940 F.2d at 1327. AT&T argues that Pallas is no longer good law for three reasons: (a) it was implicitly overruled by intervening Supreme Court decisions addressing the retroactive application of statutes; (b) it was implicitly overruled by National Railroad Passenger Corporation v. Morgan, 536 U.S. 101 (2002), which overruled one aspect of this Court's continuing-violation doctrine; and (c) it was bad law when decided because it failed to address the discussion of § 703(h)'s protection for seniority systems in International Brotherhood of Teamsters v. United States, 431 U.S. 324 (1977). As we explain below, none of these arguments provides a basis for this panel not to follow Pallas. A. Pallas was not Implicitly Overruled by Subsequent Supreme Court Decisions Regarding the Retroactive Application of Statutes. AT&T argues that Pallas has been implicitly overruled by Landgraf v. USI Film Products, 511 U.S. 244 (1994), and Lockheed Corporation v. Spink, 517 U.S. 882 (1996). According to AT&T, under those decisions it is clear that this Court's decision in Pallas constituted an impermissible retroactive application of the PDA to conduct which occurred before that statute took effect. However, as we explain, this Court's reasoning in Pallas is not inconsistent with either Landgraf or Lockheed. They therefore provide no basis for overruling Pallas or reversing the district court's decision. Landgraf addressed whether the provisions of the Civil Rights Act of 1991 that made employers liable for compensatory and punitive damages should be applied in cases challenging violations that occurred before the act took effect. The Supreme Court held they should not. The Court ruled that Congress had not clearly stated an intent to apply the new damages provisions retroactively, and that courts should therefore apply the presumption against retroactive application of any statute that "would impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed." 511 U.S. at 280. AT&T contends that Pallas violated these principles by imposing new liability on Pacific Bell based on service-crediting decisions that were made before the effective date of the PDA, when they were lawful. Landgraf, however, is fundamentally different from this case in that the plaintiff in Landgraf was asking the court to apply a new remedy to an act that was completed before the remedy was made available. By contrast, Pallas was not asking the courts to increase her employer's liability for events that were completed before 1979: e.g., by compensating her for lost compensation during her 1972 pregnancy leave, or for employment opportunities she lost before 1979 due to the diminished job-bidding seniority she had during that period. Rather, Pallas was asking the courts to impose liability on her employer for a decision it made in 1987. She was challenging Pacific Bell's decision in 1987 to continue relying on a system that discriminates on the basis of pregnancy. Accordingly, Landgraf does not call into question this Court's decision in Pallas. Similarly, in Lockheed, the plaintiffs were seeking full relief for actions that were made unlawful only after they were completed. Lockheed hired Spink in 1979, when he was over 60 years old, and excluded him from its pension plan because of his age. ERISA then expressly allowed such age-based exclusions. In 1986 Congress amended ERISA to prohibit excluding employees from retirement programs on the basis of their age, and Lockheed accordingly enrolled Spink in its pension plan prospectively, starting at the end of 1988. In early 1992 Spink sued Lockheed, claiming that it had violated ERISA and the ADEA by failing to treat him as if he had been included in the company's pension plan starting in 1979, when he was hired. This Court ruled for Spink, concluding that the 1986 amendments required this "retroactive" application. Spink v. Lockheed Corp., 60 F.3d 616, 620-22 & n.1 (9th Cir. 1995). The Supreme Court reversed, pointing out that the 1986 amendments themselves stated that they applied only to pension plan years starting after the amendments took effect. Lockheed, 517 U.S. at 896-97. AT&T contends that the facts in Pallas (and this case) are "in all relevant respects identical" to Lockheed, and that the relief granted in Pallas accordingly constitutes impermissible retroactive relief under Lockheed. Br. at 34. But Lockheed differs from Pallas in a critical respect. Spink asked his employer for complete retroactive relief: he wanted Lockheed to adjust his pension-plan status (and make the required back contributions) as if the 1986 amendments had actually gone into effect before he started working for Lockheed in 1979. Pallas (like the plaintiffs in this case) was not asking her employer to treat her as if the PDA had been enacted before her 1972 pregnancy leave. She was not asking, for example, for the salary she would have received during her pregnancy, or for back pay for positions she was denied due to her lower seniority. Rather, she was asking Pacific Bell not to discriminate on the basis of pregnancy in the decisions it made in 1987. AT&T relies on Landgraf and Lockheed to argue that a statute has an impermissible retroactive effect whenever an entity subject to the statute is required, in making present decisions, to recalculate the effect of lawful actions taken before the statute was in effect. The company's position cannot be reconciled with Regions Hospital v. Shalala, 522 U.S. 448 (1998), which was decided after Landgraf and Lockheed. In that case, the Supreme Court held that a regulation was not retroactive despite the fact that it required the re-auditing of a hospital's reimbursable costs for a past year in order to establish its reimbursement for future years. The regulation at issue was promulgated by the Secretary of Health and Human Services in 1989 and required a re-audit of a hospital's reimbursable costs for medical education during 1984 before using that figure to determine the hospital's reimbursement for future years. The hospital sued the Secretary, arguing that her regulation was giving the 1986 statute impermissible retroactive effect in violation of Landgraf because it allowed the Secretary to re- audit the reimbursable costs that the hospital had incurred in 1984, before the regulation went into effect. The Supreme Court rejected this argument, quoting a passage from Landgraf stating that a statute "is not made retroactive merely because it draws upon antecedent facts for its operation." Regions Hosp., 522 U.S. at 456 (quoting Landgraf , 511 U.S. at 270 n.24) (citation and punctuation omitted). The Court noted that the Secretary was not recalculating the hospital's 1984 costs in order to change retroactively the amount the hospital would be reimbursed for that year. Rather, the Secretary was recalculating the hospital's 1984 costs in order to determine the reimbursable costs for years to which the 1986 amendment clearly prospectively applied. Id. at 456 ("[T]he Secretary's reaudits leave undisturbed the actual 1984 reimbursements and reimbursements for any later cost-reporting year on which the three-year reopening window had closed. The adjusted reasonable cost figures resulting from the reaudits are to be used solely to calculate reimbursements for still open and future years.").<1> Similarly here, as in Pallas, consideration of AT&T's former policy regarding pregnancy leaves is not being used to obtain relief for, or alter the legal effect of, actions taken pursuant to that policy in the past. Rather, that policy is at issue only insofar as it relates to the legality of current actions. Accordingly, Pallas does not sanction an impermissibly retroactive application of the PDA. Pallas correctly held that the plaintiff's claim was governed by Bazemore. The employers in Bazemore, once they became subject to Title VII, were no longer allowed to base their current and prospective salary decisions in part on the disparate salaries that whites and blacks had (lawfully) been paid before 1972. Therefore, this Court correctly held in Pallas that Pacific Bell, once it became subject to the PDA in 1979, was no longer allowed to base its current and prospective decisions about the level of benefits it would award new retirees in part on the disparate service credit it had accorded female employees who took pregnancy leave before 1979. B. Pallas was not Implicitly Overruled by the Supreme Court's Decision in Morgan Regarding the Limitations Period for Challenging Discrete Acts of Discrimination under Title VII. AT&T also argues that Pallas was implicitly overruled by National Railroad Passenger Corporation v. Morgan, 536 U.S. 101 (2002). The company contends that Pallas relied on the continuing-violation doctrine, and that Morgan rejected the aspect of the continuing-violation doctrine on which Pallas relied. The argument is meritless. Pallas did not rely on the continuing-violation doctrine at all, and certainly not on the aspect of that doctrine that Morgan rejected. Pallas used the term "continuing violation" only once, in discussing the holdings of Lorance and Evans, but it held that the district court had erred in following those cases. Pallas, 940 F.2d at 1326-27. In Morgan, the Supreme Court rejected this Court's holding that, under the "continuing violation" theory, the plaintiff could seek relief for discrete acts of discrimination which occurred outside Title VII's 300-day limitations period for filing a charge as long as those violations were sufficiently related to violations that took place within that period. The Court held that "discrete discriminatory acts are not actionable if time barred, even when they are related to acts alleged in timely filed charges." Morgan, 536 U.S. at 113. This holding in Morgan is not relevant to the continuing vitality of Pallas. Pallas was not challenging a series of discrete discriminatory actions, some occurring outside and some inside the 300- day period, and the Pallas Court did not rely on the theory of continuing violations. Rather, it held that Pallas's claim was timely because she was challenging a discriminatory action that her employer took in 1987, less than 300 days before she filed her charge. Pallas, 940 F.2d at 1327 ("Pacific Bell is liable for its decision to discriminate against Pallas in 1987 on the basis of pregnancy."). It is true that the Morgan decision discusses Evans and Delaware State College v. Ricks, 449 U.S. 250 (1980). Morgan, 536 U.S. at 112-13. It also summarizes the holding in Bazemore. Id. at 111-12. But Morgan does not purport to alter the holdings of these earlier cases, and summarizes them only as background for the principles it derives from them. Under those principles a plaintiff may not seek relief for a "discrete discriminatory act" that occurred outside the 180- or 300-day period. Id. at 113. On the other hand, even though an employee cannot seek relief for time-barred acts, she may seek relief for "related discrete acts so long as the acts are independently discriminatory and charges addressing those acts are themselves timely filed." Id. As this Court recognized, Pallas was seeking relief for a decision that Pacific Bell made in 1987 that discriminated against her on the basis of pregnancy, and her claim was therefore timely. Thus nothing in Morgan changes the holdings in Bazemore or Evans, and nothing in Morgan casts doubt on this Court's decision that Pallas's claim should be governed by Bazemore instead of Evans.<2> AT&T cites four decisions for the proposition that Morgan "effected fundamental changes to the statute of limitations law surrounding Title VII claims," and that "[p]revious continuing violation law must be reexamined in light of the Supreme Court's recently imposed limits on the viability of the doctrine' in Morgan." Br. at 39, 43 (internal quotations omitted) (citing Raad v. Fairbanks North Star Borough Sch. Dist., 323 F.3d 1185 (9th Cir. 2003); Lyons v. England, 307 F.3d 1092 (9th Cir. 2002); Martinez v. Potter, 347 F.3d 1208 (10th Cir. 2003); and Sharpe v. Cureton, 319 F.3d 259 (6th Cir. 2003)). However, none of the cited decisions are relevant to the Pallas Court's decision that this case is a challenge to a present discriminatory act controlled by Bazemore, and not an attempt to recover for the present effects of a time-barred past act under Evans. Rather, they cite Morgan solely for its rejection of the principle that a time-barred discrete act may be challenged if it is sufficiently related to acts occurring within the limitations period, a holding that, as we have demonstrated supra, is not relevant to the continuing vitality of Pallas. Indeed, this Court in Lyons went out of its way to point out that Morgan's rejection of the "serial violation" rule does not mean that claims based on discriminatory policies initiated outside the limitations period will be foreclosed. . . . Following Morgan, when a plaintiff alleges a systematic violation, each individual act of discrimination occurring within the limitations period may form the basis of an actionable claim, even if the discriminatory policy was initiated outside the limitations period. Lyons, 307 F.3d at 1107 n.7. The only case that AT&T cites in this section of its brief that contains a discussion relevant to Pallas's choice between Bazemore and Evans is Carter v. West Publishing Company, 225 F.3d 1258 (11th Cir. 2000), but that decision was issued before Morgan, and, therefore, cannot be applying any new principles announced in that case. Furthermore, Carter is fully consistent with Pallas. Carter addressed a claim by female employees that their employer had, up until August 1994, discriminated against them by not allowing them to purchase the company's stock, or by not allowing them to purchase as much stock as comparable male employees were allowed to purchase. The earliest charge filed with the EEOC challenging this policy was filed more than 300 days after West last sold any stock to its employees. The court of appeals rejected plaintiffs' argument that the charge was timely under the continuing violation doctrine because West continued to pay dividends on the stock the employees owned up until June 1996, when another company purchased West. Carter, 225 F.3d at 1260-61, 1263. The court held that West's payment of dividends was not itself a discriminatory act, but was instead merely an "inevitable consequence" of the earlier, time-barred, allegedly discriminatory practice of selling its stock to its male employees more liberally than to its female employees. Id. at 1265. The court accordingly held that the timeliness of Jones's claim was governed by Evans and Ricks, and not Bazemore. Id. at 1263-65 (analogizing West's dividend payments to the college's policy in Ricks of allowing its faculty members to work one additional year after it denied them tenure, and to the impact that the airline's neutral seniority system had on Evans). The facts of Pallas are quite different. In Pallas the employer had made a decision in 1987 that was not an "inevitable consequence" of the decision it had made earlier in 1972 (with respect to Pallas's pregnancy leave): it decided to continue relying in 1987 on a service-crediting system that openly discriminated on the basis of pregnancy. If West paid dividends in 1995, it was legally bound to pay dividends to all its stockholders. Pacific Bell, however, was not legally bound to continue basing its current retirement decisions on the openly discriminatory service-crediting system. Indeed, the PDA prohibited it from doing so. C. The Pallas Court's Failure to Cite the Supreme Court's Decision in Teamsters does not Provide a Ground for this Panel to Fail to Follow it. Finally, AT&T argues that Pallas was bad law when it was decided because the decision failed to address International Brotherhood of Teamsters v. United States, 431 U.S. 324 (1977), which AT&T describes as "the leading case construing Title VII's specially-tailored seniority provision, Section 703(h)." Initially, we note, AT&T cites no intervening decision of the Supreme Court in support of its contention that Pallas misconstrued § 703(h). Accordingly, even if the company's analysis were correct, it would establish only that Pallas was wrongly decided, not that it is not binding precedent in this circuit. However, AT&T's argument fails on the merits; Pallas correctly applied § 703(h) to the facts of that case, which are indistinguishable from the facts of this case. In Teamsters, the Supreme Court held that under § 703(h), "the routine application of a bona fide seniority system [is not] unlawful under Title VII, . . . even where the employer's pre-Act discrimination resulted in whites having greater existing seniority rights than Negroes," with the consequence that the neutral seniority system "perpetuates" pre-Act discrimination. Id. at 352. The Court stressed, however, that § 703(h) does not immunize all seniority systems. It refers only to "bona fide" systems, and a proviso requires that any differences in treatment not be "the result of an intention to discriminate because of race . . . or national origin . . . ." Id. at 353. It is true that this Court's decision in Pallas does not cite to Teamsters. However, contrary to AT&T's argument, that does not relieve this panel of its obligation to follow Pallas. First, it is clear – and AT&T does not maintain otherwise – that Pallas did not ignore the § 703(h) issue that AT&T is so concerned about. Indeed, the principal holding in Pallas addressed the application of § 703(h)'s protection for bona fide seniority systems to the facts before it. The district court had held that the NCS system on which Pacific Bell relied was a bona fide seniority system, and that Pallas's challenge was therefore untimely under Lorance and Evans. Pallas, 940 F.2d at 1326. This Court reversed, and spelled out two reasons why the district court had erred. One, Pallas was challenging a decision that Pacific Bell made in 1987, not one it made in 1972, when Pallas went out on pregnancy leave. Id. at 1327. Two, the NCS system was not protected by §703(h) because it was not a bona fide, facially neutral system. On the contrary, it applied rules that discriminated on their face on the basis of pregnancy. Id. ("The system . . . facially discriminates against pregnant women."). Second, and more important, the manner in which Pallas distinguished Lorance and Evans demonstrates that the Pallas court would have distinguished Teamsters on the same ground. Lorance, Evans, and Teamsters all dealt with seniority systems that were facially neutral: the seniority system in Lorance was based on seniority in a particular position (seniority as a tester) and contained no provision relating to gender; the controlling seniority provision in Evans related to breaks in service and said nothing about gender; and the relevant provision in Teamsters mandated bargaining-unit seniority and was silent with respect to race and national origin. Pallas, on the other hand, addressed an NCS system whose service-crediting rules expressly discriminated between pregnancy-based disability and other types of disabilities. 940 F.2d at 1327 ("The system used to determine eligibility facially discriminates against pregnant women."). Had Pallas mentioned Teamsters, it would therefore have distinguished it on the same ground as Lorance and Evans. Its failure to discuss Teamsters specifically therefore does not detract in the slightest from the validity of its holding. AT&T argues that a proper application of Teamsters would have prevented the Pallas Court from relying on either of the reasons it gave for distinguishing Evans and Lorance. Pallas ruled that Pacific Bell's NCS system was not bona fide because it discriminated on its face on the basis of pregnancy, and "thereby ‘perpetuate[s]' prior acts of discrimination." Br. at 47 (quoting Pallas, 940 F.2d at 1327). It is true that Pallas used the word "perpetuate" in describing the NCS system, but it used the same word in describing the holding in Bazemore, and therefore clearly was not using the word solely in the sense that Teamsters used it. In any event, Teamsters did not hold that § 703(h) protects any seniority system that perpetuates the effects of past discrimination. It held that § 703(h) protects bona fide, facially neutral seniority systems, and does not render them unlawful merely because they perpetuate the effects of time-barred (or otherwise lawful) discrimination. Here, and in Pallas, §703(h) as interpreted by Teamsters does not protect the NCS system, because the system itself discriminates on the basis of pregnancy.<3> Second, Pallas ruled that Evans and Lorance did not govern the timeliness of Pallas's claim because she was challenging decisions that Pacific Bell made in 1987, and her charge was therefore timely. AT&T contends that Teamsters disallows this rationale, too. Teamsters, AT&T maintains, "made clear that Section 703(h) applies not only to seniority systems, but also to independent, post- Act employment and benefit decisions based on such systems." Br. at 48-49. Again, AT&T fails to distinguish between seniority systems that are facially neutral, as in Teamsters, and those that on their face continue to discriminate on a prohibited basis, as the NCS system does. In sum, Pallas correctly ruled that the NCS system, insofar as it constitutes a seniority system, discriminates on its face on the basis of pregnancy, and is therefore not a bona fide seniority system entitled to protection under § 703(h). AT&T cites no Supreme Court case decided after Pallas that casts doubt on this aspect of the Pallas decision. Accordingly, this Court must follow Pallas and affirm the district court's ruling that AT&T violates Title VII when it chooses to base its current decisions regarding benefits on NCS rules that continue to treat plaintiffs' pre-1979 pregnancy leaves less favorably than their co-workers' pre- 1979 non-pregnancy-related disabilities. See EEOC Compliance Manual, ch. 3, "Employee Benefits," Title VII/EPA Issues, III.B (issued Oct. 3, 2000) (discussing an example whose facts parallel those in Pallas and concluding: "While the denial of service credit to women on maternity leave was not unlawful when [the charging party] took her leave in [1975], the employer's decision to incorporate that denial of service credit in calculating seniority in 1996 is discriminatory.") (available at ). CONCLUSION For the reasons stated above, the Commission urges this Court to affirm the decision of the district court. Respectfully submitted, JAMES L. LEE Deputy General Counsel LORRAINE C. DAVIS Acting Associate General Counsel VINCENT J. BLACKWOOD Assistant General Counsel PAUL D. RAMSHAW Attorney U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION 1801 L Street, N.W., 7th floor Washington, DC 20507 (202) 663-4737 CERTIFICATE OF SERVICE I hereby certify that two copies of the foregoing brief were served by mailing them on this date first class, postage prepaid, to the following counsel of record: Joseph R. Guerra* Joseph Palmore* Sidley Austin Brown & Wood LLP 1501 K St., N.W. Washington, DC 20005 Charles C. Jackson Allegra R. Rich Seyfarth Shaw LLP 55 E. Monroe St., Suite 4200 Chicago, IL 60603 Laura A. Kaster Valerie Fant Custer AT&T Corporation One AT&T Way, Room 3A213 Bedminster, NJ 07921 Blythe Mickelson Suzanne Murphy Weinberg, Roger & Rosenfeld 180 Grand Ave., Suite 1400 Oakland, CA 94612 Judith E. Kurtz 192 Bocana St. San Francisco, CA 94110 Mary K. O'Melveny Communications Workers of America 501 3rd St., N.W., Suite 800 Washington, DC 20001 Henry S. Hewitt Erickson, Beasley, Hewitt & Wilson 483 9th St., Suite 200 Oakland, CA 94607 Noreen Farrell Equal Rights Adovcates 1663 Mission St., Suite 250 San Francisco, CA 94103 Paul D. Ramshaw Equal Employment Opportunity Commission 1801 L Street, N.W., Room 7018 Washington, DC 20507 (202) 663-4737 September 17, 2008 * Messrs. Guerra and Palmore also received a .pdf version of the brief transmitted by email on this date. *********************************************************************** <> <1> The Regions Hospital Court also relied on the fact that the re-audits that the Secretary required were not applying a new set of rules to the 1984 reimbursement, but were instead applying the rules that applied to the original audit, albeit after the time limit for reopening the reimbursement had expired. 522 U.S. at 456. The PDA was not in effect at the time the plaintiff in Pallas took her pregnancy leaves. However, this makes no difference. The Supreme Court stated in Evans that “[a] discriminatory act which is not made the basis for a timely charge is the legal equivalent of a discriminatory act which occurred before the statute was passed.” 431 U.S. at 558. Accordingly, Pacific Bell’s pre-PDA decision to deny Pallas full credit for her pregnancy leave is legally equivalent to a similar decision made after the PDA was in effect but which was not timely challenged, like the reimbursements in Regions Hospital. <2> This Court’s decision that Pallas’s claim should be governed by Bazemore and not Evans in turn depended on the Pallas Court’s determination that insofar as the NCS system constituted a seniority system potentially protected by § 703(h), the system was facially discriminatory. 940 F.2d at 1326-27. We address this issue in more detail infra, at 21-26. <3> AT&T apparently is not arguing that the portions of the NCS system that continue to treat women who took pregnancy leave before 1979 differently from employees who had other types of disabilities during that period are not a part of the NCS system on which AT&T continues to rely. Any such argument should be rejected. See California Brewers Ass’n v. Bryant, 444 U.S. 598, 607 (1980) (the “ancillary rules . . . that define which passages of time will ‘count’ towards the accrual of seniority and which will not” are an integral part of a seniority system).