Ameritech Benefit v. Communications WorkAmeritech Benefit v. Communications Work
Diane P. Wood, Circuit Judge. This case is about the present consequences of the way in which Ameritech Corporation (and its predecessors) computed time for purposes of its pension plan, early retirement, and similar benefits, when the reason for an approved absence from work wаs pregnancy rather than any other short-term disability. (For the sake of convenience, we refer throughout to the company as Ameritech, even though Ameritech did not come into being until 1984. The difference in corporate identity makes no difference to the outcome of this case.) After the passage of the Pregnancy Discrimination Act (the PDA) in 1979,
This decision took on immediate importance for the affected employees in 1994, when Ameritech added benefits to its pension plan. For these people, indeed, it made the difference between eligibility to take early retirement and to enjoy other pension benefits, and lack of eligibility. In an unusual move, Ameritech jumped into court with an action for a declaratory judgment, and it attempted to sue a defendant class of employees. The district court granted summary judgment for Ameritech, dismissing the class claims under Title VII, ERISA, the Equal Pay Act, and various state laws. We affirm.
I
For the entire time period relevant to this suit, Ameritech has used a record-keeping system it calls Net Credited Service (NCS) for purposes of determining an employee‘s entitlement to pension and other employment benefits. The NCS system produces a number, created by Ameritech and assigned to each employee, which reflects an adjusted amount of “continuous” employment with which the employee is credited. Each employee‘s NCS number is based on several factors, including credit that Ameritech gives the employee for time spent working at Ameritech, and credit that it gives the employee for various leaves of absence. In other words, employees receive service credit for actual time worked and for certain leaves, but they do not receive service credit for other leaves. The latter time periods are “squeezed out” or subtracted frоm the gross time between hire date and the present, before benefit eligibility is determined. Ameritech notes, without contradiction from the employees, that the NCS system is incorporated in both its collective bargaining agreements and in its pension plans.
The addition of the PDA to Title VII, effective April 29, 1979, forced Ameritech to change its method of calculating NCS. For most of the time prior to the advent of the PDA, Ameritech had counted only a maximum of 30 days of an employee‘s pregnancy or maternity leave towards her NCS (because it was treating pregnancy as a “personal leave” capped by a 30-day limit, instead of as a disability leave). Pregnancy leaves in those days typically lasted much more than 30 days, at Ameritech‘s insistence: Ameritech required pregnant women to begin their pregnancy leaves several months before their due dates. In contrast, employees with other disabilities were granted full NCS credit for
Here matters stood for many years. The stakes for the women who had received only partial credit for their pre-PDA pregnancy leaves became higher in 1994, however, which led to the present litigation. On March 7 of that year, Ameritech amended its pension plan to provide early retirement benefits to some employees. Under the amendments, eligible non-management employees who retired between February 22, 1994, and September 30, 1995 were entitled to have three years added tо their terms of employment and three years added to their actual ages for purposes of determining retirement eligibility and calculating the amount of their pension benefits. The same employees were made eligible for additional tuition assistance, as well as cash payments under a Supplemental Income Protection Program. Ameritech‘s plan administrators used the NCS in calculating each employee‘s term of employment in order to distribute the benefits. Because employees who had taken pregnancy or maternity leaves prior to April 29, 1979 had lower NCS numbers than they would have had under a system that did not discriminate against pregnancy, some of them did not receive the added 1994 benefits even though they would have been eligible if they had been disabled in any other way.
Cheryl Cuprys and Bernadette Bernabei were two Ameritech employees who had taken pre-April 29, 1979 pregnancy and maternity leaves and were therefore not eligible for the 1994 benefits. Cuprys and Bernabei both challenged their denial of benefits, but Ameritech‘s benefit committee denied their claims and appeals. Cuprys and Bernabei then turned to the EEOC and filed charges with it. The EEOC issued a right to sue letter to Cuprys on February 24, 1995, and to Bernabei on September 28, 1995.
On December 20, 1995, Bernabei filed suit in the United States District Court for the Northern District of Ohio alleging thаt Ameritech‘s actions violated Title VII, the Equal Pay Act, ERISA, and state law (Bernabei v. Ameritech Corp., et al., No. 97-CV-02209). On March 3,
The putative defendant class and the CWA filed their answers, along with counterclaims under Title VII, the Equal Pay Act, ERISA, and the state laws. (Indeed, these claims mirrored Ameritech‘s request for declaratory relief, which saves this case from undue complication as we explain below.) In an order dated August 28, 1997, the district court approved the parties’ joint request for class certification as to the Title VII, ERISA, and state law claims, apparently under
II
A. Subject Matter Jurisdiction
The EEOC, through a brief amicus curiae it has filed with this court, argues that the district court lacked subject matter jurisdiction over Ameritech‘s Title VII and Equal Pay Act claims, because neither statute provides for suits by the employer against whom discrimination is alleged. Given the fundamental nature of this argument, we address it first. In our view, the district court had subject matter jurisdiction under
The Commission is really arguing that the statutes confer no right on Ameritech to sue as a plaintiff, because they confer no such rights on employers (i.e. no claim can be stated) or because it is the wrong pаrty (i.e. it lacks statutory standing). While these could be important points, they do not implicate the jurisdiction of the district court. Our basis for jurisdiction comes from the underlying controversy, not the particular party initiating suit. We note, however, that the question whether an employer should have the right to short circuit the EEOC‘s internal processes by running to court and filing a declaratory judgment action in a Title VII suit is an important one, which will have to be addressed in a case that raises it properly. The counterclaims and Bernabei‘s direct action mean that this is not such a case, however, so we leave further discussion of this point to another day.
B. Ripeness of Ameritech Action
The EEOC argues in the alternative that Amеritech‘s suit was unripe because the parties failed to exhaust their administrative remedies. At the time Ameritech filed its action, individual charges were still pending before the EEOC‘s Cleveland office, that office had not completed its consideration of the charges, yet Ameritech named some of those people as defendants. Shortly after Ameritech filed this action, the Commission filed its own suit in the Northern District of Ohio, naming Ameritech, the IBEW, and the CWA as the defendants and asserting claims similar to those that are here. Although Bernabei‘s suit was transferred to the Northern District of Illinois from the same Ohio district court, that court denied Ameritech‘s motion to transfer the EEOC case here, and so the Commission‘s action is still pending there, awaiting the outcome of this appeal.
Had Ameritech not filed its declaratory judgment action, the Commission could have controlled both the timing and the forum of this litigation to a far greater degree. (We note, however, that the Commission is not immune from a transfer of venue under
We would have a much more difficult case on our hands if Bernabei and Cuprys had never filed charges with the EEOC, or if the EEOC had not responded to the charges by issuing right-to-sue letters. We do not need to address that hypothetical situation here, however, nor is it necessary for us to address the question whether an employer must file a formal charge with the Commission as a prerequisite to bringing the kind of declaratory judgment action Ameritech filed. In our case, individual charges were filed and the EEOC issued right-to-sue letters. Thus, whatever interests in completion of the Commission‘s internal procedures may exist were satisfied. We are left with the more conventional problem of competing lawsuits on the same issues in two different federal districts. This does not seem to have bothered the parties much, and it is surely not the kind of fundamental defect that divests the district court of power to rule on the case.
C. Class Certification
Despite the fact that neither party has addressed the way that class certification was accomplished in this case, we cannot proceed without considering this problem as well. This is so precisely because classes include not only the parties directly before the court, but absentees, and in some cases the active participants may sell out the interests of the others. See, e.g., Crawford v. Equifax Payment Services, Inc., 201 F.3d 877, 882 (7th Cir. 2000); see Pettway v. American Cast Iron Pipe Co., 576 F.2d 1157, 1169 (5th Cir. 1978); Plummer v. Chemical Bank, 668 F.2d 654, 658 (2d Cir. 1982). We look at the alleged defendant class that the district court certified for Ameritech‘s declaratory judgment under Title VII.
To begin with, there is a potential problem with virtually all defendant classes that proceed
Our decision in Henson v. East Lincoln Township, 814 F.2d 410 (7th Cir. 1987), cert. granted, 484 U.S. 923 (1987), cert. dismissed, 506 U.S. 1042 (1993), holds that a defendant class is normally impermissible under
The parties did not ask for class certification for purposes of the Equal Pay Act claims, because they recognized that the problems with certifying such a class under the Equal Pay Act are especially great. There is no such thing as a
The problem with ignoring these issues is that the rights of persons not before the court are necessarily implicated once a class is certified. We have concluded that the proper way to proceed is to decide the claims of the parties who are clearly before the court: the named plaintiffs and anyone who intervened formally.1 In fact, our resolution of these claims will have a powerful stare decisis effect on the claims absentees might have wanted to assert, but that cannot be helped. By the same token, our ruling in this action will not formally preclude the EEOC in its Ohio action, since the Commission is also not a party before this court. The Ohio court, and the Sixth Circuit in turn should an appeal be taken, will have the right to come to their own conclusions on these issues.
D. The Unions
As the litigation progressed, only the CWA played an active role in filing papers with the court. Our comments, however, apply in principle to both unions. Apart from their potential role as an organizational representation of their members, the unions had little to say here. Indeed, because the way in which time of service was computed implicates the collective bargaining agreements the unions had with Ameritech, they might have some incentive to defend their earlier actions. For the same reason we have disregarded the role of the absentee class members, we do not reach the legal issues that might be raised in conjunction with the unions’ role. Neither party briefed these questions, and it suffices to say here that the unions’ participation does not change our view of the merits of the action.
III
We turn, finally, to the merits. Because this appeal comes to us from a grant of summary
A. Title VII
As we have already noted, Title VII prohibits an employer from discriminating against an employee or applicant based on sex,
The outcome of this case turns on which of two cоmpeting lines of authority provide a better “fit” here. The one on which the employees rely is represented by Bazemore v. Friday, 478 U.S. 385 (1986). In Bazemore, the Court found that an employer‘s calculation of a discriminatory base salary structure prior to the effective date of Title VII did not leave the employer free to use that tainted base salary structure in determining salaries after Title VII‘s effective date. Id. at 395-96. See also Wagner v. NutraSweet Company, 95 F.3d 527, 534 (7th Cir. 1996). Just so here, they say: Ameritech may not use a system for calculating time of service that was tainted by pregnancy discrimination when it makes present decisions about eligibility for benefits.
Intoning the words “bona fide seniority system” does not help Ameriteсh, in the employees’ view,
Ameritech (naturally) relies on the other line of cases, represented by United Airlines v. Evans, 431 U.S. 553 (1977), and Delaware State College v. Ricks, 449 U.S. 250 (1980). In Evans, the employer‘s discriminatory action occurred when it forced a female flight attendant to quit because she got married. 431 U.S. at 554-55. Later, the employer rehired the flight attendant. The Evans Court held that the employer‘s refusal after the rehiring to “correct” the effects of the past firing by affording her additional seniority did not violate Title VII, because such a refusal was not a discriminatory action in itself. Id. at 557-58. Both male and female employees who had been fired (whether for a non-discriminatory reason or for an unchallenged discriminatory reason) and then re-hired were treated the same for purposes of seniority credit. The continuing impact of the earlier action, within the context of an otherwise neutral system, was not enough to show a present violation. Ricks is similar. There, the College‘s discriminatory act occurred when it denied plaintiff Ricks academic tenure, allegedly on the basis of his national origin. 449 U.S. at 252. The college fired Ricks a year later, as it fired other academic employees at the expiration of their terminal 1-year contracts. The Court concluded that there was no continuing violation, and that Ricks’ claim accrued at the time of the tenure denial. Id. at 257-58.
For a number of reasons, we think that Ameritech has the better of this dispute, though we acknowledge that the line between continuing
The statute itself offers good reason to treat seniority systems with special care, because it specifically exempts discriminаtory effects that flow from bona fide seniority systems from the definition of unlawful employment practices, as long as the differences are not the result of an intention to discriminate.
In our opinion, these employees cannot show the kind of intentional discrimination that would trigger the exception to the statutory protection afforded to seniority systems. As Ameritech points out, prior to the adoption of the PDA an authoritative Supreme Court decision had held that Title VII did not prohibit distinctions based on pregnancy. General Electric Co. v. Gilbert, 429 U.S. 125 (1976). Moreover, the PDA has not been treated as a retroactive statute, see Condit v. United Air Lines Inc., 631 F.2d 1136, 1139-40 (4th Cir. 1980); Schwabenbauer v. Board of Ed. of City Sch. Dist. of City of Olean, 667 F.2d 305, 310 n. 7 (2d Cir. 1981); Whitehead v. Oklahoma Gas & Elec. Co., 187 F.3d 1184, 1193 (10th Cir. 1999), and so Ameritech would have had no reason to think it had to reshuffle its NCS list after the Act was passed. Third, the Supreme Court has held that the fact that a seniority system perpetuates pre-Act discrimination does not preclude it from being bona fide. See International Brotherhood of Teamsters v. United States, 431 U.S. 324, 352-53 (1977). The employees here protest that they are not talking about a seniority system, but they are wrong. Under the Supreme Court‘s test in California Brewers Ass‘n v. Bryant, 444 U.S. 598, 606 (1980), the key to deciding whether a decision-making рrocess qualifies as a seniority system is its reliance on relative lengths of employment.
Last, this is not a case like some continuing violations where the employees had no way of knowing that something bad had happened to them until much later. Hostile environment sexual harassment cases, for example, can only be brought once it becomes clear that the harassment is severe or pervasive enough to constitute an adverse effect on terms and conditions of employment. Here, the women knew the minute they took their pregnancy or maternity leaves that they were not getting full credit for their time off. No later than the time when Ameritech amended its plan in response to the PDA, they knew that their NCS had not been amended. It is no secret to any employee that seniority rolls like Ameritech‘s NCS make a difference for a host of employee benefits, some present, and some future. Ameritech informed each employee periodically of his or her accrued NCS. The time for bringing a complaint was therefore long ago, and the district court correctly recognized that these employees had sued too late.
B. The Equal Pay Act
The employees next challenge Ameritech‘s procedures under the Equal Pay Act. (As before, we are addressing only the claims of the named plaintiffs and anyone who properly intervened before the district court.) We assume for the sake of argument that the employees have satisfied their initial burden under the statute to show that Ameritech pays women less than men for “equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.”
But once again, the faсt that the disadvantage from which they suffer is the result of a bona fide seniority system dooms their claim. The Equal Pay Act provides that there is no violation if the unequal pay was due to “any other factor other than sex,” including “(i) a seniority system; (ii) a merit system; [or] (iii) a system which measures earnings by quantity or quality of production.”
C. ERISA
The employees’ final federal claims involve ERISA. First, they believe that Ameritech violated its duty under ERISA to act in the best interest of all the plan beneficiaries and participants when it discriminated against certain female beneficiaries of the plan. ERISA fiduciaries are required to act with care and skill “solely in the interest of the participants and beneficiaries.”
Even if we agreed that the employees’ ERISA claims were timely, perhaps because they arise more directly out of the 1994 plan amendment than the Title VII or Equal Pay Act claims, the ERISA claims face an additional hurdle. In order for the employees to show that Ameritech breached either a fiduciary duty or section 510, the employees must be able to show that they were, at some time, eligible for the plan‘s benefits. Fiduciaries are required to act “in accordance with the documents and instruments governing the plan.”
The employees stress that the plan refers to “TOE,” or “time of employment,” and not NCS. They maintain that TOE does not necessarily need to be calculated using NCS, and that they would be eligible for the benefits of the plan if their time of employment was calculated in the same way as it would be for other previously disаbled employees. Nevertheless, Ameritech‘s decision to use NCS to calculate time of employment cannot evidence an intent to discriminate if the NCS system itself has passed muster under the antidiscrimination laws.
Furthermore, there may be a problem with shoehorning a discrimination claim into the ERISA notion of fiduciary duty, because ERISA “does not itself proscribe discrimination in the provision of employee benefits.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 91 (1983). Shaw found that a state law prohibiting discrimination was preempted by ERISA, because it “related to” the area of benefits, which is covered by ERISA. Id. at 99. Ameritech argues that the Shaw Court also insinuated that ERISA would not be a source of protection against such discriminаtion. The Court said that discriminatory practices would have to be evaluated under Title VII, rather than a broad state law, and did not specifically include the option of resorting to ERISA. Id. at 105-06. But the Shaw Court was not presented with and did not answer the question of whether discrimination against certain plan participants could ever reach the point of breaching fiduciary duties. We have no need to decide whether such a claim might be stated in some future case; we conclude only that this is not such a case.
ERISA‘s fiduciary duty was meant to hold plan administrators to a duty of loyalty akin to that of a common-law trustee. See John Langbein, “The Supreme Court Flunks Trusts,” 1990 Sup. Ct. Rev. 207, 210-11. A commоn-law trustee was not allowed to favor one class of beneficiaries over another. Restatement of Trusts sec. 183. A plan administrator‘s duty to act in the best interest of all the beneficiaries cannot mean that it must cater to the optimal needs of each individual beneficiary. All of the beneficiaries’ interests will not always be aligned. The fiduciary must act as though it were a reasonably prudent businessperson with the interests of all the beneficiaries at heart. The question is whether such a businessperson, facing potential risks of future litigation as well as possible employee disenchantment with the plan, would have chosen to adhere to the NCS system, with the consequent effect of denying the 1994 benefits to the women affected here. See
IV
The district court‘s order granting summary judgment also awarded judgment to Ameritech on the state law claims, because they mirrored the federal claims. The appellants have not contested that part of the court‘s decision on appeal, and so we consider any possible arguments waived.
For the reasons stated, we AFFIRM the judgment of the district court.