Whether the disparate impact model can be applied in a compensation case is a difficult, unsettled question. Fortunately, I need not decide it. Even if plaintiff could proceed in this case on such a theory, it has failed to meet its burden of demonstrating a prima facie case. Furthermore, defendants have come forward with valid, nondiscriminatory reasons for their actions.
4. Plaintiff's Disparate Impact Case
The ADEA was enacted to promote employment of older Americans and to remove arbitrary age discriminations in employment. See 29 U.S.C. § 621(b); EEOC v. Wyoming, 460 U.S. 226, 103 S. Ct. 1054, 75 L. Ed. 2d 18 (1983). The Act's protections extend to all those in the protected age group, i.e., those between the ages of 40 and 70. The ADEA applies to state and local governments. 29 U.S.C. § 630(b)(2).
A plaintiff's burden in a disparate impact case is heavier than it would be in a disparate treatment case. Massarsky, 706 F.2d at 120. In order to establish a prima facie case under the disparate impact model, the plaintiff must show "that the facially neutral employment practice had a significantly discriminatory impact." Connecticut v. Teal, 457 U.S. 440, 102 S. Ct. 2525, 2531, 73 L. Ed. 2d 130 (1982). "If that showing is made the employer must then demonstrate that 'any given requirement [has] a manifest relationship to the employment in question,' in order to avoid a finding of discrimination . . . . Even in such a case, however, the [plaintiff] may prevail, if he shows that the employer was using the practice as a mere pretext for discrimination." Teal, 102 S. Ct. at 2531 (quoting Griggs, 401 U.S. at 432). The employer has no burden to come forward with any justification until the plaintiff has made out a prima facie case. Albemarle Paper Co. v. Moody, 422 U.S. 405, 45 L. Ed. 2d 280, 95 S. Ct. 2362 (1975).
Defendants contend that the plaintiff has not made out a prima facie case and that, even if it has, there are compelling business justifications that bring its actions within the "reasonable factors other than age" exception to the ADEA's prohibitions.
It seems beyond dispute that the salary steps in the GMSD are correlated with age. There is also no dispute that the individuals affected by the compaction system in the allegedly adverse way are all within the protected age group.
Defendants contend, however, that there has been no discrimination as a matter of law because the teachers at the most senior levels of the step system are also the highest paid. They contend that the EEOC has improperly focused on one aspect of the entire payroll system: the amount of the wage increases given for the 1983-1984 academic year.
It is not disputed that the oldest teachers in the GMSD are also the highest paid teachers. Defendants contend that this should essentially be the end of the inquiry. The EEOC on the other hand sees the fact that the highest paid teachers received a lower salary increase than those below them on the salary ladder as discriminatory. Although the defendants' argument may be somewhat overbroad, I believe that the EEOC has failed to demonstrate any discrimination in the GMSD's salary system.
In essence the EEOC would find any salary-step system with a top salary to be discriminatory, despite its protestations to the contrary. In any system in which there are a limited number of steps, and in which the relative disparities between the highest and lowest salaries are held constant, those at the higher end of the salary system will receive a lower effective yearly increase than those who are still progressing from step-to-step. At oral argument on this motion, the EEOC conceded that it considered only an equal effective percentage increase to accord with the ADEA as it interprets it. Requiring an equal percentage increase across-the-board would, however, make the number of steps grow each year and would also mean that the gap between the highest and lowest teachers would grow continuously.
Defendants argue that the Supreme Court's decision in General Electric Co. v. Gilbert, 429 U.S. 125, 50 L. Ed. 2d 343, 97 S. Ct. 401 (1976), requires the conclusion that it is improper to focus on just one aspect of the compensation system. In Gilbert, the Court was faced with a challenge to the health insurance benefits available to General Electric employees. The specific claim was that the health plan did not cover maternity and pregnancy benefits. A class of female employees at General Electric sued claiming that this treatment of pregnancy benefits constituted a violation of Title VII. The Supreme Court held that it did not. Relying on Geduldig v. Aiello, 417 U.S. 484, 41 L. Ed. 2d 256, 94 S. Ct. 2485 (1974), the court held that a classification based on pregnancy was not equivalent to a classification based on sex. The Court also held that as long as the overall benefits available to employees under the insurance plan were equivalent, there was no discrimination. Defendants argue that this holding makes invalid any examination of the compensation system which does not look to the entirety of the payroll package.
Defendants have not been able to cite me any cases directly on point and the only cases I have located which apply Gilbert involve pregnancy benefits. See e.g., Women in City Government United v. City of New York, 563 F.2d 537, 540-41 (2d Cir. 1977); Guse v. J.C. Penney Co., 562 F.2d 6, 8 (7th Cir. 1977); Grogg v. General Motors Corp., 444 F. Supp. 1215, 1218-19 (S.D.N.Y. 1978). None of these cases is very strong support for defendants' position, notwithstanding the broad language contained in some of the opinions.
In spite of the lack of direct support for their position, I believe that the defendants are essentially correct that it would be improper to focus too narrowly on a particular aspect of something like a compensation system. Such a system is designed to provide employees with an overall package of payroll benefits. The precise manner in which this is accomplished will obviously vary widely. It is true that the teachers at the top of the step system received the smallest increases, but they also received the highest pay. It is only when the amount of the pay increase is separated from all other aspects of the compensation system, and the amount given to the older teachers as opposed to the teachers with less seniority is examined in isolation, that anything remotely unusual can be seen. I believe that this dissection of the compensation system is improper.
The EEOC contends that Connecticut v. Teal prevents this conclusion. In Teal, the Court rejected an employer's reliance on a "bottom line" defense. Teal involved a challenge to job selection processes. The employer argued that even if its selection criteria were discriminatory, its work force was racially balanced and, therefore, the "bottom line" was that it was not discriminating. The Court rejected this argument. Its holding was predicated on its conclusion that the protections of Title VII applied to individual employees primarily rather than to a minority group as a whole. Id. at 453-54. In the instant case, the defendants argue that the total payroll package received by each individual teacher is nondiscriminatory and therefore that the "bottom line" to each teacher is nondiscriminatory. Teal therefore does not cover this situation.
Even assuming, however, that the EEOC has demonstrated a prima facie case,
the defendants have come forward with reasonable factors other than age upon which their decisions were based. These alternative grounds for the decisions reveal the nondiscriminatory nature of the defendants' actions.
The defendant has suggested a number of reasons for the compaction plan. The primary reasons appear to be the desire to limit the number of steps so that teachers would eventually reach the top of the salary ladder; the desire to shorten the time necessary for a teacher to reach the top of the salary system, and the desire to enhance the professional status of the teachers by creating a more reasonable number of steps with a fixed top step.
Under the ADEA, it is not unlawful for an employer to differentiate among its employees based on reasonable factors other than age even if that differentiation would otherwise be a violation of the Act. The actions taken by defendant fall within this exception.
Under the new system, all teachers reach the top of the salary system earlier than they would have otherwise. Moreover, even those at the top of the salary system were not harmed by the compaction plan. Those at step twenty-eight still received the highest salary in the system and still received a raise in salary equal to that received by all other teachers exclusive of step increases. The GMSD and the GMEA both had an equally valid desire to ensure that there would be no ever-increasing disparity between the highest and lowest paid teachers within the system. Under any approach acceptable to the EEOC, this result would be unattainable. Under the compaction plan, the overall earnings of all teachers would also be increased when considered as a career-long lump sum. Obviously, this is a valid goal of the GMEA.
The EEOC argues that all of these goals were achieved at the expense of the older workers in the system. I disagree with this characterization. Although the teachers between steps twenty-four and twenty-eight received less of an increase than those below them, this must always be so in any system in which there are fixed number of steps of set salary. Obviously, when an employee reaches the top step of such a system, she or he is no longer entitled to a step increase as before. This fact alone would not, in my view, render the system discriminatory where there are valid business reasons for the fixed-step system. Defendants have demonstrated those reasons here.
Plaintiff argues, however, that this is precisely the type of bottom line defense rejected in Teal. Once again, however, I believe that this case is distinguishable from Teal. That case involved employee selection processes, not compensation. That fact alone may serve to distinguish Teal. It is also apparent that at least some of the individual teachers in steps twenty-four and above will also be the beneficiaries of the enhanced professional status attached to reaching the top level of the salary system. In addition, unlike the situation in Teal, defendants do not seek to justify discrimination against members of the protected class by pointing to the treatment given to other members of the same class.
This case is much more similar to Wambheim v. J.C. Penney, 705 F.2d 1492 (9th Cir. 1983) (per curiam), than it is to Teal. In Wambheim, the plaintiffs attacked the manner in which defendant distributed its insurance benefits. Penney had eliminated insurance coverage for spouses of Penney employees, unless the employee earned more than half of the combined income of the family. The result of this restriction was that wives of male employees were more often included within the plan than were husbands of female employees. Penney argued that these distinctions were made in order to benefit the largest number of employees with the greatest need. It argued that another system would result in increased health insurance premiums which would make health insurance too expensive for those with low incomes.
The concerns expressed by the defendants are similar to those accepted by the court in Wambheim. Although they are not as compelling as those presented in that case, they reflect a desire to improve the lot of the most teachers possible. I believe that this end has been accomplished in a non-discriminatory manner. I will therefore grant defendants' motion for summary judgment and deny plaintiff's motion for partial summary judgment.
0 r D E R
NOW, this 9th day of October, 1985, upon consideration of plaintiff's motion for partial summary judgment, defendants' motions for summary judgment, the responses thereto, memoranda of law submitted by the parties, and for the reasons set forth in the accompanying memorandum, IT IS ORDERED that:
1. Plaintiff's motion for partial summary judgment is DENIED.
2. Defendant's motions for summary judgment are GRANTED.
3. Judgment is entered in favor of defendants and against plaintiff.
Before HUYETT, J.
AND NOW, this 9th day of October, 1985, in accordance with the order dated October 9, 1985,
IT IS ORDERED that Judgment be and the same is hereby entered in favor of the defendants and against the plaintiff