E.E.O.C. v. Korn Industries, Inc.

• Decision Date: 20 October 1981
• Docket Number: No. 80-1606,80-1606
• Citation: 662 F.2d 256
• Parties: 27 Fair Empl.Prac.Cas. 13, 27 Empl. Prac. Dec. P 32,179 EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Appellant and Ruth Stukes, Plaintiff, v. KORN INDUSTRIES, INC., Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 256

662 F.2d 256

27 Fair Empl.Prac.Cas. 13, 27 Empl. Prac.

Dec. P 32,179

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Appellant and Ruth Stukes, Plaintiff, v. KORN INDUSTRIES, INC., Appellee.

No. 80-1606.

United States Court of Appeals Fourth Circuit.

Argued May 6, 1981.

Decided Oct. 20, 1981.

Allyson K. Duncan, E. E. O. C., Washington, D. C. (Leroy D. Clark, Gen. Counsel, Philip B. Sklover, Acting Associate Gen. Counsel, Vella M. Fink, Asst. Gen. Counsel, Washington, D. C., on brief) for appellant.

Harry C. Wilson, Sumter, S. C. (Nash, Chappell, Wilson & Booth, Sumter, S. C., on brief), and Karl W. McGhee, Wilmington, N. C. (Stevens, McGhee, Morgan & Lennon, Wilmington, N. C., on brief), for appellee.

Before SPROUSE and ERVIN, Circuit Judges, and RAMSEY, District Judge. ^*

ERVIN, Circuit Judge:

In this class action arising under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., the Equal Employment Opportunity Commission (the Commission) sought compensatory and injunctive relief for alleged racial discrimination by Korn Industries. Although the trial court held in the Commission's favor on the issue of liability, the Commission contends on appeal that the damages awarded were inadequate.

After considering the briefs, record and oral arguments, we affirm the determination of Korn's liability but remand for a recalculation of damages.

I.

A. Background

Korn Industries, Inc. (Korn) is a South Carolina corporation composed of two divisions: the Hardwood Division, which cuts and processes lumber, and the Sumter Cabinet Division, which manufactures bedroom furniture and which is the object of this lawsuit.

Hourly paid production workers at the Sumter Cabinet Division are divided into categories one through nine, in ascending order of pay and skill. Categories one through three include the basic entry level classifications, e. g., janitor and floor sweepers, which require no experience or qualifications other than passing a medical examination. Categories four and five include responsibilities such as sanding curved surfaces, smoothing drawer joints, and spraying lacquer or stain on finished surfaces. Categories six and above involve such duties as applying final coats to completed pieces, maintaining machinery and supplies and generally perfecting and inspecting finished work. Korn labels categories one through three as unskilled, four and five as semiskilled, and six through nine as skilled, but the district court found "confusion and inconsistency" within the categories and that "Korn has no written or even clearly defined policy to determine the entry level job of a new employee."

The district court found that from 1966 to 1975 the number of blacks employed by the Sumter Cabinet Division increased from 167 to 248, and that, during the same time, the number of white employees decreased from 268 to 207. The court also found that most blacks are originally employed in categories one, two and three. As of June 30, 1974, over 97% of the employees originally assigned to category one, over 91% of those assigned to category two, and over 62% of those assigned to category three, were black. No blacks had ever been originally assigned to categories six, eight and nine. As of August 30, 1974, 20.1% of the blacks but only 0.7% of the whites hired were originally assigned to category one. Sixty-eight percent of the whites hired were originally assigned to category four or above. As of that date, category one was 100% black; category two, 87% black; category three, 76% black; category four, 58% black; and categories five through nine predominantly white. In 1974, there were 131 employees in categories one through three; 123 employees in four and five; and 131 employees in six through nine.

All of Korn's corporate officers are white, as are its eleven clerical workers and members of its technical staff, i. e., the plant manager, personnel manager, cost accountant and computer staff. In addition, at the time the action was filed and through the close of discovery, Korn employed a supervisory staff of eighteen foremen and assistant foremen (collectively, foremen) all of whom were white. ¹ These foremen, who are generally salaried employees, benefit from an incentive bonus plan, in effect since 1970 under which "production bonuses" are awarded based on certain objective factors, that is, the foreman's base pay, the net footage produced in his department and the total man hours utilized in his department per foot of product; minus bonus figures are not charged against the regular pay of the foremen but are charged against future bonus earnings. The foremen have input in the hiring and promotion processes.

Although Korn had no black foremen at times pertinent to this lawsuit, it did have two black employees classified as group leaders, who supervise small groups of employees in the shipping and finishing departments. ² Group leaders are paid on an hourly basis, spend more than 20% of their time performing manual labor and are not eligible for production bonuses. Further, they have no input into the hiring and promotion processes. No white employee has ever carried the designation of group leader nor had a black group leader during times relevant to this litigation ever supervised a white employee.

Hiring decisions at Korn are made jointly by the personnel manager and the plant manager. When a vacancy occurs, the plant manager notifies the personnel manager, who screens active applications and selects potential candidates. After doing a reference or experience check, the personnel manager interviews candidates and refers those who pass to the plant manager for a second interview. Since 1973, foremen have also participated in the selection process.

With regard to promotion decisions, Korn's policy is to promote from within its ranks; however, employees are not given the opportunity to bid for promotions as notices of openings are not posted but are rather circulated by word of mouth. When an opening occurs, foremen evaluate the employees under their supervision for that position and recommend their selections to the plant manager. ³ The district court found that, during the five years immediately preceding trial, blacks had received two-thirds of the promotions, but that "most" of these had been into categories two, three and four. The court further found that the "vast majority" of white promotions were into categories five through nine.

B.

This action

This suit had its origin in a May 1971 charge filed with the Commission by Ruth Stukes, a black female, alleging that she had been denied re-employment by Korn because of her sex. As a result of its investigation of this charge, the Commission brought suit against Korn alleging that the company refused to hire black females because of their race and sex and, further, that the company maintained race and sex segregated job classifications. ⁴ On the Commission's motion, the issues of liability and relief were bifurcated.

After the first stage of the trial, the court concluded that Korn had violated Title VII by hiring and assigning blacks to lower paying jobs than whites with equal qualifications and by using subjective criteria for promotion. The court reserved judgment, however, on whether maintenance of the group leader classification was discriminatory, advising the parties that it would hear additional testimony on that point as well as on damages at a later hearing.

Following two subsequent hearings, the district court concluded that the maintenance of the group leader position was not discriminatory. It further concluded that additional testimony indicated that Korn was not guilty of racial discrimination in its hiring and promotion practices but that the company had discriminated in making initial job assignments in some instances, for which it would be required to make compensation. Korn was enjoined from violating Title VII and specifically from discriminating on the basis of race in the assignment of jobs to black employees, and was ordered to submit employment reports to the Commission every six months for two years.

In its order following the damages stage of the bifurcated trial, the court noted:

Since the plaintiff made out a prima facie case at the original hearing by use of statistics as to racial discrimination on initial placement of new employees, the burden shifted to the defendant to rebut the statistics by showing the assignment policy does not discriminate according to race.

At the second trial defendant went into great detail in showing the standards used in hiring and initial job assignment. Information as to every new employee was avai(l)able and compared with the criteria of past related work experience, education and unusual physical attributes of strength or height. After weighing this testimony and reviewing the various exhibits the Court is convinced that the defendant has rebutted the prima facie case of racial discrimination except in a few cases where white and black employees were hired at or about the same time with little or no difference in their qualifications and the white was assigned to a higher category than the black. In these cases the court is awarding back pay to the black ....

III.

On appeal, the Commission argues (1) that the trial court erred in concluding that maintenance of the group leader position was not discriminatory; (2) that the court erred as a matter of law in concluding that the liability established at stage one had been rebutted with respect to all except twenty-six employees at stage two of the proceedings; and (3) that even with respect to the named discriminatees, the relief awarded was inadequate because the district court (a) fixed an arbitrary cutoff date for backpay and (b) imposed a fifty dollar de minimis rule on those awards. We will treat each of these contentions in turn.

A.

The group leader position

The district court concluded that Korn's creation of the...