Klanseck v. Prudential Ins. Co. of America

• Decision Date: 26 February 1981
• Docket Number: Civ. A. No. 80-72069.
• Citation: 509 F. Supp. 13
• Parties: James KLANSECK and Terri Mozug, Plaintiffs, v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant.
• Court: U.S. District Court — Western District of Michigan

509 F. Supp. 13

James KLANSECK and Terri Mozug, Plaintiffs, v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant.

Civ. A. No. 80-72069.

United States District Court, E. D. Michigan, S. D.

June 27, 1980.

August 20, 1980.

Supplemental Memorandum Opinion February 26, 1981.

Albert Calille, Detroit, Mich., for plaintiff.

Thomas G. Kienbaum, Detroit, Mich., for defendant.

Order Granting Plaintiffs' Motion For Evidentiary Hearing and Modification of Memorandum Opinion. MEMORANDUM OPINION

THORNTON, District Judge.

Plaintiffs herein seek a declaratory judgment and injunctive relief. At issue is an employment policy of defendant Prudential Insurance Company of America alleged by plaintiffs to be violative of the Michigan Civil Rights Act. Plaintiffs are two persons each employed by defendant as a District Agent. Plaintiffs are planning to marry each other in August, 1980. It is the policy of the defendant that:

If two members of the District Agencies Sales Staff in the same or different Districts (Agents, Sales Managers, and Managers) marry, one of them must resign or be transferred to the Sales Staff of the Ordinary Agencies or to the Home Office, if such can be arranged.

Plaintiffs contend that the above policy directly violates the Elliott-Larsen Civil Rights Act of 1977,¹ in particular MCL § 37.2202; MSA § 3.548(202). Said provision insofar as applicable reads as follows:

(1) An employer shall not:

(a) Fail or refuse to hire, or recruit, or discharge, or otherwise discriminate against an individual with respect to employment, compensation, or a term, condition, or privilege of employment, because of religion, race, color, national origin, age, sex, height, weight, or marital status.

It is clear (and undisputed) that upon the marriage of plaintiffs (to each other) one of them must discontinue his or her status as District Agent. By affidavit² defendant states that either plaintiff could be employed immediately "within the ordinary agency department as a special agent." It is the position of plaintiff(s) that as Special Agent he or she would earn less money than as a District Agent. Defendant does not dispute that this is a possibility.

As legal justification for the policy prohibiting two persons who are married to each other from both being District Agents defendant relies on an exemption provision in the Michigan Civil Rights Act — M.C.L. § 37.2208; M.S.A. § 3.548(208). Said provision reads as follows:

A person subject to this article may apply to the commission for an exemption on the basis that religion, national origin, age, height, weight, or sex is a bona fide occupational qualification reasonably necessary to the normal operation of the business or enterprise. Upon sufficient showing, the commission may grant an exemption to the appropriate section of this article. An employer may have a bona fide occupational qualification on the basis of religion, national origin, sex, age, or marital status, height and weight without obtaining prior exemption from the commission, provided that an employer who does not obtain an exemption shall have the burden of establishing that the qualification is reasonably necessary to the normal operation of the business. (Emphasis supplied).

It is the position of defendant that its policy of non-spousal District Agents is "reasonably necessary to the normal operation of its business." Defendant's compensation plan is such that it is entirely possible for a spousal District Agent team to manipulate their accounts in such a way as to increase their earnings in a way not obtainable by a District Agent "who is not on a one family income basis with another District Agent." The underlying principle involved is conceptually comparable to gerry-mandering. Defendant does not have a policy prohibiting District Agents from manipulating policy sales for the reason that it would be impossible as a practical matter to enforce such policy. The potential for spousal team manipulation is there and because of the very nature of policy sales there is no way for defendant to monitor the occurrence of the manipulation of policies sold.

Pending before the Court are cross motions for summary judgment and affidavits filed in support thereof. Defendant submitted the Affidavit of Robert V. Hau, Vice President — Regional Marketing of the Michigan Region of The Prudential Insurance Company of America. The Hau Affidavit details the compensation plan of defendant's and illustrates by way of examples how the manipulation by two spousal District Agents actually can operate to frustrate the plan, said plan having been in effect since some time in the 1940's and covering 20,000 District Agents employed by defendant in the United States. We set forth below several paragraphs from the Hau Affidavit:

4. Prudential has in effect a compensation plan covering its District agents (as well as other plans for the remainder of its sales force). This compensation plan, which covers the District sales force located in the State of Michigan, is contained in an agreement in effect between Prudential and the Insurance Workers International Union (AFL-CIO), a copy of which is attached hereto as Exhibit "A" and by this reference made a part hereof. The essence of the agents' compensation plan as contained in Exhibit "A" has been in effect since some time in the 1940's. It covers, with minor variation, all 20,000 District agents employed by Prudential in the United States.

* * * * * *

6. Prudential has in effect various rules governing the employment of persons related to each other on one basis or another in order to avoid, or at least minimize, the possibility of conflicts (for instance, in order to avoid supervision of an employee by a relative). One of these is a prohibition against the employment of a spouse of a District agent as a District agent. This Rule provides:

`If two members of the District Agencies Sales Staff in the same or different Districts (Agents, Sales Managers, and Managers) marry, one of them must resign or be transferred to the Sales Staff of the Ordinary Agencies or to the Home Office, if such can be arranged.'

7. The reason Prudential implemented this rule is as follows: Prudential's compensation plan, as will hereafter be more fully explained, is based on the efforts of individual District agents. Because of the nature of the compensation plan, it would be profitable for two District agents who are married, to manipulate the terms of the compensation plan so that increased compensation for the spousal team, not reflecting the efforts of individuals as is intended by the compensation plan, would result. The reason this particular rule pertains to spouses (as opposed to other family relationships) is because the possibility and motivation for manipulation of compensation is very slight, if not non-existent, in cases where separate household incomes are involved. The policy is not intended to affect the employment of married persons by Prudential. Prudential hires and employs individuals without regard to their marital status (unless by operation of Prudential's anti-nepotism policy) and, of course, a large number of its present District sales force is married.

* * * * * *

9. The foregoing examples do not constitute the only possibilities under Prudential's compensation program plan for manipulation by a spousal team. However, the Affiant is informed and believes that it covers the significant instances where this could occur. The instances referred to could, in the case of only one spousal team which chooses to manipulate program features as described, cost Prudential well in excess of $3,500 per year in unwarranted compensation. Multiplied by a number of years and a number of spousal teams, this could cost Prudential in the State of Michigan alone tens of thousands of dollars.

10. The policy set forth in paragraph 6 above does not require that one or the other agent affected by the policy resign. Instead, it is contemplated that he or she may be employed within the ordinary agency department as a special agent. Either Mr. Klanseck or Ms. Mozug could be so employed immediately.

Defendant agrees that it has the burden under the statute "of establishing that the qualification is reasonably necessary to the normal operation of the business." The Supreme Court had this to say in Furnco Construction Corp. v. Waters, 438 U.S. 567, 577-578, 98 S.Ct. 2943, 2949-2950, 57 L.Ed.2d 957 (1978):

When the prima facie case is understood in the light of the opinion in McDonnell Douglas, it is apparent that the burden which shifts to the employer is merely that of proving that he based his employment decision on a legitimate consideration, and not an illegitimate one such as race. To prove that, he need not prove that he pursued the course which would both enable him to achieve his own business goal and allow him to consider the most employment applications. Title VII prohibits him from having as a goal a work force selected by any proscribed discriminatory practice, but it does not impose a duty to adopt a hiring procedure that maximizes hiring of minority employees. To dispel the adverse inference from a prima facie showing under McDonnell Douglas, the employer need only `articulate some legitimate,

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