Kouba v. Allstate Ins. Co.

• Citation: 691 F.2d 873
• Decision Date: 29 October 1982
• Docket Number: Nos. 81-4536,81-4566,s. 81-4536
• Parties: 30 Fair Empl.Prac.Cas. 57, 30 Empl. Prac. Dec. P 33,123 Lola KOUBA, a/k/a Lola Hogan, individually and on behalf of all others similarly situated, Plaintiff-Appellee, United States Equal Employment Opportunity Commission, Plaintiff in Intervention-Appellee, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 873

691 F.2d 873

30 Fair Empl.Prac.Cas. 57, 30 Empl. Prac.

Dec. P 33,123

Lola KOUBA, a/k/a Lola Hogan, individually and on behalf of all others similarly situated, Plaintiff-Appellee, United States Equal Employment Opportunity Commission, Plaintiff in Intervention-Appellee, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellant.

Nos. 81-4536, 81-4566.

United States Court of Appeals Ninth Circuit.

Argued and Submitted May 14, 1982.

Decided Oct. 29, 1982.

Kalvin M. Grove, Fox & Grove, Chicago, Ill., for Allstate Ins. Co.

Vella M. Fink, E.E.O.C., Washington, D. C., Judith E. Kurtz, San Francisco, Cal., for EEOC & Kouba.

Appeal from the United States District Court for the Eastern District of California.

Before MERRILL, CHOY and HUG, Circuit Judges.

CHOY, Circuit Judge:

This appeal calls into question the scope of the "factor other than sex" exception to the Equal Pay Act of 1963 ¹ as incorporated into Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, et seq., by the Bennett Amendment. ² Because the district court misconstrued the exception, we reverse and remand.

I

Allstate Insurance Co. computes the minimum salary guaranteed to a new sales agent on the basis of ability, education, experience, and prior salary. During an 8-to-13 week training period, the agent receives only the minimum. Afterwards, Allstate pays the greater of the minimum and the commissions earned from sales. A result of this practice is that, on the average, female agents make less than their male counterparts.

Lola Kouba, representing a class of all female agents, argued below that the use of prior salary caused the wage differential and thus constitutes unlawful sex discrimination. Allstate responded that prior salary is a "factor other than sex" within the meaning of the statutory exception. The district court entered summary judgment against Allstate, reasoning that (1) because so many employers paid discriminatory salaries in the past, the court would presume that a female agent's prior salary was based on her gender unless Allstate presented evidence to rebut that presumption, and (2) absent such a showing (which Allstate did not attempt to make), prior salary is not a factor other than sex.

II

The Equal Pay Act prohibits differential payments between male and female employees doing equal work except when made pursuant to any of three specific compensation systems or "any other factor other than sex." These exceptions are affirmative defenses which the employer must plead and prove. Corning Glass Works v. Brennan, 417 U.S. 188, 196-97, 94 S.Ct. 2223, 2229, 41 L.Ed.2d 1 (1974) (claim brought under the Equal Pay Act).

Because Kouba brought her claim under Title VII rather than directly under the Equal Pay Act, ³ Allstate contends that the standard Title VII rules govern the allocation of evidentiary burdens. It cites Texas Department of Community Affairs v. Burdine, 450 U.S. 248, 253, 101 S.Ct. 1089, 1091, 67 L.Ed.2d 207 (1981), for the proposition that under Title VII an employee alleging sex discrimination bears the burden of persuasion at all times as to all issues, and concludes that Kouba failed to carry the burden of showing that the wage differential did not result from a factor other than sex. ⁴

Allstate misallocates the burden. In County of Washington v. Gunther, 452 U.S. 161, 170-71, 101 S.Ct. 2242, 2248-49, 68 L.Ed.2d 751 (1981), the Supreme Court recognized that very different principles govern the standard structure of Title VII litigation, including burdens of proof, and the structure of Title VII litigation implicating the "factor other than sex" exception to an equal-pay claim (though the Court reserved judgment on specifically how to structure an equal-pay claim under Title VII). Accordingly, we have held that even under Title VII, the employer bears the burden of showing that the wage differential resulted from a factor other than sex. Piva v. Xerox Corp., 654 F.2d 591, 598-601 (9th Cir. 1981); Gunther v. County of Washington, 623 F.2d 1303, 1319 (9th Cir. 1979) (supplemental opinion denying rehearing), aff'd, 452 U.S. 161, 101 S.Ct. 2242, 68 L.Ed.2d 751 (1981). Nothing in Burdine converts this affirmative defense, which the employer must plead and prove under Corning Glass, into an element of the cause of action, which the employee must show does not exist.

III

In an effort to carry its burden, Allstate asserts that if its use of prior salary caused the wage differential, ⁵ prior salary constitutes a factor other than sex. An obstacle to evaluating Allstate's contention is the ambiguous statutory language. The parties proffer a variety of possible interpretations of the term "factor other than sex."

A

We can discard at the outset three interpretations manifestly incompatible with the Equal Pay Act. At one extreme are two that would tolerate all but the most blatant discrimination. Kouba asserts that Allstate wrongly reads "factor other than sex" to mean any factor that either does not refer on its face to an employee's gender or does not result in all women having lower salaries than all men. Since an employer could easily manipulate factors having a close correlation to gender as a guise to pay female employees discriminatorily low salaries, it would contravene the Act to allow their use simply because they also are facially neutral or do not produce complete segregation. Not surprisingly, Allstate denies relying on either reading of the exception.

At the other extreme is an interpretation that would deny employers the opportunity to use clearly acceptable factors. Kouba insists that in order to give the Act its full remedial force, employers cannot use any factor that perpetuates historic sex discrimination. The court below adopted a variation of this interpretation: the employer must demonstrate that it made a reasonable attempt to satisfy itself that the factor causing the wage differential was not the product of sex discrimination. Kouba v. Allstate Insurance Co., 523 F.Supp. 148, 162 (E.D.Cal.1981). But while Congress fashioned the Equal Pay Act to help cure long-standing societal ills, it also intended to exempt factors such as training and experience that may reflect opportunities denied to women in the past. H.R. Rep. No. 309, 88th Cong., 1st Sess. 3, reprinted in 1963 U.S. Code Cong. & Ad. News 687, 689. See, e.g., Strecker v. Grand Forks County Social Service Board, 640 F.2d 96, 100 (8th Cir. 1981); Horner v. Mary Institute, 613 F.2d 706, 714 (8th Cir. 1980); EEOC v. Aetna Insurance Co., 616 F.2d 719, 726 & n. 10 (4th Cir. 1980); EEOC v. New York Times Broadcasting Service, Inc., 542 F.2d 356, 359-60 (6th Cir. 1976). Neither Kouba's interpretation nor the district court's variation can accommodate practices that Congress and the courts have approved.

B

All three interpretations miss the mark in large part because they do not focus on the reason for the employer's use of the factor. The Equal Pay Act concerns business practices. It would be nonsensical to sanction the use of a factor that rests on some consideration unrelated to business. An employer thus cannot use a factor which causes a wage differential between male and female employees absent an acceptable business reason. ⁶ Conversely, a factor used to effectuate some business policy is not prohibited simply because a wage differential results.

Even with a business-related requirement, an employer might assert some business reason as a pretext for a discriminatory objective. This possibility is especially great with a factor like prior salary which can easily be used to capitalize on the unfairly low salaries historically paid to women. See Futran v. RING Radio Co., 501 F.Supp. 734, 739 n. 2 (N.D.Ga.1980) (expressing concern that the use of prior salary would perpetuate the traditionally lower salaries paid women); Neeley v. MARTA, 24 F.E.P. Cases 1610, 1611 (N.D.Ga.1980) (same). The ability of courts to protect against such abuse is somewhat limited, however. The Equal Pay Act entrusts employers, not judges, with making the often uncertain decision of how to accomplish business objectives. See County of Washington v. Gunther, 452 U.S. at 170-71, 101 S.Ct. at 2248-49. We have found no authority giving guidance on the proper judicial inquiry absent direct evidence of discriminatory intent. A pragmatic standard, which protects against abuse yet accommodates employer discretion, is that the employer must use the factor reasonably in light of the employer's stated purpose as well as its other practices. The specific relevant considerations will of course vary with the situation. In Part IV of this opinion, we outline how the court below should apply this test to the business reasons given by Allstate for its use of prior salary.

C

Relying on recent Supreme Court precedent, Kouba would limit the category of business reasons acceptable under the exception to those that measure the value of an employee's job performance to his or her employer. In County of Washington v. Gunther, 452 U.S. at 170-71 n. 11, 101 S.Ct. at 2248-49 n. 11, the Court reported that Congress added the exception "because of a concern that bona fide job evaluation systems used by American businesses would otherwise be disrupted." In Corning Glass Works v. Brennan, 417 U.S. at 199, 94 S.Ct. at 2230, the Court explained that these systems "took into consideration four separate factors in determining job value-skill, effort, responsibility and working conditions-and each of these four components was further systematically divided into various subcomponents." Our study of the legislative history of the Equal Pay Act confirms that Congress discussed only factors that reflect job value.

In drafting the Act, however, Congress did not limit the exception to job-evaluation systems. Instead, it excepted "any other factor other than sex" and thus created a "broad general exception." H.R. Rep. No. 309, 88th Cong., 1st Sess. 3, reprinted in 1963 U.S. Code Cong. &...