Wambheim v. J.C. Penney Co., Inc.

• Decision Date: 20 April 1981
• Docket Number: No. 79-3306,79-3306
• Citation: 642 F.2d 362
• Parties: 27 Fair Empl.Prac.Cas. 1495, 25 Empl. Prac. Dec. P 31,770, 2 Employee Benefits Ca 1291 Frances WAMBHEIM, individually and on behalf of all women similarly situated, Plaintiff-Appellant, and Catherine Heggelund, individually and on behalf of all women similarly situated, Plaintiff in Intervention and Appellant, v. J. C. PENNEY COMPANY, INC., Defendant and Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 362

642 F.2d 362

27 Fair Empl.Prac.Cas. 1495,

25 Empl. Prac. Dec. P 31,770,

2 Employee Benefits Ca 1291

Frances WAMBHEIM, individually and on behalf of all women

similarly situated, Plaintiff-Appellant,

and

Catherine Heggelund, individually and on behalf of all women

similarly situated, Plaintiff in Intervention and Appellant, v. J. C. PENNEY COMPANY, INC., Defendant and Appellee.

No. 79-3306.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted Feb. 12, 1981.

Decided April 20, 1981.

Vella M. Fink, Washington, D. C., Bonjour, Gough, Stone & Remer, Hayward, Cal., on brief; Deborah Reik, Washington, D.C., Kerry M. Gough, Hayward, Cal., argued, for plaintiff-appellant.

Don T. Hibner, Jr., Los Angeles, Cal., on brief; David W. Farrar, Sheppard, Mullin, Richter & Hampton, Los Angeles, Cal., argued, for defendant and appellee.

Appeal from the United States District Court Northern District of California.

Before FARRIS and FERGUSON, Circuit Judges, and CRAIG, ^* District Judge.

FERGUSON, Circuit Judge:

Plaintiffs Frances Wambheim and Catherine Heggelund brought a class action under Fed.R.Civ.P. 23 alleging that two policies of J.C. Penney Co. violate Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, ¹ and the Equal Pay Act of 1963, 29 U.S.C. § 206(d). Penney's medical insurance plan includes a head-of-household rule which permits the spouse of an employee to receive medical and dental benefits only if the employee earns more than the spouse. Until 1977, Penney also included in its medical plan maternity benefits for its married, but not for unmarried, women. Plaintiffs claim that those provisions constitute illegal sex discrimination.

The district court granted Penney's motion for summary judgment, concluding that the facts did not constitute a prima facie case of discrimination. We reverse and remand.

I. FACTS

A. The Head of Household Rule

From 1955 until 1971, Penney's insurance policy was facially discriminatory, allowing only men to receive coverage for their spouses. In 1971, management changed the provision to the facially neutral head-of-household rule, allowing both sexes to receive dependent coverage if the employee earned more than 50% of the combined income of the spouses. The new rule excludes as income money earned from stocks, bonds, savings accounts, disability benefits, social security or pensions.

At the time of the change, Penney continued coverage as before, regardless of income, for the spouses of employees (all necessarily male) formerly included in the plan. This grandfathering provision was discontinued when the instant action was filed.

Penney's work force consists of 70% women. Sixty percent of these women work in low-paying sales positions, compared to 33% of the men Penney employs. Women occupy 6.7% of the profit-sharing management positions and 35.5% of the lower-level management. As a result, 37% of the women covered by Penney's medical plan receive dependent coverage; the comparable figure for men is 95%.

Wambheim claims that Penney's hiring practices, the history of its medical insurance program, ² and its refusal to include all earnings in its definition of income indicate that its head-of-household rule is a pretext for the continuation of discrimination against women. Penney claims that the rule is neutral on its face and justified by cost analysis. The Equal Employment Opportunity Commission ("EEOC") in its amicus curiae brief contends that its guidelines and a Department of Labor regulation prohibit head-of-household rules. ³

The district court granted Penney's motion for summary judgment, finding that Wambheim had failed to prove a prima facie case of discrimination. The court relied on City of Los Angeles Dept. of Water & Power v. Manhart, 435 U.S. 702, 711 n.20, 98 S.Ct. 1370, 1376 n.20, 55 L.Ed.2d 657 (1978), which states:

Even a completely neutral practice will inevitably have some disproportionate impact on one group or another. Griggs does not imply, and this Court has never held, that discrimination must always be inferred from such consequences.

The district court held that a prima facie case is not established by disproportionate effect alone.

B. The Maternity Benefits Rule

Until 1977, Penney's medical coverage included maternity benefits for married women only. Heggelund claims that this policy constituted "sex-plus" discrimination, i.e., discrimination based on sex plus another facially neutral factor marriage and that Penney's discriminatory history is evidence of an invidious intent. Furthermore, Heggelund asserts that this policy had a disproportionate impact on women because of the substantial disparity in the numbers of men and women receiving dependent coverage.

The district court held that Heggelund failed to prove a prima facie case because she did not demonstrate disproportionate impact. The court grounded its result on a finding that unmarried men and women are both denied benefits under the plan.

II. ANALYSIS

A. The Head-of-Household Rule

The district court held that Wambheim failed to prove a prima facie case of discrimination. We disagree, and accordingly reverse the summary judgment entered in favor of defendants.

A prima facie case is established in a Title VII case if the challenged employment policy is based on gender. Griggs v. Duke Power Co., 401 U.S. 424, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971). Proof of a neutral policy's substantially disparate impact also establishes a prima facie case. ⁴ Id. at 431, 91 S.Ct. at 853. The Supreme Court has established a three-step test regarding proof of discrimination when parties assert disparate impact. McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973).

First, the plaintiff must demonstrate a facially discriminatory policy or a facially neutral policy which has a substantially disproportionate impact. 411 U.S. at 802 n.14, 93 S.Ct. at 1824 n.14. See Griggs v. Duke Power Co., supra, 401 U.S. at 431, 91 S.Ct. at 853. This showing constitutes the prima facie case. Second, the employer may defend on the ground of a valid business justification. 411 U.S. at 802, 93 S.Ct. at 1824. If the defendant offers no proof to justify the practice or policy, the court is entitled to "assume no justification exists," Nashville Gas Co. v. Satty, 434 U.S. 136, 143, 98 S.Ct. 347, 352, 54 L.Ed.2d 356 (1977), and find discrimination. On the other hand, the court is not compelled to find discrimination on the set of facts required to prove a prima facie case. Manhart, supra, 435 U.S. at 711 n.20, 98 S.Ct. at 1376 n.20; Satty, supra, 434 U.S. at 145, 98 S.Ct. at 353. Proof of disparate impact accordingly satisfies the burden of going forward, but may or may not satisfy the burden of persuasion. Finally, the plaintiff may counter that defense with evidence of a prior history of discriminatory intent. Such a history may demonstrate that the challenged policy is in reality a pretext for further invidious discrimination. 411 U.S. at 804, 93 S.Ct. at 1825.

The district court, relying on footnote 20 in Manhart, held that a prima facie case could not be established by disparate impact alone. Accordingly, it granted defendant's motion for summary judgment. The court thus misapplied the Title VII analysis described above. Disparate impact, while not proving a case of discrimination, does constitute a prima facie case. The figures introduced by Wambheim show that only 37% of the women covered by Penney's medical plan receive dependent coverage, as opposed to 95% of the men. Because of this disproportionate impact, a prima facie case exists. ⁵ The decision to grant summary judgment must therefore by reversed. ⁶

B. The Maternity Benefits Rule

The district court found that the provision of maternity benefits only for married women did not produce a disproportionate impact on women, because single men would also be denied these benefits for dependents. Heggelund correctly asserts that the court looked only to the language of the rule and not to its operation under Penney's employment practices.

The maternity provision and the head-of-household provision exist concurrently. Therefore, the maternity provision must be evaluated in the context of a plan which includes the head-of-household rule. Ninety-five percent of the men enrolled in the plan receive dependent coverage, compared with 37% of the women. Conceivably, 63% of the women could be denied coverage for maternity benefits because unmarried, while only 5% of the men are denied benefits for their pregnant dependents. ⁷ The rule, while facially a marital-status rule, may have been an invidious perpetration of an overall policy to discriminate against women, as Heggelund asserts.

While the inclusion in the plan of the no maternity benefits rule is allowed, General Electric Co. v. Gilbert, 429 U.S. 125, 97 S.Ct. 401, 50 L.Ed.2d 343 (1976), and the marital status rule may be upheld, ⁸ the combination of these two rules with a head-of-household rule, which allegedly has a disparate impact on women, may disproportionately affect women covered by the plan. Accordingly, as the district court did not consider the impact in light of the operation of Penney's hiring policies and the head-of-household rule, the challenge to the maternity benefits rule is remanded to the district court to determine whether that rule, combined with the various policies of Penney, produced a disproportionate impact on women not evidenced by the words of the rule alone. ⁹

REVERSED and REMANDED.

* Honorable Walter E. Craig, Senior United States District Judge, District...