Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-97-05247/USCOURTS-caDC-97-05247-0/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 3, 1998 Decided July 2, 1999

No. 97-5247

Vicente J. Anderson, et al.,

Appellants

v.

Alberto Aleman Zubieta,

Appellee

Appeal from the United States District Court

for the District of Columbia

(No. 96cv02832)

Richard J. Hirn argued the cause for appellants. With

him on the briefs was Ernest Allen Cohen.

Kimberly N. Brown, Assistant U.S. Attorney, argued the

cause for appellee. With her on the brief were Wilma A.

Lewis, U.S. Attorney, and R. Craig Lawrence, Assistant U.S.

Attorney.

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Before: Sentelle, Henderson and Garland, Circuit

Judges.

Opinion for the Court filed by Circuit Judge Garland.

Garland, Circuit Judge: Plaintiffs are black American

citizens of Panamanian or Hispanic national origin who have

long worked for the Panama Canal Commission and its

predecessor, the Panama Canal Company (together, the

"PCC" or "Canal Commission"). The PCC pays them substantially less in salary and benefits than it pays other

American citizens working at the same jobs--the overwhelming majority of whom are white, non-Panamanians. The

plaintiffs allege this pay differential constitutes race and

national origin discrimination in violation of Title VII of the

Civil Rights Act of 1964, Pub. L. No. 88-352, 78 Stat. 241

(codified as amended at 42 U.S.C. ss 2000e to 2000e-17

(1994)). The district court granted summary judgment in

favor of the PCC and dismissed plaintiffs' complaint. We

reverse.

I

The Canal Commission is a wholly-owned United States

government corporation. The thirteen plaintiffs were hired

by the PCC before 1979, and all but two before 1976. Compl.

pp 4-16. One has since retired. Id. All the plaintiffs are

currently United States citizens: eleven were naturalized

between 1987 and 1994; one became a citizen in 1977 following his service in the military; and the remaining plaintiff is

the son of a United States citizen whose citizenship was not

registered with the U.S. Embassy until 1991. Id. The PCC

denies plaintiffs three types of benefits that it grants to other

employees, which generates the pay differential of which they

complain.

The first benefit is the so-called "tropical differential," the

current version of which was authorized by Congress in the

Panama Canal Act of 1979, 22 U.S.C. s 3657. The differential, paid as a "recruitment or retention" incentive, is a 15%

increment above the employee's basic pay. Id. s 3657(a); see

35 C.F.R. s 251.31(a). Under the statute it is available to

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"any" employee who meets the eligibility requirements, without reference to the nature of the employee's job. Anyone

employed before October 1, 19791 is statutorily eligible for the

benefit, regardless of citizenship or place of recruitment, as is

anyone recruited after that date from outside Panama. 22

U.S.C. s 3657(a). Because all plaintiffs were employed before October 1, 1979, all are eligible under the statutory

criteria.

The Canal Commission, however, has chosen to restrict

eligibility further than Congress required. Under the PCC's

regulations, only American citizens are eligible for the tropical differential. 35 C.F.R. s 251.31(a). Moreover, employees

hired from within Panama ("Panamanian hires") are eligible

only if they also come within a "grandfather clause" the PCC

adopted in 1976--which requires that they were employed

and receiving the differential no later than July 3, 1976. See

id. s 251.31(c). This effectively limits the eligibility of Panamanian hires to those who already were American citizens on

that date.2 This requirement disqualifies all of the plaintiffs.

The second benefit is known as the "equity adjustment

package," and consists of free rent and electricity in PCC

housing, as well as certain travel and educational benefits.

Pls. Br. at 15. For many years, the PCC operated subsidized

stores where employees who were American citizens could

purchase goods at prices below those available elsewhere in

__________

1 The Panama Canal Treaty of 1977 took effect on this date.

2 Prior to the Canal Act, the Canal Commission was authorized

to pay the tropical differential to all U.S. citizens, but only to U.S.

citizens. See Pub. L. No. 85-550, s 7, 72 Stat. 405, 407-08 (1958).

In 1976, the PCC by regulation limited payment to those who were

recruited from outside of Panama, but grandfathered in those

locally-hired citizen-employees who had been working since July 3,

1976 and receiving the differential (and hence who had been citizens) as of that date. PCC Br. at 5. The Commission chose to

retain those limitations after the Canal Act was passed in 1979. See

35 C.F.R. s 251.31(b)(1)(i); id. s 251.31(c)(1); see also PCC Br. at

6.

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Panama. See PCC Cross-Motion (Dist. Ct. Record Entry

[hereinafter "R."] 13), Ex. 37. As part of the Panama Canal

Treaty of 1977, the United States agreed to close those

stores. PCC citizen-employees, however, were permitted to

shop in military commissaries for a limited period of time

ending September 30, 1984. Effective October 1, 1984, Congress authorized an allowance for any U.S. citizen (as of the

time the benefits are received) who was employed on September 30, 1979, regardless of place of recruitment. The allowance was also authorized for anyone recruited after September 30, 1979 from outside Panama, regardless of citizenship.

22 U.S.C. s 3646. From 1984-89, five plaintiffs were eligible

under these statutory criteria and received the equity package benefits.

On December 29, 1989, the last American administrator of

the Canal changed the PCC's policy and imposed additional

eligibility requirements on Panamanian hires. Under these

new criteria, an employee hired from within Panama is eligible for the equity package only if he or she was employed on

September 30, 1979 and was a citizen before October 1, 1984.

See PCC Cross-Motion (R. 13), Exs. 20, 54. As a consequence of the new criteria, four plaintiffs who had been

receiving the equity package lost their benefits. Pls. Br. at

16; PCC Br. at 8.

The final benefits at issue are travel and home leave

vacation benefits. An employee hired from within Panama is

eligible if he or she was employed on September 30, 1979 and

was a citizen as of that date. An employee recruited from

outside of Panama is eligible regardless of date of employment or citizenship. PCC Cross-Motion (R. 13), Ex. 67. The

date-of-citizenship requirement disqualifies all but one of the

plaintiffs. Compl. pp 4-16.3

Between June 2, 1995 and July 3, 1996, the plaintiffs filed

formal complaints with the PCC's Office of Equal Opportunity alleging that their exclusion from these salary and benefit

programs constituted race and national origin discrimination.

__________

3 As is evident from the description of the three benefit programs, and as the PCC conceded at oral argument, plaintiffs are not

disqualified by statute from receiving the benefits at issue in this

case. Only the PCC's discretionary policies render them ineligible.

Pls. Br. at 3. The PCC accepted most of the claims for

investigation.4 After completing the investigation, however, it

dismissed the claims as untimely, ruling that plaintiffs should

have filed years earlier when the benefit policies were first

applied to them.

In December 1996, the plaintiffs brought an action in

district court, alleging that the denial of the three benefit

packages constituted intentional disparate treatment, and had

an unlawful disparate impact, in violation of 42 U.S.C.

s 2000e-2.5 Plaintiffs relied on statistical evidence, as well as

on an attack on the rationales offered by the PCC for denying

them the benefits. They contended that the date-ofcitizenship requirements were mere pretext, guaranteeing

continued benefits to white non-Panamanians while denying

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them to black Panamanian employees, the vast majority of

whom did not become citizens until after the cut-off dates.6

They also proffered evidence of what they contended was the

Panama Canal's "longstanding history of discriminating

against employees from the West Indies in every aspect of

Canal life and employment," symbolized, they said, by a

racially-based payroll system in which white Canal workers

were paid in gold from a "gold roll," while black Panamanians

__________

4 The PCC declined to accept the complaints of two plaintiffs

regarding the equity package, on the ground that those plaintiffs

had already filed formal grievances. See 5 U.S.C. s 7121(d) (barring federal employees from raising discrimination charges through

both negotiated grievance and administrative complaint procedures). The district court did not consider this issue, and because

it appears to involve factfinding we leave it for that court's initial

consideration on remand.

5 The plaintiffs also alleged a violation of the Fifth Amendment,

an argument not pressed on this appeal.

6 In conjunction with the Panama Canal Treaty of 1977, Congress amended U.S. immigration laws to make it easier for noncitizen employees of the PCC to become U.S. citizens. The amendments made Panamanian-born Canal employees residing in the

Canal Zone, as well as their spouses and children, eligible for

"special immigrant" status, which in turn made them permanent

residents and eligible for naturalization. See 8 U.S.C.

s 1101(a)(27)(E)-(G). Eleven of the plaintiffs became U.S. citizens

pursuant to this legislation. Pls. Br. at 10.

were paid in less-valuable Panamanian silver. Pls. Br. at 21.

"[P]ayment of the tropical differential to some employees and

not others," they contended, reflected nothing more than "a

continuation of the 'gold' and 'silver' roll wage differentials

which were based on race." Id. at 35.

The district court granted summary judgment in favor of

the Commission and dismissed the case. The court rejected

plaintiffs' disparate treatment claim, concluding they were

denied benefits because of their "citizenship, not because of

membership in a Title VII protected class." Anderson v.

Zubieta, 977 F. Supp. 439, 441-42 (D.D.C. 1997). The court

denied the disparate impact claim on the ground that, although disparate impact "may be true as a matter of fact,"

there was "no evidence that the Defendant acted with any

unlawful discriminatory purpose." Id. at 442. This appeal

followed.

II

As an initial matter, we must decide whether plaintiffs

timely filed their claims with the PCC's Office of Equal

Opportunity. Regulations issued by the Equal Employment

Opportunity Commission (EEOC) require federal employees

to bring Title VII complaints to the attention of an Equal

Employment Opportunity counselor within 45 calendar days

of the alleged discriminatory event. See 29 C.F.R.

s 1614.105(a)(1). A plaintiff's administrative complaint is untimely unless it is brought within the 45-day limitations

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period, or unless the plaintiff establishes a basis for equitable

tolling. See id. s 1614.107(b).

After investigating plaintiffs' complaints, the PCC rejected

them as untimely. The Canal Commission had amended the

benefit policies in question in 1976, 1979, and 1989. The

plaintiffs, all of whom became citizens between 1977 and 1994,

received notice that they were not entitled to the benefits on

various dates ranging from July 13, 1977 to July 7, 1994. See

PCC Stmt. of Material Facts (R. 16). None brought a

complaint within 45 days of either the amendments or the

notice; the first complaint was not brought until June 2, 1995.

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On that basis, the PCC concluded plaintiffs' administrative

complaints were filed too late.

The plaintiffs respond that their complaints allege continuing violations of Title VII, actionable upon receipt of each

paycheck. We agree. As a unanimous Supreme Court said

in Bazemore v. Friday, "[e]ach week's paycheck that delivers

less to a black than to a similarly situated white is a wrong

actionable under Title VII, regardless of the fact that this

pattern was begun prior" to the limitations period. 478 U.S.

385, 395 (1986) (Brennan, J., concurring, joined by all other

Members of the Court). The Courts of Appeals have repeatedly reached the same conclusion.7

The Canal Commission bases its contrary position on a line

of Supreme Court cases beginning with United Air Lines v.

Evans, 431 U.S. 553 (1977). In Evans, defendant had discriminatorily dismissed the plaintiff in 1968, pursuant to a

policy barring married female flight attendants. When it

__________

7 See Ashley v. Boyle's Famous Corned Beef Co., 66 F.3d 164,

167-68 (8th Cir. 1995) (en banc); Brinkley-Obu v. Hughes Training, Inc., 36 F.3d 336, 345-49 (4th Cir. 1994) ("Our cases demonstrate ... that in a compensation discrimination case, the issuance

of each diminished paycheck constitutes a discriminatory act.");

Beavers v. American Cast Iron Pipe Co., 975 F.2d 792, 796-800

(11th Cir. 1992); EEOC v. Penton Indus. Publ'g Co., 851 F.2d 835,

838 (6th Cir. 1988) (recognizing that "where an employer continues

to presently impose disparate work assignment or pay rates between similarly situated employee groups" a continuing violation

exists); Gibbs v. Pierce County Law Enforcement Support Agency,

785 F.2d 1396, 1399 (9th Cir. 1986) ("The policy of paying lower

wages ... on each payday constitutes a 'continuing violation.' ")

(internal quotation omitted); see also Miller v. Beneficial Management Corp., 977 F.2d 834, 843-44 (3d Cir. 1992) (applying continuing violations doctrine to unequal pay claim under Equal Pay Act);

Satz v. ITT Fin. Corp., 619 F.2d 738, 743 (8th Cir. 1980) ("The

practice of paying discriminatorily unequal pay occurs not only

when an employer sets pay levels, but as long as the discriminatory

differential continues."). But cf. Hendrix v. City of Yazoo, 911 F.2d

1102, 1103-05 (5th Cir. 1990) (holding that discriminatory pay

reduction under Fair Labor Standards Act does not constitute

continuing violation).

rehired plaintiff in 1972 after changing the policy, it did not

give her any seniority credit for her earlier service. Suing in

1973, plaintiff conceded that a claim for her 1968 dismissal

was untimely, but contended that the seniority system impermissibly gave present effect to that past act of discrimination.

The Court held the challenge to defendant's neutral seniority

system time barred notwithstanding that present effect. Id.

at 558.

The second case in the Evans line, Delaware State College

v. Ricks, 449 U.S. 250 (1980), involved a professor's claim of

unlawful termination by a university. The Court held that

the limitations period was triggered at the moment the

university allegedly denied plaintiff tenure for a discriminatory reason, rather than a year later when he ultimately lost his

job. In the third case, Lorance v. AT&T Technologies, Inc.,

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490 U.S. 900, 903 (1989), the Court held that when a seniority

system was "not alleged to be discriminatory on its face or as

presently applied," a complaint contending it was originally

adopted for discriminatory reasons (outside the limitations

period) was time barred.

The Evans-Ricks-Lorance line of cases does not support

the Canal Commission's contention that plaintiffs' claims are

time barred. To the contrary, the Lorance Court's explanation of the difference between that line and Bazemore makes

it clear that the opposite is true. As Lorance explained,

Bazemore was a case in which plaintiffs contended not just

that the pay system was originally adopted for discriminatory

reasons, but that it continued to discriminate unlawfully each

time it was applied. Lorance, 490 U.S. at 912 n.5. "There is

no doubt," Justice Scalia said, that a system "that treats

similarly situated employees differently ... can be challenged

at any time." Id. at 912. By contrast, in Lorance, "[p]etitioners [did] not allege that the seniority system treat[ed]

similarly situated employees differently or that it ha[d] been

operated in an intentionally discriminatory manner. Rather,

they claim[ed] that its differential impact on the sexes [was]

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unlawful because the system 'ha[d] its genesis in [sex] discrimination.' " Id. at 905.8

Similarly, Lorance explained that in Evans the plaintiff did

not contend that the present seniority system was discriminatory, but rather "asserted a claim that [was] wholly dependent on discriminatory conduct occurring well outside the

period of limitations"--that is, her dismissal in 1968. Lorance, 409 U.S. at 907-08; see Evans, 431 U.S. at 560 ("[R]espondent does not attack the bona fides of United's seniority

system, and ... makes no charge that the system is intentionally designed to discriminate...."). Likewise in Ricks,

the Lorance Court said, plaintiff "did not claim that 'the

manner in which his employment was terminated differed

discriminatorily from the manner in which the College terminated other professors who had been denied tenure.' " Rather, the only alleged discrimination occurred earlier, when

plaintiff had been demoted into the ranks of the untenured.

See Lorance, 490 U.S. at 906 (quoting Ricks, 449 U.S. at 258).

__________

8 The result in Lorance was also based in part on the fact that

"[s]eniority systems ... are afforded special treatment under Title

VII." Id. at 904 (quoting Trans World Airlines v. Hardison, 432

U.S. 63, 81 (1977)). That special treatment, the Court said, was "by

reason of s 703(h), which states:

Notwithstanding any other provision of this subchapter, it shall

not be an unlawful employment practice for an employer to

apply different standards of compensation, or different terms,

conditions, or privileges of employment pursuant to a bona fide

seniority ... system, ... provided that such differences are

not the result of an intention to discriminate because of race,

color, religion, sex, or national origin....

Id. at 904-05 (quoting Title VII s 703(h), 42 U.S.C. s 2000e-2(h)).

That section has no application to the benefits policies at issue here.

See also 42 U.S.C. s 2000e-5(e)(2) (overruling Lorance's application

to seniority systems by providing that an intentionally discriminatory seniority system is a violation "when ... adopted, when an

individual becomes subject to the seniority system, or when a

person aggrieved is injured by the application of the seniority

system") (added by Civil Rights Act of 1991, Pub. L. No. 102-166,

s 112, 105 Stat. 1075, 1078-79 (1991)).

The plaintiffs here fall on the Bazemore rather than Evans

side of the line drawn in Lorance. They do not seek relief for

the PCC's initial announcement of its discriminatory policies,

but rather for their continued application. Unlike the petitioners in Lorance, the plaintiffs in this case allege that the

PCC's policy currently "treats similarly situated employees

differently." Id. at 905. Accordingly, under Lorance they

may challenge those policies "at any time." Id. at 912.

Defendant also seeks support in a series of our cases

holding that, to establish a continuing violation, a plaintiff

must show "a series of related acts, one or more of which falls

within the limitations period, or the maintenance of a discriminatory system both before and during the [statutory] period." McKenzie v. Sawyer, 684 F.2d 62, 72 (D.C. Cir. 1982)

(quoting Valentino v. United States Postal Serv., 674 F.2d 56,

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65 (D.C. Cir. 1982)); see Palmer v. Kelly, 17 F.3d 1490, 1496

(D.C. Cir. 1994) (citing Berger v. Iron Workers Reinforced

Rodmen Local 201, 843 F.2d 1395, 1422 (D.C. Cir. 1988)).

Defendant's quotation of McKenzie is accurate, but the line of

cases it represents goes to an analytically different question

than the one we have just discussed. Thus far, we have been

considering the "first question in the analysis of a continuing

violations claim," namely, "whether an actual violation of Title

VII occurred during the statutory period." Palmer, 17 F.3d

at 1496. As noted above, plaintiffs have adequately alleged

such a "present violation." See id. (quoting Evans, 431 U.S.

at 558). As explained below, that claim survives summary

judgment. If plaintiffs' claim of a present violation is ultimately proven, it will justify their request to be made whole

for those paychecks received during the 45-day window and

for all paychecks issued thereafter.

Like most plaintiffs, however, the plaintiffs here want more

than that. They also want to reach back and obtain compensation for the lower paychecks they received prior to the 45-

day limitations period.9 It is to this "next question" that our

__________

9 They concede, however, that this claim is bounded by 42

U.S.C. s 2000e-5(g)(1), which limits back pay to two years prior to

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cases refer when they require that a present violation be

either "part of a series of related discriminatory acts or ...

caused by a discriminatory system in effect both before and

during the limitations period." Id.10

Plaintiffs plainly satisfy this test as well. Indeed, they

allege that their current lower paychecks and benefits are

both part of a series of such discriminatory payments and

caused by the continued maintenance of a broadly discriminatory pay and benefits system. Plaintiffs do not merely

challenge "separate and distinct" events, see Stoller v. Marsh,

682 F.2d 971, 975 (D.C. Cir. 1982), but rather allege that the

"current violations" they have identified "were taken pursuant to the same employment policy as the actions sought to

be challenged outside the normally applicable limitations period." Berger, 843 F.2d at 1422 (citing Evans, 431 U.S. at 558).

"Where, as here, discrimination is not limited to isolated

incidents, but pervades a series or pattern of events which

continue to within [45] days of the filing of the charge ... ,

the filing is timely ... regardless of when the first discriminatory incident occurred." Laffey v. Northwest Airlines, 567

F.2d 429, 473 (D.C. Cir. 1976). We therefore reject the

contention that plaintiffs' claims are time barred.11

__________

the filing of an administrative complaint. See also 29 C.F.R.

s 1614.501(c)(1); McKenzie, 684 F.2d at 72 n.8.

10 See McKenzie, 684 F.2d at 72 ("Plaintiffs charging a continuing violation of Title VII need not show that the entire violation

occurred within the actionable period.... Once having shown

discrimination continuing into the actionable period, however, the

plaintiffs may also recover for portions of the persistent process of

illegal discrimination that antedated the limitations period.") (citing

Laffey v. Northwest Airlines, 567 F.2d 429, 472 (D.C. Cir. 1976));

see also Berger, 843 F.2d at 1422 ("Plaintiffs hope to connect the

violations which are clearly within the limitations period ... to the

violations we have held to be outside the limitations period.").

11 The Commission also seeks comfort in another line of cases

which, it asserts, establishes that for a claim to fit within the

continuing violations doctrine, the employee must "not at the time

know or have reason to know that an employment decision was

discriminatory in nature." Stoller, 682 F.2d at 974; see SmithIII

We turn now to the merits of plaintiffs' claims. We review

the district court's grant of defendant's motion for summary

judgment de novo, and can sustain the court's decision only if

"there is no genuine issue as to any material fact and ... the

moving party is entitled to judgment as a matter of law."

Fed. R. Civ. P. 56(c); see FDIC v. Bender, 127 F.3d 58, 63

(D.C. Cir. 1997). We must view the evidence in the light

most favorable to the non-moving party, and ask "whether

any reasonable jury could find in its favor." Harbor Ins. Co.

v. Schnabel Found. Co., 946 F.2d 930, 935 (D.C. Cir. 1991).

In this Part, we first set forth the framework for analyzing

plaintiffs' claims of unlawful wage discrimination under Title

VII. We then focus on the first element of that framework,

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the prima facie case, and consider the reasons given by the

district court, and an alternative rationale offered by the

Canal Commission, for finding that plaintiffs failed to establish such a case. We conclude that both the district court and

the Commission were wrong, and that plaintiffs have met the

requirements for showing a prima facie violation of Title VII.

A

Plaintiffs allege wage discrimination under theories of both

disparate treatment and disparate impact. Disparate treatment occurs when "[t]he employer simply treats some people

__________

Haynie v. District of Columbia, 155 F.3d 575, 579-80 (D.C. Cir.

1998). Because plaintiffs did know of the allegedly discriminatory

nature of the PCC's pay policies prior to the limitations period, the

PCC contends they are barred from asserting a continuing violation. But the portions of both Stoller and Smith-Haynie cited by

the PCC do not discuss the continuing violations doctrine, which

deems certain claims to be timely filed within the limitations period,

but rather discuss the criteria for the equitable tolling doctrine,

which permits the tolling of that period. Because plaintiffs satisfy

the requirements of the continuing violations doctrine, they have no

need to rely on a theory of equitable tolling.

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less favorably than others because of their race, color, religion, sex, or national origin." International Bhd. of Teamsters v. United States, 431 U.S. 324, 335 n.15 (1977). "Proof

of discriminatory motive is critical" for such claims. Id.

Disparate impact claims, on the other hand, "involve employment practices that are facially neutral in their treatment of

different groups but that in fact fall more harshly on one

group than another and cannot be justified by business

necessity." Id. at 336 n.15. "Proof of discriminatory motive

... is not required under a disparate-impact theory." Id.

The familiar three-step evidentiary framework for proving

a disparate treatment case was set forth in McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973). The plaintiffs must

first establish a prima facie case, the elements of which vary

according to the circumstances. Id. at 802 & n.13. For a

prima facie case of wage discrimination, plaintiffs must show

"membership in a protected class ... , and that [they] were

performing work substantially equal to that of white employees who were compensated at higher rates than they were."

Coward v. ADT Sec. Sys., Inc., 140 F.3d 271, 273 (D.C. Cir.

1998) (internal quotations and alterations omitted); see id. at

275. Once plaintiffs establish a prima facie case of disparate

treatment, under the second step of McDonnell Douglas

"[t]he burden then must shift to the employer to articulate

some legitimate, nondiscriminatory reason" for the challenged

employment practice. McDonnell Douglas, 411 U.S. at 802.

If the defendant carries this burden, the third step requires

that plaintiffs be "afforded a fair opportunity to show that

[the] stated reason ... was in fact pretext" for discrimination.

Id. at 804. For a disparate treatment case finally to reach

the jury, the court must find in light of all the evidence that

"the plaintiff has met his burden of showing that a reasonable

jury could conclude that he had suffered [intentional] discrimination." Aka v. Washington Hosp. Ctr., 156 F.3d 1284, 1290

(D.C. Cir. 1998) (en banc).

In a disparate impact case, a three-step, burden-shifting

framework is also employed. As with disparate treatment,

the plaintiff must first make out a prima facie case. AlbeUSCA Case #97-5247 Document #446806 Filed: 07/02/1999 Page 13 of 31
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marle Paper Co. v. Moody, 422 U.S. 405, 425 (1975). This

"may be established by policies or practices that are neutral

on their face and in intent but that nonetheless discriminate

in effect against a particular group." International Bhd. of

Teamsters, 431 U.S. at 349. In the second step, the burden

shifts to the employer to "demonstrate that the challenged

practice is job related for the position in question and consistent with business necessity." 42 U.S.C. s 2000e2(k)(1)(A)(i); see Griggs v. Duke Power Co., 401 U.S. 424, 431

(1971).12 Finally, if the defendant demonstrates business

necessity, plaintiffs must be given an opportunity to demonstrate that an alternative employment practice could meet the

employer's legitimate needs without a similar discriminatory

effect. See 42 U.S.C. s 2000e-2(k)(1)(A)(ii); Albemarle Paper Co., 422 U.S. at 425.

B

Plaintiffs receive a 15% lower salary than their white, nonPanamanian counterparts and are not given the equity package and vacation benefits. This is sufficient to establish a

prima facie case of wage discrimination. There is no dispute

that race and national origin are protected classes. Nor is

there any dispute that the work plaintiffs perform is substantially the same as that of the white non-Panamanians: the

PCC awards the wage differential and benefits as an increment above an employee's base salary regardless of the kind

of work he or she performs or the level of skill it requires.

In addition to this comparison of their personal situations,

plaintiffs offered statistics showing a wide disparity between

the percentages of black versus white U.S. citizens who

receive the higher salary and benefits, as well as between the

__________

12 For purposes of the disparate impact test, Title VII defines

the term "demonstrates" as "meets the burdens of production and

persuasion." 42 U.S.C. s 2000e(m). This definition was added by

the Civil Rights Act of 1991, Pub. L. No. 102-166, s 104, 105 Stat.

1071, 1074 (1991). Compare Thomas v. National Football League

Players Ass'n, 131 F.3d 198, 202 (D.C. Cir. 1998) (characterizing

defendant's burden at second stage of disparate treatment test as a

" 'burden of production' because the ultimate burden of persuasion

remains with the plaintiff").

percentages of U.S. citizens of American versus Panamanian

or Hispanic national origin who receive them. The statistics

offered by plaintiffs were compiled by the PCC's own Office

of Equal Opportunity from a survey it conducted of PCC

employees, all of whom were U.S. citizens. The following

table summarizes those statistics:

Percentage of U.S. Citizen Employees Receiving Indicated Benefit13

______________________________________________________________________________

% of 

Panamanian

% of % of % of American or Hispanic

White Black National Origin 

National Orgin

______________________________________________________________________________

Tropical Differential 76% 15% 78% 27%

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______________________________________________________________________________

Equity Package 65% 25% 64% 46%

______________________________________________________________________________

Vacation Benefits 96% 58% 97% 70%

______________________________________________________________________________

According to plaintiffs' evidence, each of the disparities

shown in the table exceeds 1.96 standard deviations under a

two-tailed test of statistical significance. Pls. Br. at 19 (citing

Hirn Decl. pp 3, 4 (R. 9)). Many of the disparities are far in

excess of 1.96 standard deviations.14 Under our case law, this

level of statistical significance is sufficient to establish a prima

facie case of both disparate treatment and disparate impact.

See Berger, 843 F.2d at 1412; Palmer v. Shultz, 815 F.2d 84,

91-92 (D.C. Cir. 1987); see also Metrocare v. Washington

Metro. Area Transit Auth., 679 F.2d 922, 930 n.12 (D.C. Cir.

1982) (noting that statistics can be used for both disparate

impact and disparate treatment claims).

__________

13 See PCC Survey, summarized in Pls. Stmt. of Material Facts

(R. 9) pp 25-26, 37-38, 42-43; PCC Cross-Motion (R. 13), Ex. 62-

64.

14 For example, the disparity with respect to race was 4.24

standard deviations for the tropical differential, 2.8 standard deviations for the equity package, and 2.7 for the vacation benefits. The

disparity with respect to national origin was 4.6 standard deviations

for the tropical differential and 2.46 for the vacation benefits. See

Hirn Decl. pp 3, 4 (R. 9).

C

As the plaintiffs have established a prima facie case of

disparate treatment, under the second step of McDonnell

Douglas "[t]he burden then must shift to the employer to

articulate some legitimate, nondiscriminatory reason" for the

challenged employment practice. McDonnell Douglas, 411

U.S. at 802. Similarly, under the disparate impact provisions

of Title VII, proof of a prima facie case shifts the burden to

the employer to demonstrate that the challenged practice is

job related and consistent with business necessity. 42 U.S.C.

s 2000e-2(k)(1)(A)(i); Griggs, 401 U.S. at 431.

The district court, however, pretermitted any further analysis under either theory after the prima facie stage. Although it agreed that Title VII protects against discrimination "because of [an] individual's race ... or national origin,"

977 F. Supp. at 442 (quoting 42 U.S.C. s 2000e-2(a)(1)), the

court cut off the analysis of plaintiffs' disparate treatment

claim on the ground that the discrimination here was " 'because of' citizenship, not because of membership in a Title VII

protected class." Id. Stating that "[t]he Supreme Court

held in Espinoza v. Farah, that ... [Title VII] does not offer

protection from discrimination on the basis of citizenship," the

district court held that plaintiffs had failed as a matter of law

to make out a prima facie case of disparate treatment. Id. at

441 (citation omitted).

The district court's reliance on Espinoza was misplaced for

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two reasons. First, although the Supreme Court did hold

that citizenship is not a facially-unlawful criterion for employment decisions, see 414 U.S. 86, 91 (1973), it also recognized

that "an employer might use a citizenship test as a pretext to

disguise what is in fact national-origin discrimination." Id. at

92. Title VII, the Court said, "prohibits discrimination on the

basis of citizenship whenever it has the purpose or effect of

discriminating on the basis of national origin." Id. That

principle was of no assistance to the Espinoza plaintiffs, who

alleged discrimination based on Mexican national origin: notwithstanding the employer's citizens-only policy, there was no

evidence of discriminatory purpose or effect since more than

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96% of its employees were of Mexican descent. Id. at 93.

Here, however, plaintiffs' claims of pretext and disparate

effect are not as easily brushed aside: the overwhelming

majority of those who receive the pay differential are whites

of non-Panamanian origin. See supra p. 15. If, as Espinoza

proclaimed, Title VII truly does "prohibit[ ] discrimination on

the basis of citizenship whenever it has the purpose or effect

of discriminating on the basis of national origin," then courts

must afford plaintiffs an opportunity to prove such a purpose

or effect. See also 29 C.F.R. s 1606.5(a) (EEOC regulation)

("[W]here citizenship requirements have the purpose or effect

of discriminating against an individual on the basis of national

origin, they are prohibited by [T]itle VII.").

Second, "citizenship" is simply not the basis upon which the

PCC differentiates, or even contends that it differentiates,

among its employees. All of the plaintiffs are, in fact, American citizens. Nor is the issue whether it was lawful for the

PCC to prefer citizens over noncitizens in 1976, the year the

tropical differential policy was announced, or to prefer them

in 1989, the year the equity package was cut off. As discussed above, the limitations period has run on those kinds of

claims. Instead, the plaintiffs' core contention is that the

PCC is engaged in a current, continuing violation of Title VII,

because today and every day it pays them less than it pays

others who are similarly situated. The question in this case,

then, is whether the PCC is unlawfully discriminating against

American citizens today, by maintaining a system of preferences based on whether they were citizens at an earlier time.

As the PCC itself describes its policies, it differentiates

among its employees based on the timing of their citizenship.

For that reason, Espinoza, a case in which the employer

simply preferred citizens over noncitizens, is not controlling.

The district court cut off the analysis of plaintiffs' disparate

impact claim on a different ground. Although it acknowledged that the PCC's benefit-eligibility requirements may

have had a disparate impact, it dismissed the claim because

plaintiffs had presented "no evidence that the Defendant

acted with any unlawful discriminatory purpose." 977

F. Supp. at 442. That ruling was flawed both in law and in

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fact. First, "[u]nlike disparate treatment cases, disparate

impact cases do not require a showing of discriminatory

animus on the part of the employer." McKenzie, 684 F.2d at

70 n.6 (citing Connecticut v. Teal, 457 U.S. 440 (1982)); see

International Bhd. of Teamsters, 431 U.S. at 336 n.15. Second, plaintiffs did present evidence of discriminatory intent.

"[T]his court has squarely held that, even absent specific

anecdotal evidence of discrimination, statistical proof alone

may establish a prima facie case of intentional discrimination." Berger, 843 F.2d at 1413. And, as noted above, we

have deemed the 1.96 standard deviations shown here to be

sufficient to do so. Id. at 1412-13. Accordingly, the district

court's conclusion that plaintiffs failed to make out a prima

facie case of disparate impact, like its conclusion with respect

to plaintiffs' disparate treatment case, was in error.

D

The PCC offers us an alternative rationale, different from

those of the district court, for concluding that plaintiffs have

failed to establish a prima facie case of disparate treatment or

impact. To prove disparate treatment, the PCC notes, plaintiffs must show they were treated differently from other

similarly-situated members of a nonprotected class. But, the

PCC contends, "appellants were only similarly situated with

other locally-hired employees who became citizens after" the

dates specified by the PCC as required qualifications for

benefits. PCC Br. at 32 (emphasis omitted). Because plaintiffs "fail[ ] to identify a single employee of any race or

national origin who was naturalized after July 3, 1976, but

who nevertheless receives the tropical differential," they assertedly cannot show disparate treatment. Id. Similarly,

because plaintiffs' statistical evidence fails to compare the

treatment of protected and nonprotected employees equally

"qualified" under the PCC's rules, the PCC contends plaintiffs' disparate impact case is also fatally flawed. At bottom,

defendant contends plaintiffs err in "lumping all PCC employees of a particular national origin together, regardless whether they were naturalized after the date the benefits were cut

off." Id. at 38.

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The PCC is correct, of course, that plaintiffs must demonstrate they are treated less well than other employees who

are similarly situated. But that does not require us to

assume that the very factor plaintiffs attack as pretext is a

bona fide attribute of being situated similarly. To adopt such

a position would be to assume the very thing the McDonnell

Douglas test is aimed at ferreting out--namely, whether that

facially-neutral factor is indeed a pretext. To require plaintiffs to compare their situation to that of others disadvantaged by the same challenged factor would effectively eliminate their opportunity to show pretext, because it would bar

them from ever passing the prima facie stage. See Segar v.

Smith, 738 F.2d 1249, 1276 (D.C. Cir. 1984) (noting that some

employer qualifications "may well serve as a veil of seeming

legitimacy behind which illegal discrimination is operating"

and that "[i]f so, measurement of the relation of such a factor

to an observed disparity would simply amount to a measure of

the amount of discrimination operating through the application of the factor").

Similarly, requiring a plaintiff to "correct" his statistics to

account for timing of citizenship would render the disparate

impact provisions of Title VII nugatory. The gravamen of

plaintiffs' disparate impact claim is that timing of citizenship

is the factor that causes the disparate impact, whether it was

intended to have that effect or not. If we were to require

that the very factor that causes disparate impact be included

in the comparison for purposes of establishing a prima facie

case, we would effectively define disparate impact analysis out

of existence. See Berger, 843 F.2d at 1417-18 (rejecting

defendant's contention that racial disparity in union admissions could be explained by minorities' inability to satisfy

union-established training requirement, since that requirement was precisely "the discriminatory practice at issue").

It is true that in order to eliminate the most common

nondiscriminatory explanation for a disparity--lack of qualifications--a plaintiff's prima facie case must take into account

the "minimum objective qualifications" for the position at

issue. Segar, 738 F.2d at 1274 (citing, inter alia, Valentino,

674 F.2d at 71); Valentino, 674 F.2d at 61 (citing Hazelwood

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Sch. Dist. v. United States, 433 U.S. 299, 308 n.13 (1977)).

But that does not mean a plaintiff must take account of every

qualification recited by the employer, nor even of every

"objective" qualification. Rather, what the case law means by

"minimum objective qualifications" are those objective qualifications that can be shown to be truly required to do the job at

issue.

The seminal disparate impact case, Griggs v. Duke Power

Co., makes this conclusion inescapable. There, plaintiffs contended that Duke Power's announced criteria for both hiring

and transfer to better-paid jobs--a high school diploma

and/or passing grade on a standardized intelligence test--had

a disparate impact on black applicants. There was no dispute

that these criteria were objective and "applied fairly to whites

and Negroes alike." 401 U.S. at 429. Nonetheless, the Court

held that plaintiffs had made out a violation of Title VII

because defendant had not shown that the criteria "bear a

demonstrable relationship to successful performance of the

jobs for which [they were] used." Id. at 431. "If an employment practice which operates to exclude Negroes cannot be

shown to be related to job performance," Chief Justice Burger held, "the practice is prohibited." Id.

Similarly, in Dothard v. Rawlinson, the plaintiff sought

employment as a prison guard, but was rejected because she

could not meet the employer's minimum height (5'2") and

weight (120 lbs.) qualifications. 433 U.S. 321, 323-24 (1977).

She offered statistical evidence that these objective qualifications had a disproportionate impact on women, and the Court

agreed that her statistics established a prima facie case--

notwithstanding that the qualification standards were "facially neutral." Id. at 329-31. It then went on to consider

defendant's claim that it had rebutted the prima facie case by

showing that the height and weight requirements were "job

related" since they correlated "with the requisite amount of

strength thought essential to good job performance." Id. at

331. The Court rejected the rebuttal because defendant

"produced no evidence" of such a correlation. Id. at 331-32.

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This Circuit's cases follow the same pattern. In Goodrich

v. International Brotherhood of Electrical Workers, 712 F.2d

1488 (D.C. Cir. 1983), a female employee contended that her

employer paid men more than women for the same work.

The employer countered that the men were paid better

because they were in positions for which plaintiff could not

qualify--not because she was a woman, but because she was

not a union member. Id. at 1492. The district court granted

summary judgment on that basis, finding the employer's

nondiscriminatory criterion of union membership fatal to

plaintiff's case. Id. at 1490. This court, however, reversed

and remanded for trial. The purpose of a trial, we held, was

to test whether union membership really provided the "special expertise" defendant claimed was necessary to succeed in

the higher-paid positions. Id. at 1493-94.

In Valentino v. United States Postal Service, we did find a

plaintiff's prima facie case insufficient because she "failed to

take into account minimum objective qualifications," namely

"specialized education and experience" required for the "high

level professional, administrative, and managerial positions"

at issue. 674 F.2d at 66-67. At the same time, however, we

"confine[d] our analysis to [such] high level" positions, id. at

68 n.16, noting that it would not apply for "jobs involving

skills 'many persons possess or can fairly readily acquire,' "

id. at 67 (quoting Hazelwood, 433 U.S. at 308 n.13). To the

same effect is our decision in Metrocare v. Washington

Metropolitan Area Transit Authority. See 679 F.2d at 930

("For some jobs, no particular qualifications are needed, and

an appropriate comparison group would be the local population in general. But when the posts require managerial

capability or other expertise, the comparison group must be

the set of available minority persons with that expertise or

qualification.") (citations omitted); see also Hazelwood, 433

U.S. at 308 n.13 (noting that when "job skill" at issue is

"special qualification" like teaching experience, the comparison must be "to the smaller group of individuals who possess

the necessary qualifications," but that when the skill is one

like driving a truck "that many persons possess," comparison

to general population is appropriate).

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With this understanding of the meaning of the term, it is

plain that the timing of an employee's citizenship is not a

"minimum objective qualification" for the wage and benefit

preferences at issue here. There is no sense at all in which

such citizenship can fairly be said to be demonstrably "related

to job performance." Having become a citizen by 1976 does

not assist an employee in digging a ditch, guiding a barge, or

programming a computer. The plaintiffs in this case already

are employees of the PCC, and most have worked there since

before 1976, all the while doing work that otherwise would

"qualify" for the preference. The PCC has never suggested,

let alone shown, that plaintiffs' job performance has suffered

in any way because of their citizenship status.

Indeed, the PCC's own policies make clear that the timing

of citizenship is not a work-related qualification. As noted in

Part I, from 1984 to 1989 four plaintiffs received the PCC's

equity adjustment package; yet there is no claim that their

work was less acceptable than that of employees with earlier

citizenship who also received the package during the same

time period. See Berger, 843 F.2d at 1421 (holding that fivemonth period in which employer did not insist on employment

qualification precluded claim that it was a "minimum objective

qualification," and noting that employer could not rely on a

qualification unless it "satisfies the bedrock requirements of

job-relatedness"); cf. Griggs, 401 U.S. at 431-32 (noting that

hiring and transfer requirements that were inapplicable to

some employees who nevertheless "perform satisfactorily ...

suggests the possibility that the requirements may not be

needed"). Even more telling, the PCC continues to make the

equity package and vacation benefits available to those who

have never become American citizens, as long as they were

recruited from outside of Panama. See 22 U.S.C. s 3646;

PCC Cross-Motion (R. 13), Exs. 20, 54, 67. Accordingly, it

cannot be said that citizenship, let alone 1976 citizenship, is

truly a job-related qualification for the PCC's pay preferences--unless by "qualification" we simply mean any qualification an employer announces.

Because the PCC has not shown that its eligibility criteria

constitute "minimum objective qualifications" for the work

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plaintiffs do, the plaintiffs' statistical comparisons are sufficient to make out a prima facie case of both disparate

treatment and disparate impact. Accordingly, summary

judgment is inappropriate unless the PCC can satisfy its

burden to show a legitimate nondiscriminatory reason and

business necessity for the requirement. And even then,

plaintiffs must be given an opportunity to show that the

reason is pretextual or that there is an alternative that can

satisfy the employer's need in a nondiscriminatory fashion.

Because of its erroneous view of the law, the district court cut

short the analysis without undertaking any of these inquiries.

IV

The PCC argues that even if plaintiffs have established a

prima facie case, it has satisfied the second step of McDonnell Douglas by showing "a legitimate, non-discriminatory

reason for denying them benefits." PCC Br. at 33. Similarly, the Commission contends that it has met the second

requirement of the disparate impact test by showing that its

"criteria for awarding benefits were job-related and consistent with business necessity." Id. at 36. But what exactly is

the defendant's explanation for its eligibility requirements?

In places in its brief, the PCC appears to suggest that the

"timing of citizenship" is the legitimate, nondiscriminatory

explanation for the disparities of which plaintiffs complain.

The district court indicated that was its understanding as

well. See 977 F. Supp. at 441-42. But in fact, the PCC does

not rest its policy on a simple preference for long-time

citizens over more recent ones. Nor is it surprising that a

corporation wholly-owned by the United States government

would eschew such a naked preference for one category of

American citizens over another. In any event, for the reasons discussed above, the timing of citizenship cannot satisfy

the "job-related" requirement of Title VII.

Rather than explain its pay disparity as the product of a

preference for the timing of its employees' citizenship, the

PCC ultimately rests instead on a policy of "grandfathering."

PCC Br. at 34. At one time, the Commission explains, any

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citizen-employee was eligible for the tropical differential.

Had that policy continued, plaintiffs would have become eligible when they, too, became citizens. But in 1976, the PCC

stopped offering the differential to Panamanian hires. See

supra note 2. It decided, however, to grandfather those who

were receiving the differential as of that date--thus effectively retaining the benefit for employees who were citizens as of

1976, but excluding those who would become citizens at a

later time. Id.

But re-labeling the policy as "grandfathering" cannot alone

satisfy the PCC's burden of producing evidence of a nondiscriminatory reason for the practice, or of establishing a

business necessity for it. Just as the employer in Dothard

could not simply announce a height and weight policy, but

rather had to show how those criteria related to the strength

required for the job of prison guard, so must the PCC explain

how grandfathering is related to the work of the Canal

Commission.

The PCC has attempted to do that. It "preserved the

benefits for those locally-hired U.S. citizens who were already

receiving the benefits," the PCC explains, "in order to retain

those employees." PCC Br. at 36. Grandfathering, it contends, was the "retention incentive" needed to ensure that its

employees stayed on the job. Id.15

The following sections consider the serious attacks plaintiffs have leveled at the credibility of this retention rationale.

Those attacks are aimed at showing that the PCC's proffered

rationale is in fact a pretext for paying benefits to its white

non-Panamanian employees while denying them to black Pan-

__________

15 The PCC also implies a second rationale for grandfathering,

namely, "to preserve the morale of innocent employees who are

victims of lowering wage scales." PCC Br. at 34 (quoting Canton v.

Canal Zone Gov't, 522 F. Supp. 1, 12 n.17 (D.C. Z. 1981) (discussing

concept in a different context)). But the PCC does not stress this

point, no doubt because the response is obvious: Why, a reasonable

juror might ask, is the morale of those who receive the benefit more

important than the morale of the plaintiff employees? And why are

the plaintiffs any less "innocent"?

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amanians, the great majority of whom did not become U.S.

citizens until after 1976. See supra note 6. They also are

aimed at showing defendant's policy unjustified by business

necessity or achievable by plaintiffs' suggested nondiscriminatory alternative of broadening eligibility to all U.S. citizen

employees. See Pls. Br. at 45.

A

The PCC's retention rationale is certainly not facially illegitimate. That, however, is not the question. The question is

whether the plaintiffs have cast such doubt on its credibility

that a reasonable juror could regard it as pretext and infer a

discriminatory motive, or that a reasonable factfinder could

conclude it was inconsistent with business necessity or achievable in a nondiscriminatory way. That conclusion seems

unavoidable here. As plaintiffs point out, the PCC has to

date offered no evidence that its pay and benefit enhancements were ever necessary for retention in the first place,

and certainly no evidence that their maintenance is necessary

for continued retention of those who receive them. It is not

as if "home" for most benefit recipients is the continental

United States, and that they are thus more likely than the

plaintiffs to leave Panama if they do not receive the pay

differential or the free vacation flights. To the contrary,

plaintiffs have proffered evidence that "home" is just as likely

to be the Panamanian isthmus for the vast majority of those

receiving the differential as it is for the plaintiffs.16 Like

plaintiffs, many of those who receive the benefits are secondand third-generation Canal employees. Pls. Br. at 37.

Moreover, just as the PCC has offered no support for its

contention that its policies are required to ensure retention of

those who receive the preferential benefits, it has offered no

__________

16 The PCC's own survey showed that 429 of the 464 employees

who were receiving the tropical differential in 1995 were already

residing in Panama at the time they were recruited to work for the

Commission. Only 35 were recruited from off-isthmus. Pls. Stmt.

of Material Facts (R. 9) p 27 (citing Regist Decl. p 14 & Attach. A);

Pls. Br. at 38.

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evidence to suggest that retention of employees like the

plaintiffs is any less important to its business. Nor has it

offered evidence that the benefits are any less necessary for

retention of the plaintiffs. Indeed, one of the plaintiffs has

already quit the PCC and moved to Florida. Id. at 39.

B

The biggest problem with the retention rationale, however,

is that even if accepted, it can only explain half of the PCC's

eligibility criteria. Although the Commission stresses the

criterion of date-of-citizenship as consistent with a grandfathering rationale, the plaintiffs correctly point out that none

of the three benefit programs is actually limited to employees

who were citizens as of a certain date. Timing of citizenship

is one way to qualify, but it is not the only way. As the PCC

concedes, the tropical differential is also available to "new

hires" from outside of Panama, regardless when they became

citizens. PCC Br. at 5-6; see 35 C.F.R. s 251.31(b)(1)(i).

And the equity package and travel benefits are available to

new hires from outside of Panama, even if they never become

American citizens. See 22 U.S.C. s 3646; PCC Cross-Motion

(R. 13), Exs. 20, 54, 67.

Needless to say, PCC's new-hire criterion cannot be explained by a retention rationale, since the new hires never

previously worked for the company. For this criterion, the

PCC must turn to a different "legitimate, nondiscriminatory

reason." The new-hire criterion is justified, the Canal Commission contends, because it is needed for "recruiting" employees. PCC Br. at 34.

Like retention, there is nothing inherently suspect about a

recruitment rationale. But as the plaintiffs note, to date the

PCC has not offered any evidence that the benefits contested

here are or were necessary for recruitment. Where is the

evidence, they ask, that the base salaries offered by the PCC

are or were insufficient to recruit the necessary workforce?

Where is the evidence that the PCC has even considered the

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question? Indeed, plaintiffs point out that the only evidence

in the record is to the contrary, i.e., that the PCC has (and

has had) no need for off-isthmus recruitment at all. An

affidavit from the PCC's own Personnel Director explains

that the reason the tropical differential was originally

dropped in 1976 was that "in general, there were sufficient

numbers of qualified applicants available locally that made it

unnecessary to grant the differential to all U.S. citizens as a

recruitment and retention incentive." Pls. Br. at 40 (quoting

Mercier Aff.); see also Comptroller General, Report to the

Subcommittee on Panama Canal 102 (1975) (noting that the

tropical differential was not needed for across-the-board recruitment because "[q]ualified applicants ... are available

locally for most skills") (quoted in Pls. Br. at 37).

C

The equity adjustment package presents a particularly

good example of the weakness, and shifting nature, of the

rationales defendant offers in support of its benefit policies.

As part of the Panama Canal Treaty negotiations, the United

States agreed that in 1984 it would close commissaries that

previously had offered goods to PCC citizen-employees at

discounted prices. PCC Br. at 6-7; Pls. Br. at 14. To offset

the increase in employee cost-of-living attributable to closure,

Congress authorized the PCC to pay a cost-of-living allowance. Congress authorized payment to "each officer and

employee ... who is a citizen of the United States and was

employed by the Panama Canal Company ... on September

30, 1979," regardless of place of recruitment, as well as to

anyone recruited "outside the Republic of Panama" after that

date, regardless of citizenship. 22 U.S.C. s 3646 (emphasis

added). Under that provision, between 1984 and 1989 the

PCC paid the equity adjustment package to five of the

plaintiffs.

On December 29, 1989, as one his final acts before departing Panama, the last American administrator of the Canal

terminated the equity adjustment package for any employee

originally hired from within Panama who was not a citizen

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before October 1, 1984. As a result, four plaintiffs lost their

benefits. As they quite rightly note, the PCC has not shown

how the need to provide retention incentives explains the

termination of their benefits. Indeed, cancellation is arguably inconsistent with that grandfathering-based rationale.

Unable to rely on a grandfathering/retention rationale, the

PCC turns instead to another: the equity adjustment package, the PCC contends, "was meant only to compensate

employees who had lost [commissary] benefits." PCC Br. at

8 (emphasis added). Because plaintiffs were not citizens

during the period the commissaries were open, they "never

received any [commissary] benefits." Id. Hence, the PCC

contends, plaintiffs should never have been given the equity

adjustment package in the first place, and the Commission

was justified in terminating the undeserved "windfall" they

had been receiving for four years. Id.

But this compensation explanation appears inconsistent

with the new-hires eligibility criterion discussed above. If

the equity allowance were meant only for those who previously had the benefit of shopping at the commissaries, why does

the PCC make it available to those whom the Commission

newly hires from outside of Panama? Those new hires, by

definition, never received the pre-1984 commissary benefits.

And why does the PCC extend this offer to new hires only if

they do not come from Panama?

To respond, the PCC retreats to a variant of the recruitment rationale: "Although these [newly-hired] employees

never received any [commissary] benefits, they receive the

equity package as compensation for the loss of access to

goods and services they received before coming to Panama."

Id. at 8. In other words, and swallowing its previous words,

the PCC contends that the equity adjustment package was

really not "meant only to compensate employees who had

lost" commissary benefits, id. at 8; it was also meant to

compensate newly-hired employees who had lost the benefit

of lower-priced goods in their home countries. The plaintiffs

are not eligible on this theory either, the PCC insists, because

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manian goods, from a Panamanian wage." Id. (quoting

Anderson, 977 F. Supp. at 441 n.2).

The plaintiffs cast substantial doubt on the credibility of

this new compensation/recruitment explanation as well.

Where is the evidence, they ask, that the new hires did pay

lower prices at home? Where is the evidence that the PCC

ever conducted the kind of cost comparison that would justify

such a policy? To date, the PCC has offered no evidence on

either score. This is hardly surprising since at bottom the

PCC's across-the-board policy--in which every new nonPanamanian hire is eligible but no Panamanian hire ever is--

appears to rest on the unlikely proposition that Panama has

(and has long had) the highest cost of living in the world.

Finally, plaintiffs point to another flaw in the PCC's proffered rationale. Notwithstanding its references to a "new

hires" criterion, the PCC is actually rather expansive in its

definition of the word "new." It not only makes the equity

adjustment package available to those newly-hired from offisthmus, it also makes it available to anyone, citizen or not,

hired from outside of Panama after September 30, 1979. See

22 U.S.C. s 3646; PCC Cross-Motion (R. 13), Exs. 20, 54.

On the PCC's rationale, how can it justify providing the

package to these not-new, not-citizen hires? Like the plaintiffs, they never received the original commissary benefits

(because they were not citizens during the commissary period), making the grandfathering/retention rationale inapplicable. But also like the plaintiffs, these hires were not enjoying

the benefit of lower-cost goods in their home countries when

the commissaries closed in 1984. Just like the plaintiffs, they

were working in Panama, "pay[ing] Panamanian prices, for

Panamanian goods, from a Panamanian wage" from 1979 to

1984. Hence, the compensation/recruitment explanation is

also unavailable. A reasonable factfinder could therefore

conclude that only one remaining line divides these employees

from the plaintiffs: they are not of Panamanian national

origin. That, however, is precisely the line the law forbids

the PCC to draw.

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V

The preceding analysis persuades us that the district court

erred in granting summary judgment and dismissing plaintiffs' Title VII complaint. With respect to the claim of

disparate impact, we have noted that the court erred in ruling

that proof of discriminatory intent was required. Accordingly, because Part III establishes that plaintiffs' statistical

evidence is sufficient for a prima facie case, and Part IV

establishes that on the present record a reasonable factfinder

could find defendant's pay policies unjustified by business

necessity (or rebutted by plaintiffs' as-yet unchallenged alternative of broadening eligibility to all U.S. citizen employees),

reversal of summary judgment on the disparate impact claim

is required.

For plaintiffs' disparate treatment charge to reach the jury,

they must show that a reasonable juror could find intentional

discrimination. Aka, 156 F.3d at 1289-90. In deciding

whether intentional discrimination can be inferred, the court

considers "the combination of (1) the plaintiff's prima facie

case; (2) any evidence the plaintiff presents to attack the

employer's proffered explanation for its actions; and (3) any

further evidence of discrimination that may be available to

the plaintiff." Id. at 1289.

Part III demonstrates that when properly evaluated, the

plaintiffs' prima facie case of disparate treatment is strong.

Not only have plaintiffs shown they were treated differently

from similarly-situated, white non-Panamanians, but they

have shown the statistical disparities to be large--large

enough alone to permit an inference of discriminatory intent.

Similarly, Part IV demonstrates that plaintiffs' attack on the

PCC's proffered explanations for that treatment is also

strong, providing a reasonable basis for viewing them as

pretexts. As we recognized in Aka v. Washington Hospital

Center, such a discrediting of an employer's explanations

"may, together with the elements of the prima facie case,

suffice to show intentional discrimination." 156 F.3d at 1293

(quoting St. Mary's Honor Ctr. v. Hicks, 509 U.S. 502, 511

(1993)). In this case, they plainly do suffice. Hence, we need

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not even consider plaintiffs' proffer of further evidence that

the PCC's eligibility criteria represent "nothing more than a

thinly veiled continuation of the 'gold' and 'silver' system that

segregated native-born white U.S. citizen employees from

black employees by pay and every other aspect of Canal

life"--a contention plaintiffs will have the opportunity to

prove at trial. Pls. Br. at 9; see McKenzie, 684 F.2d at 72

("Evidence of past practices may illuminate present statistics,

or present patterns of behavior."). Because on the current

record it is impossible to conclude that no reasonable juror

could find intentional discrimination, the grant of summary

judgment on the disparate treatment claim must also be

reversed.

Of course, plaintiffs' attack on defendant's rationales for its

wage and benefit policies may in the end prove mistaken. So

far, however, plaintiffs' contentions stand largely unrebutted

because the district court did not require the Canal Commission to offer a rebuttal in order to keep plaintiffs from a trial.

On remand the Commission will have the opportunity, and

the obligation, to do so.

Reversed and remanded.

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