Court Opinion

ID: 9470909
Source: CourtListenerOpinion
Date Created: 2023-08-05 03:20:16.259896+00
Date Added: 2024-06-11T17:38:59.989848
License: Public Domain

ENGEL, Circuit Judge,
dissenting in part and concurring in part.
I agree with the majority that the compensation system here does not come within exception (iii) of the Equal Pay Act (“the Act”), which exempts “a system which measures earnings by quantity or quality of production.” 29 U.S.C. § 206(d)(l)(iii). To the extent the trial court relied upon this exception, it was in error. Further, the parties stipulated before trial that the sole remaining issue to be decided was the application of exception (iv), relating to “a differential based on any other factor than sex.” 29 U.S.C. § 206(d)(l)(iv). I also agree with the majority’s conclusion that the employer’s “equal total remuneration argument” must fail. A deliberate differential in commission rate according to sex cannot be justified by a desire to equalize remuneration between the sexes although, as the majority points out, there could conceivably be some circumstances, not present here, in which such a result would not offend the Equal Pay Act. Since the trial court placed primary reliance upon this theory, it follows that the judgment based thereon must be vacated.
*1032If the different commission rates paid by-Detroit Health are based on the sex of the employee, they are in violation of the Act. If, however, the different commission rates paid by Detroit Health are based upon the sex of the health club member, this could quite readily be a “factor other than sex” under the Act, for the Act speaks to the sex of the employee and not to the sex of the customer.
Stipulation 16, entered into between the parties and hence binding upon the trial court and us, provides:
16. At all material times, the volume of gross sales to females was consistently higher than gross sales to males, for the spas of Detroit Health. While there are variances from month to month, when measured over representative periods of time, the ratio of gross sales to females to gross sales to males is 60/40.
In other words, there is solid evidence here that the market for men’s memberships is distinctly different from that for women’s memberships. As noted by the majority opinion and the trial judge, health spas generally, and those operated by Detroit Health Corporation in particular, attract about 50% more female customers than male customers. This disparity in business is bound to affect the operation of a health club business in a number of ways, and could quite easily evoke different economic responses. The difference in the markets for male and female memberships could be regarded as a factor “other ... than sex” under exception (iv) of the Act.
Differences in the profitability of men’s and women’s divisions were held to justify differing commission rates for male and female salespersons in Hodgson v. Robert Hall Clothes, Inc., 473 F.2d 589 (3d Cir.), cert. denied, 414 U.S. 866, 94 S.Ct. 50, 38 L.Ed.2d 85 (1973). Robert Hall would be more appropriately applied here, of course, if the female employees’ rate were higher than the male employees’ rate. Paying a higher commission rate for sales to men than for sales to women could, however, be justified by the market generally and by other economic and business considerations. Commission rates normally vary according to the type of market in which products or services are sold. If there were no sex discrimination in the selection of salespersons, different commission rates for women’s applications, men’s applications, or for applications of children, handicapped persons, golden agers, or veterans would be acceptable. Normally, employers pay commissions at a rate which they perceive will provide sufficient incentive to their sales staff and also provide enough income to retain sales personnel in their positions. If both male and female employees acted as managers or assistant managers on any given day without regard to the sex of the customers, there might be some grumbling at the different rates based upon this factor, but there would be no violation of the Equal Pay Act.
The trouble with such an analysis here is two-fold. Stipulation 3, also entered into between the parties, provides:
3. Detroit Health owns and operates a chain of health spas. Operationally, each spa is divided into a male division and a female division, with one division operating the spa on Monday, Wednesday and Friday and the other on Tuesday, Thursday and Saturday. (The determination of which division operates on which set of days varies from spa to spa.) The male division is operated by male managerial personnel and male instructors, attracting and servicing male members and guests. Conversely, the female division is operated by female managerial personnel and female instructors, attracting and servicing female members and guests.1
1 There is no allegation that the use of exclusively males to attract and service males and exclusively females to attract and service females is in any way unlawful.
Therefore, the most obvious discrimination between male and female employees — that reflected in footnote 1 of Stipulation 3— was deliberately not complained of in this case; in fact, the parties expressly agreed that this discrimination was not unlawful. It is this circumstance which makes this case so difficult to analyze properly. The second difficulty is that the record contains *1033evidence that the commission rates employed here were based not upon the sex of the customer but were in fact based upon the sex of the employee.
The principal witness for the company was James P. Hoppin, vice-president of Detroit Health Corporation since 1974. Mr. Hoppin was questioned at trial concerning the commission rate paid for walk-ins of one sex who purchase memberships from a manager or assistant manager of the other sex:
THE COURT: How are walk-ins handled on those days? Somebody not being aware of the fact that that day is allocated, and just wants to walk in and join, perhaps they have seen one of your ads, how is a female walk-in handled on a male day and a male walk-in handled on a female day?
THE WITNESS: A couple of different ways. First of all, they could make an appointment for the next day. If they are there specifically to buy a membership, they would do that. There is an appointment book there for that.
THE COURT: If a male manager sold a female membership, does he get credit for it?
THE WITNESS: We would split the dial [sic, deal], which means he would get half for writing it and it would be left for the ladies the next day, and they would get half of it.
THE COURT: So that commission then would be divided among the parties? THE WITNESS: That’s right.
* * * * * *
REDIRECT EXAMINATION BY MR. CARROLL:
Q Do these walk-ins comprise a significant part of your sales activity?
A Absolutely not.
* * * * * *
RECROSS-EXAMINATION BY MR. RADABAUGH:
Q Mr. Hoppin, I am trying to understand that in terms of the commission system. If you have a walk-in on a woman’s day, the walk-in is a male, and the women sells the male a membership, essentially enrolls him in your health spa—
A (Interposing.) Yes?
Q (Continuing) — what happens to the commission?
A It’s split in half.
Q O.K. And in terms of being split in half, what commission rate are you splitting in half?
A We are splitting the gross in half.
Q So that if a membership costs $4 hundred, you would credit $2 hundred of the $4 hundred to the male division and $2 hundred to the female division, and then you would apply the respective percentage rates to the $2 hundred?
A That is correct.
Q So if a woman sold — enrolled a man on a woman’s day, that women would get, if she was a manager, 5-percent of $2 hundred, is that correct?
A Under your example, correct.
Q Is that $10?
A That is correct.
Q And using the same application, the male manager, under my analogy, would get $15; is that correct?
A That is correct.
Q Now, reversing that example, if a woman came in and enrolled herself as a member on a male day, would there be a reverse situation?
A It would be treated the same way; the commission would be split.
Q The application of the system would be the same, is that correct.
A That is correct.
The record contains similar testimony from employees. Such testimony does not appear to have been weighed by the trial judge. In my opinion, it could compel a conclusion that the different commission rates paid by Detroit Health Corporation are violative of the Equal Pay Act because they are based on the sex of the employee and not upon the sex of the customer. The only aspect of this case which makes me hesitate is the testimony of Mr. Hoppin that *1034such sales — i.e., to walk-ins — “absolutely [do] not” comprise a significant part of the business. If, therefore, such evidence is de minimis, the trial judge might have justifiably relied upon other evidence in the record which he found more persuasive. Because this is essentially a matter of weighing the evidence and applying the appropriate law, I would remand for reconsideration of the evidence by the trial judge in light of the concerns expressed in these opinions.