69-1700-8617-2

 

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

 

FOR THE MINNESOTA DEPARTMENT OF HUMAN RIGHTS

 

S. Dennis Callister.

 

                                  Complainant,                                        ORDER ON MOTION FOR

                                                                                                SUMMARY DISPOSITION

v.

 

Carlson Marketing Group, Inc.,

 

                                  Respondent.

 

 

 

          The above-entitled matter is before the undersigned Administrative Law Judge on the motion of the Respondent for summary disposition.

 

          Gregory J. Stenmoe, Briggs and Morgan, P.A., 2400 IDS Center, 80 South Eighth Street, Minneapolis, Minnesota 55402 represents Carlson Marketing Group, Inc., the Respondent in this matter.  Sonja Dunnwald Peterson, Horton and Associates, 700 Title Insurance Building, 400 Second Avenue South, Minneapolis, Minnesota 55401, represents S. Dennis Callister, Complainant.  The record closed on this motion on August 21, 1995, upon receipt of the Respondent’s letter objecting to certain affidavits.

 

          Based on the record herein, the Administrative Law Judge makes the following:

 

ORDER

 

          Respondent's motion for summary disposition is GRANTED.

 

 

Dated this 20th day of September, 1995

 

                                                                             

STEVE M. MIHALCHICK

Administrative Law Judge

 

 

MEMORANDUM

 

This is the second Order on a motion for summary disposition in this matter.  The facts and basic law governing the motion were discussed fully in the first Order and will not be repeated here.  Certain facts will be discussed as they relate to the issues in this motion.  The first Order granted summary disposition to Respondent on the issues of discriminatory treatment and disparate impact arising out of the reduction-in-force (RIF) conducted by Respondent.  Complainant appealed the award of summary disposition to the Minnesota Court of Appeals.  On March 28, 1995, the Court of Appeals dismissed the appeal without prejudice and remanded this matter for the purpose of taking additional evidence on the issue of disparate impact.  After discovery was made and depositions were taken,  Respondent again moved for summary disposition, asserting that there are no genuine issues of material fact on which to hold a hearing on the issue of disparate impact.

Minn. Stat. § 363 (the Minnesota Human Rights Act or "MHRA") sets out the standards to be met for establishing a claim of disparate impact.  The statute states:

If the complaining party has met its burden of showing that an employment practice is responsible for a statistically significant adverse impact on a particular class of persons protected by section 363.03, subdivision 1, clause (2), an employer must justify that practice by demonstrating that the practice is manifestly related to the job or significantly furthers an important business purpose.  Upon establishment of this justification, the charging party may prevail upon demonstration of the existence of a comparably effective practice that the court finds would cause a significantly lesser adverse impact on the identified protected class.

Minn. Stat. § 363.03, subd. 11.

Respondent argues that disparate impact is inappropriate in an age discrimination matter.  Several Federal Courts share that view regarding age discrimination claims under federal law.  Gehring v. Case Corporation , 43 F.3d 340 (7th Cir. 1994); Hiatt v. Union Pacific R.R., 859 F.Supp. 1416 (D.Wy. 1994).  However, there is no limitation in the MHRA on using disparate impact.  Under the procedural posture of this case, the parties are here to develop additional evidence.  The Minnesota Court of Appeals order implicitly recognizes the propriety of applying disparate impact analysis in age discrimination cases.  The Judge has no authority to rule on an issue outside the scope of the Court of Appeals order.

The scope of age subject to the MHRA is from 18 to 65 years of age.  Making employment decisions based on age between those ages is prohibited discrimination.  Respondent argues that no “subclasses” of age can be used to determine if discrimination has occurred.  In addition, Respondent maintains that disparate impact cannot be used in a reduction-in-force (RIF) context.  As with the preceding argument, the Court of Appeals order limits the scope of action here.  This matter has been remanded solely for taking additional evidence on the Complainant’s claim of disparate impact.

The qualifications of Complainant’s statistical expert, the accuracy of the database on which the statistics were compiled, and the small sample size were criticized by Respondent.  None of these issues were specifically mentioned by the Court of Appeals.  The mathematics does not rely upon qualifications, but on application of mathematical equations.  If these equations were incorrectly performed, the Respondent needs to demonstrate that to the Court of Appeals on appeal.  Similarly, if persons were incorrectly included or excluded in the database, Respondent needs to demonstrate how the inaccuracies affect the statistical calculation.  Simply saying that the database is inaccurate does not, without more, defeat the demonstration by Complainant that an employment practice had a disparate impact on older employees.  The issue of the sample size was argued on the first motion, decided against Respondent, and may be taken up with the Court of Appeals.

Complainant’s statistical expert is criticized by Respondent for being unaware of what practice is alleged to be the cause of the claimed disparate impact and, therefore, that the expert did not establish the cause of the disparate impact.  Respondent mischaracterizes the role of the statistical expert in this matter.  The initial obligation on a complainant in a disparate impact case is to show that an employment practice had a disparate impact on workers in a protected class.  There can be no dispute that demotion and reduction in pay are impacts within the meaning of the MHRA.  Complainant has also alleged constructive discharge and that is also an impact under the statute.  The statistical expert need only show the relation of older workers affected to younger workers affected.  There is no requirement that the statistical expert understand the dynamics of the employment situation.

Complainant asserts that Respondent has not stated a “an important business purpose” within the meaning of the MHRA to justify the disparate impact on older workers at the heart of this issue.  The Judge decided that issue in the first summary disposition motion.  There is no evidence cited as not being presented at the time of the first summary disposition motion.  There is no basis for reconsidering the issue here.

Complainant has advanced three alternatives to demonstrate that genuine issues of material fact are present, thereby requiring a hearing to take evidence on alternatives available to Respondent in conducting its RIF.  One alternative would be to establish an “incentive based compensation system.”  Complainant’s Brief, at 20.  Another would be “a change in the compensation system.”  Id.  The third alternative would be an “across the board 10 to 15% salary cut.”  Id.

Respondent criticizes Complainant’s alternatives for lacking any evidence that the alternatives were feasible, that the alternatives resulted in salary reductions sufficient to meet the reduction goals, and that the alternatives result in “a significantly lesser adverse impact” upon older workers as required by the MHRA.

Complainant relies upon the expert opinion of Neil Lapidus, C.P.A., to advance its argument that alternatives existed for Respondent in its RIF.  Lapidus acknowledged that to be a comparably effective business practice, the same cost reduction must be achieved and customer service must not be so negatively affected as to reduce revenues.  Lapidus Deposition, at 78 and 80.  Lapidus acknowledged that he was unaware of how the alternatives would have affected older workers.  Lapidus Deposition, at 100.

Mathematically speaking, disparate impact on older workers can be eliminated by achieving the needed cost reduction by reducing all workers salaries by the amount of the necessary cost savings.  If all workers were to receive an identical percentage of salary reduction, there would be no class affected more than others.  Lapidus discussed this method and commented that “uniform cuts across the board are probably more effective than just terminating people.”  Lapidus Deposition, at 98.  In discussing the “across the board cuts,” Lapidus qualified his opinion by stating:

May I just comment, maybe to speed this along.  My experience is usually what happens is it is not just one of these methods but it’s a combination so that it might be a 10 percent across the board reduction in compensation and a five percent reduction in other expenses, and something else.

* * *

. . . use of this word is that maybe it’s five percent for some and 10 percent for others.  It might be different.

* * *

What I’m suggesting in terms of across the board is that it might be compensation cuts at all levels, but they might be different.

[Question:  Different percentages?]

They might be.

[Question:  When you say “across the board,” though, does that mean everybody is taking some sort of cut?]

Yes.  The thinking might be that management or people in other than in administrative capacity might take more because the administrative people are paid at a lower level and may not be able to suffer that much of a cut.  So that might be to the detriment of the higher paid employees.

[Question:  Do you think that’s a reasonable factor to consider, that you have got somebody who is earning a fairly low wage, that they should take a smaller percentage cut than somebody who is making more?]

Yes.

[Question:  So that when you say across the board, you just mean that everybody is going to take a salary cut.  What percentage they take is going to depend on what position they hold?]

Yes.  Or it could mean, say, 10 percent or 20 percent or 15 percent across the board meaning everyone takes that.  And I have actually seen that done more effectively than a tiered effect across the board.

[Question:  Can you tell me for Carlson Marketing Group Travel Division in the fall of 1992, what percentages of reduction in the total compensation you would recommend for the various positions?]

No.

Lapidus Deposition, at 101-103.

The deposition testimony of Complainant’s expert, taken in the light most favorable to the Complainant, does not demonstrate “across the board” cuts to be a feasible method of cost reduction.  There is no indication of how the cuts are to be implemented.  Differing treatment of management and nonmanagement workers is opined to be reasonable in many instances.  There is no analysis as to why such differing treatment is unreasonable in this matter.  Differing salary reductions of higher-paid and lower-paid employees were opined to be reasonable.  No recommendation was made by Complainant’s expert as to what compensation changes should have been made.

Under the MHRA, the Complainant has the burden to show “the existence of a comparably effective practice that the court finds would cause a significantly lesser adverse impact on the identified protected class.”  Minn. Stat. § 363.03, subd. 11.  The Court of Appeals remanded this matter to take evidence that could not reasonably have been presented at the first summary disposition motion on disparate treatment.  The only evidence presented runs to comparably effective practices.  Respondent asserts that the Complainant has no evidence of a comparably effective practice and has moved for summary disposition.  The Judge has carefully examined the record in this matter.  Complainant has not demonstrated that the financial impact of the practices it asserts are comparably effective in reducing costs to Carlson Marketing Group.  More significantly, there has been no showing that any of the alternative practices proposed result in any reduction of adverse impact on older workers.  Both these elements must be shown by Complainant to rebut the showing of business necessity and establish a claim of disparate treatment.

Regarding the one method which mathematically would result in an impact on all workers, “across the board cuts,” Complainant’s expert indicated that treating higher-paid and lower-paid workers differently is reasonable.  Such differing treatment is what occurred in this matter and is claimed to have a disparate impact on older workers.  There has been no evidence introduced to show when such a “tiered” method becomes unreasonable.  Complainant has introduced no evidence to show whether such a tiered method results in any reduction of adverse impact on older workers at the Carlson Marketing Group.

Complainant’s expert also indicated that cutting the salary of all workers by the ten to fifteen percent figure is an alternative.  That expert could not quantify the likelihood of the lowest paid employees leaving due to the pay reduction or any difficulty Carlson Marketing Group would experience in filling those positions due the level of pay offered.  There is no evidence in the record as to what the industry standard for such positions is in Minnesota.  The only evidence in the record regarding the impact of salary cuts is that Complainant’s morale was harmed by his demotion and reduction of pay from $37,168 to $29,734 (a 20 percent decrease).  In response to his demotion, Complainant accepted a part-time position paying a higher per hour rate rather than retain the lower-paying position.  Callister Deposition, at 101-104.  Taking writers as an example, their salaries would have been reduced from $17,930 to either $16,137 or $15,241 (depending on whether the decrease was 10 percent or 15 percent).  There is no inference that can be drawn from Complainant’s action that supports a conclusion that employees would remain in lower level positions while having their salaries reduced.

Complainant supports his position with his own affidavit regarding the travel industry.  The only reference to the possibility of employees leaving states:

I have worked in the travel industry since 1971.  I have held lower and mid-level positions throughout my career in the travel industry.  Contrary to Cantlon’s affidavit   9, it is my experience that in 1992, the travel industry was not such that the marketplace was “extremely competitive” for lower and mid-level positions.

Callister Affidavit, at 4.

Callister’s Affidavit does not indicate what wage levels were present in 1992 for the lowest level positions at the Carlson Marketing Group.  The Affidavit also does not explain how lower level employees would not find alternative work when Complainant found a replacement part-time position almost immediately at a higher hourly rate.  The Callister Affidavit does not support a conclusion that lower-level employees would not leave if their salary was reduced.

There is evidence in the record to suggest that Carlson Management Group was concerned with employee morale.  A memorandum prepared at the time of the RIF was “hidden” in the employer’s computer system and the system signed off every night to preclude its discovery.  Complainant’s Exhibit O.  The memorandum contains the following summary relating to employee attitudes:

Action/Expectations

- Attitude:        positive, open, communicative of facts

- Role:             NEVER have you or any of your people been more important to the company and to travel .... our company needs us

- Communication:      within the next two hours, get to all your people with this whole message to stop speculation - they deserve to know what is happening

 

* * *

 

Wrap:              Thank you for the past, thank you for the future  Evey (sic) confidence that the management in this group is as strong as it has ever been   The Travel team will pull through because we are that kind of group

                        Please, do not lose site (sic) of the fact that no forced lay-offs were required in travel . . . . . personal note that it is far better than I had hoped

Complainant Exhibit O.

This memorandum suggests that Carlson Marketing Group was concerned about retaining the employees who did not choose to leave employment.  There is no inference that can be drawn from the memorandum to support Complainant’s assertion that the reduced salaries would be “competitive.”

To successfully resist a motion for summary disposition, the non-moving party must show that there are specific facts in dispute which have a bearing on the outcome of the case.  Hunt v. IBM Mid America Employees Federal, 384 N.W.2d 853, 855 (Minn. 1986).  General averments are not enough to meet the non-moving party's burden under Minn.R.Civ.P. 56.05.  Id.; Carlisle v. City of Minneapolis, 437 N.W.2d 712, 715 (Minn.App. 1988).

Complainant has not demonstrated that genuine issues of material fact remain for hearing in this matter.  The Judge has carefully considered the Court of Appeals remand to determine if that order requires a hearing and the Judge has concluded that the summary disposition standard is appropriate to apply.  For disparate impact, after business necessity is shown, the burden of proof is on the Complainant by operation of Minn. Stat. § 363.03, subd. 11.  Complainant has failed to establish the element of a comparably effective practice that would cause a significantly lesser adverse impact on older workers.  Thus, there is no purpose to going forward with a hearing on the issue.[1]

S.M.M.