Albemarle Paper Co. v. Moody

Facts

The statutory anchor is Title VII’s remedial provision, section 706(g), which the Court quoted at length. It provides that, on a finding of an unlawful employment practice, the court “may enjoin the respondent … and order such affirmative action as may be appropriate, which may include, but is not limited to, reinstatement or hiring of employees, with or without back pay …, or any other equitable relief as the court deems appropriate.” (42 U.S.C. § 2000e-5(g); quoted at Albemarle, supra, 422 U.S. at p. 416, fn. 9.) Back-pay liability accrues only from “a date more than two years prior to the filing of a charge with the Commission.” (Id. at p. 416, fn. 9.)

The respondents were “a certified class of present and former Negro employees at a paper mill in Roanoke Rapids, N.C.”; the petitioners were the plant’s owner, Albemarle Paper Co., and the plant union, Halifax Local No. 425. (Id. at p. 408.) After filing an EEOC charge and receiving a right-to-sue notice, the class sued in 1966 for injunctive relief against “any policy, practice, custom or usage” at the plant violating Title VII; they “assured the court that the suit involved no claim for any monetary awards on a class basis,” but “in June 1970, after several years of discovery, the respondents moved to add a class demand for backpay.” (Id. at pp. 408–409.)

The district court found that the petitioners had “strictly segregated” the plant’s “lines of progression” before January 1, 1964, “reserving the higher paying and more skilled lines for whites,” and that a 1968 reorganization left the Negro employees “‘locked’ in the lower paying job classifications.” (Id. at p. 409.) The formerly “Negro” lines “had been merely tacked on to the bottom of the formerly ‘white’ lines,” so that “only whites had seniority in the higher job categories.” (Ibid.) The court ordered a system of “plantwide” seniority. (Ibid.)

The tests. Albemarle required applicants for the skilled lines to hold a high school diploma and to pass two general-ability tests — the Revised Beta Examination, “allegedly a measure of nonverbal intelligence,” and the Wonderlic Personnel Test, “allegedly a measure of verbal facility.” (Id. at pp. 410–411.) The Wonderlic was added in 1963; the Company “made no attempt to validate the test for job relatedness, and simply adopted the national ‘norm’ score of 18 as a cut-off point.” (Id. at p. 428.) Incumbents — “some of whom had been hired before adoption of the tests” — “were not required to pass them,” and “a number of white incumbents in high-ranking job groups could not pass the tests.” (Id. at p. 429.) “Four months before this case went to trial, Albemarle engaged an expert in industrial psychology to ‘validate’ the job relatedness of its testing program. He spent a half day at the plant and devised a ‘concurrent validation’ study, which was conducted by plant officials, without his supervision.” (Ibid.) The study covered ten job groupings “selected from near the top” of the lines, with “105 employees in all, but only four Negroes,” comparing test scores to “subjective supervisorial rankings.” (Id. at pp. 429–430.)

Procedural history

Trial was held in July and August 1971; the district court issued its opinion on November 9, 1971. (Id. at p. 409.) It ordered plantwide seniority but “refused … to award backpay to the plaintiff class,” reasoning that “there was no evidence of bad faith non-compliance with the Act” and that, because the back-pay claim “was filed nearly five years after the institution of this action” and “was not prayed for in the pleadings,” “the defendants would be substantially prejudiced.” (Id. at pp. 410–411.) On the tests, the court concluded that they “have undergone validation studies and have been proven to be job related.” (Id. at p. 411.)

The petitioners “did not seek review,” but the respondents appealed the back-pay denial and the testing ruling. (Ibid.) A divided Fourth Circuit reversed. (474 F.2d 134 (1973).) On back pay it held that an award “could not be denied merely because the employer had not acted in ‘bad faith,’” and that a successful Title VII plaintiff “should ordinarily be awarded back pay unless special circumstances would render such an award unjust,” reasoning by analogy to Newman v. Piggie Park Enterprises. (Albemarle, supra, 422 U.S. at pp. 411–412.) On the tests, the court held it error to approve “a validation study done without job analysis.” (Id. at p. 412.) The Supreme Court granted certiorari “because of an evident Circuit conflict.” (Id. at pp. 412–413.)

Issue

The Court framed “two important questions”: “First: When employees or applicants for employment have lost the opportunity to earn wages because an employer has engaged in an unlawful discriminatory employment practice, what standards should a federal district court follow in deciding whether to award or deny backpay? Second: What must an employer show to establish that pre-employment tests racially discriminatory in effect, though not in intent, are sufficiently ‘job related’ to survive challenge under Title VII?” (Id. at p. 408.) The Court was careful to note that “[w]hether a particular member of the plaintiff class should have been awarded any backpay and, if so, how much, are questions not involved in this review.” (Id. at p. 413.)

Holding

Reasoning

Discretion is guided, not unfettered. The Court rejected Albemarle’s position that section 706(g) “provides no guidance.” While back pay “is not an automatic or mandatory remedy,” the “discretionary choices are not left to a court’s ‘inclination, but to its judgment; and its judgment is to be guided by sound legal principles.’” (Id. at pp. 415–416, quoting United States v. Burr.) Equity here is not “equity which varies like the Chancellor’s foot”: “when Congress invokes the Chancellor’s conscience to further transcendent legislative purposes, what is required is the principled application of standards consistent with those purposes.” (Id. at p. 417.) The Court distinguished Newman v. Piggie Park Enterprises as an attorneys’-fee case “not directly in point,” so the back-pay standard had to be located elsewhere. (Id. at pp. 415, 413.)

The make-whole purpose drives the remedy. Quoting Griggs v. Duke Power Co., the Court explained that Title VII’s “primary objective was a prophylactic one”: “to achieve equality of employment opportunities and remove barriers that have operated in the past to favor an identifiable group of white employees.” (Id. at pp. 417–418.) Back pay supplies the incentive: “It is the reasonably certain prospect of a backpay award that ‘provide[s] the spur or catalyst which causes employers and unions to self-examine.’” (Id. at p. 418.) And because Title VII “deals with legal injuries of an economic character,” the make-whole rule applies: “‘when a wrong has been done, and the law gives a remedy, the compensation shall be equal to the injury …. The injured party is to be placed, as near as may be, in the situation he would have occupied if the wrong had not been committed.’” (Id. at pp. 418–419, quoting Wicker v. Hoppock.) The Court grounded this in the NLRA, on which “[t]he backpay provision was expressly modeled,” noting that the Labor Board “has awarded backpay as a matter of course — not … merely where employer violations are peculiarly deliberate, egregious, or inexcusable.” (Id. at pp. 419–420.)

Good faith is no defense to back pay. The district court’s first stated ground — Albemarle’s breach “had not been in ‘bad faith’” — was “not a sufficient reason.” (Id. at p. 422.) The Court drew a careful asymmetry: bad faith disqualifies an employer, but “the mere absence of bad faith simply opens the door to equity; it does not depress the scales in the employer’s favor.” (Ibid.) “If backpay were awardable only upon a showing of bad faith, the remedy would become a punishment for moral turpitude, rather than a compensation for workers’ injuries.” (Ibid.) Echoing Griggs, “Congress directed the thrust of the Act to the consequences of employment practices, not simply the motivation.” (Id. at pp. 422–423.) The Court added that Congress had recognized only “a complete, but very narrow, immunity” for good-faith reliance on a written EEOC opinion — a line the courts may not enlarge. (Id. at p. 423, fn. 17.)

Prejudice from the late demand is left open. The district court’s second ground — the respondents’ tardy, inconsistent back-pay demand — fared differently. The Court acknowledged that “Title VII contains no legal bar to raising backpay claims after the complaint … has been filed,” and that Rule 54(c) directs relief “even if the party has not demanded such relief in his pleadings.” (Id. at p. 424.) But “a party may not be ‘entitled’ to relief if its conduct of the cause has improperly and substantially prejudiced the other party,” and “[t]o deny backpay because a particular cause has been prosecuted in an eccentric fashion, prejudicial to the other party, does not offend the broad purposes of Title VII.” (Ibid.) Whether the respondents were excusable and whether the petitioners were “in fact prejudiced” were questions “open to review by the Court of Appeals” on the familiar “clearly erroneous” and abuse-of-discretion standards, since on “issues of procedural regularity and prejudice, the ‘broad aims of Title VII’ provide no ready solution.” (Id. at pp. 424–425.)

The test-validation framework: Griggs plus a pretext escape hatch. Turning to the tests, the Court restated Griggs: Title VII “forbids the use of employment tests that are discriminatory in effect unless the employer meets ‘the burden of showing that any given requirement [has] … a manifest relationship to the employment in question.’” (Id. at p. 425.) Crucially — the move CACI No. 2504 captures — the Court added a third step: “If an employer does then meet the burden of proving that its tests are ‘job related,’ it remains open to the complaining party to show that other tests or selection devices, without a similarly undesirable racial effect, would also serve the employer’s legitimate interest in ‘efficient and trustworthy workmanship.’ Such a showing would be evidence that the employer was using its tests merely as a ‘pretext’ for discrimination.” (Ibid.) The EEOC Guidelines, though “not administrative ‘regulations,’” “constitute ‘[t]he administrative interpretation of the Act by the enforcing agency,’ and consequently they are ‘entitled to great deference.’” (Id. at pp. 430–431.)

Why Albemarle’s study failed. Measured against that standard, the study “is materially defective in several respects.” (Id. at p. 431.) First, its “odd … patchwork of results” showed significant correlations “for the Beta Exam in only three of the eight lines,” with the supposedly interchangeable Wonderlic forms diverging — a test may carry over to unstudied jobs only where there are “‘no significant differences,’” yet here “the study involved no analysis of the attributes of, or the particular skills needed in, the studied job groups.” (Id. at pp. 431–432.) Second, it “compared test scores with subjective supervisorial rankings” elicited by a “‘standard’ that was extremely vague and fatally open to divergent interpretations,” leaving “no way of knowing precisely what criteria … the supervisors were considering.” (Id. at pp. 432–433.) Third, it “focused, in most cases, on job groups near the top of the various lines of progression,” though the strong scores of senior incumbents do not show the test “is a permissible measure of the minimal qualifications of new workers entering lower level jobs.” (Id. at pp. 433–434.) Fourth, it “dealt only with job-experienced, white workers,” while the tests are given to applicants “who are younger, largely inexperienced, and in many instances nonwhite.” (Id. at p. 435.) The Court also flagged that the study was “conducted by plant officials, without neutral, on-the-scene oversight, at a time when this litigation was about to come to trial,” and so “must be examined with great care.” (Id. at p. 433, fn. 32.)

The remedy: remand, not an outright testing injunction. Although it agreed the district court erred, the Court declined the Fourth Circuit’s implicit “injunction … against all use of testing,” choosing instead “to leave to the District Court the precise fashioning of the necessary relief in the first instance,” given that “[t]he appropriate standard of proof for job relatedness has not been clarified until today” and the respondents had not until then been “apprised of their opportunity to present evidence that even validated tests might be a ‘pretext.’” (Id. at p. 436.)

The separate opinions. Justice Marshall, concurring, urged that the “bar of laches … should be particularly difficult to establish,” deriding the district court’s “indulgent speculation” that the defendants “might have chosen to exercise unusual zeal.” (Id. at pp. 440–441.) Justice Rehnquist, concurring, stressed that the equitable characterization matters because if back pay “follow[s] as a matter of course from a finding of wrongdoing,” it edges toward damages and the Seventh Amendment jury-trial question, and read the opinion to leave “factors such as … the possible good faith of the employer and the excusable nature of the plaintiffs’ conduct … open for consideration.” (Id. at pp. 442–447.) Justice Blackmun, concurring in the judgment, agreed the power is discretionary but parted ways on two points: he would not say “an employer’s good faith is never a sufficient reason for refusing to award backpay,” and he refused to treat “absolute compliance with the EEOC Guidelines” as “a sine qua non of pre-employment test validation.” (Id. at pp. 447–449.) Chief Justice Burger, concurring in part and dissenting in part, agreed back pay is committed to equitable discretion but would have honored the district court’s cumulative findings, objecting that the majority’s testing analysis was “based upon a wooden application of EEOC Guidelines” and that “slavish adherence” to them “should not be required.” (Id. at pp. 449–453.)

Significance

Albemarle is the indispensable bookend to Griggs v. Duke Power Co. (1971) 401 U.S. 424. Griggs supplied the disparate-impact liability theory; Albemarle supplied both the remedy that gives it teeth and the proof standard that an employer must meet to defend a facially neutral selection device. By transforming back pay from a discretionary windfall into a presumptive entitlement — denied “only for reasons which, if applied generally, would not frustrate the central statutory purposes” (422 U.S. at p. 421) — the Court created the “spur or catalyst” that drives compliance. (Id. at p. 418.) After Albemarle, an employer cannot buy peace with an injunction alone, and cannot escape compensation by professing innocence: good faith “opens the door to equity” but does nothing more. (Id. at p. 422.)

For California practitioners the decision retains direct force. Albemarle and Griggs are the federal source of California’s disparate-impact framework under FEHA, and CACI No. 2504 (Disparate Impact — Rebuttal to Business Necessity) codifies Albemarle’s pretext-rebuttal step: even after the employer proves a test is job related, the plaintiff may prevail by showing a less discriminatory alternative would serve the same legitimate interest. The opinion’s validation analysis — patchwork correlations, vague supervisor rankings, top-of-the-line samples, and racially skewed study populations — remains a checklist courts and counsel still run against employer “business necessity” proof. Its limits are real, though: the Court expressly disclaimed deciding individual back-pay entitlement (id. at p. 413), left the prejudice/laches inquiry open (id. at pp. 424–425), and the validation Guidelines it deferred to have since been superseded by the 1978 Uniform Guidelines — a citator check is essential before relying on the specific regulatory cites.

Key quotes

“[G]iven a finding of unlawful discrimination, backpay should be denied only for reasons which, if applied generally, would not frustrate the central statutory purposes of eradicating discrimination throughout the economy and making persons whole for injuries suffered through past discrimination.” (Albemarle, supra, 422 U.S. at p. 421.)

“[T]he mere absence of bad faith simply opens the door to equity; it does not depress the scales in the employer’s favor. If backpay were awardable only upon a showing of bad faith, the remedy would become a punishment for moral turpitude, rather than a compensation for workers’ injuries.” (Id. at p. 422.)

“If an employer does then meet the burden of proving that its tests are ‘job related,’ it remains open to the complaining party to show that other tests or selection devices, without a similarly undesirable racial effect, would also serve the employer’s legitimate interest …. Such a showing would be evidence that the employer was using its tests merely as a ‘pretext’ for discrimination.” (Id. at p. 425.)

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Practice pointer

Open questions

The Court reserved several issues. It expressly declined to decide individual entitlement: “Whether a particular member of the plaintiff class should have been awarded any backpay and, if so, how much, are questions not involved in this review.” (Id. at p. 413.) It left the prejudice/laches question for the district court and a possible second appeal — “Whether the petitioners were in fact prejudiced, and whether the respondents’ trial conduct was excusable, are questions that will be open to review.” (Id. at p. 424.) It did not resolve whether back pay may be denied where an employer discriminated in reliance on a state “female protective” statute: “There is no occasion in this case to decide whether these decisions were correct.” (Id. at p. 424, fn. 18.) On the tests, it left open “whether testing requirements that take into account capability for the next succeeding position or related future promotion might be utilized” on a genuine-business-need showing (id. at pp. 433–434), and whether the Guidelines’ provisional-use circumstances “now obtain is a matter best decided, in the first instance, by the District Court” (id. at p. 436). Rehnquist, J., flagged but did not reach whether a jury-trial right attaches as back pay shades toward damages. (Id. at pp. 442–444.)