Marks v. Loral Corp. (57 Cal. App. 4th 30, 1997)

Opinion

SILLS, P. J.

I

Introduction

Michael J. Marks appeals from a judgment after the jury returned a defense verdict in his age discrimination and retaliation lawsuit against his former employer, Loral Corporation, and several other related entities and persons. He presents a series of challenges to various jury instructions, special verdict forms, and evidentiary rulings given by the trial court. Most of his contentions are simply cavils about wording, and do not establish error, much less prejudicial error.

One of Marks’s arguments, however, has some real substance to it. For years now, the federal courts have struggled, in applying federal age discrimination law, with the problem of whether an employer’s policy or practice which has a “disparate impact” on older workers generally constitutes illegal age discrimination. A few years ago, Justice Kennedy noted the issue has yet to be resolved by the United States Supreme Court. (See Hazen Paper Co. v. Biggins (1993) 507 U.S. 604 [113 S.Ct. 1701, 1710, 123 L.Ed.2d 338] (conc. opn. of Kennedy, J.).) In the present case, Marks argues that a particular jury instruction was improper because it told the jury that an employer was entitled to prefer lower paid workers to higher paid workers, even if that preference results in choosing younger workers. Marks contends that the instruction was not proper. If it were, he says, it would eliminate the “vast majority” of age discrimination cases because of the “high correlation” between age and salary level.

In this case we need not decide the broad question of whether “disparate impact analysis,” as labor law mavens style it, can ever apply to age discrimination claims, under either federal or California law. We do, however, determine that the particular jury instruction here—which deals with the impact of compensation differentials in employer decisionmaking—was correct under both federal and state law: Employers may indeed prefer workers with lower salaries to workers with higher ones, even if the preference falls disproportionately on older, generally higher paid workers. Both the text and intent of the federal and state age discrimination statutes compel such a result. Moreover, when we look at the origins of the disparate impact doctrine, we find that, by its very nature, it was never intended to apply to something so basic to the running of any enterprise as its costs of doing business. There was thus no error in giving the instruction and the judgment must be affirmed.

II

Facts

In 1988, Marks was a member of Ford Aerospace’s corporate finance staff in Michigan. That year the unit moved to Newport Beach, California. Marks was divorced and his children were in Chicago, relatively nearby. Seeking to avoid the transfer, he approached various people on Ford’s human resources staff to see if there was a “possibility” he might qualify for another position in Michigan. His efforts were unsuccessful and in July he moved out to California along with the rest of the corporate finance staff.

In 1990, Loral Corporation bought Ford Aerospace Corporation, and Marks found himself working for Loral Aerospace. In January 1991 Marks filed an age discrimination complaint with the Equal Employment Opportunities Commission against Ford Aerospace, charging that when Ford Aerospace was sold to Loral, several of his younger peers had been offered jobs in Michigan, but he had not. (Marks mistakenly thought that his complaint was against Ford Aerospace only, and Loral would not assume liability for such claims in its purchase of Ford Aerospace.)

Most of Loral Aerospace’s Newport Beach corporate finance staff positions were eliminated in 1992, including Marks’s. New accounting departments, however, were being created at seven other locations across the country. While Loral Aerospace had nó authority to direct any other division to employ any particular individual, the company’s Newport Beach human resources officer tried to help Marks find a position at one of the other locations by revising his resume, informing other divisions that Loral would pay his relocation costs, sending his resume to other divisions, and allowing him to use company computers, resume services, fax machines and telephones after his termination. (Marks’s own efforts to find work at the new locations appear to have been minimal; his attorney would later argue to the court that, because he was a member of a protected class, he need not show that he applied for any specific openings.) Ultimately, all members of the corporate finance staff willing to relocate found new positions, except for Marks and one other, who was also over 40 years old.

Meanwhile, in May 1992, the Equal Emloyment Opportunity Commission (EEOC) stated that its investigation had not uncovered evidence establishing his claims, and informed him of his right to sue. Marks, then age 49, was laid off in August 1992. He brought this suit pursuant to state and federal age discrimination laws, contending that his age was a factor in his not being able to secure another position with the company, particularly a position in Colorado Springs where several accounting positions were open. The case went to trial on claims of age discrimination and retaliation. After a 16-day trial, the jury returned a 12-0 defense verdict on the age discrimination claim and a 9-3 defense verdict on the retaliation claim. Marks then filed this appeal.

Ill

The Mixed Motives Instruction

Marks first claims that the trial court erred in refusing to give one paragraph of his special instruction No. 3, dealing with proving employment discrimination under the Fair Employment and Housing Act. (See Gov. Code, § 12900 et seq.) The language omitted was: “Employment decisions can be the product of ‘mixed motives’ that include permissible and impermissible considerations. In such cases, the Plaintiff need only prove by preponderance of all the evidence that there exists a causal connection between the Plaintiff’s protected status and the Defendants’ adverse actions. Thus, the Plaintiff is entitled to prevail on the ‘disparate treatment’ theory of liability if the evidence shows that an adverse employment action was caused, at least in part, by a discriminatory motive.”

There was no error. First, a portion of the instruction which the trial court did give to the jury told its members that plaintiff could prevail if “age played a motivating part’’ (italics added) in a decision, so Marks can hardly complain that the court precluded him from informing the jury that if his employer had a bad reason and a good reason, he should win. Second, the reference to “causal connection” between a “protected status” and an “adverse action” is hopelessly vague and overbroad—it would have been clear error to instruct the jury in that language—because it could have mislead the jury into a finding of discrimination based merely on the basis of a correlation between compensation and age, which, as we discuss in more detail in part IX, post, is not the law.

IV

The Duty to Transfer Instruction

Marks next argues that the trial court erred in refusing his special instruction No. 15, which would have told the jury: “An employer has no duty to transfer or ‘place’ an employee scheduled for layoff in an available position elsewhere in the company. To the extent Defendants voluntarily assumed such a duty by their actions and/or statements, an inference of discrimination is raised if the Plaintiff shows that others not in his protected class were treated more favorably.”

There is no error here, because the phrase “To the extent Defendants voluntarily assumed such a duty” could have misled the jmy into thinking that the court had already determined that the defendants had assumed a duty to place all of their employees elsewhere, something which they hotly disputed. Marks points to no evidence that Loral ever assumed a duty (see Rose v. Wells Fargo & Co. (9th Cir. 1990) 902 F.2d 1417) to find jobs for its laid-off employees. It is one thing for enlightened corporate personnel offices to offer assistance to employees who are about to be laid off, it is another to assume an obligation to do so. Marks adduces no authority for the idea that when employers do a good turn for their employees they are thereby creating, ipso facto, a legal obligation to do so. Indeed, when one considers the incentives established by such a rule, it is no wonder authority for it is lacking. We can think of few things more pernicious than a rule which would, in effect, penalize employers for offering assistance to employees who are about to be laid off. Marks makes the error of thinking that because many of his coworkers found jobs within the company, Loral undertook the legal obligation to find a job for anyone willing to relocate.

V

The Burden of Proof Instructions

Marks next contends that defense instructions Nos. 4 and 9, relating to the burden of proof, should not have been given because they conflicted with other instructions and were unduly repetitious.

As to defense instruction No. 9, Marks cannot complain now because he agreed to the instruction after the trial court struck some words to which he objected.

As to defense instruction No. 4, that instruction told the jury about the classic three part test which is a staple of discrimination law. (See generally, McDonnell Douglas Corp. v. Green (1973) 411 U.S. 792 [93 S.Ct. 1817, 36 L.Ed.2d 668]; Green v. Rancho Santa Margarita Mortgage Co. (1994) 28 Cal.App.4th 686, 694-695 [33 Cal.Rptr.2d 706] [analogizing test to a game of hot potato].)

Marks claims defense instruction No. 4 conflicted with his instruction No. 6. His instruction No. 6 involved the retaliation claim. It told the jury, among other things, that Marks “had the initial burden to establish a prima facie case of retaliation” and “He has done so.”

The conflict argument fails because defense instruction No. 4, by contrast with plaintiff’s instruction No. 6, concerned Marks’s age discrimination claim, not his retaliation claim. And, by the same token, given that it addressed a different claim, it could not have been unduly repetitious either.

Marks further argues that the final paragraph of defense instruction No. 4 (see fn. 1), particularly the words “affirmatively and ultimately prove” were argumentative. Not so. In the wake of St. Mary’s Honor Center v. Hicks (1993) 509 U.S. 502 [113 S.Ct. 2742, 125 L.Ed.2d 407], it is clear that, despite the “hot potato” framework of discrimination law, a plaintiff must still prove actual discrimination. (Id. at p. 518 [113 S.Ct. at p. 2753].) Thus, for example, it is not enough that a jury find that a defendant’s articulated reason for some personnel action be false. Plaintiff must still prove the real reason was a discriminatory one. (Id. at p. 517 [113 S.Ct. at pp. 2752-2753].)

VI

More Supposedly Repetitious Instructions

Marks next challenges defense instructions Nos. 17 and 19 as repetitious and argumentative. Defense instruction No. 17 involved personnel cutbacks: “During a reduction-in-force, an employer must often discharge qualified employees. The mere termination of a competent employee when an employer is making cutbacks for business reasons is insufficient to establish an initial case of age discrimination. In a case involving a cutback, plaintiff must come forward with additional evidence that his age, or that his prior age discrimination claim, was a factor in his layoff in order to establish an initial case.”

Marks claims this instruction “gave undue influence to the defense position.” Nonsense. It simply reminded the jury that Marks could not win merely by showing he was laid off.

Defense instruction No. 19 told the jury of the need to find that age discrimination or retaliation “actually played a role in defendant’s decision to terminate his [plaintiff’s] employment and that plaintiff’s age or prior age discrimination claim had a determinative influence on that decision.” Marks claims that it conflicted with his mixed motives theory of liability.

The answer here is that there was no conflict. The instruction was perfectly clear that age discrimination need be merely one of several factors to justify a plaintiff’s verdict, albeit a factor which actually made a difference (“determinative influence”). While there is a certain redundancy within the instruction itself (if something is “a factor” and plays “a role” then the implication is that it already has a “determinative influence”), the redundancy is so subtle, and countered by the defendant’s right to instruct the jury that age discrimination must indeed make a difference, that we cannot say there was any error, much less prejudicial error. It is undisputed that Marks was able, in the portion of his own instruction No. 3 which was given, to tell the jury that he should prevail if age discrimination “played a motivating part” of any adverse employment decision.

VII

The No-Duty-to-Transfer Instruction

We now come to a variation on Marks’s argument from part IV, ante, of this opinion. Not only was it error not to give his instruction on the duty to transfer issue, but, he claims, it was error to give the defense’s instruction on the subject.

Defense instruction No. 15 simply stated, “An employer has no duty to transfer or ‘place’ an employee scheduled for layoff to an available position elsewhere in the company.” Again, Marks’s error here is to assume that he showed that Loral had undertaken an obligation to transfer laid-off employees because it made services available to help them find a job within the company. As given, the instruction was thus perfectly correct.

VIII

The No-obligation-to-train-or-retrain Instruction

What we have just said applies just as much to Marks’s claim that it was error to give defense instruction No. 14, which covered job training, as distinct from job transfer. Defense instruction No. 14 told the jury, “An employer has no obligation to train or retrain an employee in order to make him as qualified as other employees. Thus, when plaintiff claims that younger employees were hired or retained instead of him, plaintiff must prove that he was as qualified to perform the service as those other employees, without any additional training.” Again, it does not follow that because an employer may not discriminate in choosing who gets to enter a job training program that an employer must set up a job training program in the first place. Nor does it follow that because a large corporate employer gives help to laid-off employees that it has an obligation to give that help in the first place. There was no error in the instruction.

IX

The Salary Instruction

The court instructed the jury that: “An employer is entitled to choose employees with lower salaries, even though this may result in choosing younger employees. If the choice is based on salary, there is no age discrimination.” Marks now argues that the salary instruction was error because of the “high correlation” between age and salary. He raises the spectre that if the law allows employers to make decisions on the basis of salary, many age discrimination claims are simply going to disappear.

We will begin our analysis by granting, for the sake of argüment, Marks’s premise that there is a “high correlation” between compensation and age generally, so that compensation based decisions would have a disparate impact on older workers generally. Commentators of various persuasions have accepted the premise, as have a number of federal courts in the specific facts of cases before them.

We would be remiss, though, not to note that the proffered high correlation is somewhat simplistic, and perhaps even itself a reflection of a stereotype. Census bureau statistics, for example, show a decline in income for older workers who reach a certain age.

As we have mentioned, there is no consensus in the federal courts on the question. An employer’s decision based on salary which disproportionately affected older workers because of the high correlation between age and salary would be actionable age discrimination under a number of relatively earlier federal circuit court decisions (see authorities collected in Caron v. Scott Paper Co. (D.Me. 1993) 834 F.Supp. 33, 36) as well as a few later ones. (See Camacho v. Sears, Roebuck de Puerto Rico, supra, 939 F.Supp. 113.) On the other hand, federal courts which have examined the issue more recently, particularly in the wake of the United States Supreme Court’s decision in Hazen Paper Co. v. Biggins, supra, 507 U.S. 604, have tended to hold that economic decisions do not give rise to liability for age discrimination, despite the disparate impact of such decisions on older workers. (See Ellis v. United Airlines, Inc. (10th Cir. 1996) 73 F.3d 999, 1009 [“of those courts that have considered the issue since Hazen, there is a clear trend toward concluding that the ADEA does not support a disparate impact claim”].) (We discuss the impact of Hazen Paper on this case below.)

The core of the split may be traced to two fundamentally differing views about the goal of the age discrimination statutes. If the goal of the age discrimination statutes is to preclude decisions based on generalities about older workers which may have no basis as to individuals, then they certainly do not extend to decisions based on relative compensation rates between individual workers. In this view, age discrimination statutes were enacted to prevent employers from assuming that just because an individual attained a certain age, he or she no longer could do the job, or do it as well.

The other view is that age discrimination statutes were enacted to protect older workers because of their status as older workers, since older workers, generally speaking, face unique obstacles late in their careers. Age discrimination law is thus seen as a kind of protective legislation designed to improve the lot of a people who are vulnerable as a class. If this view is correct, then holding that decisions based solely on salary may contravene laws precluding discrimination based on age makes sense.

Three reasons demonstrate the former view should prevail: (1) the text of both the federal and state statutes indicates that price-based decisions are not within their ambit; (2) the legislative history is devoid of any intent to impose disparate impact analysis on age discrimination claims rooted in compensation differentials in either set of statutes; and, in fact, indicates an opposite intention; and (3) disparate impact analysis, properly understood, is fundamentally inapplicable to age discrimination claims based on compensation differentials.

A

First, the texts of the federal and state statutes show an intention that price-based business decisions should not be held to constitute illegal age discrimination.

1

The Federal Statute

One of the important things about the federal age discrimination law is that it contains an explicit statement that an action based on “reasonable factors other than age” is not illegal age discrimination. (See 29 U.S.C. § 623(f)(1).) There is no counterpart to the statement in title VII of the 1964 Civil Rights Act. (See Note, Age Discrimination and the Disparate Impact Doctrine (1982) 34 Stan.L.Rev. 837, 845 [“There is no provision in Title VII equivalent to ADEA section 4(f)(1)”]; cf. Washington v. Gunther (1981) 452 U.S. 161, 170 [101 S.Ct. 2242, 2248, 68 L.Ed.2d 751] [rejecting reasonable factor defense in title VII case].)

We must note in passing (because it is necessary in order to make sense of certain court decisions and federal regulations) that the presence of the express exception for “reasonable factors other than age” presents a problem for those who would try to divine a tidy model of the law on this point. Does the specific mention of “reasonable factors” mean that they constitute an exception to a general rule that disparate analysis is normally applicable to age discrimination claims? Or does the mention mean that the lawgivers simply wanted to make doubly sure that courts would not end up second-guessing bona fide business decisions under the guise of the age discrimination laws? For purposes of this case, we need not decide. A differentiation based on salary is as “reasonable” a factor as is imaginable in a market economy.

Unlike other facially neutral factors which might fall disproportionately on older workers, decisionmaking by cost—reliance on relative prices if you will—goes to the very core of the operation of a market economy. (United States v. Socony-Vacuum Oil Co. (1940) 310 U.S. 150, 226, fn. 59 [60 S.Ct. 811, 845, 84 L.Ed. 1129] [price fixing banned because of “actual or potential threat to the central nervous system of the economy”]; see also Fisher v. City of Berkeley (1984) 37 Cal.3d 644, 717 [209 Cal.Rptr. 682, 693 P.2d 261] (dis. opn. of Lucas, J.) [“Price fixing, whether privately or publicly inspired, thus endangers the free economic system to which Congress has entrusted the prosperity of the entire nation.”].)

All pricing, of course, results in “discrimination.” Buyers “discriminate” against brand X when they purchase the cheaper brand Y because brand Y is cheaper. Compensation levels are nothing more than the price of individual services in the labor market. Prices, both in terms of what is paid for and what is received, go to the very core of operating any enterprise, be it profit, nonprofit, or governmental.

An objection to the use of price as a “reasonable factor” is that profitability has not been allowed to justify discrimination in other civil rights contexts. (E.g., Wilson v. Southwest Airlines (N.D.Tex. 1981) 517 F.Supp. 292, 304 [struggling airline could not restrict flight attendant jobs to females despite evidence that restriction was vital to airline’s marketing campaign].) Such cases have given rise to what some commentators call the “Anti-Cost Rule Under Title VII.” (E.g., Kaminshine, The Cost of Older Workers, Disparate Impact, and the Age Discrimination in Employment Act, supra, 42 Fla. L.Rev. 229, 240.)

Salary differentials, however, present a matter qualitatively different from the usual disparate impact situation in a title VII context. An action based on price differentials represents the very quintessence of a legitimate business decision. “In a for-profit enterprise,” wrote Judge Gary Taylor in a recent federal decision, “. . . the essence of employment decisions is whether an employee’s salary is justified by that employee’s productivity." (U.S. E.E.O.C. v. Newport Mesa Unif. Sch. Dist. (C.D.Cal. 1995) 893 F.Supp. 927, 932.) As the dissent pointed out in the Metz case, “wages correspond precisely to the costs of doing business, and hence to profitability.” (Metz v. Transit Mix Inc., supra, 828 F.2d at p. 1219 (dis. opn. of Easterbrook, J.).) And, as one law review commentator has noted—and we think the proposition is irrefutable—“Cost-based layoffs often constitute perfectly rational business practices, grounded in employers’ concern for economic viability.” (Comment, Disparate Impact in the Age Discrimination in Employment Act: Will the Supreme Court Permit It?, supra, 1995 Wis. L.Rev. at p. 510.)

Decisions based on salary therefore must, as Justice Rehnquist said in his dissent from the denial of a hearing of an early Second Circuit decision, come within the “reasonable factors other than age” language of the federal age discrimination statute. (See Markam v. Geller (1981) 451 U.S. 945 [101 S.Ct. 2028, 68 L.Ed.2d 332] (dis. opn. of Rehnquist, J.).)

The main “textual” argument which is advanced against the use of salary in the context of age discrimination claims is the phrase “otherwise adversely affect” as it appears in the federal age discrimination statute, 29 United States Code section 623(a)(2). Some courts have concluded that the phrase means “ ‘any policy having a more harmful effect on older people than on their co-workers.’ ” (Camacho v. Sears, Roebuck de Puerto Rico, supra, 939 F.Supp. 113, 120; Caron v. Scott Paper Co., supra, 834 F.Supp. at pp. 37-38 [“The phrase . . . implies that an employment practice may constitute illegal discrimination even if not intended or directed specifically at age.”].)

There are two flaws in the “adversely affect” argument. The first is that it is based on a grammatically nonsensical reading of the federal text. (The complete text is set out in footnote 16, ante.) Admittedly, the statute was not written by Hemingway. Nevertheless, it is not so convoluted that it cannot be understood. The text does not say, “It shall be unlawful for an employer— ... to otherwise adversely affect an employee because of such individual’s age.” It says, “It shall be unlawful for an employer to limit, segregate or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s age.” (Italics added.) We emphasize the words “his status as an employee” because those words show that the words “adversely affect” pertain to the verbs “limit, segregate or classify,” and do not stand on their own. To read the phrase the way the Camacho and Caron courts did would mean that the “his” in the phrase, “his status as an employee,” would refer to the employer, which makes no sense at all. The words “adversely affect” refer to actions which “affect” an employee’s “status as an employee” because o/“such individual’s age.”

The second flaw in the adverse affect argument is that it ignores the balance of the language from the federal age discrimination statute, all of which contradicts the idea that the statute was enacted to provide special protection for older workers as a group. In fact, the balance of the language favors the idea that the statute was enacted to protect individuals from being discriminated against because of their age, not because they share a characteristic with a protected class. The word “individual” appears no less than five times in the course of one sentence, delineating the nature of age discrimination. Here is the complete text of 29 United States Code section 623(a):

“It shall be unlawful for an employer— [f] (1) to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s age\ [*fl] (2) to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s age; or [