Equal Employment Opportunity Commission v. Chicago Miniature Lamp Works (947 F.2d 292, 1991)

CUMMINGS, Circuit Judge.

This case highlights the problems of implementing Title VII’s prohibitions against race-based employment discrimination in Chicago, which contains various segregated communities. Defendant Chicago Miniature Lamp Works (“Miniature”) is a manufacturer of light bulbs located in a largely Hispanic and Asian neighborhood on the north side of Chicago. Plaintiff Equal Employment Opportunity Commission (“EEOC”) investigated Miniature, found reasonable cause to believe that Miniature had engaged in a pattern or practice of discrimination against blacks as a class in recruitment, hiring and promotion, and filed suit against Miniature on June 8, 1979. After a bench trial, the district court found that Miniature had violated Title VII by engaging in a pattern or practice of discrimination against blacks as a class. Miniature appeals the trial court’s ruling that it was liable under both a disparate treatment and a disparate impact theory, arguing that these findings were based on a misapprehension of the law and were clearly erroneous. For the reasons stated below, we reverse.

1. FACTS

Miniature manufactured small incandescent and neon lamps and related components at its plant located at 4433 North Ravenswood Avenue in Chicago. The EEOC alleged at trial that Miniature had discriminated against blacks in its recruitment and hiring of entry-level workers. Although the district court considered evidence concerning the representation of blacks in Miniature’s work force from 1970 to 1981, the bulk of the evidence presented at trial concerned its hiring practices from 1978 to 1981. Miniature last hired an entry-level factory worker on June 29, 1981.

The entry-level jobs at Miniature involved light manufacturing work and did not require any prior experience, particular educational background, or special skills. Basic manual dexterity and the ability to speak some English were the minimal qualifications required by Miniature. The beginning pay was low and did not rise substantially over time. Because the jobs did not require English language fluency, they had some special attraction to those persons who did not speak English as a primary language.

Miniature’s principal method of obtaining new entry-level workers merits particular attention. Miniature relied almost exclusively on “word-of-mouth” in order to fill its entry-level job openings. Employees would simply tell their relatives and friends about the nature of the job — if interested, these persons then would come to Miniature’s office and complete an application form. Miniature did not tell or encourage its employees to recruit in this manner. The evidence indicates that the only time Miniature initiated this word-of-mouth process was during 1977 when it adopted an Affirmative Action plan. At that time, Miniature asked one or two black employees to recruit black applicants from among their relatives and friends.

Miniature received applications whether or not it currently had an entry-level opening to fill. Whenever Miniature needed to fill an opening, it would go through its applications on file in order, phoning applicants until one was reached at home. Until August 1980, Miniature would start with the applications that were four to five months old and process them forward in time. After that date, Miniature started with the most recent application and processed applications backward in time. Evidence indicated that only one person was hired for every fifteen that applied. Because of the success of this process, Miniature never advertised for these jobs, and only rarely used the State of Illinois unemployment referral service.

The district court found that Miniature’s reliance on word-of-mouth for filling entry-level jobs “resulted in the exclusion of blacks from the network of information concerning jobs at Chicago Miniature, * * * and gross underrepresentation of blacks in, and their exclusion from, Chicago Miniature’s entry-level work force.” 622 F.Supp. 1281, 1288 (N.D.Ill.1985). In reaching this conclusion, the lower court relied almost exclusively on statistics presented by the EEOC’s expert, Dr. Hek-mat Elkhanialy.

A central task for the district court was to define the relevant labor market — that area from which Miniature would be expected to draw workers. The court found that the factors that enter into this definition include the location and accessibility of the employer, commuting patterns, and the employer’s applicant flow. Based on its analysis of these factors, the trial court found that Chicago (the city only, not the metropolitan area) was the relevant labor market for Miniature’s entry-level workers.

Although it concluded that Chicago was the relevant labor market, the district court examined a number of different “relevant labor markets” and concluded that illegal discrimination occurred in each of these labor markets. Specifically, the district court examined each of the following labor markets: the City of Chicago, a 12-zip code area from which Miniature drew more than 90% of its applicants, a 5-zip code area from which it drew more than 70% of its applicants, and Miniature’s own zip code area, from which it drew nearly 30% of its applicants.

In 1970, the percentage of entry-level workers in Chicago who were black was 35%. In 1980, this percentage had increased to 36.4%. The judge used these percentages as a basis for comparison against Miniature’s work force in two ways. First, he compared them with the percentage of blacks in Miniature’s entry-level work force for the years 1970-1981. In addition, he compared them with the percentage of blacks hired by Miniature for entry-level positions for the years 1978-1981.

Between 1978 and 1981, Miniature hired 146 entry-level workers. Nine of these workers (6%) were black. The trial court concluded that “the statistical probability of Chicago Miniature’s hiring so few blacks in the 1978-81 period, in the absence of racial bias against blacks in recruitment and hiring, is virtually zero.” Id. at 1295. The trial court also concluded that racial bias was the reason for the disparities between the percentage of blacks in Miniature’s entry-level work force for the years 1970-1981 and the percentage of black entry-level workers in Chicago. Although the differences between expected number of black hires and applicants and actual numbers were less when the judge restricted the relevant labor market to smaller geographical areas closer to Miniature’s plant, he concluded that racial discrimination must have been the cause of disparities even in geographically smaller relevant labor markets. The judge also commented that a number of black applicants (the record reveals that there were 11) had the letter “B” hand-written on their applications.

The district court declined to attach significance to the fact that Miniature, on a percentage basis, hired more blacks than non-blacks who applied for the jobs in question. From 1978-1981, the percentage of black applicants who were hired was 16.4%; the overall percentage of applicants who were hired was 6.1%. 622 F.Supp. at 1319 (App. 3). The judge considered the higher percentage of black applicants hired an unreliable figure because of the small number of blacks involved (only 9 blacks were hired in the 1978-1981 period).

II. ANALYSIS

Miniature challenges the district court rulings as based both on a misapprehension of the law and as unsupported by the evidence. Although we revisit questions of law decided below and raised on appeal on the clean slate of de novo review, the Court sets aside only those factual determinations that were clearly erroneous. Mozee v. American Comm’l Marine Serv. Co., 940 F.2d 1036, 1044 (7th Cir.1991). The clearly erroneous standard for factual questions is especially appropriate in a discrimination case where the trial court weighed the competing statistical testimony of experts. Soria v. Ozinga Brothers, Inc., 704 F.2d 990, 995 n. 6 (7th Cir.1983).

The Supreme Court has considerably altered the landscape of Title VII jurisprudence since the trial judge issued his opinion in October 1985. See Wards Cove Packing Co. v. Atonio, 490 U.S. 642, 109 S.Ct. 2115, 104 L.Ed.2d 733 (1989); Watson v. Fort Worth Bank & Trust, 487 U.S. 977, 108 S.Ct. 2777, 101 L.Ed.2d 827 (1988). Title VII itself remains unchanged — an employer may not discriminate against an employee or applicant on the basis of race:

(a) It shall be an unlawful employment practice for an employer—

(1) to fail or refuse to hire * * * any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin; or

(2) to limit, segregate, or classify his employees or applicants for employment 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 race, color, religion, sex, or national origin.

42 U.S.C. § 2000e-2(a). Nevertheless, the Supreme Court has attempted in recent years to reconcile this general proscription with other considerations expressed elsewhere in Title VII — a caution to employers not to engage in hiring quotas, and a recognition that employers may rely on nondiscriminatory, objective standards in hiring their employees as shown in the following statutory provisions:

(j) Nothing contained in this subchapter shall be interpreted to require any employer * * * subject to this subchapter to grant preferential treatment to any individual or to any group because of the race, color, religion, sex, or national origin of such individual or group on account of an imbalance which may exist with respect to the total number or percentage of persons of any race, color, religion, sex, or national origin employed by any employer, * * * in comparison with the total number or percentage of persons of such race, color, religion, sex, or national origin in any community * * *.

(h) Notwithstanding any other provision of this subehapter, 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 or merit system * * *, provided that such differences are not the result of an intention to discriminate because of race, color, religion, sex, or national origin, nor shall it be an unlawful employment practice for an employer to give and to act upon the results of any professionally developed ability test, provided that such test, its administration or action upon the results is not designed, intended or used to discriminate because of race, color, religion, sex or national origin.

42 U.S.C. § 2000e-2. These three sections of Title VII show that Congress intended a delicate balance, strongly condemning discrimination on account of a protected characteristic, yet recognizing that racial imbalances in the work force may result from legitimate, nondiscriminatory factors. A recognition of this tension informs our analysis in this case. See Watson, 487 U.S. at 991-993, 108 S.Ct. at 2787-2788 (O’Connor, J.).

The district court found Miniature liable based on both a disparate treatment and a disparate impact model. Although it is clear that the same set of facts can support both theories of liability, Teamsters v. United States, 431 U.S. 324, 336 n. 15, 97 S.Ct. 1843, 1854 n. 15, 52 L.Ed.2d 396 (1977), it is important to treat each model separately because each has its own theoretical underpinnings. The disparate treatment model is based most directly on Title VII’s statutory language, and requires an inquiry into the defendant’s state of mind. The defendant is liable under this model when the plaintiff can prove that the defendant subjectively intended to discriminate against the plaintiff on account of a protected trait. Id. at 335 n. 15, 97 S.Ct. at 1854 n. 15.

In a disparate impact case, however, motive is irrelevant. As the Supreme Court stated in the seminal case of Griggs v. Duke Power Company, 401 U.S. 424, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971), “Under the Act, practices * * * neutral on their face, and even neutral in terms of intent, cannot be maintained if they operate to ‘freeze’ the status quo of prior discriminatory employment practices.” Id. at 430, 91 S.Ct. at 853. The line between disparate impact and disparate treatment cases is most blurred in “pattern and practice” cases such as this one, because statistics can be used to prove both disparate treatment and disparate impact. Teamsters, 431 U.S. at 339, 97 S.Ct. at 1856; Mister v. Illinois Cent. Gulf R.R. Co., 832 F.2d 1427 (7th Cir.1987), certiorari denied, 485 U.S. 1035, 108 S.Ct. 1597, 99 L.Ed.2d 911 (1988).

A. Disparate Treatment

A prima facie case for a pattern or practice of disparate treatment can be established by “statistical evidence demonstrating substantial disparities in the application of employment actions as to minorities * * *, buttressed by evidence of general policies or specific instances of discrimination.” Coates v. Johnson & Johnson, 756 F.2d 524, 532 (7th Cir.1985). The plaintiff must prove “more than the mere occurrence of isolated or ‘accidental’ or sporadic discriminatory acts.” Teamsters, 431 U.S. at 336, 97 S.Ct. at 1855. Instead, the plaintiff must show that racial discrimination was the “standard operating procedure— the regular rather than the unusual practice.” Id.

The issue is straightforward: Did the district court clearly err in deciding that Miniature had intentionally discriminated against blacks in its recruiting and hiring practices? On appeal, Miniature attacks separately the determination that it engaged in discriminatory hiring from the determination that it engaged in discriminatory recruiting. Although the district court did conclude that Miniature had discriminated against blacks “in both recruitment and hiring,” id. at 1313, it clearly based liability on a comparison between the number of blacks who were actually hired and the number of blacks in the relevant labor market. In this sense, the trial court considered recruiting and hiring as necessarily linked parts of Miniature’s procedure for obtaining new employees.

Miniature would have us arbitrarily separate the district court’s finding of intentional discriminatory recruiting from intentional discriminatory hiring. According to Miniature, “hiring” is the process by which a company selects employees from an already identified applicant pool. Miniature focuses on the fact that under its limited conception of the term “hiring,” it actually hired a greater percentage of blacks than of non-blacks. This is largely a question of semantics that only obfuscates the issue before us. The conclusion below was that the percentage of blacks in Miniature’s entry-level applicant pool and work force was so low compared to the relevant labor market that intentional discrimination against blacks must have occurred. We must consider the propriety of this finding as a legal and factual matter based largely on the statistics introduced by the EEOC — it does not help a correct analysis to separate “hiring” from “recruiting” arbitrarily.

As part of its attempt to separate its recruiting and hiring practices, Miniature argues that it did not recruit and therefore, as a matter of logic, it could not have recruited diseriminatorily. We reject this simplistic syllogism. First, as mentioned above, the lower court considered Miniature’s hiring activities as a whole, and based its finding of disparate treatment on disparities between the percentage of blacks in Miniature’s entry-level work force and the percentage of blacks in the relevant labor market. Thus even if we were to accept Miniature’s “lack of recruiting” argument, Miniature could still be liable for its hiring practices. Miniature certainly cannot claim it did not hire employees!

In any event, Miniature has recruited: it made an intentional decision to rely on word-of-mouth to attract applicants for its entry-level openings. Miniature knew how workers were learning of its employment opportunities. When it adopted an Affirmative Action plan in 1977, it made an effort to tell its black employees to contact their friends and relatives in order to increase the effectiveness of its word-of-mouth network in the black community. Miniature also used other recruiting procedures at times. It used newspaper advertisements to attract clerical and secretarial applicants. On occasion it used a job referral service. But Miniature obviously intentionally chose not to use these two forms of recruiting for its entry-level workers.

The central inquiry in disparate treatment cases is an evaluation of the intent of the employer. We cannot conclude that as a matter of law it is impossible for an employer to discriminate intentionally against blacks by relying on word-of-mouth to provide its applicants. Cf., American Nurses’ Ass’n v. Illinois, 783 F.2d 716 (7th Cir.1986) (reversing dismissal of sex-based discrimination complaint alleging intentional discrimination based on failure to equalize pay between traditionally male and female jobs). Of course, the fact that a plaintiff is unable to point to specific actions or practices by an employer that are arguably discriminatory is a probative factor that a fact-finder can and should rely upon in ruling on the ultimate issue of intentional discrimination.

In other words, we reject defendant’s claim that “Miniature cannot be held liable because it did not commit any act” (Reply Br. at 8). It was the trial court’s finding that Miniature’s overall entry-level hiring decisions were made with racial animus. It is true that the trial court focused on Miniature’s reliance on word-of-mouth as evidence of its discriminatory intent. On review, we look at all the evidence on the record to determine if the trial court’s finding was clearly erroneous. Nevertheless, Miniature’s passive reliance on word-of-mouth to generate applicants must be given minimal weight because it involved no affirmative act by Miniature. Drawing the inference of intent from “non-action” is necessarily more difficult than drawing the inference of intent from particular actions. This is especially true since intent means more than knowledge that a certain action (or non-action) will cause certain discriminatory results. Intent means a subjective desire or wish for these discriminatory results to occur. American Nurses’ Ass’n, 783 F.2d at 722.

Statistical evidence of disparities between minority representation in an employer’s work force and minority representation in the community from which employees are hired can prove disparate treatment in a pattern or practice case. Hazel-wood School Dist. v. United States, 433 U.S. 299, 307, 97 S.Ct. 2736, 2741, 53 L.Ed.2d 768 (1977). As indicated above, a pattern or practice of disparate treatment is shown through a combination of “statistical evidence demonstrating substantial disparities * * * buttressed by evidence of general policies or specific instances of discrimination.” Coates, 756 F.2d at 532. However, here the trial court clearly erred in determining that the EEOC had proved that Miniature had engaged in a pattern or practice of intentional discrimination.

1. Statistical Evidence

The trial court made many factual findings regarding statistics in this case. The data underlying the statistical findings is found in Appendices 1, 3 and 4 to the trial judge’s opinion. Appendix 1 summarizes Miniature’s “static work force statistics” for the years 1970-1981. The static work force statistics set forth for each year an employment “balance sheet” that provides a snapshot of the employer’s work force for that year. For the twelve years reported, the percentage of blacks in entry-level jobs at Miniature was relatively constant, ranging from 4.5% to 6.5%. The total number of entry-level workers ranged from 202 to 396 over this period; the actual number of black entry-level workers ranged from 9 to 22. Unlike the percentage of black entry-level workers, the percentage of Asian and Hispanic entry-level workers during 1970-1981 was not static but rather increased. The representation of Hispanic workers ranged from 40.0% to 66.0%, while Asian workers ranged from 0.0% to 16.5% over the twelve years.

Appendices 3 and 4 summarize Miniature’s hiring rates for the years 1978-1981. These figures present an employment “profit and loss” statement showing how many blacks applied and were hired over an entire year. The appendices include both the EEOC’s and Miniature’s figures. For convenience, the relevant portions are capsulized below:

Applicants (No.) Hires (No.) Hiring Rates

Year Total Total Non-Blacks Blacks Non-Blacks Blacks PQ

1978 P,D 401 66 65 16.4% 20% CO to o lO

1979-P 227 18 17 7.6% 50% to to en (M

-D — 18 17 . 1 I I

1980-P 879 38 34 3.9% 25% CO a w CD H

-D 880 38 34 4.0% 12.1% CO rf*. CO CO

1981-P 807 24 21 2.7% 9.4% -a -a oi