NO. 84-94
IN THE SUPREME COURT OF THE STATE OF MONTANA
1984
EUROPEAN HEALTH SPA,
Petitioner and Appellant,
THE H P A J RIGHTS COMMISSION OF
U4P
THE STATE OF MONTANA, and VIOLET
HADDOW,
Respondents and Respondents.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Charles Luedke, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
John K. Addy, Billings, Montana
For Respondents:
Keefer, Roybal, Hanson, Stacey & Jarussi; Calvin J.
Stacey, Billings, Montana
Kathleen F. Holden, Human Rights Commission, Helena,
Montana
Submitted on Briefs: July 27, 1984
Decided: September 13, 1984
Filed: .,G .
Clerk
Mr. Justice Frank B. Morrison, Jr. delivered the Opinion of
the Court.
The Thirteenth Judicial District Court of Montana issued
a judgment on December 19, 1983, affirming the January 21,
1983, final order of the Human Rights Commission and awarding
Violet Haddow (Haddow) $3,500 in attorney's fees. The
Commission ruled in its order that the European Health Spa
(Spa) had discriminated against Haddow on the basis of
marital status. Spa appeals the judgment of the District
Court. We affirm.
Violet Haddow was hired by Spa as an instructor in May
of 1977. She was reclassified to a counselor/consultant in
September of 1977. A counselor/consultant solicits
memberships in the Spa. As a counselor, Haddow never failed
to produce commissions equalling or surpassing her monthly
draw of $500. In fact, from September 1977 until July 1978,
Haddow averaged approximately $890.00 a month in commissions.
She was consistently above the 50th percentile in sales
totals for the Rocky Mountain area.
Haddow requested and subsequently took vacation leave
from August 3 to August 11, 1978. On August 7, 1978,
Haddow's husband, John Haddow, was terminated as manager of
the Spa. The reason given for his termination was
mismanagement of funds.
European Health Spa places a ceiling on commissions spa
managers can receive for spa memberships they, themselves,
sell. John Haddow transferred some of his own membership
sales to Spa counselors and subsequently obtained from them
the commissions they received for those sales. He also was
accused of failing to record spa membership sales and
pocketing the proceeds from those sales. (The Commission's
revised findings of fact nos. 15, 16 and 17.)
Violet Haddow visited the Spa on August 9, 1978. The
new manager's wife overheard Haddow stating that her husband
had been fired because the new manager had personal
connections with company management and that a petition to
oust the new manager and reinstate her husband would be
circulated. Haddow was subsequently called from the exercise
floor and fired by the new manager.
On August 28, 1978, Haddow filed a complaint alleging
that she was discharged because she is the wife of the
recently-discharged manager; and, that her discharge violated
the marital status discriminati-on prohibitions of the Human
Rights Act, section 49-2-303 (1) (a), MCA.
Spa denied the allegations and claimed that Haddow was
fired for several nondiscriminatory reasons. Specifically,
Violet Haddow : (1) was aware of her husband's kickback
scheme involving the commissions (p. 103 of the transcript of
the June 26, 1980, hearing before the examiner); (2) failed
in her weekend responsibilities as assistant-manager; (3) was
behind in sales production; (4) sold three, one-month
memberships (against company policy) and pocketed the
proceeds; and (5) was grossly insubordinate in her behavior
on the day she was discharged.
A hearing was held before a hearings examiner on June
26, 1980. Haddow presented substantial evidence to refute
Spa's allegations, including records of commissions she
earned, documents contradicting Spa's assertion that she was
assistant manager, the Spa's employee handbook setting forth
the procedures to be followed prior to terminating an
employee and a "Personnel Action Notice" documenting Violet
Haddow's termination prepared on August 4, 1978 and
indicating an effective date of August 7, 1978.
Coincidentally, the same dates appear on John Haddow's
"Personnel Action Notice."
Findings of fact, conclusions of law and a proposed
order were issued October 6, 1980, by the hearings examiner.
He found that Spa had decided to terminate Haddow on August
4, 1978, the same date they decided to discharge her husband.
He further found a lack of substantial credible evidence to
support all of Spa's alleged reasons for discharging Haddow
except her insubordinate conduct on August 9, 3.978.
Regarding that conduct, he stated: "Haddow's behavior in the
locker room may well be valid grounds for discharge, however,
I cannot say as a matter of fact that it overcame and
replaced the prior decision on August 4 to discharge Haddow."
(Finding of fact no. 27). Then, citing McDonnell Douglas
Corp. v. Green (1973), 411 U.S. 792, 93 S.Ct. 1817, 36
L.Ed.2d 668, the hearings examiner held that Spa's alleged
reasons for terminating Haddow were merely '% pretext for
marital status discrimination. " (Conclusion of 1a.w no. 2. )
Finally, because of her improprietous conduct, he denied
Haddow back pay. (Conclusion of law no. 3.)
Exceptions were filed, briefed and orally argued before
the Human Rights Commission. The Commission issued a
proposed opinion September 30, 1981, adopting the examiner's
conclusion that the Spa had discriminated against Haddow, but
awarding her back pay in the amount of $7,489.81, with
interest at 10%.
Spa filed a petition for judicial review in the
Thirteenth Judicial District on November 16, 1981. The trial
judge determined that the Commission had failed to review the
complete record, pursuant to section 2-4-621 ( 3 ) , MCA, before
increasing the award to Haddow recommended by the examiner.
Thus, the case was remanded for further review by the
Commission.
Upon review of the entire record, the Commission issued
a final ord.er with revised findings and conclusions, dated
January 21, 1982. The final order upheld the Commission's
initial holding and award of back pay with interest. It also
upheld the findings and conclusions of the examiner that
Spa's reasons for Haddow's discharge were a pretext for
marital status discrimination, citing McDonnell.
Spa again filed a petition for judicial review. The
District Court affirmed the Commission's final order and
awarded Haddow $3,500 in attorney's fees. From that
judgment, Spa appeals the following issues:
1. Whether the District Court erred in using the test
in McDonnell rather than the "dual motivation theory" of Mt.
Healthy City School District Board of Education v. Doyle
(1977), 429 U.S. 274, 97 S.Ct. 568, 50 L.Ed.2d 471, when
reviewing the decision of the Montana Human Rights
Commission; and
2. Whether the District Court erred in its
determination that Violet Haddow is entitled to back pay with
interest from the date of the hearing examiner's
determination?
The United States Supreme Court, in McDonnell set forth
a test for determining whether employment discrimination
exists under Title VII of the Civil Rights Act of 1964, when
an employee is discharged for both discriminatory and
nondiscriminatory reasons. The test was explained in Texas
Deptartment of Community Affairs v. Burdine (1981), 450 U.S.
248, 252-253, 101 S.Ct. 1089, 1093, 67 L.Ed.2d 207, 215:
"First, the plaintiff has the burden of proving by
the preponderance of the evidence a prima facie
case of discrimination. Second, if the plaintiff
succeeds in proving the prima facie case, the
burden shifts to the defendant 'to articulate some
legitimate, nondiscriminatory reason for the
employee's rejection.' Third, should the defendant
carry this burden, the plaintiff must then have an
opportunity to prove by a preponderance of the
evidence that the legitimate reasons offered by the
defendant were not its true reasons, but were a
pretext for discrimination." (Citations omitted)
Mt. Healthy involves a constitutionally protected, first
amendment right. Mr. Green was a nontenured school teacher
in the Mt. Healthy City School District. He was denied
tenure and discharged for "'a notable lack of tact in
handling professional matters which leaves much doubt as to
your sincerity in establishing good school relationships."'
Mt. Healthy, 429 U.S. at 282, 97 S.Ct. at 574, 50 L.Ed.2d at
481. One stated indiscretion was an activity
constitutionally protected by the First Amendment. The other
stated reason was an incident in the school's cafeteria which
did not involve a constitutionally protected act. The
Supreme Court remanded the case with the following
instructions for determining whether Mr. Green's discharge
was a violation of his first amendment rights.
"Initially, in this case, the burden was properly
placed upon respondent to show that his conduct was
constitutionally protected, and that this conduct
was a 'substantial factor' - or, to put it in other
words, that it was a 'motivating factor' in the
Board's decision not to rehire him. Respondent
having carried that burden, however, the District
Court should have gone on to determine whether the
Board had shown by a preponderance of the evidence
that it would have reached the same decision as to
respondent's reemployment even in the absence of
the protected conduct." Mt. Healthy, 429 U.S. at
287, 97 S.Ct. at 576, 50 ~ T ~ d . 2at 484. (footnote
d
omitted)
In Martinez v. Yellowstone County Welfare Department
(Mont. 1981), 626 P.2d 242, 38 St.Rep. 474, we adopted the
McDonnell test for employment discrimination cases filed
under section 49-2-303, MCA, which involve disparate
treatment of a protected class because "[tlhe provisions of
Title 49, Montana Human Rights Act, are closely modeled after
Title VII of the Federal Civil Rights Act of 1964. . . ."
Martinez, 626 P.2d at 245, 38 St.Rep. at 477. Marital status
is defined as a protected class in Thompson v. Board of
Trustees, School District No. 12, Harlem, Blaine County,
(Mont. 1981), 627 P.2d 1229, 1231, 38 St.Rep. 706, 709.
Since the instant case was filed under section 49-2-303, MCA,
and involves a member of a protected class, we see no reason
to deviate from our posit.ion in Martinez. The McDonnell test
is the appropriate test in this case.
The second issue presented to this Court is whether or
not the Commission erred in awarding Haddow back pay when the
hearings examiner refused to do so. We find. no error.
The hearings examiner held as a matter of law that
Haddow was not entitled to any pecuniary award, stating:
". . . Haddow's improprietous actions were no doubt
soon discovered after her discharge. The
respondent would have had and did have adequate
justifiable grounds to discharge her once it
discovered the improper activities of the charging
party." (Hearings examiner's conclusion of law no.
3
"The Commission may reject or modify an examiner's
conclusions of law." City of Billings v. State of Montana
Human Rights Commission (Mont. 1984), 681 P.2d 33, 37, 41
St.Rep. 688, 693. Section 2-4-621 (3), MCA. After reviewing
the entire record, the Commission substantially changed the
hearings examiner's conclusion:
"Conclusive substantial credible evidence that
Violet Haddow has committed improprietous action is
not part of the record. The Respondent may have
had adequate justifiable grounds to discharge her
once it determined in a fair manner that she was
involved in improper business activities. The
Respondent's handbook sets forth a procedure for
such a discharge and Section 49-2-303, MCA, clearly
permits such a discharge. Neither was heeded in
these circumstances." (Commission's final order,
conclusion of law no. 3)
The Commission then awarded Haddow $7,489.81, with
interest thereon at 10% per annum from the date of the
hearing, June 26, 1980, until the date paid. The sum
represents the amount Haddow would have earned through June
30, 1979, the date she left the Billings, Montana area.
Section 49-2-506 (1) (b), MCA, gives the Commission
discretionary authority "to rectify any harm, pecuniary or
otherwise," to the person against whom discrimination is
found .
Neither the District Court nor this Court may alter the
conclusi.on of the Commission absent a finding that such
conclusion is arbitrary and capricious. Section 2-4-704 ( 2 ) ,
MCA. City of Billings v. Billings Firefighters Local No. 521
(Mont. 1982), 651 P.2d 627, 39 St.Rep. 1844. The award of
back pay is supported by the evidence discussed above and is
well within the powers of the Commission. It was neither
arbitrary nor capricious.
The judgment of the District Court approving the order
of the Human Rights Commission is affirmed.
We concur:
-
Chief Justice