Anderson, Vicente J. v. Zubieta, Alberto

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 3, 1998 Decided July 2, 1999

No. 97-5247

Vicente J. Anderson, et al.,
Appellants

v.

Alberto Aleman Zubieta,
Appellee

Appeal from the United States District Court
for the District of Columbia
(No. 96cv02832)

Richard J. Hirn argued the cause for appellants. With
him on the briefs was Ernest Allen Cohen.

Kimberly N. Brown, Assistant U.S. Attorney, argued the
cause for appellee. With her on the brief were Wilma A.
Lewis, U.S. Attorney, and R. Craig Lawrence, Assistant U.S.
Attorney.

 Before: Sentelle, Henderson and Garland, Circuit
Judges.

Opinion for the Court filed by Circuit Judge Garland.

Garland, Circuit Judge: Plaintiffs are black American
citizens of Panamanian or Hispanic national origin who have
long worked for the Panama Canal Commission and its
predecessor, the Panama Canal Company (together, the
"PCC" or "Canal Commission"). The PCC pays them sub-
stantially less in salary and benefits than it pays other
American citizens working at the same jobs--the overwhelm-
ing majority of whom are white, non-Panamanians. The
plaintiffs allege this pay differential constitutes race and
national origin discrimination in violation of Title VII of the
Civil Rights Act of 1964, Pub. L. No. 88-352, 78 Stat. 241
(codified as amended at 42 U.S.C. ss 2000e to 2000e-17
(1994)). The district court granted summary judgment in
favor of the PCC and dismissed plaintiffs' complaint. We
reverse.

I

The Canal Commission is a wholly-owned United States
government corporation. The thirteen plaintiffs were hired
by the PCC before 1979, and all but two before 1976. Compl.
pp 4-16. One has since retired. Id. All the plaintiffs are
currently United States citizens: eleven were naturalized
between 1987 and 1994; one became a citizen in 1977 follow-
ing his service in the military; and the remaining plaintiff is
the son of a United States citizen whose citizenship was not
registered with the U.S. Embassy until 1991. Id. The PCC
denies plaintiffs three types of benefits that it grants to other
employees, which generates the pay differential of which they
complain.

The first benefit is the so-called "tropical differential," the
current version of which was authorized by Congress in the
Panama Canal Act of 1979, 22 U.S.C. s 3657. The differen-
tial, paid as a "recruitment or retention" incentive, is a 15%
increment above the employee's basic pay. Id. s 3657(a); see
35 C.F.R. s 251.31(a). Under the statute it is available to

"any" employee who meets the eligibility requirements, with-
out reference to the nature of the employee's job. Anyone
employed before October 1, 19791 is statutorily eligible for the
benefit, regardless of citizenship or place of recruitment, as is
anyone recruited after that date from outside Panama. 22
U.S.C. s 3657(a). Because all plaintiffs were employed be-
fore October 1, 1979, all are eligible under the statutory
criteria.

The Canal Commission, however, has chosen to restrict
eligibility further than Congress required. Under the PCC's
regulations, only American citizens are eligible for the tropi-
cal differential. 35 C.F.R. s 251.31(a). Moreover, employees
hired from within Panama ("Panamanian hires") are eligible
only if they also come within a "grandfather clause" the PCC
adopted in 1976--which requires that they were employed
and receiving the differential no later than July 3, 1976. See
id. s 251.31(c). This effectively limits the eligibility of Pana-
manian hires to those who already were American citizens on
that date.2 This requirement disqualifies all of the plaintiffs.

The second benefit is known as the "equity adjustment
package," and consists of free rent and electricity in PCC
housing, as well as certain travel and educational benefits.
Pls. Br. at 15. For many years, the PCC operated subsidized
stores where employees who were American citizens could
purchase goods at prices below those available elsewhere in

__________
1 The Panama Canal Treaty of 1977 took effect on this date.

2 Prior to the Canal Act, the Canal Commission was authorized
to pay the tropical differential to all U.S. citizens, but only to U.S.
citizens. See Pub. L. No. 85-550, s 7, 72 Stat. 405, 407-08 (1958).
In 1976, the PCC by regulation limited payment to those who were
recruited from outside of Panama, but grandfathered in those
locally-hired citizen-employees who had been working since July 3,
1976 and receiving the differential (and hence who had been citi-
zens) as of that date. PCC Br. at 5. The Commission chose to
retain those limitations after the Canal Act was passed in 1979. See
35 C.F.R. s 251.31(b)(1)(i); id. s 251.31(c)(1); see also PCC Br. at
6.

Panama. See PCC Cross-Motion (Dist. Ct. Record Entry
[hereinafter "R."] 13), Ex. 37. As part of the Panama Canal
Treaty of 1977, the United States agreed to close those
stores. PCC citizen-employees, however, were permitted to
shop in military commissaries for a limited period of time
ending September 30, 1984. Effective October 1, 1984, Con-
gress authorized an allowance for any U.S. citizen (as of the
time the benefits are received) who was employed on Septem-
ber 30, 1979, regardless of place of recruitment. The allow-
ance was also authorized for anyone recruited after Septem-
ber 30, 1979 from outside Panama, regardless of citizenship.
22 U.S.C. s 3646. From 1984-89, five plaintiffs were eligible
under these statutory criteria and received the equity pack-
age benefits.

On December 29, 1989, the last American administrator of
the Canal changed the PCC's policy and imposed additional
eligibility requirements on Panamanian hires. Under these
new criteria, an employee hired from within Panama is eligi-
ble for the equity package only if he or she was employed on
September 30, 1979 and was a citizen before October 1, 1984.
See PCC Cross-Motion (R. 13), Exs. 20, 54. As a conse-
quence of the new criteria, four plaintiffs who had been
receiving the equity package lost their benefits. Pls. Br. at
16; PCC Br. at 8.

The final benefits at issue are travel and home leave
vacation benefits. An employee hired from within Panama is
eligible if he or she was employed on September 30, 1979 and
was a citizen as of that date. An employee recruited from
outside of Panama is eligible regardless of date of employ-
ment or citizenship. PCC Cross-Motion (R. 13), Ex. 67. The
date-of-citizenship requirement disqualifies all but one of the
plaintiffs. Compl. pp 4-16.3

Between June 2, 1995 and July 3, 1996, the plaintiffs filed
formal complaints with the PCC's Office of Equal Opportuni-
ty alleging that their exclusion from these salary and benefit
programs constituted race and national origin discrimination.

__________
3 As is evident from the description of the three benefit pro-
grams, and as the PCC conceded at oral argument, plaintiffs are not
disqualified by statute from receiving the benefits at issue in this
case. Only the PCC's discretionary policies render them ineligible.

Pls. Br. at 3. The PCC accepted most of the claims for
investigation.4 After completing the investigation, however, it
dismissed the claims as untimely, ruling that plaintiffs should
have filed years earlier when the benefit policies were first
applied to them.

In December 1996, the plaintiffs brought an action in
district court, alleging that the denial of the three benefit
packages constituted intentional disparate treatment, and had
an unlawful disparate impact, in violation of 42 U.S.C.
s 2000e-2.5 Plaintiffs relied on statistical evidence, as well as
on an attack on the rationales offered by the PCC for denying
them the benefits. They contended that the date-of-
citizenship requirements were mere pretext, guaranteeing
continued benefits to white non-Panamanians while denying
them to black Panamanian employees, the vast majority of
whom did not become citizens until after the cut-off dates.6
They also proffered evidence of what they contended was the
Panama Canal's "longstanding history of discriminating
against employees from the West Indies in every aspect of
Canal life and employment," symbolized, they said, by a
racially-based payroll system in which white Canal workers
were paid in gold from a "gold roll," while black Panamanians
__________
4 The PCC declined to accept the complaints of two plaintiffs
regarding the equity package, on the ground that those plaintiffs
had already filed formal grievances. See 5 U.S.C. s 7121(d) (bar-
ring federal employees from raising discrimination charges through
both negotiated grievance and administrative complaint proce-
dures). The district court did not consider this issue, and because
it appears to involve factfinding we leave it for that court's initial
consideration on remand.

5 The plaintiffs also alleged a violation of the Fifth Amendment,
an argument not pressed on this appeal.

6 In conjunction with the Panama Canal Treaty of 1977, Con-
gress amended U.S. immigration laws to make it easier for non-
citizen employees of the PCC to become U.S. citizens. The amend-
ments made Panamanian-born Canal employees residing in the
Canal Zone, as well as their spouses and children, eligible for
"special immigrant" status, which in turn made them permanent
residents and eligible for naturalization. See 8 U.S.C.
s 1101(a)(27)(E)-(G). Eleven of the plaintiffs became U.S. citizens
pursuant to this legislation. Pls. Br. at 10.

were paid in less-valuable Panamanian silver. Pls. Br. at 21.
"[P]ayment of the tropical differential to some employees and
not others," they contended, reflected nothing more than "a
continuation of the 'gold' and 'silver' roll wage differentials
which were based on race." Id. at 35.

The district court granted summary judgment in favor of
the Commission and dismissed the case. The court rejected
plaintiffs' disparate treatment claim, concluding they were
denied benefits because of their "citizenship, not because of
membership in a Title VII protected class." Anderson v.
Zubieta, 977 F. Supp. 439, 441-42 (D.D.C. 1997). The court
denied the disparate impact claim on the ground that, al-
though disparate impact "may be true as a matter of fact,"
there was "no evidence that the Defendant acted with any
unlawful discriminatory purpose." Id. at 442. This appeal
followed.

II

As an initial matter, we must decide whether plaintiffs
timely filed their claims with the PCC's Office of Equal
Opportunity. Regulations issued by the Equal Employment
Opportunity Commission (EEOC) require federal employees
to bring Title VII complaints to the attention of an Equal
Employment Opportunity counselor within 45 calendar days
of the alleged discriminatory event. See 29 C.F.R.
s 1614.105(a)(1). A plaintiff's administrative complaint is un-
timely unless it is brought within the 45-day limitations
period, or unless the plaintiff establishes a basis for equitable
tolling. See id. s 1614.107(b).

After investigating plaintiffs' complaints, the PCC rejected
them as untimely. The Canal Commission had amended the
benefit policies in question in 1976, 1979, and 1989. The
plaintiffs, all of whom became citizens between 1977 and 1994,
received notice that they were not entitled to the benefits on
various dates ranging from July 13, 1977 to July 7, 1994. See
PCC Stmt. of Material Facts (R. 16). None brought a
complaint within 45 days of either the amendments or the
notice; the first complaint was not brought until June 2, 1995.

On that basis, the PCC concluded plaintiffs' administrative
complaints were filed too late.

The plaintiffs respond that their complaints allege continu-
ing violations of Title VII, actionable upon receipt of each
paycheck. We agree. As a unanimous Supreme Court said
in Bazemore v. Friday, "[e]ach week's paycheck that delivers
less to a black than to a similarly situated white is a wrong
actionable under Title VII, regardless of the fact that this
pattern was begun prior" to the limitations period. 478 U.S.
385, 395 (1986) (Brennan, J., concurring, joined by all other
Members of the Court). The Courts of Appeals have re-
peatedly reached the same conclusion.7

The Canal Commission bases its contrary position on a line
of Supreme Court cases beginning with United Air Lines v.
Evans, 431 U.S. 553 (1977). In Evans, defendant had dis-
criminatorily dismissed the plaintiff in 1968, pursuant to a
policy barring married female flight attendants. When it

__________
7 See Ashley v. Boyle's Famous Corned Beef Co., 66 F.3d 164,
167-68 (8th Cir. 1995) (en banc); Brinkley-Obu v. Hughes Train-
ing, Inc., 36 F.3d 336, 345-49 (4th Cir. 1994) ("Our cases demon-
strate ... that in a compensation discrimination case, the issuance
of each diminished paycheck constitutes a discriminatory act.");
Beavers v. American Cast Iron Pipe Co., 975 F.2d 792, 796-800
(11th Cir. 1992); EEOC v. Penton Indus. Publ'g Co., 851 F.2d 835,
838 (6th Cir. 1988) (recognizing that "where an employer continues
to presently impose disparate work assignment or pay rates be-
tween similarly situated employee groups" a continuing violation
exists); Gibbs v. Pierce County Law Enforcement Support Agency,
785 F.2d 1396, 1399 (9th Cir. 1986) ("The policy of paying lower
wages ... on each payday constitutes a 'continuing violation.' ")
(internal quotation omitted); see also Miller v. Beneficial Manage-
ment Corp., 977 F.2d 834, 843-44 (3d Cir. 1992) (applying continu-
ing violations doctrine to unequal pay claim under Equal Pay Act);
Satz v. ITT Fin. Corp., 619 F.2d 738, 743 (8th Cir. 1980) ("The
practice of paying discriminatorily unequal pay occurs not only
when an employer sets pay levels, but as long as the discriminatory
differential continues."). But cf. Hendrix v. City of Yazoo, 911 F.2d
1102, 1103-05 (5th Cir. 1990) (holding that discriminatory pay
reduction under Fair Labor Standards Act does not constitute
continuing violation).

rehired plaintiff in 1972 after changing the policy, it did not
give her any seniority credit for her earlier service. Suing in
1973, plaintiff conceded that a claim for her 1968 dismissal
was untimely, but contended that the seniority system imper-
missibly gave present effect to that past act of discrimination.
The Court held the challenge to defendant's neutral seniority
system time barred notwithstanding that present effect. Id.
at 558.

The second case in the Evans line, Delaware State College
v. Ricks, 449 U.S. 250 (1980), involved a professor's claim of
unlawful termination by a university. The Court held that
the limitations period was triggered at the moment the
university allegedly denied plaintiff tenure for a discriminato-
ry reason, rather than a year later when he ultimately lost his
job. In the third case, Lorance v. AT&T Technologies, Inc.,
490 U.S. 900, 903 (1989), the Court held that when a seniority
system was "not alleged to be discriminatory on its face or as
presently applied," a complaint contending it was originally
adopted for discriminatory reasons (outside the limitations
period) was time barred.

The Evans-Ricks-Lorance line of cases does not support
the Canal Commission's contention that plaintiffs' claims are
time barred. To the contrary, the Lorance Court's explana-
tion of the difference between that line and Bazemore makes
it clear that the opposite is true. As Lorance explained,
Bazemore was a case in which plaintiffs contended not just
that the pay system was originally adopted for discriminatory
reasons, but that it continued to discriminate unlawfully each
time it was applied. Lorance, 490 U.S. at 912 n.5. "There is
no doubt," Justice Scalia said, that a system "that treats
similarly situated employees differently ... can be challenged
at any time." Id. at 912. By contrast, in Lorance, "[p]eti-
tioners [did] not allege that the seniority system treat[ed]
similarly situated employees differently or that it ha[d] been
operated in an intentionally discriminatory manner. Rather,
they claim[ed] that its differential impact on the sexes [was]

unlawful because the system 'ha[d] its genesis in [sex] dis-
crimination.' " Id. at 905.8

Similarly, Lorance explained that in Evans the plaintiff did
not contend that the present seniority system was discrimina-
tory, but rather "asserted a claim that [was] wholly depen-
dent on discriminatory conduct occurring well outside the
period of limitations"--that is, her dismissal in 1968. Lor-
ance, 409 U.S. at 907-08; see Evans, 431 U.S. at 560 ("[R]e-
spondent does not attack the bona fides of United's seniority
system, and ... makes no charge that the system is inten-
tionally designed to discriminate...."). Likewise in Ricks,
the Lorance Court said, plaintiff "did not claim that 'the
manner in which his employment was terminated differed
discriminatorily from the manner in which the College termi-
nated other professors who had been denied tenure.' " Rath-
er, the only alleged discrimination occurred earlier, when
plaintiff had been demoted into the ranks of the untenured.
See Lorance, 490 U.S. at 906 (quoting Ricks, 449 U.S. at 258).

__________
8 The result in Lorance was also based in part on the fact that
"[s]eniority systems ... are afforded special treatment under Title
VII." Id. at 904 (quoting Trans World Airlines v. Hardison, 432
U.S. 63, 81 (1977)). That special treatment, the Court said, was "by
reason of s 703(h), which states:

Notwithstanding any other provision of this subchapter, 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 ... system, ... provided that such differences are
not the result of an intention to discriminate because of race,
color, religion, sex, or national origin....

Id. at 904-05 (quoting Title VII s 703(h), 42 U.S.C. s 2000e-2(h)).
That section has no application to the benefits policies at issue here.
See also 42 U.S.C. s 2000e-5(e)(2) (overruling Lorance's application
to seniority systems by providing that an intentionally discriminato-
ry seniority system is a violation "when ... adopted, when an
individual becomes subject to the seniority system, or when a
person aggrieved is injured by the application of the seniority
system") (added by Civil Rights Act of 1991, Pub. L. No. 102-166,
s 112, 105 Stat. 1075, 1078-79 (1991)).

The plaintiffs here fall on the Bazemore rather than Evans
side of the line drawn in Lorance. They do not seek relief for
the PCC's initial announcement of its discriminatory policies,
but rather for their continued application. Unlike the peti-
tioners in Lorance, the plaintiffs in this case allege that the
PCC's policy currently "treats similarly situated employees
differently." Id. at 905. Accordingly, under Lorance they
may challenge those policies "at any time." Id. at 912.

Defendant also seeks support in a series of our cases
holding that, to establish a continuing violation, a plaintiff
must show "a series of related acts, one or more of which falls
within the limitations period, or the maintenance of a discrim-
inatory system both before and during the [statutory] peri-
od." McKenzie v. Sawyer, 684 F.2d 62, 72 (D.C. Cir. 1982)
(quoting Valentino v. United States Postal Serv., 674 F.2d 56,
65 (D.C. Cir. 1982)); see Palmer v. Kelly, 17 F.3d 1490, 1496
(D.C. Cir. 1994) (citing Berger v. Iron Workers Reinforced
Rodmen Local 201, 843 F.2d 1395, 1422 (D.C. Cir. 1988)).
Defendant's quotation of McKenzie is accurate, but the line of
cases it represents goes to an analytically different question
than the one we have just discussed. Thus far, we have been
considering the "first question in the analysis of a continuing
violations claim," namely, "whether an actual violation of Title
VII occurred during the statutory period." Palmer, 17 F.3d
at 1496. As noted above, plaintiffs have adequately alleged
such a "present violation." See id. (quoting Evans, 431 U.S.
at 558). As explained below, that claim survives summary
judgment. If plaintiffs' claim of a present violation is ulti-
mately proven, it will justify their request to be made whole
for those paychecks received during the 45-day window and
for all paychecks issued thereafter.

Like most plaintiffs, however, the plaintiffs here want more
than that. They also want to reach back and obtain compen-
sation for the lower paychecks they received prior to the 45-
day limitations period.9 It is to this "next question" that our

__________
9 They concede, however, that this claim is bounded by 42
U.S.C. s 2000e-5(g)(1), which limits back pay to two years prior to

cases refer when they require that a present violation be
either "part of a series of related discriminatory acts or ...
caused by a discriminatory system in effect both before and
during the limitations period." Id.10

Plaintiffs plainly satisfy this test as well. Indeed, they
allege that their current lower paychecks and benefits are
both part of a series of such discriminatory payments and
caused by the continued maintenance of a broadly discrimina-
tory pay and benefits system. Plaintiffs do not merely
challenge "separate and distinct" events, see Stoller v. Marsh,
682 F.2d 971, 975 (D.C. Cir. 1982), but rather allege that the
"current violations" they have identified "were taken pursu-
ant to the same employment policy as the actions sought to
be challenged outside the normally applicable limitations peri-
od." Berger, 843 F.2d at 1422 (citing Evans, 431 U.S. at 558).
"Where, as here, discrimination is not limited to isolated
incidents, but pervades a series or pattern of events which
continue to within [45] days of the filing of the charge ... ,
the filing is timely ... regardless of when the first discrimi-
natory incident occurred." Laffey v. Northwest Airlines, 567
F.2d 429, 473 (D.C. Cir. 1976). We therefore reject the
contention that plaintiffs' claims are time barred.11

__________
the filing of an administrative complaint. See also 29 C.F.R.
s 1614.501(c)(1); McKenzie, 684 F.2d at 72 n.8.

10 See McKenzie, 684 F.2d at 72 ("Plaintiffs charging a continu-
ing violation of Title VII need not show that the entire violation
occurred within the actionable period.... Once having shown
discrimination continuing into the actionable period, however, the
plaintiffs may also recover for portions of the persistent process of
illegal discrimination that antedated the limitations period.") (citing
Laffey v. Northwest Airlines, 567 F.2d 429, 472 (D.C. Cir. 1976));
see also Berger, 843 F.2d at 1422 ("Plaintiffs hope to connect the
violations which are clearly within the limitations period ... to the
violations we have held to be outside the limitations period.").

11 The Commission also seeks comfort in another line of cases
which, it asserts, establishes that for a claim to fit within the
continuing violations doctrine, the employee must "not at the time
know or have reason to know that an employment decision was
discriminatory in nature." Stoller, 682 F.2d at 974; see Smith-

III

We turn now to the merits of plaintiffs' claims. We review
the district court's grant of defendant's motion for summary
judgment de novo, and can sustain the court's decision only if
"there is no genuine issue as to any material fact and ... the
moving party is entitled to judgment as a matter of law."
Fed. R. Civ. P. 56(c); see FDIC v. Bender, 127 F.3d 58, 63
(D.C. Cir. 1997). We must view the evidence in the light
most favorable to the non-moving party, and ask "whether
any reasonable jury could find in its favor." Harbor Ins. Co.
v. Schnabel Found. Co., 946 F.2d 930, 935 (D.C. Cir. 1991).

In this Part, we first set forth the framework for analyzing
plaintiffs' claims of unlawful wage discrimination under Title
VII. We then focus on the first element of that framework,
the prima facie case, and consider the reasons given by the
district court, and an alternative rationale offered by the
Canal Commission, for finding that plaintiffs failed to estab-
lish such a case. We conclude that both the district court and
the Commission were wrong, and that plaintiffs have met the
requirements for showing a prima facie violation of Title VII.

A

Plaintiffs allege wage discrimination under theories of both
disparate treatment and disparate impact. Disparate treat-
ment occurs when "[t]he employer simply treats some people

__________

Haynie v. District of Columbia, 155 F.3d 575, 579-80 (D.C. Cir.
1998). Because plaintiffs did know of the allegedly discriminatory
nature of the PCC's pay policies prior to the limitations period, the
PCC contends they are barred from asserting a continuing viola-
tion. But the portions of both Stoller and Smith-Haynie cited by
the PCC do not discuss the continuing violations doctrine, which
deems certain claims to be timely filed within the limitations period,
but rather discuss the criteria for the equitable tolling doctrine,
which permits the tolling of that period. Because plaintiffs satisfy
the requirements of the continuing violations doctrine, they have no
need to rely on a theory of equitable tolling.

less favorably than others because of their race, color, reli-
gion, sex, or national origin." International Bhd. of Team-
sters v. United States, 431 U.S. 324, 335 n.15 (1977). "Proof
of discriminatory motive is critical" for such claims. Id.
Disparate impact claims, on the other hand, "involve employ-
ment practices that are facially neutral in their treatment of
different groups but that in fact fall more harshly on one
group than another and cannot be justified by business
necessity." Id. at 336 n.15. "Proof of discriminatory motive
... is not required under a disparate-impact theory." Id.

The familiar three-step evidentiary framework for proving
a disparate treatment case was set forth in McDonnell Doug-
las Corp. v. Green, 411 U.S. 792 (1973). The plaintiffs must
first establish a prima facie case, the elements of which vary
according to the circumstances. Id. at 802 & n.13. For a
prima facie case of wage discrimination, plaintiffs must show
"membership in a protected class ... , and that [they] were
performing work substantially equal to that of white employ-
ees who were compensated at higher rates than they were."
Coward v. ADT Sec. Sys., Inc., 140 F.3d 271, 273 (D.C. Cir.
1998) (internal quotations and alterations omitted); see id. at
275. Once plaintiffs establish a prima facie case of disparate
treatment, under the second step of McDonnell Douglas
"[t]he burden then must shift to the employer to articulate
some legitimate, nondiscriminatory reason" for the challenged
employment practice. McDonnell Douglas, 411 U.S. at 802.
If the defendant carries this burden, the third step requires
that plaintiffs be "afforded a fair opportunity to show that
[the] stated reason ... was in fact pretext" for discrimination.
Id. at 804. For a disparate treatment case finally to reach
the jury, the court must find in light of all the evidence that
"the plaintiff has met his burden of showing that a reasonable
jury could conclude that he had suffered [intentional] discrim-
ination." Aka v. Washington Hosp. Ctr., 156 F.3d 1284, 1290
(D.C. Cir. 1998) (en banc).

In a disparate impact case, a three-step, burden-shifting
framework is also employed. As with disparate treatment,
the plaintiff must first make out a prima facie case. Albe-

marle Paper Co. v. Moody, 422 U.S. 405, 425 (1975). This
"may be established by policies or practices that are neutral
on their face and in intent but that nonetheless discriminate
in effect against a particular group." International Bhd. of
Teamsters, 431 U.S. at 349. In the second step, the burden
shifts to the employer to "demonstrate that the challenged
practice is job related for the position in question and consis-
tent with business necessity." 42 U.S.C. s 2000e-
2(k)(1)(A)(i); see Griggs v. Duke Power Co., 401 U.S. 424, 431
(1971).12 Finally, if the defendant demonstrates business
necessity, plaintiffs must be given an opportunity to demon-
strate that an alternative employment practice could meet the
employer's legitimate needs without a similar discriminatory
effect. See 42 U.S.C. s 2000e-2(k)(1)(A)(ii); Albemarle Pa-
per Co., 422 U.S. at 425.

B

Plaintiffs receive a 15% lower salary than their white, non-
Panamanian counterparts and are not given the equity pack-
age and vacation benefits. This is sufficient to establish a
prima facie case of wage discrimination. There is no dispute
that race and national origin are protected classes. Nor is
there any dispute that the work plaintiffs perform is substan-
tially the same as that of the white non-Panamanians: the
PCC awards the wage differential and benefits as an incre-
ment above an employee's base salary regardless of the kind
of work he or she performs or the level of skill it requires.

In addition to this comparison of their personal situations,
plaintiffs offered statistics showing a wide disparity between
the percentages of black versus white U.S. citizens who
receive the higher salary and benefits, as well as between the

__________
12 For purposes of the disparate impact test, Title VII defines
the term "demonstrates" as "meets the burdens of production and
persuasion." 42 U.S.C. s 2000e(m). This definition was added by
the Civil Rights Act of 1991, Pub. L. No. 102-166, s 104, 105 Stat.
1071, 1074 (1991). Compare Thomas v. National Football League
Players Ass'n, 131 F.3d 198, 202 (D.C. Cir. 1998) (characterizing
defendant's burden at second stage of disparate treatment test as a
" 'burden of production' because the ultimate burden of persuasion
remains with the plaintiff").

percentages of U.S. citizens of American versus Panamanian
or Hispanic national origin who receive them. The statistics
offered by plaintiffs were compiled by the PCC's own Office
of Equal Opportunity from a survey it conducted of PCC
employees, all of whom were U.S. citizens. The following
table summarizes those statistics:

Percentage of U.S. Citizen Employees Receiving Indicated Benefit13
______________________________________________________________________________
% of Panamanian
% of % of % of American or Hispanic
White Black National Origin National Orgin
______________________________________________________________________________
Tropical Differential 76% 15% 78% 27%
______________________________________________________________________________
Equity Package 65% 25% 64% 46%
______________________________________________________________________________
Vacation Benefits 96% 58% 97% 70%
______________________________________________________________________________

According to plaintiffs' evidence, each of the disparities
shown in the table exceeds 1.96 standard deviations under a
two-tailed test of statistical significance. Pls. Br. at 19 (citing
Hirn Decl. pp 3, 4 (R. 9)). Many of the disparities are far in
excess of 1.96 standard deviations.14 Under our case law, this
level of statistical significance is sufficient to establish a prima
facie case of both disparate treatment and disparate impact.
See Berger, 843 F.2d at 1412; Palmer v. Shultz, 815 F.2d 84,
91-92 (D.C. Cir. 1987); see also Metrocare v. Washington
Metro. Area Transit Auth., 679 F.2d 922, 930 n.12 (D.C. Cir.
1982) (noting that statistics can be used for both disparate
impact and disparate treatment claims).

__________
13 See PCC Survey, summarized in Pls. Stmt. of Material Facts
(R. 9) pp 25-26, 37-38, 42-43; PCC Cross-Motion (R. 13), Ex. 62-
64.

14 For example, the disparity with respect to race was 4.24
standard deviations for the tropical differential, 2.8 standard devia-
tions for the equity package, and 2.7 for the vacation benefits. The
disparity with respect to national origin was 4.6 standard deviations
for the tropical differential and 2.46 for the vacation benefits. See
Hirn Decl. pp 3, 4 (R. 9).

C

As the plaintiffs have established a prima facie case of
disparate treatment, under the second step of McDonnell
Douglas "[t]he burden then must shift to the employer to
articulate some legitimate, nondiscriminatory reason" for the
challenged employment practice. McDonnell Douglas, 411
U.S. at 802. Similarly, under the disparate impact provisions
of Title VII, proof of a prima facie case shifts the burden to
the employer to demonstrate that the challenged practice is
job related and consistent with business necessity. 42 U.S.C.
s 2000e-2(k)(1)(A)(i); Griggs, 401 U.S. at 431.

The district court, however, pretermitted any further anal-
ysis under either theory after the prima facie stage. Al-
though it agreed that Title VII protects against discrimina-
tion "because of [an] individual's race ... or national origin,"
977 F. Supp. at 442 (quoting 42 U.S.C. s 2000e-2(a)(1)), the
court cut off the analysis of plaintiffs' disparate treatment
claim on the ground that the discrimination here was " 'be-
cause of' citizenship, not because of membership in a Title VII
protected class." Id. Stating that "[t]he Supreme Court
held in Espinoza v. Farah, that ... [Title VII] does not offer
protection from discrimination on the basis of citizenship," the
district court held that plaintiffs had failed as a matter of law
to make out a prima facie case of disparate treatment. Id. at
441 (citation omitted).

The district court's reliance on Espinoza was misplaced for
two reasons. First, although the Supreme Court did hold
that citizenship is not a facially-unlawful criterion for employ-
ment decisions, see 414 U.S. 86, 91 (1973), it also recognized
that "an employer might use a citizenship test as a pretext to
disguise what is in fact national-origin discrimination." Id. at
92. Title VII, the Court said, "prohibits discrimination on the
basis of citizenship whenever it has the purpose or effect of
discriminating on the basis of national origin." Id. That
principle was of no assistance to the Espinoza plaintiffs, who
alleged discrimination based on Mexican national origin: not-
withstanding the employer's citizens-only policy, there was no
evidence of discriminatory purpose or effect since more than

96% of its employees were of Mexican descent. Id. at 93.
Here, however, plaintiffs' claims of pretext and disparate
effect are not as easily brushed aside: the overwhelming
majority of those who receive the pay differential are whites
of non-Panamanian origin. See supra p. 15. If, as Espinoza
proclaimed, Title VII truly does "prohibit[ ] discrimination on
the basis of citizenship whenever it has the purpose or effect
of discriminating on the basis of national origin," then courts
must afford plaintiffs an opportunity to prove such a purpose
or effect. See also 29 C.F.R. s 1606.5(a) (EEOC regulation)
("[W]here citizenship requirements have the purpose or effect
of discriminating against an individual on the basis of national
origin, they are prohibited by [T]itle VII.").

Second, "citizenship" is simply not the basis upon which the
PCC differentiates, or even contends that it differentiates,
among its employees. All of the plaintiffs are, in fact, Ameri-
can citizens. Nor is the issue whether it was lawful for the
PCC to prefer citizens over noncitizens in 1976, the year the
tropical differential policy was announced, or to prefer them
in 1989, the year the equity package was cut off. As dis-
cussed above, the limitations period has run on those kinds of
claims. Instead, the plaintiffs' core contention is that the
PCC is engaged in a current, continuing violation of Title VII,
because today and every day it pays them less than it pays
others who are similarly situated. The question in this case,
then, is whether the PCC is unlawfully discriminating against
American citizens today, by maintaining a system of prefer-
ences based on whether they were citizens at an earlier time.
As the PCC itself describes its policies, it differentiates
among its employees based on the timing of their citizenship.
For that reason, Espinoza, a case in which the employer
simply preferred citizens over noncitizens, is not controlling.

The district court cut off the analysis of plaintiffs' disparate
impact claim on a different ground. Although it acknowl-
edged that the PCC's benefit-eligibility requirements may
have had a disparate impact, it dismissed the claim because
plaintiffs had presented "no evidence that the Defendant
acted with any unlawful discriminatory purpose." 977
F. Supp. at 442. That ruling was flawed both in law and in

fact. First, "[u]nlike disparate treatment cases, disparate
impact cases do not require a showing of discriminatory
animus on the part of the employer." McKenzie, 684 F.2d at
70 n.6 (citing Connecticut v. Teal, 457 U.S. 440 (1982)); see
International Bhd. of Teamsters, 431 U.S. at 336 n.15. Sec-
ond, plaintiffs did present evidence of discriminatory intent.
"[T]his court has squarely held that, even absent specific
anecdotal evidence of discrimination, statistical proof alone
may establish a prima facie case of intentional discrimina-
tion." Berger, 843 F.2d at 1413. And, as noted above, we
have deemed the 1.96 standard deviations shown here to be
sufficient to do so. Id. at 1412-13. Accordingly, the district
court's conclusion that plaintiffs failed to make out a prima
facie case of disparate impact, like its conclusion with respect
to plaintiffs' disparate treatment case, was in error.

D

The PCC offers us an alternative rationale, different from
those of the district court, for concluding that plaintiffs have
failed to establish a prima facie case of disparate treatment or
impact. To prove disparate treatment, the PCC notes, plain-
tiffs must show they were treated differently from other
similarly-situated members of a nonprotected class. But, the
PCC contends, "appellants were only similarly situated with
other locally-hired employees who became citizens after" the
dates specified by the PCC as required qualifications for
benefits. PCC Br. at 32 (emphasis omitted). Because plain-
tiffs "fail[ ] to identify a single employee of any race or
national origin who was naturalized after July 3, 1976, but
who nevertheless receives the tropical differential," they as-
sertedly cannot show disparate treatment. Id. Similarly,
because plaintiffs' statistical evidence fails to compare the
treatment of protected and nonprotected employees equally
"qualified" under the PCC's rules, the PCC contends plain-
tiffs' disparate impact case is also fatally flawed. At bottom,
defendant contends plaintiffs err in "lumping all PCC employ-
ees of a particular national origin together, regardless wheth-
er they were naturalized after the date the benefits were cut
off." Id. at 38.

 The PCC is correct, of course, that plaintiffs must demon-
strate they are treated less well than other employees who
are similarly situated. But that does not require us to
assume that the very factor plaintiffs attack as pretext is a
bona fide attribute of being situated similarly. To adopt such
a position would be to assume the very thing the McDonnell
Douglas test is aimed at ferreting out--namely, whether that
facially-neutral factor is indeed a pretext. To require plain-
tiffs to compare their situation to that of others disadvan-
taged by the same challenged factor would effectively elimi-
nate their opportunity to show pretext, because it would bar
them from ever passing the prima facie stage. See Segar v.
Smith, 738 F.2d 1249, 1276 (D.C. Cir. 1984) (noting that some
employer qualifications "may well serve as a veil of seeming
legitimacy behind which illegal discrimination is operating"
and that "[i]f so, measurement of the relation of such a factor
to an observed disparity would simply amount to a measure of
the amount of discrimination operating through the applica-
tion of the factor").

Similarly, requiring a plaintiff to "correct" his statistics to
account for timing of citizenship would render the disparate
impact provisions of Title VII nugatory. The gravamen of
plaintiffs' disparate impact claim is that timing of citizenship
is the factor that causes the disparate impact, whether it was
intended to have that effect or not. If we were to require
that the very factor that causes disparate impact be included
in the comparison for purposes of establishing a prima facie
case, we would effectively define disparate impact analysis out
of existence. See Berger, 843 F.2d at 1417-18 (rejecting
defendant's contention that racial disparity in union admis-
sions could be explained by minorities' inability to satisfy
union-established training requirement, since that require-
ment was precisely "the discriminatory practice at issue").

It is true that in order to eliminate the most common
nondiscriminatory explanation for a disparity--lack of qualifi-
cations--a plaintiff's prima facie case must take into account
the "minimum objective qualifications" for the position at
issue. Segar, 738 F.2d at 1274 (citing, inter alia, Valentino,
674 F.2d at 71); Valentino, 674 F.2d at 61 (citing Hazelwood

Sch. Dist. v. United States, 433 U.S. 299, 308 n.13 (1977)).
But that does not mean a plaintiff must take account of every
qualification recited by the employer, nor even of every
"objective" qualification. Rather, what the case law means by
"minimum objective qualifications" are those objective qualifi-
cations that can be shown to be truly required to do the job at
issue.

The seminal disparate impact case, Griggs v. Duke Power
Co., makes this conclusion inescapable. There, plaintiffs con-
tended that Duke Power's announced criteria for both hiring
and transfer to better-paid jobs--a high school diploma
and/or passing grade on a standardized intelligence test--had
a disparate impact on black applicants. There was no dispute
that these criteria were objective and "applied fairly to whites
and Negroes alike." 401 U.S. at 429. Nonetheless, the Court
held that plaintiffs had made out a violation of Title VII
because defendant had not shown that the criteria "bear a
demonstrable relationship to successful performance of the
jobs for which [they were] used." Id. at 431. "If an employ-
ment practice which operates to exclude Negroes cannot be
shown to be related to job performance," Chief Justice Burg-
er held, "the practice is prohibited." Id.

Similarly, in Dothard v. Rawlinson, the plaintiff sought
employment as a prison guard, but was rejected because she
could not meet the employer's minimum height (5'2") and
weight (120 lbs.) qualifications. 433 U.S. 321, 323-24 (1977).
She offered statistical evidence that these objective qualifica-
tions had a disproportionate impact on women, and the Court
agreed that her statistics established a prima facie case--
notwithstanding that the qualification standards were "facial-
ly neutral." Id. at 329-31. It then went on to consider
defendant's claim that it had rebutted the prima facie case by
showing that the height and weight requirements were "job
related" since they correlated "with the requisite amount of
strength thought essential to good job performance." Id. at
331. The Court rejected the rebuttal because defendant
"produced no evidence" of such a correlation. Id. at 331-32.

 This Circuit's cases follow the same pattern. In Goodrich
v. International Brotherhood of Electrical Workers, 712 F.2d
1488 (D.C. Cir. 1983), a female employee contended that her
employer paid men more than women for the same work.
The employer countered that the men were paid better
because they were in positions for which plaintiff could not
qualify--not because she was a woman, but because she was
not a union member. Id. at 1492. The district court granted
summary judgment on that basis, finding the employer's
nondiscriminatory criterion of union membership fatal to
plaintiff's case. Id. at 1490. This court, however, reversed
and remanded for trial. The purpose of a trial, we held, was
to test whether union membership really provided the "spe-
cial expertise" defendant claimed was necessary to succeed in
the higher-paid positions. Id. at 1493-94.

In Valentino v. United States Postal Service, we did find a
plaintiff's prima facie case insufficient because she "failed to
take into account minimum objective qualifications," namely
"specialized education and experience" required for the "high
level professional, administrative, and managerial positions"
at issue. 674 F.2d at 66-67. At the same time, however, we
"confine[d] our analysis to [such] high level" positions, id. at
68 n.16, noting that it would not apply for "jobs involving
skills 'many persons possess or can fairly readily acquire,' "
id. at 67 (quoting Hazelwood, 433 U.S. at 308 n.13). To the
same effect is our decision in Metrocare v. Washington
Metropolitan Area Transit Authority. See 679 F.2d at 930
("For some jobs, no particular qualifications are needed, and
an appropriate comparison group would be the local popula-
tion in general. But when the posts require managerial
capability or other expertise, the comparison group must be
the set of available minority persons with that expertise or
qualification.") (citations omitted); see also Hazelwood, 433
U.S. at 308 n.13 (noting that when "job skill" at issue is
"special qualification" like teaching experience, the compari-
son must be "to the smaller group of individuals who possess
the necessary qualifications," but that when the skill is one
like driving a truck "that many persons possess," comparison
to general population is appropriate).

 With this understanding of the meaning of the term, it is
plain that the timing of an employee's citizenship is not a
"minimum objective qualification" for the wage and benefit
preferences at issue here. There is no sense at all in which
such citizenship can fairly be said to be demonstrably "related
to job performance." Having become a citizen by 1976 does
not assist an employee in digging a ditch, guiding a barge, or
programming a computer. The plaintiffs in this case already
are employees of the PCC, and most have worked there since
before 1976, all the while doing work that otherwise would
"qualify" for the preference. The PCC has never suggested,
let alone shown, that plaintiffs' job performance has suffered
in any way because of their citizenship status.

Indeed, the PCC's own policies make clear that the timing
of citizenship is not a work-related qualification. As noted in
Part I, from 1984 to 1989 four plaintiffs received the PCC's
equity adjustment package; yet there is no claim that their
work was less acceptable than that of employees with earlier
citizenship who also received the package during the same
time period. See Berger, 843 F.2d at 1421 (holding that five-
month period in which employer did not insist on employment
qualification precluded claim that it was a "minimum objective
qualification," and noting that employer could not rely on a
qualification unless it "satisfies the bedrock requirements of
job-relatedness"); cf. Griggs, 401 U.S. at 431-32 (noting that
hiring and transfer requirements that were inapplicable to
some employees who nevertheless "perform satisfactorily ...
suggests the possibility that the requirements may not be
needed"). Even more telling, the PCC continues to make the
equity package and vacation benefits available to those who
have never become American citizens, as long as they were
recruited from outside of Panama. See 22 U.S.C. s 3646;
PCC Cross-Motion (R. 13), Exs. 20, 54, 67. Accordingly, it
cannot be said that citizenship, let alone 1976 citizenship, is
truly a job-related qualification for the PCC's pay prefer-
ences--unless by "qualification" we simply mean any qualifi-
cation an employer announces.

Because the PCC has not shown that its eligibility criteria
constitute "minimum objective qualifications" for the work

plaintiffs do, the plaintiffs' statistical comparisons are suffi-
cient to make out a prima facie case of both disparate
treatment and disparate impact. Accordingly, summary
judgment is inappropriate unless the PCC can satisfy its
burden to show a legitimate nondiscriminatory reason and
business necessity for the requirement. And even then,
plaintiffs must be given an opportunity to show that the
reason is pretextual or that there is an alternative that can
satisfy the employer's need in a nondiscriminatory fashion.
Because of its erroneous view of the law, the district court cut
short the analysis without undertaking any of these inquiries.

IV

The PCC argues that even if plaintiffs have established a
prima facie case, it has satisfied the second step of McDon-
nell Douglas by showing "a legitimate, non-discriminatory
reason for denying them benefits." PCC Br. at 33. Similar-
ly, the Commission contends that it has met the second
requirement of the disparate impact test by showing that its
"criteria for awarding benefits were job-related and consis-
tent with business necessity." Id. at 36. But what exactly is
the defendant's explanation for its eligibility requirements?

In places in its brief, the PCC appears to suggest that the
"timing of citizenship" is the legitimate, nondiscriminatory
explanation for the disparities of which plaintiffs complain.
The district court indicated that was its understanding as
well. See 977 F. Supp. at 441-42. But in fact, the PCC does
not rest its policy on a simple preference for long-time
citizens over more recent ones. Nor is it surprising that a
corporation wholly-owned by the United States government
would eschew such a naked preference for one category of
American citizens over another. In any event, for the rea-
sons discussed above, the timing of citizenship cannot satisfy
the "job-related" requirement of Title VII.

Rather than explain its pay disparity as the product of a
preference for the timing of its employees' citizenship, the
PCC ultimately rests instead on a policy of "grandfathering."
PCC Br. at 34. At one time, the Commission explains, any

citizen-employee was eligible for the tropical differential.
Had that policy continued, plaintiffs would have become eligi-
ble when they, too, became citizens. But in 1976, the PCC
stopped offering the differential to Panamanian hires. See
supra note 2. It decided, however, to grandfather those who
were receiving the differential as of that date--thus effective-
ly retaining the benefit for employees who were citizens as of
1976, but excluding those who would become citizens at a
later time. Id.

But re-labeling the policy as "grandfathering" cannot alone
satisfy the PCC's burden of producing evidence of a nondis-
criminatory reason for the practice, or of establishing a
business necessity for it. Just as the employer in Dothard
could not simply announce a height and weight policy, but
rather had to show how those criteria related to the strength
required for the job of prison guard, so must the PCC explain
how grandfathering is related to the work of the Canal
Commission.

The PCC has attempted to do that. It "preserved the
benefits for those locally-hired U.S. citizens who were already
receiving the benefits," the PCC explains, "in order to retain
those employees." PCC Br. at 36. Grandfathering, it con-
tends, was the "retention incentive" needed to ensure that its
employees stayed on the job. Id.15

The following sections consider the serious attacks plain-
tiffs have leveled at the credibility of this retention rationale.
Those attacks are aimed at showing that the PCC's proffered
rationale is in fact a pretext for paying benefits to its white
non-Panamanian employees while denying them to black Pan-

__________
15 The PCC also implies a second rationale for grandfathering,
namely, "to preserve the morale of innocent employees who are
victims of lowering wage scales." PCC Br. at 34 (quoting Canton v.
Canal Zone Gov't, 522 F. Supp. 1, 12 n.17 (D.C. Z. 1981) (discussing
concept in a different context)). But the PCC does not stress this
point, no doubt because the response is obvious: Why, a reasonable
juror might ask, is the morale of those who receive the benefit more
important than the morale of the plaintiff employees? And why are
the plaintiffs any less "innocent"?

amanians, the great majority of whom did not become U.S.
citizens until after 1976. See supra note 6. They also are
aimed at showing defendant's policy unjustified by business
necessity or achievable by plaintiffs' suggested nondiscrimina-
tory alternative of broadening eligibility to all U.S. citizen
employees. See Pls. Br. at 45.

A

The PCC's retention rationale is certainly not facially ille-
gitimate. That, however, is not the question. The question is
whether the plaintiffs have cast such doubt on its credibility
that a reasonable juror could regard it as pretext and infer a
discriminatory motive, or that a reasonable factfinder could
conclude it was inconsistent with business necessity or achiev-
able in a nondiscriminatory way. That conclusion seems
unavoidable here. As plaintiffs point out, the PCC has to
date offered no evidence that its pay and benefit enhance-
ments were ever necessary for retention in the first place,
and certainly no evidence that their maintenance is necessary
for continued retention of those who receive them. It is not
as if "home" for most benefit recipients is the continental
United States, and that they are thus more likely than the
plaintiffs to leave Panama if they do not receive the pay
differential or the free vacation flights. To the contrary,
plaintiffs have proffered evidence that "home" is just as likely
to be the Panamanian isthmus for the vast majority of those
receiving the differential as it is for the plaintiffs.16 Like
plaintiffs, many of those who receive the benefits are second-
and third-generation Canal employees. Pls. Br. at 37.

Moreover, just as the PCC has offered no support for its
contention that its policies are required to ensure retention of
those who receive the preferential benefits, it has offered no

__________
16 The PCC's own survey showed that 429 of the 464 employees
who were receiving the tropical differential in 1995 were already
residing in Panama at the time they were recruited to work for the
Commission. Only 35 were recruited from off-isthmus. Pls. Stmt.
of Material Facts (R. 9) p 27 (citing Regist Decl. p 14 & Attach. A);
Pls. Br. at 38.

evidence to suggest that retention of employees like the
plaintiffs is any less important to its business. Nor has it
offered evidence that the benefits are any less necessary for
retention of the plaintiffs. Indeed, one of the plaintiffs has
already quit the PCC and moved to Florida. Id. at 39.

B

The biggest problem with the retention rationale, however,
is that even if accepted, it can only explain half of the PCC's
eligibility criteria. Although the Commission stresses the
criterion of date-of-citizenship as consistent with a grandfa-
thering rationale, the plaintiffs correctly point out that none
of the three benefit programs is actually limited to employees
who were citizens as of a certain date. Timing of citizenship
is one way to qualify, but it is not the only way. As the PCC
concedes, the tropical differential is also available to "new
hires" from outside of Panama, regardless when they became
citizens. PCC Br. at 5-6; see 35 C.F.R. s 251.31(b)(1)(i).
And the equity package and travel benefits are available to
new hires from outside of Panama, even if they never become
American citizens. See 22 U.S.C. s 3646; PCC Cross-Motion
(R. 13), Exs. 20, 54, 67.

Needless to say, PCC's new-hire criterion cannot be ex-
plained by a retention rationale, since the new hires never
previously worked for the company. For this criterion, the
PCC must turn to a different "legitimate, nondiscriminatory
reason." The new-hire criterion is justified, the Canal Com-
mission contends, because it is needed for "recruiting" em-
ployees. PCC Br. at 34.

Like retention, there is nothing inherently suspect about a
recruitment rationale. But as the plaintiffs note, to date the
PCC has not offered any evidence that the benefits contested
here are or were necessary for recruitment. Where is the
evidence, they ask, that the base salaries offered by the PCC
are or were insufficient to recruit the necessary workforce?
Where is the evidence that the PCC has even considered the

question? Indeed, plaintiffs point out that the only evidence
in the record is to the contrary, i.e., that the PCC has (and
has had) no need for off-isthmus recruitment at all. An
affidavit from the PCC's own Personnel Director explains
that the reason the tropical differential was originally
dropped in 1976 was that "in general, there were sufficient
numbers of qualified applicants available locally that made it
unnecessary to grant the differential to all U.S. citizens as a
recruitment and retention incentive." Pls. Br. at 40 (quoting
Mercier Aff.); see also Comptroller General, Report to the
Subcommittee on Panama Canal 102 (1975) (noting that the
tropical differential was not needed for across-the-board re-
cruitment because "[q]ualified applicants ... are available
locally for most skills") (quoted in Pls. Br. at 37).

C

The equity adjustment package presents a particularly
good example of the weakness, and shifting nature, of the
rationales defendant offers in support of its benefit policies.
As part of the Panama Canal Treaty negotiations, the United
States agreed that in 1984 it would close commissaries that
previously had offered goods to PCC citizen-employees at
discounted prices. PCC Br. at 6-7; Pls. Br. at 14. To offset
the increase in employee cost-of-living attributable to closure,
Congress authorized the PCC to pay a cost-of-living allow-
ance. Congress authorized payment to "each officer and
employee ... who is a citizen of the United States and was
employed by the Panama Canal Company ... on September
30, 1979," regardless of place of recruitment, as well as to
anyone recruited "outside the Republic of Panama" after that
date, regardless of citizenship. 22 U.S.C. s 3646 (emphasis
added). Under that provision, between 1984 and 1989 the
PCC paid the equity adjustment package to five of the
plaintiffs.

On December 29, 1989, as one his final acts before depart-
ing Panama, the last American administrator of the Canal
terminated the equity adjustment package for any employee
originally hired from within Panama who was not a citizen

before October 1, 1984. As a result, four plaintiffs lost their
benefits. As they quite rightly note, the PCC has not shown
how the need to provide retention incentives explains the
termination of their benefits. Indeed, cancellation is argu-
ably inconsistent with that grandfathering-based rationale.

Unable to rely on a grandfathering/retention rationale, the
PCC turns instead to another: the equity adjustment pack-
age, the PCC contends, "was meant only to compensate
employees who had lost [commissary] benefits." PCC Br. at
8 (emphasis added). Because plaintiffs were not citizens
during the period the commissaries were open, they "never
received any [commissary] benefits." Id. Hence, the PCC
contends, plaintiffs should never have been given the equity
adjustment package in the first place, and the Commission
was justified in terminating the undeserved "windfall" they
had been receiving for four years. Id.

But this compensation explanation appears inconsistent
with the new-hires eligibility criterion discussed above. If
the equity allowance were meant only for those who previous-
ly had the benefit of shopping at the commissaries, why does
the PCC make it available to those whom the Commission
newly hires from outside of Panama? Those new hires, by
definition, never received the pre-1984 commissary benefits.
And why does the PCC extend this offer to new hires only if
they do not come from Panama?

To respond, the PCC retreats to a variant of the recruit-
ment rationale: "Although these [newly-hired] employees
never received any [commissary] benefits, they receive the
equity package as compensation for the loss of access to
goods and services they received before coming to Panama."
Id. at 8. In other words, and swallowing its previous words,
the PCC contends that the equity adjustment package was
really not "meant only to compensate employees who had
lost" commissary benefits, id. at 8; it was also meant to
compensate newly-hired employees who had lost the benefit
of lower-priced goods in their home countries. The plaintiffs
are not eligible on this theory either, the PCC insists, because
they have always "had to pay Panamanian prices, for Pana-

manian goods, from a Panamanian wage." Id. (quoting
Anderson, 977 F. Supp. at 441 n.2).

The plaintiffs cast substantial doubt on the credibility of
this new compensation/recruitment explanation as well.
Where is the evidence, they ask, that the new hires did pay
lower prices at home? Where is the evidence that the PCC
ever conducted the kind of cost comparison that would justify
such a policy? To date, the PCC has offered no evidence on
either score. This is hardly surprising since at bottom the
PCC's across-the-board policy--in which every new non-
Panamanian hire is eligible but no Panamanian hire ever is--
appears to rest on the unlikely proposition that Panama has
(and has long had) the highest cost of living in the world.

Finally, plaintiffs point to another flaw in the PCC's prof-
fered rationale. Notwithstanding its references to a "new
hires" criterion, the PCC is actually rather expansive in its
definition of the word "new." It not only makes the equity
adjustment package available to those newly-hired from off-
isthmus, it also makes it available to anyone, citizen or not,
hired from outside of Panama after September 30, 1979. See
22 U.S.C. s 3646; PCC Cross-Motion (R. 13), Exs. 20, 54.
On the PCC's rationale, how can it justify providing the
package to these not-new, not-citizen hires? Like the plain-
tiffs, they never received the original commissary benefits
(because they were not citizens during the commissary peri-
od), making the grandfathering/retention rationale inapplica-
ble. But also like the plaintiffs, these hires were not enjoying
the benefit of lower-cost goods in their home countries when
the commissaries closed in 1984. Just like the plaintiffs, they
were working in Panama, "pay[ing] Panamanian prices, for
Panamanian goods, from a Panamanian wage" from 1979 to
1984. Hence, the compensation/recruitment explanation is
also unavailable. A reasonable factfinder could therefore
conclude that only one remaining line divides these employees
from the plaintiffs: they are not of Panamanian national
origin. That, however, is precisely the line the law forbids
the PCC to draw.

 V

The preceding analysis persuades us that the district court
erred in granting summary judgment and dismissing plain-
tiffs' Title VII complaint. With respect to the claim of
disparate impact, we have noted that the court erred in ruling
that proof of discriminatory intent was required. According-
ly, because Part III establishes that plaintiffs' statistical
evidence is sufficient for a prima facie case, and Part IV
establishes that on the present record a reasonable factfinder
could find defendant's pay policies unjustified by business
necessity (or rebutted by plaintiffs' as-yet unchallenged alter-
native of broadening eligibility to all U.S. citizen employees),
reversal of summary judgment on the disparate impact claim
is required.

For plaintiffs' disparate treatment charge to reach the jury,
they must show that a reasonable juror could find intentional
discrimination. Aka, 156 F.3d at 1289-90. In deciding
whether intentional discrimination can be inferred, the court
considers "the combination of (1) the plaintiff's prima facie
case; (2) any evidence the plaintiff presents to attack the
employer's proffered explanation for its actions; and (3) any
further evidence of discrimination that may be available to
the plaintiff." Id. at 1289.

Part III demonstrates that when properly evaluated, the
plaintiffs' prima facie case of disparate treatment is strong.
Not only have plaintiffs shown they were treated differently
from similarly-situated, white non-Panamanians, but they
have shown the statistical disparities to be large--large
enough alone to permit an inference of discriminatory intent.
Similarly, Part IV demonstrates that plaintiffs' attack on the
PCC's proffered explanations for that treatment is also
strong, providing a reasonable basis for viewing them as
pretexts. As we recognized in Aka v. Washington Hospital
Center, such a discrediting of an employer's explanations
"may, together with the elements of the prima facie case,
suffice to show intentional discrimination." 156 F.3d at 1293
(quoting St. Mary's Honor Ctr. v. Hicks, 509 U.S. 502, 511
(1993)). In this case, they plainly do suffice. Hence, we need

not even consider plaintiffs' proffer of further evidence that
the PCC's eligibility criteria represent "nothing more than a
thinly veiled continuation of the 'gold' and 'silver' system that
segregated native-born white U.S. citizen employees from
black employees by pay and every other aspect of Canal
life"--a contention plaintiffs will have the opportunity to
prove at trial. Pls. Br. at 9; see McKenzie, 684 F.2d at 72
("Evidence of past practices may illuminate present statistics,
or present patterns of behavior."). Because on the current
record it is impossible to conclude that no reasonable juror
could find intentional discrimination, the grant of summary
judgment on the disparate treatment claim must also be
reversed.

Of course, plaintiffs' attack on defendant's rationales for its
wage and benefit policies may in the end prove mistaken. So
far, however, plaintiffs' contentions stand largely unrebutted
because the district court did not require the Canal Commis-
sion to offer a rebuttal in order to keep plaintiffs from a trial.
On remand the Commission will have the opportunity, and
the obligation, to do so.

Reversed and remanded.