The opinion of the court was delivered by: GAGLIARDI
Plaintiffs commenced this action against Ogilvy & Mather, Inc. ("0&M"), an advertising agency, alleging employment discrimination based on sex in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000 et seq. ("Title VII"). The case was tried without a jury from October 3, 1983, through November 15, 1983. In its opinion, Rossini v. Ogilvy & Mather, Inc., 597 F. Supp. 1120 (S.D.N.Y. 1984), the court discussed but did not rule on the claim of salary discrimination. This decision constitutes the court's findings of fact and conclusions of law, pursuant to Rule 52(a), Fed. R. Civ. P., on the salary discrimination claim.
The court reserved decision on the claim of salary discrimination to allow revision of the relevant trial exhibits to incorporate previously omitted data on 0&M "officers." Such revisions became necessary when the court found erroneous a prior ruling that precluded plaintiffs' discovery of the personnel files of 0&M's officers.
The court directed that the additional evidence would be received only to permit modification of existing exhibits to reflect the addition of officer data.
In order that neither side can take advantage of the initial erroneous discovery ruling, the court directs that, to the extent possible, the regression studies including officers replicate those based solely upon non-officers. In particular, neither side is to use this reopening of the evidence as an opportunity to add or delete contested independent variables or to alter questioned data used for non-officers.
Rossini v. Ogilvy & Mather, Inc., supra, 597 F. Supp. at 1167.
Despite this clear instruction, both sides have chosen to act as if the court were continuing trial of the salary discrimination claim. Both have unnecessarily submitted exhibits which do not comply with the court's order. The defendant has introduced studies which add variables to previous tables. Plaintiffs have submitted tables which incorporate data specifically excluded at trial. The studies that do not conform to the court's order accordingly are excluded from consideration.
The evidence introduced at trial on the issue of salary discrimination is summarized in the November 1984 opinion, and will not be repeated here. In addition, the court now has before it plaintiffs' direct report (ex. P-1-A) ("plaintiffs' 1985 report"), plaintiffs' reply report (ex. P-1-B) ("plaintiffs' 1985 reply"), defendant's direct report (ex. D-703) ("defendant's 1985 report), and defendant's reply report (ex. D-704) ("defendant's 1985 reply"), all of which incorporate the officer data. The parties have also submitted briefs addressing the results of the 1985 reports and a stipulation filed June 24, 1985, "in lieu of further expert testimony."
I. O&M's Objections to Plaintiffs' Studies
A. Relevance of the Statute of Limitations
0&m argues that little weight should be given to the salary studies that include employees hired prior to the limitations date of May 30, 1975. It is true that primary consideration should be given to studies that reflect only 0&M's employment decisions after that date, i.e., regression analyses of salaries of employees hired on or after May 30, 1975, or of salary increases for all 0&M employees after that date. See Sobel v. Yeshiva University, 566 F. Supp. 1166 (S.D.N.Y. 1983); Melani v. Board of Higher Education of the City of New York, 561 F. Supp. 769 (S.D.N.Y. 1983) (hereinafter Melani v. Board). Some consideration must be given, however, to studies of salaries of all 0&M employees, even though inclusion of those hired before May 30, 1975, means that the data necessarily reflect employment decisions both preceding and following the limitations date.
Such studies may provide background evidence relevant to the claim of actionable salary discrimination within the limitations period. See United Airlines v. Evans, 431 U.S. 553, 97 S. Ct. 1885, 52 L. Ed. 2d 571 (1977). Moreover, where, as here, a pattern and practice of discrimination is alleged, pre-limitations date employment decisions may be actionable as part of a continuing violation of Title VII which continued into the limitations period. See Melani v. Board, supra, 561 F. Supp. at 780-81.
0&m asserts that pre-limitations date salary decisions should serve neither as background evidence nor as proof of a pattern and practice of salary discrimination, since in 1976 0&M changed its procedures for setting salaries. The memoranda prepared and testimony given by Frances Devereux, who became director of personnel at that time, indicate that the female presence among the salary decision-makers was increased, but do not necessarily establish that the procedures followed after 1976 altered prior practice in other ways. Before 1976, salary decisions were made by the executive committee of the board of directors, an almost exclusively male group of ten people. By 1976, salary decisions were being made by a smaller salary committee composed of Devereux; Bill Phillips, a top 0&M official; and either Jules Fine, for review of media department salaries, or Reva Korda, for review of creative department salaries.
Statistical evidence, however, supports 0&M's position that salary practices differed for the pre- and post-May 30, 1975, periods. Plaintiffs prepared a Chow test to assess whether there are statistically significant differences between the regression models arrived at for salaries of pre-limitations date hires and those calculated for post-limitations date hires. Plaintiffs' amended Chow test (incorporating officer data) indicates statistically significant differences between regressions for personnel hired before and after the limitations date.
Thus, the pre-May 30, 1975, salary decisions provide relatively little useful background evidence and little indication of a continuing employment practice.
This does not mean that the court should disregard entirely salary studies which cover all 0&M employees, however. Plaintiffs have argued that all post-limitations date salaries are relevant to the issue of whether actionable salary discrimination exists, even when they reflect pre-limitations date employment decisions. As the District of Columbia Court of Appeals stated in Valentino v. United States Postal Service, 218 U.S. App. D.C. 213, 674 F.2d 56, 71 n.26:
Statistics tuned to the proper time period are more probative than statistics not so tuned, but categorical rejection of the latter is not warranted. See EEOC v. American Nat'l Bank, 652 F.2d 1176, 1188-89 (4th Cir. 1981); Movement for Opportunity and Equality v. General Motors Corp., 622 F.2d 1235, 1244-45 (7th Cir. 1980); Vuyanich, 505 F. Supp. at 360; B. Schlei & P. Grossman, supra, at 326-27. See also Hazelwood, 433 U.S. at 308 n.13, 97 S. Ct. at 2742 n.13.
Further, the weight of authority holds that where pay differentials are based exclusively on gender, each discriminatory paycheck constitutes in effect a new violation of Title VII. See Bartelt v. Berlitz School of Languages of America, 698 F.2d 1003, 1004-05 (9th Cir. 1983), cert. denied, 464 U.S. 915, 104 S. Ct. 277, 78 L. Ed. 2d 257 (1984); Hall v. Ledex, Inc., 669 F.2d 397, 398-99 (6th Cir. 1982); Higgins v. State of Oklahoma ex. rel. Okl. Emp. Sec., 642 F.2d 1199, 1200 n.2 (10th Cir. 1981); Boyd v. Madison County Mutual Insurance Co., 653 F.2d 1173, 1176-77 (7th Cir. 1981), cert. denied, 454 U.S. 1146, 71 L. Ed. 2d 299, 102 S. Ct. 1008 (1982); Parker v. Baltimore & Ohio Railroad Co., 555 F. Supp. 1177, 1182 (D.D.C. 1983); Licari v. National Maritime Union, 21 Fair Empl. Prac. Cas. 1638 (S.D.N.Y. 1979); but see Sobel v. Yeshiva University, supra, 566 F. Supp. at 1188 n.57.
The Court of Appeals for the Second Circuit in Title VII class actions has examined together salaries of employees hired before and after the relevant limitations date, but has carefully scrutinized any showing of disparity that results from the inclusion of pre-limitations date hires. In Coser v. Moore, 739 F.2d 746 (2d Cir. 1984), the court had before it regression studies indicating no gender-based disparity in raises after the limitations date or in gross salaries of employees hired after the limitations date. Rather than simply find no discrimination on the basis of those studies, the court looked at the broader studies, which "arguably show[ed] that defendants discriminated with respect to salary before [the limitations date] and that a residual effect of that discrimination continue[d] to exist." Id. at 754. The court then found, however, that the pre-limitations hires were "a very small group" and that any salary difference attributable to them disappeared when certain unique categories of employees" were excluded.
Such careful scrutiny is appropriate here, where the statute of limitations properly should insulate from review certain salary differences which result from employment decisions made prior to the limitations date. Consider the hypothetical case of similarly qualified male and female account executives who both earned $15,000 in April, 1975. On May 1, 1975 (prior to the limitations date), the man, solely on the basis of his gender, was promoted to account supervisor, a position with somewhat more responsibilities, and given a raise in recognition of those responsibilities. The gender-based promotion decision is not a continuing violation of Title VII. Assuming no pattern and practice of discrimination, the promotion is protected from review by the statute of limitations. In addition, the change in responsibilities which results is a legitimate basis for a post-May 20, 1975, salary differential. Cf. Ste. Marie v. Eastern Railroad Association, 650 F.2d 395, 400-02 (2d Cir. 1981) (no violation of Title VII where apparent salary discrimination resulted from disproportionate appointment of men to technical and Managerial Positions prior to limitations date). Since the legitimacy of the salary discrepancy derives from the differences in job duties, one way to screen out any substantial effect from alleged discrimination which is no longer actionable may be to control for job title (as a measure of job duties) in studies which include employees hired before the limitations date.
In sum, the court will give some consideration to the regression studies that cover employees hired before May 30, 1975. Those studies, however, will be evaluated with special care so that the court does not treat as evidence of actionable discrimination salary differences resulting from pre-limitations date employment decisions that themselves do not constitute continuing violations.
B. Constructed Data for Age at Highest Degree
0&m argues that plaintiffs inaccurately constructed data in a manner which seriously undermines their regression analyses. For many of their studies,
plaintiffs' expert utilized an independent variable controlling for an 0&M employee's experience as calculated from a presumed age at completion of formal education. For example, in some cases plaintiffs' expert assigned as the age at highest degree age 18 for high school graduates, age 20 for junior college or technical school graduates, age 22 for college graduates and age 24 for those with graduate degrees. In certain other cases, age 18 was assigned as the age at highest degree for anyone who did not graduate from college.
0&m established at trial that it had previously transmitted to plaintiffs personnel files indicating the actual dates of graduation for many of the 0&M employees for whom plaintiffs had constructed such data. For example, studies in the 1983 "yellow report" (plaintiffs' 1983 submission entitled "Revised Tables to Report and Reply Report of Donald E. Wise") that included 449 0&M employees utilized constructed data on experience for 168 employees whose personnel files indicated their actual dates of graduation. For those 168, plaintiffs' constructed information was erroneous in 120 (approximately 72%) of the cases. Plaintiffs' 1983 Reply Report used constructed data for 239 employees, 79 of whom had their actual date of graduation indicated in their personnel files. In approximately 82% of the cases in which such information was available, the constructed date of graduation differed from the real date.
Where errors in the data base are "egregious," the value of studies based on the data is severely limited. Such gross errors render the studies suspect even in the absence of a showing that the mistakes are "systematic," thereby affecting the "accuracy of the signal of whether or not group [race or gender] status is being taken into account by the employer. . . ." Vuyanich v. Republic National Bank of Dallas, 505 F. Supp. 224, 306 (N.D. Tex. 1980); cf. Melani v. Board, 561 F. Supp. at 780 (missing data for 20% of employees in regression analysis not of a magnitude to undermine plaintiffs' prima facie showing). In those instances where plaintiffs had access to the employee's actual date of graduation, the error rate in the constructed data approaches the egregious. There is no basis for an inference that the data constructed for the remaining employees were any more accurate.
Moreover, this is not an instance in which "'plaintiffs cannot legitimately be faulted for gaps in their statistical analysis [because] the information necessary to close those gaps was possessed only by defendants and was not furnished either to plaintiffs or to the Court.'" Trout v. Lehman, 226 U.S. App. D.C. 357, 702 F.2d 1094, 1102-03 (D.C. Cir. 1983), vacated on other grounds, 465 U.S. 1056, 104 S. Ct. 1404, 79 L. Ed. 2d 732 (1984), quoting Trout v. Hidalgo, supra, 517 F. Supp. at 883; cf. Melani v. Board, supra, 561 F. Supp. at 780 n.18 (where defendant stopped collecting relevant employee data during the course of Title VII litigation, plaintiffs' studies not flawed by failure to include that information). Here, in many instances, defendant had provided plaintiffs with accurate information prior to trial and there was no need for constructed data.
The court concludes that errors in the constructed graduation data seriously undermine the value of plaintiffs' Tables 1 through 4, and Tables VI-1 and VI-2.
The problems with the constructed data also limit the weight to be accorded to Table 6.
C. Omission of Employees Departing in 1975, 1976, or 1977
0&m argues that plaintiffs' data base is seriously flawed because it omits all professional employees (other than officers) who left 0&M in 1975, 1976, or in 1977. Testimony at trial established that plaintiffs' data base was limited to the 0&M employees appearing in the PERS 3600 tape, that is, to employees who were working for 0&M in 1978, 1979 or 1980. Accordingly, Plaintiffs' studies based on their own data include only 449 non-officer employees, and omit as many as 300 employees who left 0&M between 1975 and 1978.
The court finds that this omission casts great doubt upon the utility of the studies based on plaintiffs' own data. The omission is serious, verging on the egregious, because 0&M provided plaintiffs with the personnel files of employees not included on the PERS 3600 tapes. 0&M's data base included those employees, utilizing information which was gathered directly from the personnel files. Plaintiffs' studies premised on their own data base are thus of limited evidentiary value.
D. Appropriate Measure of Statistical Significance
0&m contends that plaintiffs' regression studies do not reflect a level of statistical significance sufficient to establish a prima facie case of intentional sex discrimination. 0&M asserts that the court should be hesitant to draw an inference of discrimination from any salary disparity with a statistical significance of less than 3 standard deviations.
In Hazelwood School District v. United States, 433 U.S. 299, 311, 53 L. Ed. 2d 768, 97 S. Ct. 2736 n.17 (1977) (emphasis added), the Supreme Court compared the actual number of black teachers hired by the defendant with the number of black teachers one would expect, by the laws of probability, given the labor pool and under an unbiased hiring system:
[T]he difference between the observed number of 15 Negro teachers hired . .. would vary from the expected number of 62 by more than six standard deviations. Because a fluctuation of more than two or three standard deviations would undercut the hypothesis that decisions were being made randomly with respect to race Castaneda v. Partida, supra,, 430 U.S. at 497 n.17, . . . these statistical comparisons would reinforce rather than rebut the [plaintiff's] other proof. If, however, the 5.7% areawide [black population] figure is used, the expected number of Negro teachers hired . . . of 23 would be less than 2 standard deviations from the observed total of 15.
[I]t appears that well short of three standard deviations the probability levels for chance as explanation [for a disproportionately low number of minority employees] have already dropped far below the point at which courts of law--concerned with proof by the "greater weight" or "preponderance " of the evidence--would presumably have discarded the hypothesis of chance. Just short of two standard deviations--specifically at 1.96 -- the probability of chance is only 5 in 100; at just over two and one half, it is only 1 in 100; by three it is less than 1 in 100. W. Hays & R. Winkler, Statistics : Probability, Inference and Decision 218-19, 381-82 (1971). For this reason, authority can be found for the proposition that most social scientists, applying laboratory rigor to rule out chance as even a theoretical possibility rather than the law's rougher gauge of the "preponderance of the evidence," are prepared to discard chance as an hypothesis when its probability level is no more than 5%, i.e. at approximately two standard deviations. Id. at 394.
From all this we conclude that courts of law should be extremely cautious in drawing any conclusions from standard deviations in the range of one to three. Above this range, with standard deviations of more than three the analysis may perhaps safely used absolutely to exclude chance as a hypothesis, hence absolutely to confirm the legitimacy of an inference of discrimination based upon judicial appraisals that disparities are, to the legally trained eye, "gross." . . . . Within the range of one to three standard deviations, where the probability of chance as explanation for revealed underrepresentation declines precipitately from only 5% at two standard deviations to less than 1% at three, we do not see how a court can properly find the only other hypothesis--discrimination-- dispelled by this analysis alone.
In that case, the court, on the basis of minority hiring figures reflecting standard deviations from one to three, reversed the district court's finding of no discrimination. Nevertheless, EEOC v. American National Bank has been cited by some courts and by 0&M for the proposition that courts should also exercise "extreme caution" in drawing an inference of intentional discrimination from studies reflecting standard deviations in the range of 1 to 3.
See EEOC v. Federal Reserve Bank of Richmond, 698 F.2d 633, 647-48 (4th Cir. 1983), rev'd on other grounds sub nom. Cooper v. Federal Reserve Bank of Richmond, 467 U.S. 867, 104 S. Ct. 2794, 81 L. Ed. 2d 718 (1984); Gay v. Waiters' and Dairy Lunchmen's Union , 694 F.2d 531, 551 (9th Cir. 1982). 0&M contends that, in light of those decisions, even those of plaintiffs' studies which are not flawed by the problems described above do not establish a prima facie case because they generally reflect student t values lower than three.
The court finds that the cases citing EEOC v. American National Bank, supra, do not purport to create a general Title VII rule that a prima facie case of intentional discrimination can be established through statistics only where the figures indicate disparities significant at the confidence level reflected by three or more standard deviations. In EEOC v. Federal Reserve Bank of Richmond, supra, the court found that plaintiffs had not established a prima facie case of discriminatory promotions where properly calculated standard deviations for four years of employment figures were all less than two. In Gay v. Waiters' Union, supra, the Ninth Circuit found that plaintiffs had not established their respective individual cases of discriminatory hiring, where the standard deviation for the variance between the actual and expected numbers of minority hires at one hotel was 2.46 and at another was 1.30. In the absence of significant anecdotal evidence of intentional discrimination, the statistical disparities were not sufficient to establish the discriminatory intent required for plaintiffs' disparate treatment cases.
While courts evaluating salary and work force statistics in Title VII suits have limited the weight given to disparities significant at levels below two standard deviations, see Sobel v. Yeshiva University, supra, 566 F. Supp. at 1173-74, they have not required plaintiffs to show disparities significant at three standard deviations or more to establish a prima facie case of discrimination. See Segar v. Smith, 238 U.S. App. D.C. 103, 738 F.2d 1249 (D.C. Cir. 1984), cert. denied, 471 U.S. 1115, 105 S. Ct. 2357, 86 L. Ed. 2d 258, 53 U.S.L.W. 3824 (May 20, 1985) and cases cited therein. Accordingly, this court will consider those studies those student t values ...