Equal Employment Opportunity Commission v. The Rath Packing Company

Rath Packing Company (Rath) appeals and the Equal Employment Opportunity Commission (EEOC) cross-appeals from a final judgment entered in the District Court for the Southern District of Iowa in an action brought pursuant to 42 U.S.C. Sec. 2000e et seq. (1982) (Title VII). The district court found that Rath's subjective hiring practices resulted in discrimination against women and were not justified by business necessity. The district court upheld Rath's no-spouse rule as justified by business necessity. The district court awarded backpay, post-judgment interest and affirmative injunctive relief. EEOC v. Rath Packing Co., No. 77-57-D, slip op. at 7 (S.D.Iowa Feb. 10, 1984).

For reversal Rath argues that (1) the action should have been automatically stayed under 11 U.S.C. Sec. 362(a) of the Bankruptcy Act, (2) the district court abused its discretion in denying a stay under 11 U.S.C. Sec. 105 and 28 U.S.C. Sec. 1651, (3) the district court's judgment violated 11 U.S.C. Secs. 362(b)(5), 502(b) and 1129 because the judgment enforces a money judgment and imposes post-judgment interest, (4) the district court erred in finding a lack of business necessity for Rath's hiring practices, and (5) the district court abused its discretion in awarding backpay in light of Rath's precarious financial condition. Rath also appeals a final order entered on March 14, 1985, denying Rath's Fed.R.Civ.P. 60(b) motion.

EEOC on cross-appeal argues that the district court erred (1) as a matter of law and fact in concluding that Rath's no-spouse rule was justified by business necessity, (2) in denying retroactive seniority, prejudgment interest, and full costs to EEOC, and (3) in not calculating the class backpay award on the basis of the availability of female workers in the general population of Louisa County, Iowa.

For the reasons discussed below, we affirm in part, reverse in part and remand this case for further proceedings consistent with this opinion.

Rath, an Iowa corporation, is engaged in the business of slaughtering hogs and processing the meat products obtained from the hogs. Rath has its principal plant in Waterloo, Iowa, and a limited operation in Columbus Junction, Iowa. The Columbus Junction plant, the subject of this litigation, is divided into 12 departments: hog kill, hog cut, loading, sanitation, trim, inedible rendering, yards, smoking, curing, packing, maintenance and miscellaneous gang. More than half of the job classifications at the Columbus Junction plant for the period from September 1, 1970, to August 31, 1979, were in the kill and cut departments. These jobs were considered the least desirable jobs in the plant but were the highest paid.

Rath's Columbus Junction facility employed approximately 250 persons; 50% of the employees were related to one another and 95% were male. The population of Columbus Junction is approximately 1500 persons.

Stipulated statistics established that 554 persons applied to Rath for employment from January 1, 1973, to February 15, 1978. During this period seven (or 7.39%) of the 95 female applicants (who were not spouses of current employees) were hired. Twenty-six additional female applicants were denied employment because they were spouses of current employees. Information concerning applications filed after February 15, 1978, is not available.

The United Food and Commercial Workers,1 AFL-CIO (formerly Amalgamated Meatcutters and Butchers Workmen of North America), District Local No. 431 (Union), was the exclusive bargaining representative for plant employees at the Columbus Junction plant. The collective bargaining agreements governing the plant required that where possible Rath would promote or transfer from within rather than hire from without. When a vacancy occurred, the vacancy was posted so that employees in that department could bid. If there were no bids, persons in other departments could bid. If no one in another department bid, then the employee with the least seniority in the department where the vacancy occurred was "forced to" the job. If there was no employee to "force to" the job, then a new employee was hired. Rath had no established procedure for giving notice of vacancies to the public.

Rath's office manager, Walter McFarland, was responsible for accepting and maintaining applications and selecting applicants for employment. The plant superintendent had the authority to overrule McFarland's choice of applicants but seldom did so. Rath had no written or otherwise established selection guidelines and McFarland was unable to identify what information was deemed significant in evaluating and selecting applicants. McFarland expressly discounted age, height, weight, prior experience, and work history as being critical in the selection of new employees. McFarland, however, stressed the importance of getting the right person for the job because the person could be assigned to any job in the plant.

In August 1973 Rath prospectively implemented a no-spouse rule prohibiting the employment of spouses of Rath employees. From approximately 1966 to the time of trial, Rath employed seven married couples at the Columbus Junction plant.

EEOC filed this suit in September 1977. The suit was based on a charge filed on December 15, 1975, by Mary Turner, who alleged that Rath unlawfully refused to employ her because of her sex. EEOC alleged in its complaint that Rath refused to hire women at its Columbus Junction plant and that Rath's policy of not hiring spouses of employees excluded a disproportionate number of women from employment. EEOC sought injunctive relief, full backpay with interest, and costs.

The action was bifurcated and separate trials on liability and relief were held. After a four day trial in July 1980 on liability, the district court found that Rath discriminated against women in hiring from 1971 forward and that three women who testified at trial established individual claims of disparate treatment. The district court concluded, however, that Rath had shown a business necessity for the no-spouse rule.

The case was referred to a special master in 1982 for relief proceedings. In January 1983 Rath closed its Columbus Junction plant.2 In April of 1983 the trial on relief was held. The special master recommended a class backpay award of $1,015,901, injunctive relief, and retroactive seniority for rejected female applicants. The special master further recommended that prejudgment interest not be granted. No recommendation was made concerning costs because one item of costs was compensation for the services of the special master.

After the special master issued his report and recommendations, Rath filed a petition in the bankruptcy court for reorganization under Chapter 11 of the Bankruptcy Act. The district court held that Rath's bankruptcy petition did not automatically stay the Title VII proceedings, In re Rath Packing Co., 37 B.R. 614, 616-17 (S.D.Iowa 1984), and accordingly proceeded to consider the special master's recommendations and to enter final judgment.

The district court adopted the special master's recommendations to grant injunctive relief and to deny prejudgment interest. The district court awarded class-based backpay ($1,000,000) and post-judgment interest but denied retroactive seniority. The district court ordered that costs be shared equally between EEOC and Rath.

Rath and EEOC subsequently appealed the judgment of the district court. On October 9, 1984, the appeal was argued before this court. In February 1985 Rath filed a Rule 60(b) motion and requested that its appeal before this court be held in abeyance pending a decision on the motion. On February 22, 1985, this court ordered the district court to certify its ruling on the Rule 60(b) motion and ordered that the appeal be held in abeyance. On March 14, 1985, the district court denied Rath's 60(b) motion. On April 22, 1985, the order holding the appeals in abeyance was vacated, and the appeal from the denial of the 60(b) motion was consolidated with the pending appeals.

Rath argues that the district court erred in refusing to stay those portions of the Title VII proceedings related to backpay, seniority, and interest because Sec. 362(a) provides for an automatic stay of such proceedings. In support of its position, Rath argues that the automatic stay is one of the fundamental debtor protections provided by the Bankruptcy Act and is inapplicable only where a governmental unit sues to protect the public safety and health. Relying on Missouri v. Bankruptcy Court, 647 F.2d 768, 776 (8th Cir.1981), cert. denied, 454 U.S. 1162, 102 S.Ct. 1035, 71 L.Ed.2d 318 (1982), Rath argues that an action brought by EEOC, although a regulatory agency, is stayed by the automatic stay provision because it is primarily directed to making aggrieved persons financially whole.

EEOC argues that this action comes within the exception to the automatic stay provision because it is a Title VII action brought to enforce federal laws prohibiting discrimination in the work place. EEOC argues that suits under Title VII are guided by "an overriding public interest in equal employment opportunity asserted through direct federal enforcement." General Telephone Co. v. EEOC, 446 U.S. 318, 326, 100 S.Ct. 1698, 1704, 64 L.Ed.2d 319 (1980) (citations omitted).

Section 362(a)3 provides that filing a bankruptcy petition operates as an automatic stay of judicial proceedings against the debtor. "The general policy behind this section is to grant complete, immediate, albeit temporary relief to the debtor from creditors, and also to prevent dissipation of the debtor's assets before orderly distribution to creditors can be effected." Penn Terra Ltd. v. Department of Environmental Resources, 733 F.2d 267, 271 (3d Cir.1984) (Penn Terra ). However, actions by a government unit to enforce its police or regulatory powers are exempt from operation of the automatic stay provision under Sec. 362(b)(4).4 Thus,

where a governmental unit is suing a debtor to prevent or stop violation of fraud, environmental protection, consumer protection, safety, or similar police or regulatory laws, or attempting to fix damage for violation of such laws, the action or proceeding is not stayed under the automatic stay.

S.Rep. No. 989, 95th Cong., 2nd Sess. 52, reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 5838; H.Rep. No. 595, 95th Cong., 2nd Sess. 343, reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 6299.

No court has considered whether a suit by EEOC comes within the exception to the automatic stay. Courts have, however, considered whether actions brought by other types of regulatory agencies come within the automatic stay. The Sixth Circuit held that workers' compensation proceedings were not automatically stayed where the benefits were to be paid from an insurance fund or from security bonds which were not part of the debtor's estate. In re Mansfield Tire & Rubber Co., 660 F.2d 1108, 1115 (6th Cir.1981). Proceedings brought under the Fair Labor Standards Act for the assessment of penalties for violation of child labor laws likewise were not stayed by the automatic stay provision. In re Tauscher, 7 B.R. 918, 920 (Bankr.E.D.Wis.1981). The Third Circuit has also held that an action seeking a preliminary injunction to correct violations of the state environmental protection statute was not stayed by the automatic stay provision. Penn Terra, 733 F.2d at 274. Lastly, NLRB proceedings, which are closely analogous to EEOC proceedings, have not been stayed by the automatic stay provision. Ahrens Aircraft, Inc. v. NLRB, 703 F.2d 23, 24 (1st Cir.1983); NLRB v. Evans Plumbing Co., 639 F.2d 291, 293 (5th Cir.1981) (per curiam); In re Bel Air Chateau Hospitals, Inc., 611 F.2d 1248, 1250-51 (9th Cir.1979). Contra In re The Theobald Industries, Inc., 16 B.R. 537, 537 (Bankr.D.N.J.1981).

Rath, relying on this court's decision in Missouri v. Bankruptcy Court, 647 F.2d at 776, argues that under the reasoning of this case the EEOC proceeding should have been automatically stayed. We disagree. In Missouri v. Bankruptcy Court, a state regulatory agency attempted in state court to enforce Missouri's grain laws, which enforcement was in direct conflict with the bankruptcy court's orders. This court rejected the state's contention that the police power exception automatically applied because a state agency was involved. Instead we analyzed the purpose underlying the Missouri law and found that although the law might be "regulatory in nature, [it] primarily relate[s] to the protection of pecuniary interest in the debtors' property and not to matters of public safety and health." Id.

By contrast, "EEOC does not function simply as a vehicle for conducting litigation on behalf of private parties; it is a federal administrative agency charged with the responsibility of investigating claims of employment discrimination and settling disputes." Occidental Life Insurance Co. v. EEOC, 432 U.S. 355, 368, 97 S.Ct. 2447, 2455, 53 L.Ed.2d 402 (1977). Thus, "[w]hen the EEOC acts, albeit at the behest of and for the benefit of specific individuals, it acts also to vindicate the public interest in preventing employment discrimination." General Telephone Co. v. EEOC, 446 U.S. at 326, 100 S.Ct. at 1704. When EEOC sues to enforce Title VII it seeks to stop a harm to the public--invidious employment discrimination which is as detrimental to the welfare of the country as violations of environmental protection and consumer safety laws, which are expressly exempt from the automatic stay. We therefore hold that the automatic stay provision did not apply to this Title VII action brought by EEOC.

Rath next argues that the district court abused its discretion in refusing to grant a discretionary stay based on 11 U.S.C. Sec. 105 and 28 U.S.C. Sec. 1651. Rath argues that its assets were diminished by the litigation expenses and therefore a discretionary stay should have been granted. Further, Rath argues that the Columbus Junction plant closed during the pendency of the litigation and no decision had been made at the time of the trial whether it would reopen. Thus, Rath argues the injunctive relief sought was meaningless.

EEOC argues that the district court properly denied the discretionary stay because litigation fees do not threaten the estate of the bankrupt. Litigation fees, like other debts incurred by a bankrupt before its reorganization plan is filed or approved, are ultimately settled by the bankruptcy court. EEOC argues that Congress by providing for the exception to the automatic stay implicitly recognized that preservation of the estate of the debtor is not always the primary goal.

Section 1055 gives the bankruptcy court the power to issue orders necessary or appropriate to carry out the provisions of Title 11. The All Writs Act, 28 U.S.C. Sec. 1651,6 authorizes bankruptcy courts to issue stays. "Stays or injunctions issued under these sections will not be automatic upon the commencement of a case, but will be granted or issued under the usual rules governing the issuance of injunctions." In re Vantage Petroleum Corp., 25 B.R. 471, 476 (Bankr.E.D.N.Y.1982). "[S]tays will be granted only if a party shows a necessity for a stay." In re Bel Air Chateau Hospitals, Inc., 611 F.2d at 1251; see In re Matter of Shippers Interstate Service, Inc., 618 F.2d 9, 13 (7th Cir.1980). These stays by definition are discretionary and this court will overturn the decision of the lower court only if there has been an abuse of discretion.

We hold that the district court did not abuse its discretion in denying the request for a stay of the EEOC action. Congress by excepting certain actions from the automatic stay provision recognized that the debtor would likely incur litigation expenses as a result of any excepted lawsuit. Penn Terra, 733 F.2d at 278. Congress has therefore implicitly recognized that litigation expenses alone do not justify a stay of a proceeding. See In re Rath Packing Co., 38 B.R. 552, 562-63 (Bankr.N.D.Iowa 1984) (stay of NLRB proceedings denied).

Rath next argues that the district court erred in entering the judgment against Rath because governmental units may not seek to enforce money judgments. Rath, relying on In re Mansfield Tire & Rubber Co., 660 F.2d at 1113, 1115, argues that the scope of the district court's order far exceeds the limited police power exception of 11 U.S.C. Sec. 362(b)(5). Rath argues that the district court order established a payment plan, imposed prejudgment interest, and elevated EEOC to the status of a favored creditor with 100% payment.

EEOC argues that the district court judgment does not violate Sec. 362(b)(5). Specifically EEOC argues that Sec. 362(b)(5) only prohibits actions to enforce or execute a money judgment, and the judgment in this case is not self-executing. Relying on Penn Terra, EEOC argues that it is the "seizure of a defendant debtor's property, to satisfy the judgment ... which is proscribed by subsection 362(b)(5)." 733 F.2d at 275. EEOC further asserts that during the pendency of the bankruptcy proceedings it will not file an action against Rath for contempt for failure to pay or otherwise attempt to actually obtain execution of the judgment.

Section 362(b)(5)7 provides that the automatic stay does not apply to enforcement of a judgment, other than a money judgment, obtained in an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory powers. The reason for this ban against enforcement of money judgments is to prevent unfairness to a debtor's other creditors.

Since the assets of the debtor are in the possession and control of the bankruptcy court, and since they constitute a fund out of which all creditors are entitled to share, enforcement by a governmental unit of a money judgment would give it preferential treatment to the detriment of all other creditors.

H.Rep. No. 595, 95th Cong., 2nd Sess. 342-43 (1978); reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 6299; S.Rep. No. 989, 95th Cong., 2nd Sess. 51-52 (1978), reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 5838.

The entry of a judgment for injunctive relief and backpay is permitted under Sec. 362(b)(5), but the actual enforcement of the backpay judgment is not permitted. E.g., NLRB v. Evans Plumbing Co., 639 F.2d at 293; cf. In re Mansfield Tire & Rubber Co., 660 F.2d at 1115 (Industrial Commission of Ohio, Bureau of Workers Compensation, could adjudicate workers' compensation claims against the debtor and could order payment of the claims only because the claims were to be paid either from an insurance fund or surety bonds, neither of which were a part of the debtor's estate).

We hold that the district court did not err in entering a money judgment against Rath. The district court, however, went beyond the entry of a money judgment as permitted by Sec. 362(b)(5) and established a detailed payment plan. The judgment of February 10, 1984, not only awarded EEOC the sum of $1,000,000, but required Rath to repay the sum in five equal installments of principal with accrued interest, with the first installment due on February 10, 1985. Failure to meet a required installment results in acceleration of the unpaid balance at the option of EEOC. EEOC was also directed to formulate a plan for disbursement of judgment proceeds and to set up a claims system. This plan went beyond the entry of a money judgment and therefore violated 11 U.S.C. Sec. 362(a).

Rath also argues that the establishment of a payment plan violates 11 U.S.C. Sec. 1129.8 We agree. The bankruptcy court has the responsibility to confirm a reorganization plan and to distribute Rath's assets in accord with this plan. Payment of the EEOC claim, a pre-petition unsecured claim, may not be given preference over the claims of other creditors. Neither EEOC's promise not to collect the judgment nor the possibility that the bankruptcy court will modify the payment plan is sufficient to correct the error.

Rath further argues that the imposition of post-judgment interest is contrary to 11 U.S.C. Sec. 502(b) which prohibits the imposition of interest after the date of the bankruptcy filing. We agree that the district court erred in awarding post-judgment interest. Section 502(b)9 provides that as of the date of the bankruptcy filing, interest will not accrue and any claims for unmatured interest which become due after the filing date shall be disallowed. Nicholas v. United States, 384 U.S. 678, 682, 86 S.Ct. 1674, 1678-79, 16 L.Ed.2d 853 (1966); In re Boston & Maine Corp., 719 F.2d 493, 495 (1st Cir.1983), cert. denied, 466 U.S. 938, 104 S.Ct. 1913, 80 L.Ed.2d 461 (1984). The purpose of this rule is stated in Vanston Bond Holders Protective Committee v. Green, 329 U.S. 156, 163-64, 67 S.Ct. 237, 240, 91 L.Ed. 162 (1946):

Exaction of interest where the power of the debtor to pay even his contractual obligations is suspended by law, has been prohibited because it was considered in the nature of a penalty imposed because of a delay in prompt payment--a delay necessitated by law.... The delay in distribution ... is a necessary incident to the settlement of the estate ... it would be inequitable for anyone to gain an advantage or to suffer a loss because of such delay.

Rath next argues that the district court erred in holding that there was no business necessity for Rath's subjective hiring practices. Rath had no established criteria for selecting employees. Rath argues that the positions, although unskilled in nature, require certain objective skills and experience because an employee might be forced to perform any job in the plant. Rath also argues that it should not be required to adopt what the court perceives to be the best hiring procedures rather than those which Rath has developed based on its experience. Lastly, Rath argues that the district court did not distinguish between the strict test of a bona fide occupational requirement and the less strict test of a valid business reason.10

EEOC argues that the district court's finding is supported by the overwhelming weight of the evidence and therefore is not clearly erroneous. EEOC argues that McFarland, the Rath official primarily responsible for hiring at Rath, was unable to articulate any particular qualifications or attributes he looked for in an applicant. EEOC also argues that Rath failed to establish that the subjective hiring procedures were necessary or essential and that there were no alternative practices with less discriminatory effect.

"[A]n employment practice which has a disparate impact on a group protected under Title VII is invalid unless the employer can prove the challenged practice is justified by a business necessity." Kirby v. Colony Furniture Co., 613 F.2d 696, 703 (8th Cir.1980). " 'The touchstone is business necessity and the practice must be shown to be necessary to safe and efficient job performance....' " Id. (citations omitted). "The system in question must not only foster safety and efficiency, but must be essential to that goal." United States v. St. Louis-San Francisco R.R., 464 F.2d 301, 308 (8th Cir.1972) (emphasis added), cert. denied, 409 U.S. 1116, 93 S.Ct. 913, 34 L.Ed.2d 700 (1973). A business practice may not be justified on the basis of business necessity if there exists a "nondiscriminatory alternative means of determining qualification." Id. at 309; see Dothard v. Rawlinson, 433 U.S. 321, 329, 97 S.Ct. 2720, 2726-27, 53 L.Ed.2d 786 (1977).

We hold that the district court did not err in holding that Rath's subjective hiring practices were not justified by business necessity. The undisputed evidence established that Rath's subjective hiring practices had a disparate impact on women. Ninety-five percent of Rath's employees were men. After EEOC established the disparate impact of the subjective hiring practices, Rath had the burden of producing evidence of business necessity and the burden of persuasion on that issue. Rath was unable to identify the criteria and qualifications which were considered in the hiring decisions. It follows therefore that Rath could not establish that these qualifications and criteria were necessary to the safety and efficiency of its operations. Rath's hiring practices, even if intended to select the best qualified person, were highly susceptible to abuse. While some subjectivity is inevitable in the hiring process, the total lack of objective criteria at Rath "could only reinforce the prejudices, unconscious or not, which Congress in Title VII sought to eradicate as a basis for employment." Stewart v. General Motors Corp., 542 F.2d 445, 451 (7th Cir.1976), cert. denied, 433 U.S. 919, 97 S.Ct. 2995, 53 L.Ed.2d 1105 (1977). " '[S]ex is the sole identifiable factor explaining the divergence in numbers of men and women selected by Rath during the relevant time frame.' " EEOC v. Rath Packing Co., No. 77-57-D, slip op. at 6 (liability order of April 22, 1981) (citation omitted).

Rath next argues that the district court erred in awarding backpay. In support of this position, Rath argues that the district court failed to make findings concerning Rath's ability to pay or to articulate reasons for its decision. Rath also argues that the district court failed to consider the number of victims and the number of nonvictims affected and the economic circumstances of the industry.

Rath argues that it has experienced "horrendous losses" since 197711 and therefore does not have the ability to pay the award out of current resources, either borrowed or owned. Rath argues that the employees, the majority owners of the company, are the only ones who can provide funds to satisfy such an award and they have already made many financial sacrifices for the company.

Rath urges this court to review this issue because the issue is based almost entirely on the written record and not upon the testimony of witnesses. Lastly, Rath argues that it may have no forum to have this issue reviewed if this court does not review it because EEOC will argue in the bankruptcy court that the issue is "res judicata" and, secondly, the bankruptcy court may believe that it does not have the authority to modify the district court's order.

EEOC argues that the district court did not abuse its discretion in awarding backpay. EEOC argues that persons who have been denied employment because of discrimination are entitled under Title VII to backpay and backpay is to be denied only in extraordinary circumstances.

"The district court is obligated to grant a plaintiff who has been discriminated against ... the most complete relief possible." Briseno v. Central Technical Community College Area, 739 F.2d 344, 347 (8th Cir.1984); see Franks v. Bowman Transportation Co., 424 U.S. 747, 764, 96 S.Ct. 1251, 1264, 47 L.Ed.2d 444 (1976). There is a strong presumption that persons who have been discriminated against are entitled under Title VII to backpay; this presumption can only be overcome "for reasons, which if applied generally, would not frustrate the central statutory purposes of eradicating discrimination throughout the economy and making persons whole for injury suffered through past discrimination." Albemarle Paper Co. v. Moody, 422 U.S. 405, 421, 95 S.Ct. 2362, 2373, 45 L.Ed.2d 280 (1975). "[S]pecial factors which justify not giving an award of class wide backpay have been narrowly construed," Kirby v. Colony Furniture Co., 613 F.2d at 699; see Wells v. Meyer's Bakery, 561 F.2d 1268, 1272 (8th Cir.1977), and usually include circumstances where state legislation is in conflict with Title VII. Pettway v. American Cast Iron Pipe Co., 494 F.2d 211, 260 (5th Cir.1974) (banc).

We consider first Rath's argument that the district court was required to state its reasons in support of the award of backpay. Rath cites two district court cases for the proposition that a district court must state reasons for an award of backpay. Ingram v. Madison Square Garden Center, 482 F.Supp. 918, 921 (S.D.N.Y.1979); Rios v. Enterprise Ass'n of Steamfitters Local 638, 400 F.Supp. 988, 991 (S.D.N.Y.1975). Rath also attempts to argue by analogy from other cases which state that a district court must identify the factors which justify the denial of backpay. The rationale, however, underlying the requirement for a statement of reasons for a denial of backpay does not exist where a district court grants backpay. A presumption exists in favor of backpay; backpay may be denied only if there are compelling reasons justifying the denial. Consequently, the district court is required to state reasons for the denial in order that a reviewing court may determine if compelling reasons exist. We hold that the district court did not err in failing to identify those specific factors it considered in awarding backpay.

Rath next argues that the district court did not consider Rath's ability to pay prior to granting backpay. The record does not support Rath's assertion. The special master considered at length Rath's financial condition. The special master found that the factors militating against an award of backpay--(1) Rath's "precarious financial status and ongoing losses," (2) 60% of the shareholders are employees, and (3) Rath's stated inability to liquidate an award without further employee concessions--were not of sufficient weight or so exceptional that they overcame the presumption that backpay is one of the consequences of Title VII violations.

The district court approved and adopted the report and recommendation of the special master except as modified. The district court did not modify the special master's findings or recommendation on backpay except to round the backpay award off to $1,000,000. Further, the district court specifically considered and overruled Rath's objection to the special master's recommendation for backpay. EEOC v. Rath Packing Co., No. 77-57-D, slip op. at 7 (order of Feb. 10, 1984). Rath challenged the recommendation on the grounds that Rath was unable to pay the award and the award would have an adverse effect on the employees at the Columbus Junction plant. In response to this objection, the district court did not indicate that Rath's financial condition was not considered in making the backpay award. Rather, the district court expressly recognized th