Lawley v. Department of Higher Educ.

Citations: 36 P.3d 1239; 2001 Colo. LEXIS 1002; 87 Fair Empl. Prac. Cas. (BNA) 1025; 2001 WL 1525213Docket: 00SC473

Court: Supreme Court of Colorado; December 2, 2001; Colorado; State Supreme Court

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The Supreme Court of Colorado reviewed a case involving Kathryn L. Lawley and the Colorado State Personnel Board against the Department of Higher Education and the University of Northern Colorado. The Colorado Court of Appeals had reversed the Personnel Board's decision that ordered Lawley's reinstatement as Director of Parking Services after her position was abolished in June 1997. The Board had adopted the findings of fact from an Administrative Law Judge (ALJ) but rejected the ALJ's conclusions, which found the University's actions were neither arbitrary nor discriminatory. The Board concluded that the University's decision to abolish Lawley's position was arbitrary and capricious and constituted gender discrimination. 

The Supreme Court addressed whether the Board was bound by the ALJ's conclusions and whether the court of appeals erred in its determination. It found that the Board's conclusions were ultimate findings of fact, allowing it to substitute its judgment for that of the ALJ. The Court also determined that the court of appeals erred by assessing only part of the evidence and ruled that sufficient evidence supported the Board's conclusion that the University acted with gender motivation in abolishing Lawley's position. Consequently, the Supreme Court reversed the court of appeals' decision and reinstated the order of the Personnel Board.

Factual background includes Lawley's tenure as Director of Parking Services from June 1988 to June 1997, during which the unit generated significant revenue and operated with a budget surplus. Lawley's salary of $67,680 was funded through revenues from parking services.

In fiscal year 1996-97, the University faced a continued decline in enrollment, impacting state funding due to the TABOR amendment. To address a budget shortfall of $159,607 in salaries for the 1997-98 fiscal year, the University aimed to retain current employees, maintain salary levels, and preserve essential services. The Division of Finance and Administration was tasked with reducing state-funded salaries by $40,000, leading to the abolition of the Parking Director position. Responsibilities were reassigned to the Police Chief, who would oversee parking operations with a new position created to assist him, funded partially by parking revenues.

Mike Rose filled the new Administrative Program Specialist position at a salary of $39,600, following the elimination of his previous job. This restructuring helped prevent the displacement of another employee, Darrell Johnson, which was cited as a reason for creating the new role. Testimony indicated that the management, including Robert Hetzel, considered internal redistributions and expressed concerns regarding the previous Parking Director Lawley’s salary, which was higher than comparable positions at other institutions. However, no formal salary survey was conducted, and informal comparisons were omitted in communications to personnel services, despite their significance in the analysis. Prior to the restructuring, a job audit of Lawley's position had been completed in 1995, but none was done for the abolishment process. Chief Urista proposed an alternative restructuring plan that would not eliminate Lawley’s position, but the University proceeded with its original plan without modifications.

Chief Urista testified that a memo from Hetzel to Vice President Steven Garcia inaccurately depicted his recommendations regarding the abolition of the Director of Parking Services position. The memo claimed that Urista suggested creating a Police Officer III role due to a reorganization of Parking Services, while Urista stated he had actually recommended an Administrator I position. Consequently, Lawley invoked her retention rights under State Personnel Board rules and was reassigned to the Police Officer III position, which was a demotion due to its lower pay grade. Following a grievance filed by Lawley, she was promoted to Lieutenant with a salary of $60,060, but her new schedule was less desirable. Lawley then appealed to the Board, claiming unlawful discrimination and arbitrary actions by the University. The Administrative Law Judge (ALJ) initially denied her claims, concluding no discrimination or arbitrary conduct occurred. However, the Board later reversed this decision, finding evidence of both discrimination and arbitrary action by the University. On appeal, the court reversed the Board's decision, stating that reasonable individuals would reach a different conclusion based on the findings and evidence. The case focuses on whether the Board properly substituted its conclusions for those of the ALJ and if the court of appeals erred in finding an abuse of discretion by the Board regarding discrimination and arbitrary actions. An introduction to the state personnel system is provided, detailing the constitutional and statutory framework governing the State Personnel Board, its authority to employ ALJs, and the procedural standards for reviewing ALJ decisions.

Section 24-4-105(15)(b) delineates the scope of review for the Board regarding an Administrative Law Judge's (ALJ) decisions, stipulating that findings of evidentiary fact can only be set aside if they contradict the weight of the evidence. In contrast, the Board may exercise its judgment on ultimate conclusions of fact if such conclusions have a lawful basis. The distinction between evidentiary and ultimate facts is crucial; evidentiary facts are detailed findings that support legal determinations, while ultimate conclusions involve legal judgments that affect the rights of the parties.

The Board was not bound by the ALJ's ultimate conclusions, as the correct standard for review is outlined in section 24-4-105(15)(b), not section 24-4-106(7). The University’s appeal misinterpreted the review standard, incorrectly asserting that the Board's reversal of the ALJ's credibility decision constituted an improper overreach. In discrimination cases, determining whether a plaintiff has met the burden of proof requires analyzing historical facts against applicable law, ultimately leading to conclusions regarding discrimination. This process aligns with U.S. Supreme Court guidance, where intentional discrimination is treated as an ultimate fact. 

In its findings, the Board highlighted several historical facts, including Hetzel's failure to consult with key personnel about a proposal affecting Lawley's position, potential miscommunication of alternatives, and evidence that Hetzel's actions were motivated by salary concerns regarding Lawley, who was not asked to reduce her pay.

The Board concluded that the University discriminated against Lawley by targeting his job to preserve another male employee's position, allowing it to override the ALJ's findings. This conclusion, described as arbitrary and capricious, is supported by factual findings, including the lack of consultation with the Chief of Campus Police, potential miscommunication regarding the Chief's views, and the disregard for an alternative proposal. The Board's findings establish the University acted improperly, necessitating a review of the ALJ's determination. A reviewing court can reverse an administrative agency's decision if it is deemed arbitrary, unsupported by the record, legally erroneous, or beyond the agency's authority. The court of appeals erred by only considering part of the evidence instead of the entire record, failing to adequately assess whether substantial evidence supported the Board's conclusion that Lawley's job was targeted. The legal framework for evaluating discrimination claims in Colorado, aligned with the U.S. Supreme Court's McDonnell Douglas standard, requires a plaintiff to demonstrate a prima facie case of discrimination by showing membership in a protected class, qualifications for the job, adverse employment action despite qualifications, and circumstances suggesting unlawful discrimination. Establishing this prima facie case creates a presumption of unlawful discrimination by the employer.

If the employer does not counter the presumption of discrimination, the factfinder must rule in favor of the complainant. The burden of proof lies with the complainant, but the employer must provide a non-discriminatory explanation for its actions. If the employer successfully articulates and supports a legitimate reason for the adverse decision, the presumption of discrimination is rebutted, and the employee cannot solely rely on the prima facie case to prevail. Should the employer meet this burden, the complainant must then have the opportunity to demonstrate that the employer's reasons were merely a pretext for discrimination, which can be substantiated by existing evidence in the record without the need for additional proof of intentional discrimination. The factfinder will consider all evidence to determine if the complainant has proven intentional and unlawful discrimination. Notably, a factfinder's disbelief of the employer's reasons, especially if it suggests dishonesty, can contribute to an inference of intentional discrimination based on the prima facie case. 

In this case, Lawley established a prima facie case of gender discrimination, demonstrating that as a woman, she is part of a protected class, was qualified for her position, suffered an adverse employment action with the abolition of her role, and that the position was filled by someone not in a protected class, indicating potential discrimination. The University provided a non-discriminatory rationale for abolishing her position, citing budget cuts and salary discrepancies compared to similar institutions. In response, Lawley argued that this rationale was a pretext for discrimination.

Lawley's evidence indicated that the University eliminated her position as Director of Parking Services, which was held by a highly paid female, to create a new role specifically for a male employee, Rose. This action was seen as a means to protect another male employee, Johnson, from displacement. The decision was made without consulting Chief Urista or considering his alternative proposal, which aimed to save costs without terminating Lawley’s position. There were concerns regarding whether Hetzel accurately communicated Urista's assessment to the Vice President of Administration. Lawley also provided evidence of Hetzel's persistent focus on her salary, and no formal salary audit or survey was conducted prior to the decision, despite claims that Lawley was overpaid. The court found that enough evidence existed to suggest the University's stated nondiscriminatory reason for abolishing Lawley's position was a pretext for discrimination. The court of appeals' stance, which stated there was no discrimination, was inconsistent with previous rulings in Big O Tires and Bodaghi. The appeals court reviewed only partial evidence, failing to assess whether substantial evidence supported the Board's discrimination inference and incorrectly concluded that the University’s justification was decisive. It misunderstood that circumstantial evidence can be as valid as direct evidence in proving discrimination, thus overlooking relevant facts that supported the inference of intentional discrimination.

The Board concluded that Hetzel targeted Complainant Lawley due to her perceived high salary. In 1995, the University conducted a desk audit to determine Lawley's salary but did not perform a formal salary survey or job audit before abolishing her position, relying solely on an employment advertisement from a similar university that Hetzel failed to disclose in his communications. His omission contradicted his claims about the importance of salary comparisons. Despite being aware of comparable institutions, Hetzel could not provide their salary ranges. Testimonies indicated Hetzel frequently expressed discontent with Lawley's salary, highlighting a conversation with Chief Urista where he questioned Lawley’s higher pay compared to his own, despite Urista's defense of her salary based on job demands. 

While the court of appeals supported the University’s rationale regarding Lawley being overpaid, the Board, leveraging its expertise, inferred unlawful discrimination. The court accepted the University’s explanations for restructuring without adequately considering evidence that suggested the University may have targeted Lawley's job to retain a male employee. Chief Urista's testimony revealed that Hetzel indicated eliminating Lawley’s position would resolve issues related to the job security of male employees, suggesting a motive beyond financial considerations. The evidence supports the Board's inference that the University discriminated against Lawley based on her gender to preserve employment for a male employee.

Mr. Rangel, a former human resources specialist at the University, testified that Hetzel had asked him to change the job classification for Darrell Johnson to protect him from losing his position and to limit the pool of applicants for that role. Rangel noted that Hetzel never made similar requests for female employees. The court of appeals focused on the University’s disregard for a written counterproposal from Chief Urista, assessing whether this indicated arbitrary and capricious actions rather than intentional discrimination. The court concluded that the evidence did not support claims of discrimination; however, the Board argued that Urista's counterproposal showed that eliminating Lawley’s position was unnecessary. The Board found that Hetzel's actions disproportionately favored male employees, specifically Johnson and Rose, while unjustly leading to Lawley’s layoff. The Board criticized Hetzel for not consulting division heads and for potentially miscommunicating Urista’s suggestions. The court's failure to acknowledge these factors undermined the Board’s inference of discrimination, which was based on substantial evidence. The determination that the University acted arbitrarily and capriciously falls under the criteria that the Board must establish, which include a lack of reasonable diligence, failure to consider evidence candidly, and actions that suggest conclusions contrary to what reasonable individuals would reach based on the evidence presented.

The Board's conclusion that the University's decision to abolish Lawley's position was arbitrary and capricious is supported by a reasonable legal basis. The court of appeals mistakenly overturned this decision. Key factors considered by the Board included: Hetzel's failure to consult with Chief Urista or Lawley when proposing the abolishment, potential inaccuracies in how Urista's ideas were communicated to the Vice President of Administration, and the lack of consideration given to Urista's alternative proposal aimed at achieving budgetary savings without eliminating Lawley's position. The Board determined that the University did not honestly consider evidence regarding Urista's proposal, leading to an arbitrary and capricious decision. 

Two principles guide the review of administrative decisions: resolving reasonable doubts in favor of the administrative body and not disturbing its determinations absent an abuse of discretion. The State Personnel Board, as a constitutionally established agency with expertise in personnel matters, deserves deference in its decisions. The Board found that the University ignored the Chief's proposal, that there may have been miscommunication regarding his ideas, and that consultation with affected department heads was lacking. The findings support the conclusion that the University's actions were arbitrary and capricious. 

The Board was justified in replacing the ALJ's conclusions regarding intentional discrimination and arbitrary actions, and there is sufficient evidence to conclude that gender bias motivated the University's decision to eliminate Lawley's position. The court of appeals' ruling is reversed, and the Board's order is reinstated, with a partial dissent and concurrence from Justice Coats and Justice Kourlis.

Justice COATS dissents in part and concurs in part, disagreeing with the majority's view that the Personnel Board can substitute its judgment for that of the Administrative Law Judge regarding findings of intentional discrimination. COATS argues that such findings are historical facts that should be reviewed under a "clearly erroneous" standard, not subject to agency discretion. He notes that Colorado's employment discrimination statute aligns closely with Title VII of the Civil Rights Act, adopting the necessary proof order and analysis from federal case law, specifically referencing the McDonnell Douglas framework. The determination of intentional discrimination hinges on whether an employer's stated nondiscriminatory reasons are merely a pretext, requiring the employee to prove this by a preponderance of evidence, primarily through witness credibility. COATS emphasizes that in legal motions for judgment, courts cannot preempt factfinders or assess credibility but must make inferences favoring the non-moving party. He draws parallels to the analysis of discriminatory jury selection challenges, referencing relevant case law, and advocates for a standard of review informed by Title VII precedents, particularly emphasizing that findings of intentional discrimination must be treated as factual determinations entitled to deference by reviewing courts.

In the context of the Batson analysis regarding actual racial discrimination, the trial court's determination is treated as a factual issue, reviewed for clear error. Prior rulings establish that findings of evidentiary fact must be based on evidence presented and are binding unless contradicted by the weight of the evidence. The distinction exists between "evidentiary facts," which hearing officers determine and which are binding on agencies, and "ultimate conclusions of fact," which can include legal conclusions. The text argues that allowing an administrative board to make new evidentiary findings undermines the established role of hearing officers who evaluate witness credibility and conflicting evidence. The dissent emphasizes that findings of intentional discrimination should be regarded as factual and entitled to deference, thus supporting a reversal of the Board's decision to disregard the administrative law judge's (ALJ) finding of no intentional discrimination. Additionally, references are made to the procedural history involving a finding of no probable cause by the Colorado Civil Rights Division before a hearing was requested. The excerpt also clarifies the legal framework governing evidentiary and ultimate conclusions and the extent of appellate review concerning administrative findings.

Urista served as Lawley's supervisor while she was the Director of Parking Services. The court granted certiorari to assess whether the court of appeals improperly reversed the Board's findings regarding discrimination and arbitrary actions. Under Section 24-4-107, the State Administrative Procedure Act applies to all state agencies unless specified otherwise. Section 24-50-125.4(3) allows any party to appeal the Board's decision to the court of appeals within 45 days, in accordance with Section 24-4-106(1). Section 24-4-106(7) outlines the court's obligations during review, including affirming agency actions if no errors are found or setting them aside if deemed arbitrary, capricious, or contrary to law, among other criteria. The court is required to review the entire record and interpret relevant statutory and constitutional provisions. Removing the Board's discretion to determine discrimination claims could lead to inconsistent rulings by different administrative law judges (ALJs), as highlighted by a precedent involving medical practice standards. The court of appeals reviewed the Board's decision according to the relevant statutory provisions, as noted in prior case law. The McDonnell Douglas framework is specifically designed to address employer failures to hire based on racial discrimination.

Confusion can arise between the standard of review for appellate review of administrative decisions and the standard used by the Board to evaluate claims of unlawful discrimination. In *Big O Tires*, a prior decision was rejected which stated that racial discrimination must be substantiated by substantial evidence for it to be inferred as the reason for an employee's discharge. The court determined that this standard did not adequately address whether intentional discrimination could be inferred when an employer's stated reasons were pretextual. Consequently, the appellate review focuses on whether substantial evidence supports the Board's conclusion that the University’s nondiscriminatory justification was pretextual.

The Colorado Constitution defines "appointing authority" as the head of each principal department and the heads of divisions within that department, who have authority over personnel within their divisions. The case of *Hughes v. Department of Higher Education* has raised questions regarding the applicability of the principles established in *Van DeVegt*. In *Hughes*, the court overturned an Administrative Law Judge's (ALJ) decision regarding the University of Colorado at Colorado Springs, labeling the action of abolishing an employee's position as arbitrary and capricious, stating the ALJ's reliance on *Van DeVegt* was inappropriate. The court differentiated between statutory requirements for evidence and discretionary considerations. It emphasized that the factors and their weights are determined by the University. The court interpreted *Van DeVegt* too narrowly and misapplied its second prong regarding the consideration of evidence. Consequently, *Hughes* is overruled where it contradicts *Van DeVegt* and this opinion.