UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


ANDERSON, VICENTE J.

v.

ZUBIETA, ALBERTO


97-5247a

D.C. Cir. 1999


*	*	*


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 




__________

n 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 


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.


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. 




__________

n 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  


__________

n 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.


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 




__________

n 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


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




__________

n 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


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 


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 




__________

n 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




__________

n 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


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


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 




__________

n


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 


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 




__________

n 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 


__________

n % of Panamanian % of % of % of American or Hispanic White Black
National Origin National Orgin 


__________

n Tropical Differential 76% 15% 78% 27% 


__________

n Equity Package 65% 25% 64% 46% 


__________

n Vacation Benefits 96% 58% 97% 70% 


__________

n


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).




__________

n 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.


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


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


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


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


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


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


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


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


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


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-




__________

n 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 




__________

n 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); 


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.


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.


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


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


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.