Sex Discrimination and CPA Firms

By Wootton, Charles W.; Hogan, Stephen D. et al. | Journal of Accountancy, August 1992 | Go to article overview

Sex Discrimination and CPA Firms

Wootton, Charles W., Hogan, Stephen D., Huie, Marsha C., Journal of Accountancy

President Bush late last year signed the Civil Rights Act of 1991, which amends Title VII of the Civil Rights Act of 1964. Precisely what this act achieves will not be clear until it is interpreted in the courts. However, we do know the law increases the potential liability of employers found to have discriminated on the basis of sex. Male-dominated CPA firms may be particularly vulnerable. Firm partners, after all, will be passing judgment on the thousands of women who become eligible for partnership nominations. As they do, they should be conscious of what is and is not acceptable behavior.

It's important, then, that partners carefully design and fully understand their firms' personnel evaluation procedures. All evaluations must be gender neutral. Unfortunately, no one is exactly sure what gender neutrality means in practice. However, the new law does offer important clarification of the issues raised in Hopkins v. Price Waterhouse, a very meaningful case for the accounting profession, which was tried under Title VII of the 1964 act. Partners can draw conclusions from the case to help them avoid sex discrimination.


The Civil Rights Act of 1991 amends earlier legislation. It also offsets several U.S. Supreme Court decisions that narrowed the scope and effectiveness of discrimination law and makes it easier for victims of alleged job discrimination to sue and collect damages.

The act is aimed at victims of sex and other kinds of discrimination. In cases of intentional discrimination, it gives either companies or employees the right to jury trials instead of the prior right to bench trials only. Victims of intentional discrimination are entitled to compensatory damages. Also, if individuals can demonstrate their employers unlawfully discriminated with malice or reckless indifference to their rights, they are eligible for punitive as well as compensatory damages. And courts may award victims the jobs or promotions they were denied.

However, there are two important qualifications. First, it's possible that an individual could prove sex discrimination was a motivating factor in a personnel action while the employer proves it would have taken the same action had there been no illegal discrimination. In these "mixed-motives" cases, the court may grant only certain kinds of relief (such as limited injunctions) plus attorney fees and related costs. It may not award money damages or require admission, reinstatement or promotion.

Second, the new law limits damage dollar amounts for intentional discrimination based on company size: $50,000 for businesses with 15 to 100 employees, $100,000 for those with 101 to 200, $200,000 for companies with 201 to 500 employees and $300,000 for those with more than 500. The sum of compensatory and punitive damages can't exceed these caps, but the limits don't include attorney fees or court costs. It isn't clear if these caps are constitutional, especially since the law places no caps on racial discrimination case awards.

Since it is not yet possible to know how courts will interpret the act, firm partners must be guided by relevant case law. The most important recent decision is Hopkins v. Price Waterhouse, which offers instructions on the standards CPA firms must meet. However, because the case predates the 1991 act, it must be read in conjunction with it.


Price Waterhouse said Ann Hopkins was turned down for partnership in 1983 and not renominated because she lacked the necessary interpersonal skills. She resigned and, after following appropriate administrative remedies, sued the firm in federal court, charging it with sexual discrimination in its promotion practices under the 1964 Civil Rights Act. The U.S. Supreme Court decision in the case has a significant bearing on all CPA firms because, for the first time in U.S. history, an accounting partnership was forced to accept as a partner a person it did not want to remedy discriminatory behavior. …

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