## Facts

- The EEOC sued Rath Packing Company, an Iowa meat-processing employer, alleging sex discrimination in hiring under Title VII.
- Rath used discretionary, subjective hiring methods rather than objective, job-related criteria; women were substantially underrepresented compared to the relevant labor pool.
- Rath maintained a “no-spouse rule” restricting hiring of spouses of current employees; the EEOC alleged it disproportionately harmed women.
- After the suit began, Rath filed for Chapter 11 bankruptcy and argued the automatic stay barred the action and limited any monetary relief, including interest.
- The district court found Rath’s subjective hiring practices unlawfully discriminatory and not justified by business necessity, upheld the no-spouse rule as a business necessity, and awarded over $1 million in backpay plus post-judgment interest and injunctive relief with an installment payment schedule.

## Issues

1. Whether Chapter 11’s automatic stay bars an EEOC Title VII enforcement action, and if not, whether it bars entry or enforcement of a money judgment (backpay and interest).
2. Whether Rath’s subjective hiring practices had an unlawful disparate impact on women and were justified by business necessity.
3. Whether Rath’s no-spouse rule violated Title VII and, if so, whether Rath proved business necessity.
4. Whether the district court’s remedies—backpay methodology, retroactive seniority, interest, costs, and enforcement structure—were legally proper given the bankruptcy posture.

## Decision

- Affirmed in part, reversed in part, and remanded.
- Held the automatic stay did not apply to the EEOC’s enforcement action because it fell within the governmental police/regulatory power exception; the EEOC could litigate to judgment and obtain injunctive relief.
- Held that, although a money judgment could be entered, enforcement/collection against estate property could not proceed by ordinary execution and had to follow bankruptcy procedures.
- Affirmed the finding that Rath’s subjective hiring practices unlawfully discriminated against women and were not justified by business necessity.
- Reversed the ruling upholding the no-spouse rule; Rath did not prove the rule was necessary to safe and efficient operations or that less discriminatory alternatives would be ineffective.
- Remanded for remedial adjustments, including retroactive seniority and revisions to parts of the backpay and costs rulings; directed use of labor-market measures not distorted by potentially discriminatory applicant-flow data.

## Legal Principles

- A governmental enforcement action seeking to stop or remedy violations of federal law generally falls within the bankruptcy code’s police/regulatory power exception to the automatic stay; the presence of backpay claims does not convert the action into a purely private collection effort.
- The bankruptcy code permits entry of a money judgment by a governmental unit, but stays enforcement of that judgment against estate property outside the bankruptcy claims and distribution process.
- Under Title VII disparate-impact doctrine, an employer must justify practices causing sex-based disparities by showing a manifest relationship to the job and necessity to safe and efficient operation, and must address the availability of comparably effective, less discriminatory alternatives.
- Blanket workplace policies such as no-spouse rules are unlawful when they create a disparate impact and are supported only by generalized concerns; business necessity requires specific proof and consideration of less discriminatory means.
- Title VII “make-whole” relief commonly includes backpay and retroactive seniority; statistical measures used to quantify discrimination should not rely exclusively on applicant-flow data that may reflect the effects of discrimination, and prevailing enforcement plaintiffs ordinarily receive costs.

## Conclusion

The Eighth Circuit held that the EEOC’s Title VII action could proceed despite Rath’s Chapter 11 filing, affirmed liability based on subjective hiring practices, rejected the no-spouse rule for lack of proven business necessity, and required further remedial proceedings while limiting collection of monetary relief to bankruptcy mechanisms.


Equal Emp. Opportunity Comm’n v. Rath Packing Co., 787 F.2d 318 (8th Cir. 1986)