                                No. 84-129
               IN THE SUPREME COURT OF THE STATE OF MONTANA
                                    1984


L. WARREN STONE,

                 Petitioner and Appellant,


BELGRADE SCHOOL DISTRICT NO. 44 and
MONTANA HUMAN RIGHTS COMMISSION,
                 Respondents and Respondents.
...........................
                                No. 84-130
BELGRADE SCHOOL DISTRICT NO. 44,
                 Petitioner and R.espondent,


THE HUMAN RIGHTS CObMISSION OF THE
STATE OF MONTANA, and L. WARREN STONE,
                 Respondents and Appellants.



APPEALS FROM:      District Court of the Eighteenth Judicial District,
                   In and for the County of Gallatin,
                   The Honorable Byron Robb, Judge presiding.

COUNSEL OF RECORD:

        For Appellant:
                 Gregory 0. Morgan argued, Bozeman, Montana
                 Anne MacIntyre argued for Human Rights Commission,
                 Helena, Montana
        For Respondent:
                 Smith Law Firm; Chadwick Smith argued, Helena, Montana




                                   Submitted:   November 13, 1984
                                     Decided:   December 28, 1984




                                   Clerk
Mr. Ju-sticeJohn Conway Harrison delivered the Opinion of the
Court.

       Two causes have been consolidated in this appeal for
convenience.      Both will be decided by this opinion.                       The
appellant      appeals     from    the     judgment    of   the     Eighteenth
Judicial District, County of Gallatin, overruling a decision
of the Human Rights Commission and dismissing the appellant's
employment discrimination action against the Belgrade School
District No.      44 and the Montana Human Rights Commission.
       L. Warren Stone            (Stone) filed a sex discrimination
complaint with the Kontana Human Rights Commission, August
15,    1977.      Following       an     evidentiary     hearing     before    a
Commission      Hearings     Officer       on   September     30,     1981., a
recommendation was         made    that the petition          be    dismissed.
Shortly thereafter Stone filed an exception to the hearings
officer's findings of fact that gender was not a BFOQ (bona
fide occupational qualification) but not to the findings of
facts as to Stone's damages.             Before the Commission in August
of 1982, Stone was found to have been discriminated against
by the School District and the Commission ordered payment of
lost   salary    based     upon    the hearings officer's findings.
Stone petitioned for judicial review of the amount of damages
(lost wages) given by the Commission and the School District
petitioned for judicial review of the BFOQ issue.                      Stone's
petition in cause No. 84-129 was denied on the grounds that
he had failed to exhaust his a.dministrative remedies.                  On the
BFOQ issue, the District Court ordered the Commission to
vacate    its    findings     and        dismiss   the      charge    of      sex
discrimination against the School District.                   Stone appeals
the denial of his petition for judicial review in cause No.
84-129.     In cause No. 84-130, both Stone and the Commission
appeal from the order of the District Court in favor of the
School District.            We affirm the District Court in cause No.
84-130.
         In    July    of    1977, L.    Warren       Stone applied    for an
available position of guidance counselor with Belgrade School
District No. 44.            Prior to 1976, the School District had only
one full-time guidance counselor, a man, Mr. Pat Kramarich,
who served the entire student body.                   The position for which
Stone applied was for a second counselor position which had
been created within the district.               Five women and three men
applied for the position.
         In    order    to    give   students     a    choice   when   seeking
counsel, the School. District wished to hire a woman to fill
the position.          Appellant argues that he and the other male
applicants were thus excluded               from consideration for the
position.       A woman, Lois Kuni, was hired for the position.
She was one of two women selected by the board for interview.
Mrs. Kuni worked for the School District for two years when
she was replaced by another woman, Sandra Amiel.                  Mrs. Amiel
resigned at the end of the 1979 school year and was not
replaced due to budgetary               constraints.       The decision to
eliminate the counseling position, rather than a teaching
position, occurred when the school district was forced to cut
funding due       to    the     failure of      a mill     levy within    the
district.       Mrs. Amiel asked to be released from her 1980-81
contract and the School District elected to follow a "course
of least resistance in deciding not to fill the vacant posi-
tion."        Since the 1979-80 school year, the only counselors
available to the students in the school district have been
men.     A male teacher with counseling credentials was assigned
counseling duties for two of the seven periods of the school
day to assist the full-time guidance counselor.
        According to the testimony, students who did not wish
to speak with a male counselor were allowed to go to female
teachers.      Since 1980, the School District has taken no
further     steps    to    insure   counselors   of   both    sexes were
available to students.
        At the time of the original hiring of Mrs. Kuni, the
school board        decided to balance the counseling staff by
hiring a female counselor so the students of the district,
both male and female, in both the junior and senior high
school, would       have    a   choice between   a man       and a woman
counselor.    Testimony indicated the School District wanted to
hire a woman counselor for the benefit of those students who
wished to discuss very personal and private matters with a
counselor.    Female students in the school indicated in a poll
they would not visit a male counselor in some situations
because of embarrassment or inhibitions.              In addition, the
School District wanted a female counselor on the staff to
increase     the     effectiveness    of   the   school's      counseling
service.     The School District reasoned Stone was excluded
from consideration for the position because he could not
provide that desired balance.
        Two counseling experts testified at the hearing before
the hearings officer regarding the importance of hiring a
male and a female counselor so that all students would have a
choice.     Dr. A1 Suvak, who is a director of testing services
at Montana State University, has worked at the counseling
center at the University for some twenty years.                 He has a
Ph.D.   in counseling and is a licensed psychologist.                Dr.
Suvak      testified success in counseling depends upon the
ability      to    relate    to   the    persons      being    counseled     and,

therefore, if two counselors are to be employed for boys and
girls, the counselors should be one male and one female.                       He
testified different personalities are a-ble to communicate
better with one sex or the other and in his professional
opinion it was proper for the Belgrade School District to
hire a female for the position in 1 9 7 7 as long as she was
fully qualified.
        Mr. Pat Kramarich also testified as an expert witness.
Kramarich has a master's degree in cc?unseling, has twelve
years    counseling experience at Belgrade                    schools and    has
special training in guidance and counseling.                     He confirmed
Dr.   Suvak's      testimony that        students, depending on            their
personality, are sometimes able to communicate and relate to
one sex better than the other.            Stone presented no testimony,
expert or otherwise, to contradict the testimony of these two
experts.
        It   should     be   noted      the   hearings     officer     for   the
commission, an assistant attorney general with expertise in
the   field       of   responsibility,        found    facts    to   support   a
conclusion that gender was a BFOQ for the position.                          The
commission itself, acting on review, admits it upheld the
hearings officer's findings of fact, but rejected only his
conclusions as to a BFOQ.
        The issue in cause number 8 4 - 1 3 0 is whether gender is a
bona fide occupational qualification exempticn to Montana's
prohibition against sex            discrimination in the context of
hiring a second person to a school guidance counseling staff.
The sole issue in cause number 8 4 - 1 2 9            is whether raising two
issues of error in a petition for judicial review of an
administrative order when only one of those issues was raised
in petitioner's written        exceptions to      the   administrative
examiner's findings constitutes a failure on the part of the
petitioner to exha.usthis administra-tiveremed.ies.
      We will first dispose of the issue raised in cause
number 84-129.
      Respondents     argue    Stone     failed    to    exhaust   his
administrative remedy notwithstanding the language in his
exceptions and accompanying proposed findings of fact and
conclusions of law.       Respondents argue Stone waived           the
question of damages by his failure to advise the commission
of the action he wanted the commission to take with respect
to those damages.
      We find Stone did exhaust his administrative remedies
because in his exceptions he incorporated by reference the
issue of damages which was sufficient to bring the issue
before the Commission.        However, in view of our holding on
the issue raised in cause No. 84-130, and in so finding for
the School District, we do not change the ultimate decision
of   the   District   Court which      reversed   the   Human   Rights
Commission's findings and conclusions.
      The Montana Code Annotated statutes applicable to this
matter are the following:
              "S49-2-303.    Discrimination in employ-
              ment.   (1) it is un.lawfu1 discriminatory
              practice for:
              " (a) an employer to refuse employment to
              a person, to bar him from employment or
              to     discriminate   against   him    in
              compensation or in a term, condition or
              privilege of employment because of his
              race, creed, rel.igion, marital status,
              color, or national origin or because of
              his age, physical or mental handicap, or
              sex when the reasonable demands of the
              position do not require an age, physical
              or mental handicap, or sex distinction
               ...
             "549-2-101. Definitions. As used in this
             chapter, unless the context requires
             otherwise, the    following definitions
             apply :


             " (8) 'Employer1 means an employer of one
             or more persons   ...
             "549-3-201.    Employment of       state   and
             local government personnel.
             " (1) State and I-ocal government officials
             and supervisory personnel shall recruit,
             appoint, assign, train, evaluate, and
             promote personnel on the basis of merit
             and qualifications without regard to
             race, color, religion, creed, political
             ideas, sex, age, marital status, physical
             or mental handicap, or nztional origin
             ...
             "549-3-101.  Definitions.   As used in
             this chapter, the following definitions
             apply:


             " (6)    'Qualifications1    means  such
             qualifications as are genuinely related
             to    competent    performance   of  the
             particular occupational task.
             "549-3-103.      Permitted   distinction.
             Nothing in this chapter (Chapter 3, Title
             49) shall prohibit any public or private
             employer :
              ( 1 from enforcing a differentiation
             based on age or physical or mental
             handicap wh.en based on a bona fide
             occupational   qualification  reasonably
             necessary to the normal operation of the
             particular   business   or   where   the
             differentiation is based on reasonable
             factors other than age;   . . ."
     These   sections    set   forth    the     rules   regarding
discrimination in employment for all employers and allows for
exception when the reasonable demands of the position require
a sex distinction.
     The appellant argues interpretation of what is meant by
RFOQ or "reasonably necessary to the normal operation of a
business" is a question of law, and that whether gender is a
BFOQ is a question of fact.            He insists the District Court
erred in making an unsupported assumption of fact that most
students will communicate better with a counselor of their
own gender about personal matters.
         In addition, Stone argues the District Court may not
substitute its discretion for that of the agency as to the
weight    of    the   evidence    in   questions of   fact.            Section
2-4-704, MCA.         Stone further argues when a decision of an
administrative agency "is based upon a fair interpretation of
the   record     it    should    not   be   overturned."         Slater    v.
Employment Security Division (Mont. 1984), 676 P.2d 220, 41


      The appellant notes in his argument that for twelve
years, prior to 1977, there had never been a female counselor
and the School District's desire to hire a female counselor
was not a necessity but xather only a preference.                He argued:
                 "It is clear that the only time the
                 district considered a female counselor
                 was when the enrollment required two
                 counselors.    Note, state accreditation
                 requirements did not specify the sex of
                 either counselor. This in and of itself
                 is substantial evidence that a female
                 counselor was not reasonably necessary to
                 the normal operation of the business, but
                 was in fact a preference."

      Administrative       Rules of M-ontana, ARM          24.9.1402      and
24.9.1407      and 29 CFR 1604.2 (a) (1984), in pertinent part
reads :
                 "24.9.1402   Sex Discrimination            as     a
                 reasonable demand of employment.


                 "The following situations do not warrant
                 the   application   of   a    bona    fide
                 occupational qualification exception:
                  " (iii) The refusal to hire an individual
                  because of the preference of co-workers,
                  the employer, clients or customers."
       It is Stone's position the School District violated
these provisions because it refused to hire a male counselor
due to the preference of its clients.
       Montana Human Rights Commission, as an appellant, adds
to Stone's position by first citing section 49-2-303(1) (a),
MCA, which states, "It is an unlawful discriminatory practice
for   .. .   an employer to refuse employment to a person [or]
to bar him from employment           . . .   because of his        . . .    sex
when the reasonable demands of the position do not require                    .
.     Ta] sex discrimination         . . .     "     The Commission then
relies on section 49-2-402, MCA, which states: "Any grounds
urged as a        'reasonable1 basis for an exemption under any
section of this chapter shall be strictly construed."                       For
additional        support   the   Commission       relies    on   Dothard   v.
Rawlinson (1977), 433 U.S.           321, 97 S.Ct.          2720, 53 L.Ed.2d
786, which held the BFOQ exception to the prohibition against
gender based discrimination in employment is an "extremely
narrow" one.        See also Maine Human Rights Commission v. City
of Auburn (Maine 1979) , 408 A. 2d 1253. Further the exception
is a defense to otherwise unlawfully discriminatory conduct,
thereby      in     the     nature   of   an        affirmative     defense.
Consequently, the employer shoulders the burden of proving by
a preponderance        of evidence the gender restriction falls
within the purview of the statutorily-carved exception.                     See
Percy v. Allen (Me. 1 9 8 2 ) , 449 A.2d 337; Laugesen v. ~nz-conda
Company   (6th Cir. 1975), 510 F.2d            307 at 313; Roberts v.
Union Co. (6th Cir. 1973) 487 F.2d 387 at 389; and Fesel v.
Masonic Home of Delaware Inc. (Del. 1978), 447 F.Supp. 1346
at 1350 (which characterizes the employer's burden as "very
heavy") affirmed 591 F.2d 1334 (3rd Cir. 1979).
                In Dothard, the United States Supreme Court considered
the            legality    of employment policies which               foreclose the
hiring               of women     guards in a maximum         security prison            in
Alabama.               The prison officials argued successfully that the
gender restriction was a BFOQ under 42 U.S.C.A.                          §200Q(e)-2(e)
                                                                              h
because the condition of the institution reached the levels
of "rampant violence" and a "jungle atmosphere."                           433 U.S. at
334, 97 S.Ct. at 2729,                   53 L.Ed.2d at 800.        By virtue of her
womanhood,               the    Court    held,     a     female    guard    would        be
particularly vulnerable to physical assault, jeopardizing the
security of the facility itself.                       In reaching this conclusion
the Court invoked two criteria for determining whether, on
that basis, a BFOQ existed.                        First "the essence of the
business operation would be undermined by not hiring members
of one sex exclusively" a.nd.secondly, the employer must have
"reasonable cause to believe, that is factual basis for be-
lieving, that substantially all women would be unable to per-
form safely and efficiently the task that the job invoked."
                Where the asserted justification for the discriminatory
conduct is rooted in privacy interests of those with whom the
complainant has contact, a third component is brought to bear
on             the    assertion     of   the     defense.         This     element       is
accommodation; the employer must demonstrate that it could
not reasonably rearrange job responsibilities or engage in
alternative practices so as to minimize the clash between the
privacy               interests    of    the   inmates
                                                fundamental and    the
                                                     c;~r\tl.lQl- t"
principle bearing discrimination in employment.   See Iowa
                                                                                  A --
State Men's---------- - - __
                 Reformatory et -al.              we(1980), 612                      ~.2d
                                                    &wLiT-iLuF-
- -
 - C   -_ _
       - ^-
        -  -
1079 a.t 1086, cert. denied at 446 U.S.         966, 100 S.Ct,. 2942,
64 L.Ed.2d   825.
     The Commission contends the School District did               not
factually establish the essential purpose of the school would
be undermined by not hiring appellant Stone and the school
did not have a        factual basis for believing that all or
substantial-ly all men would be unable to perform the duties
of the job of counselor as well as a woman.
     Further, the Commission argues no factual basis exists
to support the school's contention that ability to perform as
a counselor is gender related: "A review of the evidence will
demonstrate that the argument of the school district that
ability to perform is gender related, is based on nothing
more than stereotypic assumptions rather than on any factual
basis. "
     Finally,       the   Commission   argues   the   District   Court
applied an improper standard of review when it reversed the
decision of the Commission.            First, the Commission cites
section 2-4-702(2), MCA, which outlines seven reasons a court
may reverse a decision of an administrative agency.         Then the
Commission argues Northern Plains Resource Council v. Board
of Natural Resources and Conservation (1979), 181 Mont. 500,
594 P.2d 297, controls.       In that decision this Court held the
burden on a party appealing from an agency decision is a
substantial burden.        See also Slater v. Employment Security
Division (Mont. 1984), 676 P.2d 220, 41 St.Rep. 243.             Based
on the above opinion, it is the Commission's position that
the District Court erred in reversing its decision.
     We hold under section 49-2-303 (1) (a), MCA, the employer
can discriminate on the basis of gender when the reasonable
demands of the position require sex discrimination.          Pendery
v. City of Polson, HDC Case No. SEQ-882, where it was found
that "under the Montana Human Rights Act, the school district
must prove only that the hiring of a woman in this case is
reasonably necessary          because of      the demands of            guidance
counselor positions, not that the essence of the entire
business would be undermined if it does not hire her."
     We note both respondent and appellant rely on Dothard,
supra, and Langois v. Montana State Prison (Case No. 44232,
1980), where the courts recognize gender as a BFOQ when pri-
vacy rights of the students are at stake.              The case authority
supports the vacation by the District Court of the Comrnis-
sion's findings.          Based on these cases, the respond.ent con-
tends :
            "Intimate personal matters encompass more
            than exposing one Is body.     Discussing
            intimate, emotional or sexual problems
            with a guidance counselor is every bit as
            personal and private as exposing one's
            body. The counselor and the student must
            be able to discuss matters without
            inhibitions or reservations to get to the
            heart of the problem. Counseling without
            the freedom of expression is ineffective,
            and ineffective counseling is no better
            than no counseling at all.    If students
            refuse to seek the help of a guidance
            counselor because of his sex, then the
            sex of the guidance counselor is 'crucial
            to successful job performance. ' "  Fesel
            v. Masonic Home of Delaware, Inc. (D.Del.
            1978), 447 F.Supp. 1346, aff'd. (3rd.Cir.
            1979), 591 F.2d 1334.
     We     note    throughout      the      appellant's      argument      the
appellants contend there was no                factual support for the
privacy interests of the students.             The record indicates the
respondent's       long    time   male     counselor   took     a   poll     to
determine    the     attitude     of      female   students    toward      male
counselors and found thirty-eight percent of the girls would
select a     female counselor in all matters and ninety-two
percent    of    the      girls   would    sometimes   select       a    female
counselor.      We find this poll, coupled with testimony of the
counselor    and   the   expert   from   Montana   State   University
constitutes adequate factual evidence of a compelling privacy
interest.
      In addition, we note the trial judge very carefully
stated in his conclusions of law that the question whether
gender is a BFOQ         for the position of a second guidance
counselor is an issue of law, and that the Commission's
finding that gender was not a BFOQ for the second counselor
position was improper.      We agree.
      In summation, we note the trial court not only found a
compelling privacy interest in hiring a female counselor, but
also that gender was a BFOQ for the position.              We sustain
both findings.
      The decision of the District Court is affirmed.




We concur:




Justices
J r Justice John C. Sheehy dissenting:
 l.

       The majority opinion is incorrect because it understates
the burden of proof an employer must meet to establish a bona
fide   occupational      qualification      as    an   exception       to   the
anti-discrimination laws.          The Montana Human Rights Act is
broader than Title VTI of the Civil Rights Act, but the Acts
are very similiar.           This Court has held that reference to
federal case law is useful and appropriate in considering
questions arising under the Montana Human Rights Act.                    Snell
v. Montana-Dakota Utilities (Mont. 1982), 643 P.2d 841, 845,
39 St.Rep.     763, 676.       The test in this case ought to be
whether the Belgrade Schools have established by the evidence
that ser j e a bona fide occupational qualification (BFOQ) for
the school counselor.          The school district in this case has
not established that sex is a EFOQ.
       There   are    three    phases     involved      in   a   Title      VII
discrimination       case.      Mcnonnell     Douglas    Corp.    v.     Green
(1973), 411 U.S. 792, 802-804, 93 S.Ct. 1817, 1824, 1825, 36
L.Ed.2d   668, 677-679.         A plaintiff must show (1) that he
belongs    to a protected        class;     (2)    the employer sought
applicants and he is qualified for the job; but, (3) despite
his qualifications, he was rejected.              Under phase two, the
burden shifts to the employer to prove that his reason for
rejecting the applicant was non-dicriminatory, that is, was a
valid business reason.          The burden then shifts back to the
plaintiff to establish that the purported business necessity
is pretext.
       The school board here did not use a neutral stangard in
its employment policy.         It sorted the applicants according to
whether they were male or female.           They interviewed women and
not men.       The school board         failed however to         introduce
evidence that only women and not men could act as counsel.ors
for high school girls.            The majority opinj-on is written as
though the school board            had used the ability to counsel
female students on personal problems as its standard.                 The
evidence however completely fails to show this.
        The District Court's decision cites a "higher authority"
and "facts of life," but Title VII rejects such romantic
paternalism.         Rosenfeld v.     Southern Pacific Co.      (USCA 9
1971), 444 F.2d 1219.            There is a need for evidence, which
the employer must introduce and prove.
        Here   the   school board      should have    proved   that   its
business operation would be undermined by not hiring members
of one sex exclusively, that there is reasonable cause to
believe that all or substantially all men are unable to
perform this particular job, and that the sex qualifications
in this case is based on actual sexual characteristics and
not stereotypical assumption.           Dothard v. Rawlinson (1977),
433 U.S. 321, 333, 97 S.Ct. 272.0, 2728, 2729, 53 L.Ed.2d. 786,
799, 800.
        Therefore I would reverse for two reasons:             (1)    The
school board's a.ssumption that only femal-es cou1.d. act as
counselors for females stud-ents is not even facially neutral;
(2)   the school board failed entirely to meet its burden of
proof to establish that the essence of counseling would be
undermined by the hiring of a male counselor for female
students.      TJnder   ( 1)   the school board discriminated without
more.    Under (2) it failed to establish a BFOQ.



                                                     Justice
                                             1
                                            /'
                                                                  V

Justice Frank B. Morrison concurs in the dissent of Justice
Sheehy.

Justice Daniel J. Shea dissents and will file a written dissent
later.
