                              No. 533-373
               IN THE SUPREME COURT OF THE STATE OF MONTANA
                                     1984



CITY OF BILLINGS,
               Petitioner and Appellant,


STATE OF MONTANA HUMAN RIGHTS
COMMISSION, and EMERSON GREEN,
               Respondents and Respondents.




APPEAL FROM:    District Court of the Thirteenth Judicial District,
                In and for the County of Yellowstone,
                The Honorable William J. Speare, Judge presiding.


COUNSEL OF RECORD:
      For Appellant:
               Peterson, Schofield   &   Leckie, Billings, Montana

      For Respondents :
               Anne L. MacIntyre, Dept. of Labor & Industry,
               (Human Rights) , Helena, Montana
               Boschert & Boschert, (Green), Billings, Montana



                               Submitted on Briefs:      November 17, 1983
                                              Decided:   April 19, 1984




                              Clerk
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
       The City       of Billings appeals from an order of the
District Court affirming the judgment of the Montana Human
Rights Commission in favor of Emerson Green.          We affirm the
judgment of the District Court.
       The issues presented on appeal are:
        (1)     Did the Montana Human Rights Commission follow
proper procedure?

        (2)     Was   the decision of the Commission arbitrary,
capricious and clearly erroneous?
        (3) Did the District Court apply the proper standard of
review?
       Emerson Green worked as a custodian at the Billings
International Airport from December, 1976 until March 27,
1978.         He was 71 years old at the time he was discharged.
Green filed an age discrimination complaint with the Human
Rights Commission. He alleged that he had been harassed by
his supervisor and co-workers and that other employees were
late    for work       without   being   reprimanded, while    he   was
terminated for being late for work one time.                 The Human
Rights Commission staff investigated Green's complaint.              A
hearing was held before a hearing examiner appointed by the
Commission, pursuant to section 49-2-201(2), MCA.
       Uncontested      testimony   before   the   hearing    examiner
established that Emerson Green had worked the night shift
from 9:30 p.m. to 6:00 a.m.          Green was the only night shift
custodian over        30   years of age.      Co-workers called him
"Grandpa" and "old man."          Green's supervisor once stopped a
physical assault upon Green by a co-worker during work hours,
but the supervisor did not reprimand the co-worker.           The City
had previously terminated Green's employment, but reinstated
him in his custodial position upon investigation of his union
grievance.
       The        record        includes a June 9, 1978 letter of City
Administrator, R. L. Larsen, which reflects reasons why Green
had work problems:
       II              .
                  According to information, both the
       management and union presentations, the Airport has
       had problems with custodial service due to the
       hours, tedious conditions and relatively poor
       supervision in the year 1977.     In July of 1977,
       several supervisors were replaced and a great
       number of complaints began to surface as to the
       quality of the custodial work.      Mr. Green has
       received the brunt of many of these compla.ints from
       not only the customers within the Airport Complex
       but from co-workers as well           ...
       "From the standpoint of Mr. Green, a very deep
       seated feeling was felt that his co-workers and
       supervisors were 'out to get him.'     Supervision
       appeared to be lacking and other factors seemed to
       come into play involving additional custodial
       workers.
       "During the entire period of time Mr. Green was
       employed by the City of Billings Airport, adequate
       job supervision seemed to be lacking. In addition,
       the continual conflict between co-workers appeared
       - - evident - - - age differences - -
       to be           due to the                   of the
       workers themselves
                  - -
                                      ...
                                  Under the type of work
       situation with no supervision, and a co-worker
       attitude ~roblem. it amears t h a t i F Mr. Green
       could be ;einstated to       with the City, that it
       should not be at the Airport Complex in any
       capacity." (emphasis added)
The City Administrator concluded that Mr. Green should be
reinstated without ba.ck pay in the next available City job
opening.
       On July 1, 1978, the City offered Green a custodial
position at the Public Utilities Department.                 Green refused
the reinstatement offer because he would lose seniority and
back        pay   if       he   accepted.   Green   collected unemployment
compensation until the effective date of the reinstatement
offer.        He went to work for Saga Foods at Eastern Montana
College in September, 1978.
     The      City     of    Billings    presented       evidence   to   the
Commission's hearing examiner that Green was discharged for
cause, that he          was responsible for the poor relationship
with co-workers, that he was a hostile employee and that his
work performance was poor.
        In   contradiction to        this   evidence, Green's       current
employer      testified       that    Green     was   pleasant,     prompt,
efficient, and got along well with college-age co-workers at
Eastern Montana College.             Green testified that he had been
offended by being called "old man" and that his supervisor,
as well as his co-workers, had referred to him derogatorily
in front of members of the public.               Green explained that at
times he had been unable to perform all of his assigned tasks
at the airport because co-workers forced him to do their work
in addition to his own.              He testified that co-worker Bob
McCleve ordered him about and physically assaulted him twice
during work hours.           Supervisor Jim Murray stopped the second
assault, which gave Green a black eye and broke his glasses.
McCleve was in his early 20's at the time and Green was 70
years    old.        Supervisor Murray        reported    the   incident to
Building Supervisor Russell Lehmer.             Lehmer testified that he
did not take any disciplinary action against McCleve because
he was not certain who had started the fight.
    The hearing examiner issued a proposal for decision on
February 4, 1981.           The examiner determined that the City had
discriminated against Green because of his age.                 He proposed
that the Commission order the City to pay Green "$3.55 for an
8-hour day, 40-hour week from March 27, 1978 until July 1,
1978," the date on which Green would have been reemployed by
the City had he "accepted the reinstatement offer under the
grievance procedure."
        Both parties filed exceptions to the proposed order.
New counsel was substituted for Green's trial counsel and
filed exceptions to the proposed restriction of back pay to
July 1, 1978 without interest.               Green's substituted counsel
requested oral argument before the Commission on the issue of
damages.        She asserted that the period of discrimination
lasted from the date of the discriminatory act (the unlawful
discharge        on     March     27,     1978)     until    the     date   the
discrimination is ended            (the proposed order of February 4,
1981).         She petitioned       the Commission for permission to
supplement the record on the issue of damages.
       The     issue    of     damages was       argued   orally before     the
Commission and briefed by both parties.                      Following this
hearing, the Commission ordered the City to                    (a) reinstate
Green     in    the    first available       custodial position at          the
Billings       Airport,       (b) pay     back    wages   from the date     of
discharge, March          27, 1978, until February 4, 1981, less
interim wages and             (c) pay interest at the rate of 10% per
annum.       The Commission's back pay award was based in part
upon     evidence      submitted     at    the    supplemental hearing      on
damages.
       The City petitioned for judicial review.                    The District
Court affirmed the Commission's final order.                         From this
judgment, the City appeals.


       Did the Human Rights Commission follow proper procedure
in conducting a supplemental evidentiary hearing on the issue
of damages before issuing its final order?
       The     City    contends that the Commission exceeded                its
authority in admitting new evidence on the question of lost
wages.         The     City     further    asserts    that   the     Commission
improperly modified the hearing examiner's findings of fact
and proposed order, in violation of section 2-4-621 (3), MCA,
by improperly admitting additional evidence and substituting
the Commission's decision for that of the hearing examiner.
     Following the hearing on exceptions to the proposal for
decision, the Commission ordered both parties to further
brief   the   issue    of    damages.     Both    parties      were   given
opportunity to respond to all the evidence.             The supplemental
evidence that    the City       contends was      improperly      admitted
consisted of copies of the City of Billings' Compensation
Plans, AFSCME, 1976-1379 and the agreement between Teamsters
Local 190 and the City of Billings 1980-1981.             The Commission
took judicial notice of these documents, which Green supplied
to the Commission a-nd the City.
     Section     2-15-1706 ( 3 ) ,      MCA      of      the     Executive
Reorganization Act defines the Human Rights Commission as a
quasi-judicial board.         Section 2-15-102 (9), MCA defines the
functions of a quasi-judicial board as follows:
     "'Quasi-judicial function means an adjudicatory
     function exercised by an agency, involving the
     exercise of judgment and discretion in making
     determinations in controversies. The term includes
     but   is   not   limited   to   the   functions  of
     interpreting, applying, and enforcing existing
     rules and laws;           ...
                               determining rights and
     interests of adverse parties; evaluating and
     passing on facts; awarding compensation; adopting
     procedural rules; .       .
                            . hold.ing hearings; and any
     other act necessary to the performance of a
     quasi-judicial function."
     The procedure followed by the Commission in this case is
authorized by the Administrative Rules of Montana.                Section
24.9.245 (5), A.R.M.        requires the Commission to           give any
party, who is adversely affected by a hearing examiner's
proposal for decision, the opportunity for oral argument.
Sections 24.9.245(5), A.R.M. and 2-4-621(1), MCA specify that
requests for oral argument shall be filed when exceptions to
the proposal for decision are filed.                  Here, both parties
filed exceptions to the proposed decision, and the                   full
Commission hea-rd oral argument on September 29, 1981.
     In objecting to the examiner's proposal for decision,
Green specifically moved the Commission for oral argument on
the issue of back pay and redetermination of the back pay
award.   Section 24.9.242(3), A.R.M.     states in pertinent part:
     "If the motion requires consideration of facts not
     appearing in the record, the movant shall also
     serve and file copies of all             ...
                                            evidence he
     desires to present in support of the motion."
    At the hearing on the exceptions, particul-arly the issue
of damages, Green's substituted counsel discovered tha.t the
City's   contract   and   pay   plans   had    not   previously      been
submitted for the Commission's consideration.         The Commission
took the matter of damages under advisement and requested
supplemental briefs.      Copies of the City's contract and pay
plans were attached to Green's supplemental brief.              Copies of
these documents and Green's computation of lost wages were
served upon the City, which filed its supplemental brief two
days later.
     The Commission took judicial notice of the contract and
pay plans.     In its order, the Commission explained that:
     "These calculations are based on figures submitted
     in evidence at the hearing, on exceptions submitted
     by the parties, and on computations and briefs of
     the parties on the issue of damages submitted at
     the request of the Human Rights Commission.     The
     briefs were served on opposing counsel in addition
     to being submitted to the Human Rights Commission
     and the parties had the opportunity to respond."
    No contention of inaccuracy or lack of opportunity to
respond is made.     The City is arguing for application of a
technical rule of evidence.
     The   Commission     has   statutory     authority    to     conduct
supplemental   hearings     and    accept     additional        evidence.
Nothing in the Montana Code or the Administrative Rules of
Montana prohibits the Commission from formulating a final
order     based    on     all   the    evidence.     In    fact,   section
2-4-621 ( 3 ) ,   MCA     requires    the   Commission    to   review   the
complete record before increasing the recommended penalty in
a   proposal       for     decision.        Additional    indication     of
legislative intent that the agency's determination be based
on a review of all material evidence is found in section
2-4-703, MCA.            That section authorizes a court to order
additional evidence to be presented. to the agency prior to
judicial review of the agency's               determination.       It also
authorizes the agency to modify its decision based on the
additional material evidence.
      The manner in which the Commission may adopt, reject or
modify    a proposal        for decision is set forth in section
2-4-621 ( 3 ) ,   MCA.      That   subsection imposes the        following
restrictions upon the Commission:
      " (3) The agency may adopt the proposal for
      decision as the agency's final order. The agency
      in its final order may reject or modify the
      conclusions   of   law    and   interpretation   of
      administrative rules in the proposal for decision
      but may not reject or modify the findings of fact
      unless the agency first determines from a review of
      the complete record and states with particularity
      in the order that the findings of fact were not
      based upon competent substantial evidence or that
      the proceedings on which the findings were based
      did not comply with essential requirements of law.
      The agency may accept or reduce the recommended
      penalty in a proposal for decision but may not
      increase it without a review of the complete
      record. "
      Green's position regarding back pay changed when new
counsel was substituted after issuance of the proposal for
decision and prior to the parties' filing of exceptions.                The
matter of interim wages became critical at this point.               After
filing exceptions and a motion for oral argument on the issue
of back pay, Green's substituted counsel successfully argued
that computation of lost wages should include wages lost
between the date of discharge and issuance of the proposed
decision.
     The examiner's findings of fact 1-9 were adopted in
full; fin.dings10 and 11 were incorporated into findings made
by the Commission after taking notice of additional material
evidence and reviewing the complete record.
     In effect, the Commission's order modified a conclusion
of law, i .e. , the proper termination date of a back pay
award.     The examiner concluded that the termination date was
the date of the offer of reinstatement without back pay or
seniority.    The Commission disagreed with this conclusion and
extended the back pay award to the date of determination of
discrimination.       The Commission may            reject or modify        an
examiner's conclusions of             law.    Section 2-4-621 (3), MCA.
     It is true that the Commission failed to state with
particularity that findings of fact 10 and 11 were not based
on substantial credible evidence, as required by the second
sentence     in    section      2-4-621 (3),    MCA.           However,     the
Commission's       findings      10     and    11     are      supported    by
uncontradicted evidence submitted to the hearing examiner.
While there has been a technical failure to comply with the
code section, there is no reason to consume additional time
by returning this cause for supplemental statements in the
final order since the evidence supporting the Commission's
findings is uncontradicted.
     We     hold   that   the    Commission         properly    conducted    a
supplemental hearing and reviewed the complete record prior
to its increase of the recommended penalty.
                                      I1

     Was the decision of the Commission arbitrary, capricious
a.nd clearly erroneous?
      Appellant argues that all of the evidence militates
against any suggestion that Green's age played a role in his
discharge; that Green failed to prove a prima facie case of
discrimination; and         that the hearing examiner and                 Human
Rights Commission cannot substitute their judgment for that
of management regarding the discharge of an employee.
      The    hearing    examiner     found     that     Emerson    Green   had
established a prima facie case of age discrimination.                      That
finding was sustained by the Commission and the District
Court.      Martinez v. Yellowstone County Welfare Dept. (Mont.
1981), 626 P.2d 242, 246, 38 St.Rep. 474, 478, sets forth the
criteria     required     to   establish      a    prima   fa-cie case      of
disparate treatment in employment.                The evidence established
that (1) Green was 71 years of age and therefore a member of
a protected class; (2) he was qualified to perform the work
and had done so for a number of years; (3) he was discharged
despite his qualifications; (4) he was the only custodian on
his shift who was more than 30 years of age, and (5) his
co-workers referred to him derrogatorily as "Grandpa" and
"old man."
      Additionally, Mr. Green testified about harassment by
his   co-workers    and     failure    of     supervisory    personnel      to
resolve this problem.          This testimony was substantiated by
that of Airport Manager, Dale Norby.               The June 9, 1978 letter
from the City Administrator further substantiates Green's
testimony that there was a longstanding conflict between
Green and his co-workers, "due to the age differences of the
workers,    . . . [a]   work situation with no supervision, and a
co-worker attitude problem."             This letter along with the
testimony      of   Green      and    Norby       are   evidence     of    age
discrimination against Green.
          The    examiner's       finding    that     Green's problems           while
employed by the City were directly related to his co-workers'
discriminatory actions was adopted by the Commission. Finding
of Fact 7.             The standard of judicial review of an agency's
find.ing of fact is whether it is supported by                            reliable,
probative and substantial evidence.                       Section 2-4-704 (2)(e),
MCA   .        "Where factual determinations are warranted by the
record and have a reasonable basis in law, they are to be
accepted."         In the Matter of the Wage Appeal of Montana State
Highway Patrol Officers v. Board of Personnel Appeals (Mont.
1984), 41 St.Rep.           154, 158, quoting Standard Chem. Mfg. Co.
v. Employment Sec. (1980), 185 Mont. 241, 246, 605 P.2d 610,
613.
          We    conclude that there was              reliable, probative           and
substantial            evidence     in      the   record       to    support       the
Commission's determination that Mr. Green's problems while
employed by the City were directly related to his co-workers'
discriminary actions, that those actions were based solely on
Mr.       Green's        age,     and    that       the     employer      tolerated
discri-minatory actions              and     failed       to   maintain      a    work
environment free of intimidation.


          Did the District Court apply the proper standard of
review?
          The City contends that the District Court failed to
consider         the    City's     allegations       that      the   Human       Rights
Commission acted in excess of its statutory authority, made
its decision upon unlawful procedure or that its decision was
arbitrary or characterized by abuse of discretion.                        The City
argues that the District Court erred in limiting its review
to a determination of whether the Commission's decision was
supported by substantial evidence.
       Section 2-4-704, MCA specifies the standards for review
of administrative decisions:
       "Standards of review. (1) The review shall be
       conducted b - h
                  yte     court without a - - and shall be
                                          jury
       confined to the record.        In cases of alleged
       irregularities in procedure before the a.gency not
       shown in the record, proof thereof may be taken in
       the court.     The court, upon request, shall hear
       oral argument and receive written briefs.
       "(2) The court may not substitute its jud.gment for
       that of the agency as to the weight of the evidence
       on questions of fa.ct. The court may affirm the
       decision of the agency or remand the case for
       further proceedings.    The court may reverse or
       modify the decision if substantial rights of the
       appellant   have   been  prejudiced   because   the
       administrative findings, inferences, con.clusions,
       or decisions are:
       (a) in violation of constitutional or sta.tutory
       provisions;
       (b) in excess of the statutory authority of the
       agency;
       (c) made upon unlawful procedure;
       (d) affected by other error of law;
       (e) clearly erroneous in view of the reliable,
       probative, and substantial evidence on the whole
       record;
       (f) arbitrary or capricious or characterized by
       abuse of discretion or clearly unwarranted exercise
       of discretion; or
       (g) because    findings of     fact, upon    issues
       essential to the decision, were not made although
       requested."
       The District Court concluded that its review of the
Commission's findings of fact is subject to the substantial
evidence standard:
       "The Court here is limited to a determination of
       whether the Commission's finding of discrimination
       is supported by substantial evidence, and the
       record reveals that there was substantial evidence
       to support that decision; thus the decision was not
       arbitrary, capricious nor an a.buse of discretion."
       Conclusion of Law 3.
This    conclusion properly     reflects    the     clear    legislative
intent    that    the   reviewing   court   shall   not     reweigh   the
evidence.        "The court may not substitute its judgment for
that of the agency as to the weight of the evidence on
questions of fact. "     Section 2-4-704 (2), MCA.
      Regarding    appellant's     challenges to the Commission's
authority     to   conduct   a    supplemental   hearing         and   admit
additional evidence, the District Court concluded:
      "To reverse or modify the decision of the Human
      Rights Commission the Court must find that the
      substantial   rights   of   appellant   have   been
      prejudiced by the Commission's actions and the
      burden is on the appellant to establish such a
      violation. In this case appellant City of Billings
      failed to show that its substantial rights had been
      prejudiced." Conclusion of Law 2.
This conclusion is a proper restatement of the standard of
review   where     an   agency's     procedure       or     authority     is
challenged.
      Subsections    2-4-704 (2)(b),     (c)   and        (f),   MCA   speak
precisely to the type of alleged errors appellant raised as
issues for the District Court's review.          As noted in State,
Etc. v. Board of Natural Resources (Mont. 1982), 648 P.2d
734, 740-41, 39 St.Rep.          1238, 1243, "the mandates of the
Montana review statute cited above             ...    contain a clear
indication that the legislature intended that a court reverse
or modify the lower decision where the agency decision is
clearly erroneous, arbitrary, or capricious, resulting in the
appellants' rights being          substantially prejudiced."             The
evidence here demonstrates that the Commission's decision was
not   arbitrary,     capricious,     characterized         by    abuse   or
unwarranted exercise of discretion, or clearly erroneous.
      We conclude that the District Court employed the proper
standards of review.
      We affirm the decision of the District Court.
W e concur:

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