I. M. Dach Underwear Co. v. Employment Security Commission , 347 Mich. 465 ( 1956 )

Carr, J.

This case involves the claims of the appellants to unemployment compensation for the first week in July, 1951. The facts in the case are not in dispute. For a number of years prior to the period in question the I. M. Dach Underwear Company has operated a manufacturing business in the city of Jackson. - For varying periods less than 1 year in duration, prior to July 1, 1951, appellants were employed by the company, all of them being members of the Amalgamated Clothing Workers of America. Since 1943 said union has been recognized as the sole collective-bargaining agency for the company’s employees who were members thereof.

It further appears from the record that for a number of years prior to 1951 the company had annually granted a vacation to its employees for the week in which July 4th fell. Under date of November 21, 1950, the company and the union entered into a contract relating to various matters affecting the employment of members of the union, and specifying various incidents thereof. Article 5 of the contract read as follows :

“Article 5

“Vacations

“In appreciation of the loyal and faithful service of the employees, the employer agrees that each employee who has been continuously employed for more than 12 months on the Saturday last preceding July 4th shall be entitled to vacation pay as follows:

“Those employees who have been continuously employed for 1 year preceding July 4th, shall be entitled to 1 week’s vacation pay, and those employees who have been continuously employed for 5 years, or more, on the Saturday last preceding July 4th shall be entitled to 2 weeks’ vacation pay. Vacation pay shall be based upon the employee’s average 40-hour week earnings computed 6 weeks prior to July 4th in the year in which the vacation shall fall.

“Time eor Vacations

“All,vacations shall be taken during the week in which July 4th shall fall and the week immediately. following for those employees who are entitled to 2 weeks’ vacation pay. In the event that the management shall determine that the plant shall operate during said succeeding week, then the management shall have the privilege of so doing, providing that the entire factory shall work during said succeeding week. If the company feels it is necessary to work the entire factory during said second or succeeding week vacation period, they shall notify the employees prior to June 1st of their intention to work during said succeeding second week vacation period. It is understood and agreed that any employee who has not worked during the entire 12 months preceding July 1st, shall not be entitled to any vacation pay.”

In accordance with the contract the company, prior to July 1, 1951, posted notices on the plant bulletin board stating in substance that the vacation period would begin July 1st. Appellants herein, not having worked during the entire 12 months preceding that date, under the final provision of the excerpt óf the contract above quoted were not entitled to vacation pay, and they, with others similarly situated, filed claims for unemployment compensation under the provisions of the statute.^*

We are concerned in the instant case with provisions of the Michigan employment security act, as amended by PA 1951, No 251, effective June 17,1951. For obvious reasons, subsequent amendments are not involved in the instant controversy. The employment security commission denied compensation on the ground that the applicants were on vacation and, hence, not available for work. The conclusion reached was affirmed on redetermination. On appeal the referee reversed the holding of the commission, and the appeal board affirmed the order of the referee. On certiorari the circuit court of Jackson county reversed the appeal hoard, holding.that the applicants were voluntarily unemployed during the week in question, and for that reason were not entitled to compensation. From the judgment entered the claimants have appealed to this Court.

On behalf of appellants it is urged that during the week in question they were “unemployed” within the meaning of the term as used in sections 28 and 48 of the statute, as amended by PA 1951, No 251 (CLS 1952, §421.28 [Stat Ann 1951 Cum Supp § 17.530]) and (CLS 1952, §421.48 [Stat Ann 1951 Cum Supp § 17.552]). Special emphasis is placed on the latter section which, at the time in question here, read as follows:

“Sec. 48. An individual shall be deemed ‘unemployed’ with respect to any week during which he performs no services and with respect to which no remuneration is payable to him, or with respect to any week of less than full-time work if the remuneration payable to him is. less, than his primary weekly benefit rate: Provided, That any loss of remuneration, incurred by an individual during any week resulting from any cause other than the failure of his employing unit to furnish full-time, regular employment shall be included as remuneration earned for purposes of this section and of subsection (c) of section 27 of this act: Provided further, That the total amount of remuneration thus lost shall bo determined in such manner as the commission shall by regulation prescribe. For the purposes of this act, an individual’s primary, weekly benefit rate shall mean the weekly benefit rate shown in column B of the table in section 27 (b),-which is on the line applicable to the individual’s wage class (column A).

“All amounts paid to or due to a claimant from an employing unit or former employing unit for a vacation or a holiday, or in lieu of notice, for the purposes of determining the claimant’s benefit rights, shall-be deemed'remuneration for the period designated by the contract or agreement providing for the payment, or if there be no snch contract or agreement providing for the payment, then for the period designated by the employing unit or former employing unit: Provided, however, That payments in the form of termination, separation, severance or dismissal allowances, back pay awards and bonuses, shall not be deemed wages or remuneration within the meaning of this section.”

In accordance with general principles of statutory construction, the pertinent provisions of the Michigan employment security act must be read in the light of the purpose of the legislature in enacting it-. Section 2 thereof (CL 1948, § 421.2 [Stat Ann 1950 Eev § 17.502]) declares. such purpose in clear and unequivocal terms. It reads as follows:

“Sec. 2. Declaration of policy. The legislature acting in the exercise of the police power of the State declares that the public policy of the State is as follows : Economic insecurity due to unemployment is a serious menace to the health, morals, and welfare of the people of this State. Involuntary unemployment is a subject of general interest and concern which requires action by the legislature to prevent its spread and to lighten its burden which so often falls with crushing force upon the unemployed worker and his family, to the detriment of the welfare of the people of this State. Social security requires protection against this hazard of our economic life. Employers should be encouraged to provide stable employment. The systematic accumulation of funds during periods of employment to provide benefits for periods of unemployment by the setting aside of unemployment reserves to be used for the benefit of persons unemployed through no fault of their own, thus maintaining purchasing power and limiting the serious social consequences of relief assistance, is for the public good, and the general welfare of the people of this State.”

It thus appears that, in the interest of the public welfare, the legislature of the State undertook to deal with the problem of in-voluntary unemployment. The declaration of policy is significant in the interpretation of the various provisions of the statute through which the ultimate result sought was to be attained. Clearly the act was intended primarily for the benefit of those involuntarily unemployed, in other words, those who, capable of working, are prevented from doing so other than by the results of their own acts.

In the instant case these appellants through their agency entered into a definite agreement with the employer that the vacation period each year, recognized by the parties as necessary or at least proper, should be the week in July in which the 4th of the month fell and, subject to certain provisions, the ensuing week for those having the required seniority. Such agreement was not for the sole benefit of the employer but was primarily for the benefit of the employees. It will be noted also that the contract did not leave the fixing of the time for the. annual vacation to the employer, nor to subsequent mutual agreement by the parties. The provision of the contract was made certain and definite to the end that the parties thereto, including the employees for whom the union acted, might be apprised of their rights and obligations.

The question at issue has not been squarely raised in this State in any prior litigation. However, the courts in other States having statutes very similar in form and substance to the Michigan act have had occasion to consider the interpretation thereof and, likewise, the force and effect of a contract of the nature here involved. In Beaman v. Bench, 75 Ariz 345 (256 P2d 721), the statute involved, like the Michigan act, contained a statement of public policy emphasizing the necessity of relief from the consequences of “involuntary unemployment.” There, as here, there was in existence a contract between the employer and a union acting as the exclusive bargaining agency for its members, covering, among other matters, vacation periods. It was specifically set forth in the contract that the vacation period for the production departments maintained by the employer should begin with Monday of the week following July 4th. The agreement also specified the amount of vacation time on the basis of length of ■service. It was found that in the year 1951 more than half of the employees were entitled to a vacation. It was held that this situation, for practical reasons, forced a shutdown of the employer’s operations during the week in question and that, in consequence, employees' not entitled to vacation pay, who were in effect required to take their annual vacation at the time specified in the contract, were not entitled to unemployment compensation. In commenting on the situation, it was said (p 349):

“Appellee and the claimants he represents must be deemed to have agreed to any shutdown compelled by the company’s contractual obligations to grant leaves at a specified time. They voluntarily entered into the agreement, were voluntarily working under all of the provisions thereof, insisted upon the enforcement of its terms concerning the vacation period, and must be held to have consented to the results of such enforcement to the same extent as if they had expressly asked for the layoff. The claims deputy, the appeal tribunal and the employment security commission were all correct in ruling that the appellee and those he represents were voluntarily unemployed and not entitled to benefits under the employment security act.”

In reaching its conclusion the Arizona court recognized that a distinction is to be made .between the effect of shutdowns required by virtue of contract and those which occur at the employer’s option. On

the basis of such distinction the court differentiated American Bridge Co. v. Review Board of Indiana Employment Security Division, 121 Ind App 576 (98 NE2d 193); and Schettino v. Administrator, Unemployment Compensation Act, 138 Conn 253 (83 A2d 217). It was pointed out that in the Connecticut case the employer had the right to designate a vacation period at any time between May and October, including a time during which the plant might be shut down for other reasons, and in the Indiana case the factual situation disclosed that the shutdown was for the purpose of taking inventory, without any causal connection between the suspension of operations and the carrying out of the union contract.

In Jackson v. Minneapolis-Honeywell Regulator Company, 234 Minn 52 (47 NW2d 449), the court, after considering provisions of the statute of the State and decisions from other jurisdictions, held that:

“Where an employer’s plant was closed down for 2 weeks primarily for vacation purposes pursuant to a union contract with employer, and an employee, who was a member of the union but not entitled to vacation pay because of lack of necessary length of service, filed a claim for benefits under the Minnesota employment and security law for the vacation period, such unemployment held to be voluntary, precluding employee from right to unemployment compensation benefits.” (Syllabus by the court.)

In reaching its conclusion the court (p 58) quoted from In re Employees of Buffelen Lumber & Manfg. Co., 32 Wash2d 205, 210 (201 P2d 194), as follows:

“ ‘The claimants were parties, through their union, to the agreement which had to do with vacations. They were bound.by the terms of that agreement to the same effect as they were, bound by the working agreement. In re Employees of Polson Lumber & Shingle Mills, 19 Wash2d 467 (143 P2d 316).

“ ‘It is clear that claimants must be held to the liabilities imposed by the contract, and must suffer the result of any provisions in the agreement which is to their detriment. The contract relating to vacations determined which employees were to be paid during vacation periods. The claimants.cannot complain that they were not mentioned or their rights ascertained, the reason being that their union spoke for them to the same extent and to the same effect as they could as individuals.’ ”

The court (p 56) also quoted a provision of the Minnesota statute declaring that:

“ ‘An individual shall be deemed “unemployed” in any week during which he performs no service and with respect to which no wages are payable to him, or in any -week of less than full time work if the wages payable to him .with respect to such week are less than his weekly benefit amount.’ ”

Said provision is analogous to the language of section 48 of the Michigan act, on which appellants rely. The Minnesota court in considering the argument based on the statute declared that the purpose of the legislature, as indicated by the declaration of policy and general, purposes, was to deal with evils resulting from “involuntary unemployment.” Because the shutdown of the employer’s plant occurred in accordance with the contract between the union, of which claimant was a member, and the company, the court concluded that claimant’s unemployment was not involuntary, and that under the statute as interpreted he was not entitled to compensation. This decision -was adhered to in the later case of Johnson v. LaGrange Shoe Corporation, 244 Minn 354 (70 NW2d 335).

In harmony with the decisions above cited is Philco Corporation v. Unemployment Compensation Board of Review, 175 Pa Super 402 (105 A2d 176). Involved in that case were contracts, identical in their material provisions, between unions representing tbe unemployment compensation claimants, and the employer. One of the provisions of said agreements contemplated an annual vacation period with a discontinuance of operations by the company. The vacation for the year 1952 was declared in accordance with said contract. As in the cáse at bar,- it appeared that the claimants, who were not entitled to vacation pay, were ready and willing fo accept suitable work if tendered to them during the 2 weeks fixed as the vácation period. Holding that the employer had acted in accordance with the contract, and had in effect recognized an obligation imposed thereby, the court pointed out that the unions were the exclusive bargaining agents for their members, and that claimants were bound by agreements relating to labor-management, including vacations and vacation pay. Based on- this situation the court concluded that claimants’ unemployment was voluntary and, hence, not compensable. The court further declared that (p 408):

“Moreover in a real sense claimants were not unemployed and for that reason their idleness during the vacation period was not compensable. They were not laid off; there was no termination of employment nor even suspension of the employer-employee relationship during the period. A vacation is a period of freedom from duty, not an end of employment. Dauber's Case, 151 Pa Super 293 (30 A2d 214). Their continued employment was insured by their bargaining agreements; their names were still on the pay roll even though they did not receive vacation pay. The contract of employment persisted, under which they returned to their work at the end of the vacation period without loss of seniority. The agreements in article 2 provide for a work week of 40 hours of 8 hours per day, from Monday through Friday. The scheduled vacation period was no different in principle from the normal uncompensated week-end shutdown from Friday to the following Monday, incident to the 40-hour week.”

The supreme court of New Jersey in Glover v. Simmons Company, 17 NJ 313 (111 A2d 404), had before it a contract between a union, representing claimant for unemployment compensation, and the employer, under which the vacation period for the year 1953 was fixed commencing July 6th. It was held that the contract was binding on members of the union, and that claimant’s unemployment during said period was voluntary. There, as in the ease at bar, he had not worked for the employer a sufficient length of time to entitle him to vacation pay under the contract. It was recognized that the establishment of. a vacation period for employees was a proper matter to be included in the contract, the legislature not having spoken specifically with reference thereto. It may be further noted that the New Jersey statute contains a provision similar to the first sentence found in section 48 of the Michigan act, above quoted, on which appellants rely.

We think the reasoning of the above decisions persuasive. In accord therewith are: Mattey v. Unemployment Compensation Board of Review, 164 Pa Super 36 (63 A2d 429); General Electric Company v. Unemployment Compensation Board of Review, 177 Pa Super 49 (110 A2d 258); Claim of Rakowski, 276 App Div 625 (97 NYS2d 309). Under the facts in the case before us we conclude that the claimants were not “involuntarily unemployed,” but, rather, that the situation in which they were placed as a result of the closing of their employer’s plant for the first week in July, 1951, resulted from the contract made in their behalf by their collective-bargaining agency, the union of which they were members. The weight of authority clearly supports the judgment entered in circuit court. The right of a labor union to bind its members, for whom it is the sole collective-bargaining agency, by a contract of the character, here involved was recognized by this Court in Chrysler Corp. v. Smith, 297 Mich 438 (135 ALR 900); and in General Motors Corp. v. Unemployment Compensation Commission, 331 Mich 303.

As before stated, the question here involved is one of first impression in Michigan. Counsel have called attention' to Hubbard v. Unemployment Compensation Commission, 328 Mich 444. However, the question there at issue was essentially different from that presented here. As pointed out in the opinion of the Court, the contract between the employer and the union to which claimants belonged did not provide for a vacation. In Renown Stove Company v. Unemployment Compensation Commission, 328 Mich 436, it was declared that the objective sought to be gained by the legislature in the enactment of the statute was protection against evils incident to involuntary unemployment. This case likewise presented a different factual situation, and different issues, than are before us in the instant proceeding.

Counsel direct attention to CLS 1952, § 421.38 (Stat Ann 1951 Cum Supp § 17.540), which contains a provision to the effect that the decision of the appeal board on a question of fact may be reversed by the circuit court only if contrary to the great weight of the evidence. It is argued in substance that the questions presented to the circuit judge in the instant case involved matters of fact rather than issues of law. As before stated, however, the facts in the proceeding are not in dispute. A like situation arose in Ford Motor Co. v. Unemployment Compensation Commission, 316 Mich 468, where it was held:

“Where facts were not in dispute as to claimant’s availability for work, the question of whether she was entitled to .benefits under the. unemployment compensation act may properly be regarded as one of law, involving the interpretation of a statute (PA 1936 [Ex Sess], No 1, as amended).” (Syllabus 6.)

Likewise, in Hubbard v. Unemployment Compensation Commission, supra, it was held that under the record before the Court the facts were not in dispute but, rather, that the real issue was as to the significance of the facts in the light of the statute and of the contract between the parties, and that the question raised, in consequence, was one of law. We think the claim advanced in the instant case is without merit.

A further question is suggested with reference to the validity of the contract between the union and the employer. Section 31 of the Michigan employment security act (CL 1948, § 421.31 [Stat Ann 1950 Rev § 17.533]) forbids agreements by an individual to waive, release,.or commute his rights under the statute. In effect the claim is that if the contract between the employer and the union in this case is construed as inconsistent with the right of claimants to unemployment compensation it comes within the inhibition imposed by the legislature. However, the primary question here involved is whether claimants were involuntarily unemployed. If not, the circuit judge was right in holding that they were not entitled to unemployment compensation. There may not be a waiver as to a right that does not exist.

The statute may not be regarded as prohibiting an agreement between employer and employee with reference to a vacation for the latter, to be taken at a fixed time. Such an agreement would be equally binding whether made by the employee personally or by his union in his behalf. We think the claim advanced is well answered by the Minnesota supreme court in Jackson v. Minneapolis-Honeywell Regulator Company, supra. It was there said (pp 61, 62):

“The agreement is not one to waive rights to benefits which an employee otherwise would be entitled to, but an agreement for a 2 weeks’ vacation leave or voluntary, absence from work. An agreement between the employer and its employee providing for a 2 weeks’ leave for the individual employee certainly cannot be interpreted to mean an agreement to waive benefits and therefore prohibited. Such, an agreement made collectively by the union should not be placed in a different status. There is an important distinction between an agreement for a- leave or vacation shutdown which gives rise to no unemployment compensation benefits and a collusive agreement that unemployment compensation benefits be waived.”

The circuit court correctly determined the issues involved in the case, arid the judgment entered is affirmed. In view of the nature of the questions involved, no costs are allowed.

Dethmers, C. J., and Sharpe, Boyles, and Kelly, JJ., concurred with Carr, J.

* PA 1936 (Ex Sess), No 1, as amended (CL 1948 and CLS 1952, § 421.1 et seq. [Stat Ann 1950 Kev and Stat Ann 1951 Cum Supp § 17.-501 et seg.]).