Untitled Texas Attorney General Opinion ( 1957 )

Texas Employment Commission
Brown Building
Austin, Texas
Opinion No. WW-13
Re: Effect of the Ford Motor Com-
pany - UAW-C10 supplemental
unemployment benefit plan upon
the Texas Unemployment Com-
Gentlemen: pensation Act.
You have requested our opinion as to whether benefits
paid from trust funds created by a contract between the Ford Motor Com-
pany and the UAW -CIO and a contract between General Motors Corpora-
tion and the IJAW-Cl0 to an unemp~loyed worker to supplement payments
received from state unemployment compensation would effect a disquali-
fication of such worker for state unemployment compensation under the
provisions of the Texas Unemployment Corrlpensation Act, Article 5221b
(Vernon’s Civil Statutes of Texas).
A review of the supplemental unemployment benefit plans
in the two contracts demonstrates that they have no significant differ-
ences so far as your question is concerned; therefore, they will here-
after be treated as one and the same, and will be referred to as “the
Plan”. The companies will be referred to as “the employer”, the ben-
eficiaries of the Plan will be referred to as “the applicant”, and the Texas
Unemployment Compensation Act will be referred to as “the Act”.
The features of the Plan, in summary, and only so far as
necessary to a disposition of the questions presented, are that the em-
ployer has agreed with the applicant, through his bargaining agent, to
contribute to a trust fund over a period of years at the rate of 5 cents
for each hour for which the employee has received payment from the
employer until the trust fund reaches a designated amount -- and there-
after only so much as is necessary to retain maximum funding, but never
in excess of the 5.cent rate. The trust is non-contributory as to the em-
ployee, and is administered by a trustee independently of the employer.
The assets of the trust are for the sole benefit of the employee, and un-
der no circumstances revert to, or can be received by, the employer.
The purpose of the Plan is to supplement state system unemployment
benefits to the monetary level agreed upon by ,the.parties, and not to re-
place or duplicate them. The object of the Plan is the payment to an eli-
gible applicant by the trustee from the trust fund of such an amount as,
Texas Employment C.ommission, page 2 (WW-13)
when added to the applicant’s state unemployment benefit and other com-
pensation for any week in question, will equal a certain percentage of his
weekly after-true straight time wage.
An applicant under the Plan is eligible for a supplemental
benefit only if he is on lay-off from the employer with respect to the week
for which application is made and if: (,a) such lay-off occurred in conse-
quence of a reduction in force oretemporary lay-off, including a lay-off
because of the discontinuance of a plant or other operation; (b) the appli-
cant has registered at and has reported to an employment office main-
tained by the Texas Employment Commission, a,nd has not failed or re-
fused to accept em,ployment deemed suitable under the Texas Employment
System, and; (c) the applicant has received stats unemployment benefits not
currently under protest by the company. Several other conditions prece-
dent are set out-in the Plan, but are not deemed to be material to this dis-
cussion.
The Texas Unemployment Compensa,tion Act sets up cer-
tain requirements before an unemployed individual shall be eligib,le to
receive benefits during any benefit period (Art. 522lb-2. V.C.S.). and
further provide,s certain conditions which will disqualify, an unemployed
individual from receiving benefits during any benefit period. (Art. 5221b-
3, V.C.S.). For the purposes of this opinion it is only necessaryto state
that none of the conditions of disqualification include the psyment of the
type of benefits under the Plan. However, to be eligible for benefits un-
der the Act, an individual must be “unemployed..” The Act provides that
“an individual shall be deemed ‘totally ‘unemployed’ in any benefit period
during which he performs no services and with respect to wh+h no wages
are payable to him.” (Art. 5221b-17, V.C.S.). “W,ages” as used in the Act
is defined as “a11 remuneration for personal services, includiagcommis-
sions and bonuses and the cash value of all remuneration in any medium
other than cash.” (Art. 5221b-‘17. V.C.S.).
The specific question that must be answered is whether an
individual who receives the supplemental benefits from the trust fund es-
tablished by the Plan is “totally unemployed” within the meaning of the
Texas~Unemployment Compensation Act. As pointed out above, the stat-
ute states that sn individual ,is ~%etaHyunecnple ad” in any benefit period
during which (1) he performs no services~aad (,1) “with respect to which
no wages are payable to h@n,” with “wages’ being defined a8 “all remun-
eration for personal,services,”
A laid-off employee, during a-period.of ‘by-off which re-
sults for reasons specified in the Plan, and meeting ail other eligibility
requirements of the P&n, manifestly is performing no &wi~ei%. Herice,
the applicant meets the first requirement that “ha perfor&& servides.”
Texas Employment Commission. page 3 (WW-13)
A more difficult problem arises in determining whether
payments under the Plan are “wages”, as defined by the Act, and there-
by prevent the appliicdht from being ‘unemployed’ within the meaning of
the “Act-. It will be noted that, before an employee will be deemed em-
ployed, the Act requires that ‘wages” be payable to the “employee” with
respect to the benefit period for which he seeks State Unemployment
Compensation.
The Plan, the funds collected and held in trust under the
provisions of the Plan, and the payment of the funds to laid-tiff workers
are very similar to the Texas Unemployment Compensation Act and the
collection and distribution of funds thereunder. In Friedman v. American
Surety Co. of New York, et al., Tex. 15l.S.%‘J.Ld 570 (1941) th
Supreme Court of Texas held t&&e unsiloyment compensation >uf
collected under the Texas Unemployment Compensation Act is a trust
fund to be held by the State Treasurer as trustee for the benefit of a class
of employees whose employers contribute by virtue of the excise tax levy.
In declaring the Act to be constitutional, the Supreme Court stated that
the benefits paid under the Act were “wages or compenaatioa” of the em-
ployee:
“It is true that the employers alone directly
create the unemployment fund, but it is created for
the benefit of their employees. Therefore, the right
of such, employees to enjoy or participate in the fund
in times of unemployment should be regarded as a
part of their compensation or wages. All employees
who labor or perform services for employers who
are covered by this Act labor or serve in part for
the right to enjoy the benefit6 of this unemployment
fund. . . Those who come under its provision6 have
labored or served for such privilege . . . The right
of a&employee covered by this Act to participate in
the fund created thereby is a part of the compen6a-
tion earned while he is employed.”
As “wages* is.defined by the Act as “all remuneration for
personal se,rviceg~“, and in view of the Friedmrn ca6,e declaring benefits
of this nature to be “wages * or “compensations”, we are of the opinion
that payments to an applicant under the provisionp’ of the Plan are sus-
ceptible of being ClaEBffiCd as “remuneration for personal services” or
“wages’ within the meaning of the Act. The Plan and the ultimate receipt
of payments there.under is the result of bargaining between the employer
and the bargaining 6gent of the employee. It was one of the in@ucemente
by which the employee agreed to perform service6 and labor for the em-
ployer. Under the rea6oning of the Supreme Court of Texas in the Fried-
man case we feel that such payment6 under the Plan can r8a6OIIablyr
ssified a6 consideration or remuneration to the employee fbr ServiCsS
-
Texas Employment Commission, page 4 (WW-1.3)
:! ..
.
o-
performed by him t&t&e employer, and therefore these payment6 are
“wages” withinthe broad definition of that term given by the Texas Un-
employment Compen&.tion Act.
However, as pointed out above, to render the individual
ineligible these “wages” must be payable “with respect to,” the benefit
period in question. The El Paso Court of Civil Appeals had a similar
question before it in Western Union pany v. Texas Em-
ployment Cominiss,ion, et al., 243 S.
es rn
vth the services of an employee because they
were no longer needed or required by the company. Under a contract of
employment the company paid the individual a lump sum amount based
upon a fdimula of total prior service. This paxpent was called “sever-
ance pay’. The individual then applied for stat6 unemployment compn-
sation. It was contended by the company that the receipt of this severance
payment made the employee ineligible to receive benefits under the Un-
employment Compensation Act because the sums of money received rep-
resented wages and should be allocated to the period immediately subse-
quant,to the discharge, and therefore the employee was not unemployed
within the &caning of the Act. The employee took the po6itfon that the
seQverancc,,.pay represented wages received with raepect to past services
rrndered’and therefore did not make her ineligible under the provisions
‘of the Act. Both parties agreed that the payments were wages, and that
question was not ,decided by the Court. However., in discussing the ques-
tion of whether the individual was Yotally unemployed.” under the defini-
tion givenby the statute, the Court stated that the employte:
‘L ” . . . clearly, as is admitted, performed no
services during the period, or any period sub6equent
to her discharge to which the company would apply
payments made to her. Having performed no services
‘/~during such period no wages could be payable to her
with respect to such period. If the agreement that
such Sum.8 are wages be accurate, then the wage6
1 must be applicable to some period withrespect to
Which and during which she did perform personal
6ervices for the company.” (Emphaeis added.)
,,,. The Court, having stated that wage6 must be applicable to
Some period “with respect to which” and during which an employee per-
formed personal service6 for the company, and that such severance pay
wa6 allocable against the period in which it wasp earned, and not against
a period during which the employee’had performed no services, we feel
that the same reasoning must apply to the sums received by an applicant
under the provision6 of the Plan in question, The employee, or applicant,
will perform no services during the benefit period, and therefore the funds
received under the provision6 of the Plan will be received because of ser-
vices performed by the imployee to the company prior to hi6 lay-off.
These funds must be allocable to the period during which the individual
Taxa Employment Commi6sion, page 5 (WW-13)
performed services and will not be “with respect to” the benefit period
during which he i6 seeking state unemployment compen6ation, and will,
therefore, not make him ineligible to receive state unemployment com-
pensation.
For case6 similar to the Western Union case cited above,
see In re Public Ledger, Inc., 161 F.Zd 762. Ackerson, et al. v. Western
Union Telegraph Co., et al., 48 N.W.2d 338 ‘(S.Ct Mi 1751) Dubose v.
Maine kmployment Security Commission, 114 A.‘2d 3:: (S.Ct.‘h%aine, 1455).
We are therefore of the opinion #at the receipt of supple-
mental unemployment benefits under the Plan will not render an individuel
ineligible to receive benefit6 under the Texas Unemployment Compensa-
tion Act. We note in pa66ing that the 6ame general conclusion has been
arrived at by a great majority of our si6t6r stskr who hsve con6idered
the quartion.
SUMMARY
Receipt of rrupplementel unemplbyment ben-
efitr from trust funds accumulated and pald out un-
d,er the provisions of the contracts between Ford
Motor Company and the UAW-C10 and General Mo-
tors Corporation and the UAW -CIO doe6 not preclude
an individual from receiving benefit6 under the Texar
Unemployment Compenration Act.
Very truly yourr,
WILL WILSON
Attorney General
BY
Will D. Davis
ASSiEkLt
WDD:cm
APPROVED:
OPINION COMMITTEE
H. Grady Chandler,
Chairman