BEFORE THE
STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION

In the matter of the unemployment benefit claims of

DAVID HENDRIX, et al., Employes

Involving the account of

CATERPILLAR TRACTOR COMPANY, Employer

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 80-A-66182 MG


A department deputy's initial determinations held: that in weeks 43 through 48 of 1979, the employes received vacation pay and/or termination pay for weeks within that period which was, with due notice, definitely allocated and payable by the close of each of such weeks, and at not less than the employes' approximate full weekly wage rate, that such pay was therefore "wages," and that the employes were ineligible for benefits during each of the weeks within such time period that such wages exceeded their weekly benefit rate for unemployment compensation purposes. A timely appeal was filed for all employes by their attorneys. Prior to the hearing, certain employes withdrew their request for hearing. Hearing was held on December 19, 1980. The appeal tribunal decision, issued on July 10, 1981 and amended on July 17, 1981, affirmed the initial determinations. The employes timely petitioned for review by the Commission.

Based on the evidence and applicable law, the Commission makes the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The employer manufactures heavy industrial automotive equipment, and has a plant in Milwaukee, Wisconsin. The employes involved in this matter each worked for the employer in Milwaukee, Wisconsin, for various lengths of time immediately preceding the time period which is the subject of their appeals. Each of the employes were members of the Allied Industrial Workers of America, Amalgamated Local 806, which had a collective bargaining agreement with the employer in effect between the dates of June 1, 1977 and May 31, 1980.

The employes were laid off by the employer for indefinite periods; some on October 22, 1979 (week 43) and some on November 5, 1979 (week 45). Each received with his last paycheck a lump sum payment consisting of: (1) vacation pay, (2) vacation bonus, (3) paid absence allowance and (4) attendance bonus. After their layoff, each of the employes appeared at a public employment office, registered for work and claimed unemployment benefits. The employer contested the employes' eligibility for unemployment benefits, asserting that each element of the lump sum payments constituted either vacation pay or termination pay which was properly allocated to the U.C. weeks in issue and should be treated as wages for such weeks.

Sections 108.05 (4)(b) and (5) of the statutes provide that vacation pay and termination pay may, for U.C. purposes, be allocated as wages for a given week if paid and allocated in compliance with the mechanical requirements of those sections. Here, the parties have stipulated that the mechanical requirements were met as to each element of the lump sum payments.

The employes assert that a portion of the vacation pay paid to them at the time of their layoff was paid to them earlier than it should have been under the collective bargaining agreement. They also assert that the paid absence allowance and attendance bonus were not subject to allocation as wages for the series of U.C. weeks here in issue. All four elements of the lump sum payments and the parties' positions with respect to each element will be more fully addressed in the order listed above:

(1) Vacation Pay. Under the collective bargaining agreement here in issue (Exhibit 3), an employe's eligibility for vacation was determined on the basis of his seniority as of May 31 of each year (section 5.2). This resulted in a "base period" for vacation purposes which ran from June 1 of each calendar year through May 31 of the succeeding calendar year (section 5.4). Section 5.3 required the employes to take their vacation "during the 'base period' next following the 'base period' in which the pay applicable to the vacation was earned." (Emphasis added) Although that provision refers to vacation pay as having been "earned," it is clear that the parties recognized the well established rule that vacation pay accrues on the basis of past service but may be allocated as wages for later weeks in which no wage-earning services are performed. The employes concede that a portion of the vacation pay paid to them at the time of their layoff, was properly allocated by the employer as wages for weeks during the layoff. Specifically, the employes contended that while the employer could, at the time of their layoff in October or November 1979, pay to them and allocate to weeks during the layoff all vacation pay which was based on their service between June 1, 1978 and May 31, 1979, the employer could not pay to them and so allocate any vacation pay based on their service between June 1, 1979 and their respective layoff dates in October or November 1979. The employes assert that since they would not have been able, on their own request, to take paid vacation based on that period of service until after May 31, 1980, the employer had no right to pay them vacation pay for that portion of their total vacation entitlement until after May 31, 1980 and could not allocate such vacation pay to the period of layoff in the fall of 1979. Their contention is, in effect, "We couldn't take this vacation until after May 31, 1980 and the employer therefore could not give it to us until then."  That contention is attractively symmetrical and arguably equitable.

However, employers have a common law right of absolute discretion to designate vacation times subject only to those restrictions to which the employer is shown to have agreed. The existence and extent of such restrictions, if any, may be shown either by express provision or the past practice of the employer and its employer, where ambiguity requires that such past practice be considered.

The employer contends, and the appeal tribunal found, that the indefinite layoff of these employer constituted a "termination" within the meaning of section 5.6 of the collective bargaining agreement which provides in part:

"Employer terminated will receive as separation payment any unpaid vacation pay computed to date of separation."

The Commission does not agree that these employes were terminated within the meaning of the above quoted provision. There is no direct evidence that the term "terminated" in section 5.6 was intended by the parties to include employes on an indefinite layoff. The Commission rejects the proposition that the specialized U. C. definition of "terminated," which includes employes on indefinite layoff, dictates the meaning of that term as used within the entirely different context of a collective bargaining agreement. The proper question is: What did the parties mean? The Commission considers that under the circumstances herein the word "terminated," as used in the collective bargaining agreement should be given its commonly-understood meaning and that such commonly-understood meaning does not include employes on a layoff, whether for a definite period or an indefinite period. Section 5.6 is inapplicable to the situation of the employer herein.

Although the Commission does not agree that section 5.6 of the collective bargaining agreement is applicable herein, the Commission considers that the employer's payment of vacation pay to the employer at the time of their layoff, including that portion of such vacation pay which the employes could not, of their own volition, utilize until June 1, 1980, was not prohibited by the collective bargaining agreement. The Commission further considers that the employer's right to pay and allocate the disputed vacation pay is not dependent upon such vacation pay being characterized as "termination pay."

The collective bargaining agreement does not expressly prohibit the employer from paying a laid off employe, at the time of his layoff, for all his unused vacation time computed to the time of such layoff. It is equally true that the collective bargaining agreement does not expressly authorize the employer to do so. However, the Commission considers that employers have a common law right of absolute discretion to designate the vacation times of their employes except to the extent the employer is shown to have relinquished such right. If the employer's designation of vacation time is not prohibited by the collective bargaining agreement and the employer does comply with the mechanical requirements of the statute, the vacation pay in issue is treated as wages for the weeks to which the employer has allocated it.

Further, section 5.3 (c) of the collective bargaining agreement provides:

"When a layoff occurs before the vacation time is taken and has continued for a length of time equaling or exceeding the earned vacation time due the employe, and there is no vacation shutdown, the employe will be considered as having taken his vacation time during the layoff."

It may be argued that this section is not applicable because although the disputed vacation pay represented vacation time which had been "earned" by the time the layoff occurred, such vacation time and the corresponding vacation pay were not yet "due" in the sense of being available or payable to the employes on demand. There is no direct evidence that the parties used the term "due" in that sense. The commonly-understood meaning of "due" is ambiguous and largely dependent upon context. The context of the collective bargaining agreement here in issue provides no clear guidance. It may be argued that the express provision that terminated employes will be paid any unpaid vacation pay computed to date of separation (section 5.6) and the absence of such express language in section 5.3 (c) indicates that the employer had no right to treat the disputed portion of these laid off employes' vacation pay in the same manner. Such reasoning ignores the preemptive nature of the employer's common law right. The employer's right does not originate in collective bargaining and its existence does not depend on contract provisions. It is an inherent right and it is the employe who must establish his asserted vacation rights on the basis of express contract language or, where necessary and appropriate, the relevant past practice of the parties.

The Commission considers that the "fringe benefit" of a paid vacation consists of time off from work (vacation time) arid pay for that time (vacation pay). The employes herein were off from work during the weeks to which the employer allocated their vacation pay. They received vacation pay. The thrust of their position is that, if the employer prevails, their vacation occurred earlier than they wished. They would prefer to be eligible for U. C. benefits in the fall of 1979 and preserve their option to take paid vacations after May 31, 1980. Their remedy lies in collective bargaining and the record indicates an agreement by the employer not to allocate the vacation pay of laid off employes in this same manner in the future. That agreement does not, of course, dictate the result herein. The agreement represents a further relinquishment of the employer's common law right beyond the extent to which it was relinquished prior to the weeks here in issue.

(2) Vacation bonus. The employes do not dispute the propriety of the employer's action in paying them their vacation bonus at the time of layoff and allocating it as wages for weeks during the layoff. They clearly regard it as being "for 1979," like the undisputed portion of their regular vacation pay and the employer was, in any case, required under section 5.8 of the collective bargaining agreement to make such payment to them not later than December 15, 1979.

(3) and (4) Paid absence allowance and attendance bonus. These benefits are provided in sections 8.13 and 8.16 of the collective bargaining agreement, respectively. The employer has argued that they may be considered as vacation pay allocable under section 108.05 (4)(b) of the statutes or as termination pay allocable under section 108.05 (5) of the statutes. The latter contention is rejected by the Commission for the reasons stated above. The employes have argued variously that these benefits are allocable only to the week in which they were paid as part of the lump-sum payment here in issue and that they are allocable only to weeks in which they were "earned" prior to the layoff. The Commission rejects the first argument. There is no authority for the proposition that these types of pay or any other types of pay may only be allocated to the week in which they are paid. Many, if not most, employes actually receive their regular pay after the week in which it is earned and to which it is properly allocable. Many employes receive their vacation pay sometime before the vacation time to which it is properly allocable.

The employes' second argument requires a consideration of the nature of the paid absence allowance and the attendance bonus. Subsections 8.13 (e) and 8.16 (d) of the collective bargaining agreement identify these benefits as "an additional vacation payment" and "an additional vacation bonus," respectively. Subsections 8.13 (f) and 8.16 (e) require the employer to pay laid off employes, at the time of layoff, all of such benefits which are at that time unused and unpaid. The Commission considers that the paid absence allowance and attendance bonus paid to these employes at the time of their layoff constituted vacation pay within the meaning of section 108.05 (4)(b) just as the undisputed vacation bonus constituted vacation pay within the meaning of that statute. Since the paid absence allowance and attendance bonus constituted vacation pay, it is unnecessary as well as inaccurate to characterize them as termination pay within the meaning of section 108.05 (5) of the statutes. As vacation pay, they are allocable to weeks during the layoff because they were not earned "for" previous weeks as were the employes' regular wages for such previous weeks.

An equitable argument has also been stressed by the employes. In effect, it has been argued that the employer's payment of the lump sums and the employer's allocation of those payments were solely motivated by the employer's desire to defeat the employes' eligibility for U.C. benefits during the layoff. Such a motivation is not improper per se and the Commission considers the employer's motivation irrelevant. The allocations in this case are effective because they were not prohibited by the collective bargaining agreement and did meet the requirements of section 108.05 (4)(b) of the statutes.

The Commission therefore finds that each of these employes received vacation pay for certain weeks during the period from week 43 through week 52 of 1979, that such vacation pay was with due notice, definitely allocated and payable to them by the close of each of such weeks and at their approximate full weekly wage rate, within the meaning of section 108.05 (4)(b) of the statues and such vacation pay shall be treated as wages for such weeks. The Commission further finds that each employe is ineligible for unemployment benefits during each of such weeks in which such vacation pay equals or exceeds the employe's weekly benefit rate as held in the initial determinations herein.

DECISION

The appeal tribunal decision is amended to conform with the above and, as amended, is affirmed. Accordingly, the employes are ineligible far unemployment benefits for the weeks specified in the initial determinations herein.

Dated and mailed July 8, 1982
200-030    UW 910  UW 995

/s/ David A. Pearson, Chairman

/s/ Virginia B. Hart, Commissioner

/s/ Pamela I. Anderson, Commissioner

NOTE: The case of Peter Vincer, S.S. No. ___ __ ____ is remanded to a department deputy for a determination as to the weeks of issue applying to such employe in conformity with the above decision.

NOTE: Through counsel, the employes requested, and the employer opposed, a consolidation of this case with the case of Daniel T. Davies, et al, Hearing No. 81-A-63959 MG, involving the same employer. The employes seek to thereby establish in the instant case the fact that in weeks 15, 17, 19, 20 and 21 of 1981 some of the employes herein took time off from work and received neither pay nor unemploy ment benefits as a result of the allocations at issue herein. The Commission considers it would be improper to consolidate the records in these cases. The cases do not involve identical groups of employes, the parties appeared by different representatives and counsel for the employer in the instant case opposes consolidation. The Commission will state that if the records were consolidated, and the employes' contentions thereby established herein, it would not affect the Commission's decision herein. The Commission's view of the law and policy considerations applicable to vacation pay cases is discussed generally in the comment which follows this note. Consistent with that view, the Commission would hold that an employe who takes time off from work, despite the fact that an earlier period of layoff was validly designated as his vacation time and the further fact that his vacation pay was paid and allocated to such period of layoff in compliance with the statutes, is voluntarily unemployed and ineligible for benefits.

COMMENT: Section 108.05 (4)(b) of the statutes relates only to the allocation, for U.C. purposes, of vacation pay;   the designation of vacation time, on the other hand, is a matter of agreement or contract between the employer and the employe. Employers, have a common law right of absolute discretion to designate vacation time and where an agreement or contract exists, the issue is not whether it grants to the employer a right to designate vacation time but rather the extent to which the employer has relinquished such right.

An employer who wishes to allocate an employe's vacation pay to a week or weeks in which the employe would otherwise be unemployed and eligible for benefits must show that he has complied with the requirements of the statute. Those requirements are:

Due Notice. The Commission will not attempt to precisely define due notice under the statute. The Commission considers that it is, at a minimum, a communication which informs the employe prior to the beginning of the week in issue, that the employer is designating such week as the employe's vacation time.

Definite Allocation. By the close of the week in issue, the employer must inform the employe of the amount of vacation pay allocated to such week.

Payable. The vacation pay allocated to a given week must, by the close of such week, have been paid to the employe or made unconditionally payable to him on the regular payday for such week. 

Reasonable Weekly Rate. Where the employer has designated more than one week as the employe's vacation time, the amount of vacation pay allocated to each of such weeks by the employer must be computed in compliance with subsections 108.05 (4)(b)1. or 2.

An employe who opposes the employer's allocation of vacation pay on the basis that the vacation time was improperly designated must show that he had a right to a different vacation time. The mere fact that vacation time is scheduled does not establish that the employe has an absolute right to such vacation time or that the employer has relinquished the right to designate a different time. The resolution of that issue depends on the provisions of any existing agreement or contract between the employer and employe and, where ambiguity exists, the past practice of the parties.

The Commission further considers that if the employer has permitted the employe to take time off from work as chosen by the employe and has paid him his vacation pay, or otherwise acknowledged that such time off constituted vacation time, an irrevocable allocation-in-fact has occurred regardless of any prior or subsequent attempt by the employer to allocate such vacation pay to a different time. For example, where an employer informs its employes in April that it intends to shut down during two weeks in July and designates such two weeks as vacation time to which vacation pay will be allocated, but then permits an employe to take a week off in May and pays him his vacation pay at such time, the employer has rescinded its original designation as to one week of that employe's vacation time and the Commission will not recognize any allocation of the corresponding amount of vacation pay to any week other than such week in May.

Questions have arisen as to the correct treatment of an employe's originally-scheduled week of vacation time where a layoff occurs prior to such scheduled vacation time and the employer validly designates a week during such layoff as vacation time and allocates vacation pay to such week of layoff in compliance with the requirements of the statute. The Commission considers that if the employer requires the employe to be off work and unpaid during the originally-scheduled vacation time, the employe is involuntarily unemployed and eligible for benefits. On the other hand, if the employe insists on taking his originally-scheduled vacation time off from work which is available to him, he is voluntarily unemployed and ineligible for benefits.

cc: 
Kenneth R. Loebel
Habush, Habush & Davis, S.C.

Robert E. Schreiber
Lindner, Honzik, Marsack, Hayman & Walsh, S.C.


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