In the matter of the unemployment benefit  claims of

LAWRENCE H. DRAXLER et al., Employees

Involving the account of

KANSAS CITY STAR, Employer

The employer alleged that the employes were ineligible for unemployment benefits starting with week 36 of 1971, on the ground that they left or lost their employment because of a strike or other bona fide labor dispute in active progress in the establishment in which they were employed. The commission deputy's initial determinations issued in each case suspended benefits starting with week 32 of 1971 or a later week on the ground alleged. The employes appealed.

While the matter was pending, the Industry, Labor and Human Relations Commission, pursuant to authority granted in section 108.09(6)(a) of the statutes, transferred the proceedings to itself by an order dated October 18, 1971.

Hearing was held at Park Falls on October 25, 1971, before Max J. Peltin, examiner, acting as deputy for the Industry, Labor and Human Relations Commission.

APPEARANCES: The employes appeared by Goldberg, Previant & Uelmen, attorneys, by Albert Goldberg.

The employer appeared by Watson, Ess, Marshall & Enggas, attorneys, by Allan L. Bioff.

Based on the applicable records and evidence in this case, the Industry, Labor and Human Relations Commission makes the following

The employer is engaged in the manufacture and sale of fine paper, and has approximately 380 production workers who are represented by two unions. It has had joint collective bargaining agreements with the two unions for about thirty years, and the last such agreement was in effect from August 1, 1969, until July 31, 1971, and provided that it shall remain in effect from year to year thereafter unless terminated in accordance with an applicable provision of the agreement. This agreement provides:

"Section 1 (b) If either party shall desire to change any provision of this agreement, it shall give written notice of such desire to the other party at least sixty (60) days in advance of any anniversary date.

"(c) The giving of notice provided in subsection (b) above shall constitute an obligation upon both parties to negotiate in good faith all questions at issue, with the intent of reaching written agreement prior to the anniversary date.

"(d) If the parties have not reached agreement on or before the anniversary date, all the provisions of the agreement shall remain in effect unless specifically terminated in accordance with the provisions of Section 2, below."

Section 2 of the agreement provided;

"(a) At any time after the anniversary date, if no agreement on the questions at issue has been reached, either party may give written notice to the other party of intent to terminate the agreement in (not less than) thirty days. All the provisions of the agreement shall remain in full force and effect until the time set forth has elapsed. During this period, attempts to reach an agreement shall be continued.

"(b) If the parties have failed to resolve their differences before the time set forth has elapsed, all obligations under this agreement are automatically canceled."

The agreement further provided that the two unions are the sole bargaining agencies for all employes eligible for membership in their respective units for the purpose of collective bargaining with respect to wages, hours, and working conditions; and that all employes covered by the agreement shall as a condition of employment become members of one of the unions after thirty days of employment or the effective date of the agreement or the signing of the agreement, whichever is later. Certain classes of employes were expressly excluded from membership in either of the unions. All of the employes involved in this case were members of one or the other of the two unions.

By letter, dated May 10, 1971, which was more than sixty days prior to the termination date of the agreement, both unions gave the employer notice that they desired to open the present labor agreement and to negotiate changes, wages, and other monetary items and working conditions. After receiving this notice the employer communicated with the unions with regard to negotiating a new agreement and the first meeting between the employer and union representatives was held on June 11, 1971. At this meeting the union presented a list of its demands, including a wage increase of 10 percent with a minimum of 29 cents an hour during the first year of the contract and an increase of 32 cents an hour during the second year, and increases in various insurance coverages, increase in the third shift differentials to 20 cents from 14 cents, increases in vacation allowances and pension benefits. The employer at that time submitted a list of proposed changes in the work rules.

Meetings were held thereafter on July 1 and 2 at which the employer offered a 6 percent increase in wages without the requested minimum of 29 cents an hour the first year, and a 20 cents an hour increase in wages the second year of the contract, made counter proposals regarding vacation and pension allowances, agreed to the unions' request for an increase in life insurance from $4,000 to $6,000, agreed to increase the major medical insurance coverage from $5,000 to $10,000 but not to $20,000 as requested by the unions, and made counter proposals to the requested increase in the night shifts' wage differentials of one cent on each of the second and third shifts, or 15 cents on each shift. The unions did not accept any of the employer's counter proposals, but agreed (at that meeting or a later meeting) to lower its wage request during the first year 6f the contract from 10 percent to 9 percent. The unions did not agree to any of the most important work rule changes proposed by the employer and the employer made it clear to the unions that all of its monetary proposals were dependent upon their accepting the employer's work rule proposals.

Another meeting between the company and the unions was held about two weeks later, on July 16, at which the employer did not agree to any higher wage increase than it had previously offered, did not agree to any higher night shift differential than it first proposed, but did agree to changes in some of the fringe benefits. The unions did not agree to any of the most important changes in the work rules proposed by the employer and indicated that they would not do so. The next meeting was held on July 23 and at that meeting the employer increased its wage proposal for the first year of the contract from 6 percent to 6 1/2 percent and from 20 cents to 22 cents an hour during the second year of the contract. The unions informed the employer that its proposals were completely unsatisfactory, stated that there was no purpose in continuing the meeting, and the meeting was adjourned. No date for a further meeting was set at that time. Meanwhile, the unions notified the employer that on July 26 at a joint meeting of the union membership, the members of the unions had rejected the latest proposals of the employer by a vote of 210 to 4. The employer was also notified that on July 27 the unions had taken a strike vote and had voted 291 to 19 to strike.

A further meeting was held on August 5 at the request of a federal mediator. The employer did not increase the wage proposals it had previously made and again informed the unions that its monetary proposals depended upon the unions' acceptance of the work rule changes proposed by the employer. The unions did not agree to any changes in their requests and stated they would hold a caucus and requested the employer negotiator to be available for the results of the caucus. At 5:40 p.m. each of the unions handed the employer's negotiator (the assistant general manager) notices substantially as follows;

"Pursuant to provisions Section 2, Labor agreement between (employer) and the (union); we do hereby terminate the agreement.

"We will be glad to meet with you any time during the 30 day period to try and resolve our differences."

The following day, August 6, 1971, the employer mailed letters to each of the unions as follows:

"We are in receipt of your letter of August 5, notifying our Company that you have terminated the Labor Contract under the provisions of Section 2.

"As a result of this action on the part of the Union, all offers heretofore made by the Company in connection with our current labor negotiations is hereby withdrawn.

"During the thirty-day interim period, if it is your desire to meet with the Company Bargaining Committee, please contact (the assistant general manager and employer negotiator)."

On August 2, 1971, the employer notified its pulpwood suppliers of the threat of a strike in its plant and that unless an agreement was reached soon it would be necessary to discontinue receiving pulpwood. On August 6, the employer notified its pulpwood suppliers by letter and radio announcement that, due to an impending strike of its employes and the serving on it by the unions of notices of termination of the contract, it was discontinuing receiving pulpwood by railroad cars as of August 9, 1971, and by trucks as of 4 p.m. on August 10. It also sent letters to its suppliers of other materials to discontinue shipments of those materials. On August 10, it mailed in excess of 300 letters to its customers informing them that it was faced with a strike on September 5, that it was curtailing acceptance of orders to those that it could assure shipment before the shutdown, and that it could take no further orders for certain types of paper. The employer sent these letters to its customers so that they could arrange for other manufacturers to supply their needs. The employer did not accept any orders after August 10 for paper which it would have had to manufacture after that date, although it did accept orders that it could fill from inventory. By these actions the employer instituted a procedure by which it could cease operations in an orderly manner by the close of business on Friday, September 3, 1971 (in week 36).

On August 15, 1971, the President of the United States, by Executive Order No. 11615, ordered that prices, rents, wages, and salaries shall be stabilized for a period of 90 days effective as of the date of the order at levels not greater than the highest of those pertaining to a substantial volume of actual transactions during, the 30-day period ending August 14, 1971, and that "no person shall, directly or indirectly, pay or agree to pay in. any transaction wages and salaries in any form, or to use any means to obtain payment, of wages and salaries in any form, higher than those permitted hereunder, whether by retroactive increase or otherwise."

On August 19, 1971, a meeting was held between the employer and the union at the request of a federal mediator. At that meeting each of the unions submitted substantially similar letters to the employer, as follows:

"On August 5, 1971, we submitted a letter to you on behalf of (the local union) serving notice of contract termination.

"In light of President Nixon's ninety day freeze on wages and prices, this letter will serve as a withdrawal of that termination notice and of our desire to continue to work under the terms of the existing agreement, unless, or until, a new termination is sent or full agreement reached on a new contract."

The employer replied to the unions by a letter dated August 19, 1971, as follows:

"We are in receipt of your notice of August 18, wherein you wish to withdraw your notice of termination of Contract, dated August 5.

"We can find no provision in the present Labor Contract which would authorize the withdrawal of termination notice after once being tendered.

"We will accept the withdrawal notice, provided we have your guarantee in writing that it will not be reinstated prior to one year from the date of notice of withdrawal.

"The reason for the Company's position on this point, is that we have already begun winding down our operations, and we have turned down many orders in anticipation of an impending strike, and this places us in a very untenable position as far as our customers are concerned, and our ability to be a firm supplier of their needs. It is almost impossible for us to continue to insure the customer of our reliability if we are faced with a reinstatement of termination notice, at the whim of the Union.

"It is essential that we have this one year guarantee for our continued operation."

At the August 19 meeting the employer proposed extending the existing contract for one year as long as there would not be any chance of a strike during that year. The unions did not accept this proposal and asked if the employer had any other proposals. The employer then proposed a two-year agreement and submitted its proposed two-year agreement, which did not provide for any wage adjustment because of the price-wage freeze. The unions rejected the employer's proposed agreement. The employer proceeded winding up its operations and its operations ceased at the end of the business day on September 3. About 24 employes were laid off on September 2, an additional 23 or 24 at the beginning of September 3, and the remaining employes were laid off at the end of September 3 (in week 36). Although the employer made a few shipments in September and October from inventory and from purchases it made to meet certain commitments, its operations after September 3 were insignificant and its plant operations for all practical purposes ceased at the end of Friday, September 3, 1971.

Further meetings were held in September and October without any agreement being reached.

Section 108.04(10) of the Wisconsin Statutes provides:

"An employe who has left (or partially or totally lost) his employment with an employing unit because of a strike or other bona fide labor dispute shall not be eligible for benefits from such (or any previous) employer's account for any week in which such strike or other bona fide labor dispute is in active progress in the establishment in which he is or was employed."

The Commission does not consider that the employes lost their employment with the employer because of a bona fide labor dispute within the intent and meaning of section 108.04(10).

The employes had the contract right to terminate their agreements upon 30-day notices pursuant to section 2. They gave the employer such notices. The employes also took a strike vote and gave approval to the union officers to call a strike after the contracts were terminated.

The employes' actions were in accordance with the contract provisions and appeared in good faith. At most the strike vote was an indication that a strike might occur.

In 1969 the unions served 30-day termination notices upon the employer as provided by section 2 of the contract. No strike occurred in 1969 because agreement was reached immediately prior to the end of the 30-day period by the unions and the employer. During this period the employer did not give any notices to suppliers and customers of the contract termination or attempt to in any way "wind down' its operations.

The employer knew on August 19, 1971, that the employes would not strike after the termination of the contract on September 3, because of the unions' letters withdrawing the termination notices and indicating a willingness to continue to work under the terms of the existing contracts until new terminations of the contracts were sent or new contracts consummated.

The employer refused to accept the unions' withdrawals of the contract terminations unless the unions agreed in writing that new contract terminations would not be reinstated for a one-year period.

The employer's contention that the termination notices were strike threats loses its persuasiveness in view of the employe's withdrawal of the termination notices. It appears that the good faith efforts by the unions to continue the contracts required the employer to accept the withdrawal notice even though the contract is silent as to the unions' right to withdraw the termination notices.

The employer's actions in laying off over 20 employes on September 2, and about the same number on September 3, were in direct violation of contract provisions that there would be no lockouts during the period of the agreements. Accordingly, if these actions amounted to lockouts, these lockouts would not be bona fide labor disputes.

In view of the fact that the employer had assurance on August 19, 1971, that no strike would take place as previously threatened, the employer's actions in continuing to "wind down" its business operations and to lay off all of its production employes on September 2 and 3 were not required, necessary or warranted business decisions on the part of the employer.

Since the employer terminated the employment of the employes solely because of economic worries over the preservation of its relations with its suppliers and its customers, this was a business judgment and did not constitute a "bona fide labor dispute" as contemplated by section 108.04(10). Accordingly, the employes lost their employment as a result of the employer's actions in shutting down the plant. This action in effect was a layoff which was not as a result of a bona fide labor dispute. See Barrett v. Wasson Coal Co. (1949), 404 Ill. 11, 87 N.E. 2d 769.

The Commission therefore finds that each of the employes lost his employment with the employer in week 36 of 1971 but that such employment was not lost because of a bona fide labor dispute in active progress in the establishment in which he is or was employed, within the meaning of section 108.04 (10) of the Wisconsin Statutes.

The initial determination of the deputy is reversed. Benefits are allowed to each of the employes if he is otherwise eligible.

Dated and mailed January 4, 1972
LD 520

/s/ Philip E. Lerman, Commissioner

/s/ John C. Zinos, Commissioner

DISSENT

/s/ Joseph R. Kautzer

It is clear from the evidence that there was a labor dispute in existence, within the meaning of section 108.04(10) of the statutes, inasmuch as there was a controversy between the employer and its employes regarding the details of collective bargaining. It is further apparent that these employes lost their employment with the employer in week 36 of 1971 because of such labor dispute.

Such dispute had its inception in the 60-day notice served on the employer by the employes in May of 1971 stating that they desired to renegotiate certain provisions contained in the existing agreement. In conformance therewith, numerous meetings were held at which proposals and counter proposals were made by each party. Although no agreement was reached prior to the expiration of the existing labor agreement on July 31, 1971, negotiations continued thereafter.

At the meeting of August 5, 1971, the employer and the unions were still unable to reach agreement as to the terms and conditions of a new contract. When the unions that same day gave the employer 30-days' notice of termination of the agreement, together with the fact that the employer had previously been informed that the membership of the unions had taken a strike vote and had voted to strike by a large majority, the employer reasonably concluded that a strike would occur at the end of the 30-day period. The employer then proceeded to take steps to wind down its operations at the end of that period including notifying its suppliers that it would not accept deliveries after August 9 and 10 and notifying its customers that it would not accept further orders.

Although the unions purported to withdraw their 30-day notices of termination of the contract after President Nixon issued the Executive Order freezing wages and prices for a 90-day period, the employer was not obligated to accept those withdrawals unconditionally. Because of business considerations, including its reputation as a reliable source of its paper products, the employer considered that it could not accept the unions' withdrawal of their notices of termination of the contract without an agreement by the unions not to institute the same procedures at the conclusion oœ the 90-day wage-price freeze. Without such agreement by the unions the employer would have had to reverse the procedure it had instituted with its customers and suppliers and then be faced with the same situation at the expiration of the period of wage-price freeze and would again have to notify its suppliers to discontinue shipments and to notify its customers that it would be unable to make deliveries and would not accept orders for its products. Under the circumstances, the employer's actions cannot be considered to have been unreasonable.

The employes did not go out on strike and were willing to continue to work after September 3, 1971. Their unemployment thereafter was due to employer action and constituted a lockout. The Wisconsin Supreme Court in A. J. Sweet of LaCrosse, Inc., et al., v. Ind. Com., et a1., (1962), 16 Wis. (2d 9 , held:

"The statutory words 'other bona fide labor dispute' are broad enough to embrace those which culminate in lockouts. The commission has consistently, over a period of at least the past twenty-three years, interpreted this statute as disqualifying from benefits those employees who have lost time from work due to a lockout precipitated by a bona fide labor dispute."

Although the labor agreement provided that "The Company agrees that there will be no lockouts during the period of this Agreement," this agreement had been terminated by the unions' notification of such termination and acceptance of that termination by the employer, and pursuant to section 2 (b) of the contract, supra, all obligations under the agreement were canceled at the expiration of the 30 days on or prior to September 3, 1971, in accordance with the notice of termination submitted by the unions. After such notice of termination and acceptance thereof by the employer, the agreement could only be reinstated by mutual consent of both parties or by the making of a new contract, which did not occur.

The Executive Order of the President did not specifically refer to strikes or lockouts, but requests were made by the President's administration that current strikes be halted and that no new ones be started during the 90-day stabilization period. However, since the Executive Order did not prohibit strikes or lockouts during the 90-day period, the employer's action in discontinuing operations and locking out its employes was not in contravention of the Executive Order and was not illegal.

Under the circumstances, there was a labor dispute between the employer and the employes. Such dispute or controversy arose out of the unions' demands for contract changes and precipitated the shutdown. Such shutdown was a development in the labor dispute, and the causal connection between such dispute and the unemployment of the employes is clearly apparent.

The employer acted in good faith in its negotiations with the employes and, in view of the impasse in the negotiations, the employer's refusal to accept the unions' withdrawal of their notices of contract termination did not constitute a lack of good faith as its action in that regard was motivated by business factors since it considered that it could not continue to operate as a reliable supplier of its products without a new contract or an agreement that the unions would not serve an additional 30-day notice of contract termination for a period of one year.

Accordingly, it is abundantly clear from the evidence that the employes lost their employment with the employer starting with week 36 of 1971 because of a bona fide labor dispute in active progress in the establishment in which they were or are employed, within the meaning of section 108.04(10), stats.

In my opinion the deputy's initial determination suspending the employes' benefit eligibility as of week 36 of 1971 should be affirmed.

Appealed to Circuit Court.  Reversed.  Appealed to Supreme Court. Circuit Court decision reversed, commission decision affirmed, sub nom. Kansas City Star Co. v. ILHR Dept. (1973), 60 Wis. 2d 591, 602, 211 N. W. 2d 488. mot'n. for rehearing denied, 62 Wis. 2d 783; 217 N.W.2d 666.

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