STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

RICHARD B CLEGG, et al., Employees

NORTHWEST AIRLINES INC, Employer

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 05606928MWG


An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed. The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission makes the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The employees all worked as technicians for the employer, a commercial air carrier. They are all members of the same union, the Aircraft Mechanics Fraternal Association (AMFA), which went on strike at 11:01 p.m., CST, on August 19, 2005. The technicians were members of a national union and the effective date of the strike was 12:01 a.m., EST, on August 20, 2005 (week 34).

The issue to be decided is whether the employees left or lost their work because of a strike or other bona fide labor dispute, other than a lock out, which was in active progress in the employer's establishment beginning in week 34 of 2005 and thereafter.

Wisconsin Statute § 108.04(10)(a) provides as follows:

LABOR DISPUTE. (a) An employee who has left or partially or totally lost his or her work with an employing unit because of a strike or other bona fide labor dispute, other than a lockout, is not eligible to receive benefits based on wages paid for employment prior to commencement of the dispute for any week in which the dispute is in active progress in the establishment in which the employee is or was employed, except as provided in par. (b).

Shortly prior to the strike, the employer had the employees turn over certain items, including their security badges. The employer had a processing checklist that was presented to most of the employees for the items that were being turned in. Security badges were among those items that they turned in so that they would not have access to secure areas while they were on strike. Additionally, those technicians who had credit cards provided to them by the employer were sent a letter stating that their rights to use the cards had ended with their "termination of employment" with the employer.

The employees contended that their employment was terminated as of August 20, 2005, when they were sent the letter by the employer cancelling their credit cards because of the language in this letter stating that their right to use the cards had ended with their termination of employment. They further argued that the employer's demand for their security badges and other items in their possession support the conclusion that they were terminated or locked out by the employer. Additionally, they explained that the employer had imposed a new contract effective August 20, 2005, and had hired an outside vendor to do their jobs.

However, the letter that the employees were sent with respect to the credit card was a computer generated report designed solely to secure the return of the employer's credit cards. None of the technicians were notified that their employment was terminated in the customary manner that this would be done. All of the employees were union members and none of them filed grievances indicating that they were wrongfully discharged. Two technicians who worked with the employees crossed the picket line and retained their employment with the employer. The union representing the employees advised members on its website that the employer had the right to retrieve identification and security badges before they left work on August 19, that the employees should remain on the job until the end of the workday on August 19, and that leaving work early could be viewed as an unauthorized absence. The union's message on its website clearly stated that the union was on strike and did not take the view that workers had been terminated. Technicians set up and walked a picket line at the Milwaukee airport. Meanwhile, the employer also considered the employees to be on strike and listed them as such in its records. While the employer had imposed a new contract effective August 20, 2005, the employer was allowed to do this by federal law; negotiations continued between the employer and the union after that contract was imposed.

Given the above findings, the employees were not terminated as of August 20, 2005 (week 34), as the employer did not take affirmative action to discharge the employees and both the employer and employees engaged in conduct that would demonstrate that the employees were not terminated. Also, the employees were not barred from work and were not locked out.

On September 6, 2005 (week 37), the employer sent a letter to the union's national association, with copies to members of the National Mediation Board. That letter noted the employer's worsening financial condition, mainly due to a spike in fuel costs, and stated:

Our last best offer which was presented to you on August 18 was based on economic circumstances that no longer exist today. While the company was prepared to stand behind that offer in order to obtain a consensual agreement, unfortunately we are no longer able to do so.

The parties are now almost three weeks into the AMFA strike. During its pendency, technical operations at the company have changed dramatically. Specifically, the cleaning and custodial functions, as well as the maintenance requirements at domestic spoke stations have been permanently transferred to more efficient third party vendors. (Emphasis added).

Exhibit 16.

The employees in this case are all residents of Wisconsin and all work at the airport in Milwaukee, which is considered a "domestic spoke station." It was the employees' position that by permanently transferring their job duties to "more efficient third party vendors," the employer terminated their employment and, therefore, they are not unemployed due to a strike but because they were terminated by the employer.

In Rice Lake Creamery Co. v. Industrial Comm., 15 Wis. 2d 177 (1961), the employees left their jobs pursuant to a strike. The day before the employees went on strike the employer posted a notice indicating that it would continue operations, that employees not reporting for work would be considered on strike and would be replaced, and that the employer reserved the right to agree with any replacement that his seniority and job tenure would be superior to any employee out on strike. The next day the majority of the workers went on strike. The employer began hiring new workers. Negotiations between the employer and the union continued for about three months.

On September 10, the employer wrote the union a letter noting that a number of workers continued to work, and a substantial number of new employees had been hired on a permanent basis to replace the striking employees. The letter stated that the employer did not believe that the local represented the majority of workers and it would no longer negotiate with it. Later, a trustee for the employees' pension fund, informed striking workers by letter that the pension trust agreement provided that in the event of termination of employment the trustees were required to transfer the policies of insurance to the participants. The letter indicated that the participants had left the employ of the creamery on June 22 and therefore were entitled to receive the insurance. The employees then claimed their policies and executed releases, discharging the trustees. On December 2, the union steward and several employees told the employer's bookkeeper that the strikers were willing to return as a group. They were told to make an application to an official in charge of the matter. The next day the employer's attorney sent a letter to the union steward asking if the December 2 application meant the strike was terminated and whether the picket lines would be removed. The attorney questioned whether the offer was by each individual or if they would return only if all workers were reemployed. The union steward responded that the attorney should seek the advice of the union as to whether the strike had terminated and whether picketing would continue. The letter continued "all the employees, individually and collectively, who are currently on strike, have applied to return to work. This application was made unconditionally and its unconditional offer still stands." Neither the union steward nor any of the striking employees applied for work after receipt of the December 3 letter from the attorney. The union steward testified he would not have returned unless all strikers were taken back and also that the December 2 offer was on an all-or-none basis.

The court stated in Rice Lake Creamery:

The question presented in this case is whether the employer has taken such affirmative action to end the employee status of the defendants during the progress of the strike as to amount to an election to terminate completely such status for the purpose of applying the Unemployment Compensation Act. If the employer has done so on the facts of this case, then the ineligibility to receive unemployment benefits provided by sec. 108.04(10), Stats., does not apply to the defendants because their loss of employment was not due to the strike but to the action of the employer in discharging or terminating the employee status of the defendants which continued after the commencement of the strike.

The appellate tribunal found the employer's action in permanently replacing the employees and its notification it would no longer bargain with the union constituted a discharge. We hold that replacing striking employees during the progress of a strike with permanent employees is not in and of itself, as a matter of law, a termination of the employment status or a discharge of the striking employees. Something more on the part of the employer is required. No statutory authority exists in the Unemployment Compensation Act that employees on strike replaced by others on any basis are discharged. Such a result is necessary in the absence of a specific discharge because it is impossible to determine with any certainty until the economic strike is over the identity of those strikers who will offer to return to work and which of those who offer will not be accepted by the employer. Employment status under the Unemployment Compensation Act is not defined in terms of the specific work which was being done by an employee, but rather, in terms of a status or relationship. See Marathon Electric, Mfg. Corp. v. Industrial Comm., supra. If the replacing of a striker by a new employee was an automatic discharge of the striking employee, then in this case and most cases, no one date could be normally determinative of the discharge of all strikers. Here, the record shows replacements were made immediately after the commencement of the strike and continued to December 2, 1958. Furthermore, if replacement were considered a discharge during the strike, the employer would be forced to finance the strike to the extent such employees received unemployment benefits and this would be in contravention to the neutrality purpose of the act.

Rice Lake Creamery at 183-184.

The court then turned to the question of whether the employer had engaged in affirmative action to discharge any particular striker. The court rejected the commission's conclusion that a discharge had occurred by virtue of the September 10 letter. The court found that the September 10 letter was not a discharge as it did not constitute an "unequivocal unilateral act of the employer, leaving no shred of doubt of his intention." Rice Lake Creamery at 187. The court then looked to the conduct of the parties before and after September 10 to determine whether employee status had been terminated. The court found significant that the employees waited until December 2 to make an application for unemployment benefits based on an alleged discharge of September 10. The court also noted that the September 10 letter was sent to the union and the WERB, not the employees, and dealt solely with the relationship of the employer and the union and the union's status as a bargaining agent. The court noted that there was no evidence that the union told striking employees that they had been discharged and no evidence that the employee's considered themselves discharged on September 10. The court further stated:

It is true, in the employer's letter of December 3, the term "former employees" was used. This, the employer admits, was technically incorrect. Obviously, the union and the claimants took the same position. They did not recognize the letter of September 10 as a discharge and in their responsive letter of December 20th, prepared by the union and sent by the steward, the offer was "to return to work by all striking employees" and reiterated that "all of the employees, individually and collectively, who were currently on strike, have applied to return to work." This is an inconsistent position. If the claimants were striking employees offering to return to work on an all-or-none basis they were not discharged on September 10 as they now claim. The employer, in his return of December 6 to the claim of the union steward for unemployment benefits, answered that the applicant had left employment on June 22 because of a labor dispute.

Rice Lake Creamery at 189.

The court rejected the contention that the letter from the trustee supported a finding that there had been a discharge. The court noted that the letter referred to the workers leaving as of June 22, 1958, which was the day of the strike. Further, the pension plan was not introduced and the definition of the term "termination of employment," as used in the plan, was not in the record. The court reasoned that termination of employment could mean termination of service or work, but not necessarily status, for the purposes of the pension plan. The court concluded that the employer did not intend by the letter of September 10 to discharge the striking employees and the letter did not discharge the striking employees.

The employees contended that they were terminated by the letter dated September 6, 2005. That contention cannot be sustained. The employer sent the letter to the union's national association, not the employees, stating that the employees' work had been permanently transferred to third party vendors. All the employees in this case, except for Mr. Proctor, filed for benefits in week 35 of 2005, the first week they were unemployed, which was two weeks before the letter was sent out. Mr. Proctor filed for benefits on September 1, 2006 (week 36). The employer never directly told the union or the employees that they had lost their status as employees. Further, the employer's contracts with the third party vendors are terminable by the employer on short notice. The employer never stated that the employees could not apply to return to work, or if they did, that they would lose seniority and be treated as newly hired workers. Indeed, the September 6 letter indicated that, "Any striking technician who makes an unconditional offer to return to work is legally entitled to be placed in an authorized open position for which he is qualified or to replace a temporary replacement worker holding such a position for which he is qualified." Exhibit 16. The employees could have called an 800 number provided by the employer and workers calling the 800 number would be placed on a list for the next available position. The employees' supervisor in Milwaukee could have been contacted by the employees and was not contacted by them. The employer's Senior Labor Counsel, Mr. Ohm, testified:

A mechanic who crosses the picket line, he would get a position based upon the time at which he crossed. He would retain his previous status prior to the strike. He would retain his seniority, length of service credit for various purposes, vacation, pay progression, his pension accruals, benefit accrual service for pension purposes, it is all retained.

Syn. at 16.

The record does not indicate that, after September 6, 2005, any of the employees asked to return to work, or that any similarly situated worker asked to return and was refused. Indeed, Mr. Paffhausen, the employees' superior, testified that one worker crossed the picket line six or eight weeks after the strike, which would be after the September 6 letter, and was returned to work. Syn. at 45-46. The record does not indicate that the union ever informed the employees that their employment status had been terminated. Negotiations between the employer and the union continued after September 6, 2005.

Further, the employer had many openings for technicians in Detroit, Minneapolis and other cities across the country. The employees had the opportunity to transfer to different airports where their job duties had not been taken over by third party vendors. The employees have previously worked at other airports.

The strike in this case is ongoing and, as the court state in Rice Lake Creamery:

No statutory authority exists in the Unemployment Compensation Act that employees on strike replaced by others on any basis are discharged. Such a result is necessary in the absence of a specific discharge because it is impossible to determine with any certainty until the economic strike is over the identity of those strikers who will offer to return to work and which of those who offer will not be accepted by the employer.

Rice Lake Creamery at 183.

The letter of September 6, 2006, was not an unequivocal unilateral act of the employer leaving no shred of doubt of the employer's intentions. The conduct of the parties before and after the letter indicated that the employment relationship was ongoing. The employer simply notified the employees that their work had been permanently transferred to third party vendors. The employer did not engage in any affirmative action to discharge the employees.

The commission therefore finds that beginning in week 34 of 2005, the employees left or lost their work with the employer because of a strike or other bona fide labor dispute in active progress in the establishment in which the employees are or were employed within the meaning of Wis. Stat. § 108.04(10).

The commission further finds that the employees were paid benefits (1)  for which the employees were not eligible and to which the employees were not entitled, within the meaning of Wis. Stat. § 108.03(1).

The final issue to be decided is whether recovery of overpaid benefits must be waived. Wis. Stat. § 108.22(8)(c), provides that the department shall waive the recovery of overpaid benefits if the overpayment was the result of departmental error, and the overpayment did not result from the fault of the employee. Under Wis. Stat. § 108.02(10e)(a) and (b), departmental error is defined as an error made by the department in computing or paying benefits which results from a mathematical mistake, miscalculation, misapplication or misinterpretation of the law or mistake of evidentiary fact, by commission or omission, or from misinformation provided to a claimant by the department, on which the claimant relied.

The commission agrees with the employer that the ALJ misapplied the law in this case. The ALJ's decision relied solely on the fact that the employer had permanently replaced the workers to find that their employment status was terminated. Rice Lake Creamery made clear that permanently replacing striking workers does not in and of itself constitute a termination of the employment relationship. There was not that "something more" which is required to find a termination of the employment relationship. See also, Carley Ford, Lincoln, Mercury Inc. v. Bosquette, 72 Wis. 2d 569 (1976); Trinwith v. LIRC, 149 Wis. 2d 634 (Ct. App. 1989).

The commission further finds that waiver of benefit recovery is required under Wis. Stat. § 108.22(8)(c), because although the overpayment did not result from the fault of the employees as provided in Wis. Stat. § 108.04(13)(f), the overpayment was the result of a departmental error. See Wis. Stat. § 108.22(8)(c)2.

DECISION

The decision of the administrative law judge is reversed. Accordingly, as of week 34 of 2005, no benefits are payable based on wages paid for work performed prior to the beginning of the dispute while the dispute is in active progress. Such wages cannot be used to meet the qualifying requirements of Wis. Stat. § 108.04(4) or to determine monetary entitlement while the dispute is in active progress. No benefit years will be established based on the initial claims filed in weeks 35 and 36 of 2005. The employees are not required to repay the benefits received to the unemployment reserve fund.

Dated and mailed August 16, 2006
cleggri . urr : 132 : 8 : LD 505    BR 335.01

/s/ James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner

MEMORANDUM OPINION

The commission did consult with the ALJ who presided at the hearing regarding his impressions of witness credibility and demeanor. The ALJ did not impart any demeanor impressions he had of the witnesses that led to his decision.

 

NOTE: The employee's attorney requested that Mr. Myles be made a part of this case. However, Mr. Myles did not file an appeal to the initial determination and that determination has become final.

NOTE: The employer's attorney requested oral argument pursuant to Wis. Admin. Code LIRC § 1.06. The commission may grant a written request for oral argument if it determines that the issue would be more clearly presented by oral argument. However, the commission believes the issue is clear, as are the facts and the law. The commission therefore denies the employer's request for oral argument.

cc:
Northwest Airlines - Milwaukee, WI
Attorney Sue Edwards
Attorney Max Heerman
Steven C. Day
Frank R. Falzon
Mark A. Pankratz
James N. Proctor
Mark A. Riegelman
Frank T. Helin
Stephen S. Mason



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Footnotes:

(1)( Back ) Richard Clegg was overpaid benefits in the amount of $658.00 for weeks 38 and 39 of 2005; Steven Day was overpaid benefits in the amount of $3,009.00 for weeks 38 through 42 of 2005 and weeks 1 thorough 6 of 2006; Mark Pankratz was overpaid benefits in the amount of $8,674.00 for weeks 38 through 53 of 2005 and weeks 1 through 10 of 2006; James Proctor was overpaid benefits in the amount of $1,645.00 for weeks 38 through 42 of 2005; Frank Helin was overpaid benefits in the amount of $2,108.00 for weeks 38 through 44 of 2005; and Steven Mason was overpaid benefits in the amount of $987.00 for weeks 38 through 40 of 2005. No benefits have been paid to Frank Falzon.

 


uploaded 2006/08/22