Opinion
No. C7-98-550.
Filed December 8, 1998.
Appeal from the Department of Economic Security, Agency File No. 7939UCM97.
Carol Berg O'Toole, (for relator)
Martin J. Costello, (for employee-respondents)
Kent E. Todd, (for commissioner-respondent)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1996).
UNPUBLISHED OPINION
Relator Oak Hills Living Center challenges the determination by a representative of the Commissioner of Economic Security that respondent employees are entitled to receive reemployment insurance benefits because they were constructively locked out of their jobs. We reverse and remand.
FACTS
Relator Oak Hills Living Center operates a skilled nursing home and assisted living facility. Respondents are 51 employees who worked in various positions at Oak Hills and who are members of Teamsters Local 544.
A collective bargaining agreement between Oak Hills and Local 544 was in effect from July 1, 1994, to June 30, 1997. Article 29 of this agreement provided that if Oak Hills' income decreased due to a reduction of the reimbursement payments made by the State of Minnesota, "the parties agree to meet and negotiate a possible reduction in the wages and benefits provided for in this Agreement." The agreement also provided that the employees' pay was to be increased by 18 cents per hour on January 1, 1997, which, depending on an employee's job classification, was a two to three percent increase.
In 1995, the state reimbursement payments were reduced. Oak Hills notified Local 544 that it wished to negotiate a reduction in wages and benefits pursuant to article 29. The parties met but did not reach agreement. Oak Hills notified Local 544 that it would not implement the pay raises scheduled to take effect January 1, 1997. The commissioner's representative found that the employer made other unilateral changes in the contract, but the findings do not describe the other changes that were made.
Local 544 issued a notice of its intent to strike as of January 16, 1997, but the notice was withdrawn, and the parties continued to negotiate. In March 1997, Oak Hills began negotiations with Local 544 for a new contract to succeed the existing contract when it expired on June 30, 1997. A number of negotiating sessions occurred during April, May, and June 1997, but the parties did not reach an agreement. On June 30, 1997, Local 544 issued a notice of its intent to strike as of July 3, 1997.
Following a vote to reject Oak Hills' final offer, employees of Local 544 walked off the job. Oak Hills stayed open during the strike, and contract negotiations continued. On July 23, 1997, Oak Hills notified Local 544 that it would implement its final contract offer on August 1, 1997, and asked its striking employees to return to work under the terms of that offer. No employees returned. On August 1, 1997, Oak Hills implemented its final offer.
The employees applied for reemployment insurance benefits. A department claims representative determined that all 51 employees were disqualified from receiving reemployment insurance benefits because they were separated from employment due to a strike. The employees appealed the disqualification determination, and a reemployment insurance judge affirmed the disqualification. The employees appealed to the Commissioner of Economic Security.
The commissioner's representative reversed the decision of the reemployment insurance judge, concluding that the
employer's refusal to abide by the terms of an agreement which it had entered into, through a collective bargaining process, which terms were clearly material, gave the employees good cause to leave and thus * * * for purposes of Minnesota Statutes § 268.09, Subdivision 18 (effective July 1, 1997) * * * claimants were subject to a "constructive lockout" and therefore not disqualified from the payment of reemployment insurance benefits.
DECISION
Findings of the commissioner's representative must "be viewed in the light most favorable to the decision, and if there is evidence reasonably tending to sustain them, they will not be disturbed." White v. Metropolitan Med. Ctr. , 332 N.W.2d 25, 26 (Minn. 1983). When reviewing questions of law, this court exercises its independent judgment. Smith v. Employers' Overload Co. , 314 N.W.2d 220, 221 (Minn. 1981). Whether a claimant is properly disqualified from receiving reemployment insurance benefits is a question of law. Id. Because the reemployment insurance statute is remedial in nature, this court must interpret it liberally to effectuate public policy. Id. at 221-22. The "disqualification provisions of the [reemployment insurance] statute are to be narrowly construed." Id. at 222.
An eligible claimant will be paid reemployment insurance benefits unless some disqualification is proved. Sunstar Foods, Inc. v. Uhlendorf , 310 N.W.2d 80, 83 (Minn. 1981). The employer has the burden of showing circumstances that bring a claimant within a disqualifying provision of the statute. Id .
A claimant who has left or partially or totally lost employment with an employer because of a strike or other labor dispute at the establishment where the claimant is or was employed shall be disqualified from benefits:
(1) until the end of the calendar week that the strike or labor dispute was in active progress if the claimant is participating in or directly interested in the strike or labor dispute; or
(2) until the end of the calendar week that the strike or labor dispute commenced if the claimant is not participating in or directly interested in the strike or labor dispute.
Minn. Stat. § 268.09, subd. 18(a) (Supp. 1997). However, a claimant is not disqualified from benefits under subdivision 18 if "the claimant becomes unemployed because of a lockout." Minn. Stat. § 268.09, subd. 18(c)(2) (Supp. 1997). Whether there has been a lockout is a question of fact to be determined by the Commissioner of Economic Security. Sunstar Foods , 310 N.W.2d at 83.
The term "lockout" is not defined in the Minnesota Economic Security Law, Minn. Stat. §§ 268.001 to 268.98 (1996 Supp. 1997). However, in Sunstar Foods , the supreme court applied the definition of "lockout" set forth in the Minnesota Labor Relations Act to determine whether employees were disqualified from receiving reemployment insurance benefits. 310 N.W.2d at 83. That definition remains in effect and states that a lockout "is the refusal of the employer to furnish work to employees as a result of a labor dispute." Minn. Stat. § 179.01, subd. 9 (1996).
In Sunstar Foods , one day before a labor contract expired, the employer and the union that represented the employees agreed to extend the contract until a new contract could be negotiated. 310 N.W.2d at 81. However, when negotiations between the employer and the union failed to produce a new contract, the employer unilaterally imposed a contract that reduced wages by 21-26 percent. Id. at 82. The employer argued that because it continued to offer work, albeit at a lower wage, there was no lockout. Id. at 83. The supreme court disagreed and affirmed the commissioner's decision that the employees were separated from their employment due to a lockout. Id. at 85. The supreme court held "that the unilateral imposition by an employer of employment terms so unreasonable that the employees have no alternative but to leave constitutes a lockout." Id. at 83.
In determining whether the employees in Sunstar Foods were separated from their employment due to a lockout, the supreme court looked at reemployment insurance cases that considered whether a wage reduction constituted good cause for an employee to voluntarily terminate employment. Id. at 83-84. Those cases indicate that wage reductions less than 15 percent generally do not provide good cause for an employee to leave employment, but reductions of 20 to 25 percent do provide good cause for an employee to leave employment. Id. at 84. The court affirmed the commissioner's finding that the 21-26 percent wage reduction experienced by the employees in Sunstar Foods was so unreasonable that the employees had no alternative but to leave their employment. Id. at 85.
The commissioner's representative did not determine whether the employment terms unilaterally imposed by Oak Hills were so unreasonable that the employees had no alternative but to leave their employment. Instead, the commissioner's representative found that Sunstar Foods is not controlling because, unlike Oak Hills, the employer in Sunstar Foods made unilateral changes to an employment contract after the contract had lapsed, not during the term of the contract. The commissioner's representative concluded that a failure to comply with the material terms and conditions of a contract, by itself, gives employees good cause to leave their employment. Therefore, because Oak Hills admitted that it did not implement a pay raise called for in the agreement, the employees had good cause to leave their employment and were subject to a constructive lockout.
The commissioner's representative misread Sunstar Foods . The employment contract in Sunstar Foods had not expired when the employer unilaterally imposed the wage reduction. The Sunstar Foods opinion specifically states:
On the day before expiration of the contract, the employer and the union agreed to extend the existing labor agreement until a new contract could be negotiated.
Also, it is apparent in footnote 3 of the opinion that the court deliberately considered the employer's actions to have been taken in the context of an existing employment contract and not in the context of negotiations following the expiration of a contract. At footnote 3, the court noted:
Sunstar is correct in stating that it is not illegal or unfair for an employer to bargain for lower wages. But imposition of lower wages as terms and conditions of employment is considerably different than proposing the same terms in the course of collective bargaining and negotiation. We look to the result of the imposition of such terms of employment: If they are unreasonably onerous, we can find good cause for leaving work.
Id. at 84 n. 3.
The commissioner's representative erred by concluding that Sunstar Foods is not controlling. We reverse and remand to permit the commissioner's representative to make findings on what employment terms were unilaterally imposed by Oak Hills and to determine whether those employment terms were so unreasonable that the employees had no alternative but to leave their employment and were, therefore, separated from their employment due to a lockout.