Opinion
Nos. A05-2128, A05-2379.
Filed September 12, 2006.
Appeal from the Department of Employment and Economic Development, File No. 1442705.
Nicholas P. Granath, Seham, Seham, Metz Petersen, Llp, (for Amfa Members)
Timothy R. Thornton, Elizabeth M. Brama, Briggs and Morgan, (for Northwest Airlines, Inc.)
Linda A. Holmes, Minnesota Department of Employment and Economic Development, and Frank E. Villaume, (for Department of Employment and Economic Development)
Considered and decided by Worke, Presiding Judge; Willis, Judge; and Hudson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
In these consolidated appeals, striking member technicians and inspectors challenge the decision by the unemployment-law judge (ULJ) affirming his earlier decision that they were disqualified from receiving unemployment benefits. The ULJ determined that a 25% pay reduction was insufficient to constitute a constructive lockout, under which the technicians and inspectors would have qualified for benefits. The employer, Northwest Airlines, Inc. challenges the decision by the ULJ affirming his earlier decision that the striking Aircraft Mechanics Fraternal Association cleaners and custodians were qualified to receive unemployment benefits, determining that a 25% pay reduction constituted a lockout as to the cleaners and custodians. Because we conclude that, under Sunstar Foods, Inc. v. Uhlendorf, 310 N.W.2d 80 (Minn. 1981), the 25% pay cuts imposed on both the technicians and inspectors, as well as the cleaners and custodians, constituted a constructive lockout so as to entitle both groups to unemployment benefits, we affirm the ULJ's decision with regard to the cleaners and custodians, but we reverse the ULJ's decision with regard to the technicians and inspectors.
FACTS
Northwest Airlines, Inc. (Northwest) is a common carrier operating within the statutory framework of the Railway Labor Act (RLA), 45 U.S.C. § 151-188. The Aircraft Mechanics Fraternal Association (AMFA) represents a bargaining unit at Northwest that includes members of two crafts: technicians and inspectors, as well as cleaners and custodians. The two crafts have different job classifications, functions, and pay rates. The parties entered into a collective-bargaining agreement effective May 2001; under the RLA and the agreement, the agreement became subject to amendment in May 2005. In 2003, Northwest notified AMFA representatives of financial problems within the airline industry, including Northwest's own financial situation, and sought concessions from the union. Following procedures prescribed by the RLA, in October 2004, the parties exchanged early notices indicating an intent to amend the bargaining agreement. Negotiations were unsuccessful.
When negotiations stalled, Northwest requested mediation assistance from the National Mediation Board (NMB) in January 2005. The airline, which announced a loss of $458 million for the first quarter of 2005, sought approximately $176 million in annual concessions from the union and began strike-contingency-planning meetings in June 2005. Both parties requested a release from the NMB. This release, granted on July 20, 2005, triggered a 30-day "cooling off" period, after which both parties could engage in self-help: the airline, to impose terms and conditions of employment, and the union, to strike. Although negotiations continued, an agreement was not reached, and on August 18, Northwest submitted to the union a "last best offer," which included pay reductions of 25% for both crafts, as well as reductions to benefits and the elimination of some job-security provisions. AMFA negotiating committee members, who retained authority to determine whether to submit the proposal to union membership, deemed the offer unacceptable and declined to offer it for a vote.
On August 19, the airline announced that new terms and conditions of employment would be imposed when the deadline for self-help arrived the next day. The terms and conditions reduced the base-pay rate for each position by approximately 25%; reduced holidays; reduced vacation-accrual rates; reduced sick-leave accruals; and reduced shift premiums. AMFA directed its members to walk off the job at the deadline, 12:01 a.m. on August 20, 2005, and announced a strike. At the deadline, AMFA members walked off the job.
During the last hours before the deadline, several AMFA members were requested to leave NWA property and escorted from their work sites. The employees were paid until the end of their shift. The airline later reported that security concerns about vandalism led to the removal of these workers.
On September 6, 2005, Northwest announced the elimination of all cleaner and custodian positions, making job offers to replacement employees. The airline also announced its intention to begin hiring replacement workers to fill the technicians' and inspectors' jobs. The next week, Northwest began hiring replacement technicians and inspectors. On September 15, the airline filed for bankruptcy protection.
More than 1,600 AMFA members representing technicians and inspectors, as well as cleaners and custodians, established benefit accounts to obtain unemployment benefits with the Department of Employment and Economic Development. After department adjudicators made their decisions, appeals were taken. An unemployment-law judge (ULJ) held a consolidated hearing to consider the benefit claims of all of the AMFA members. But the ULJ issued separate decisions on the claims of the members of the two crafts. The ULJ's decisions granted benefits to the cleaners and custodians, but denied benefits to the technicians and inspectors.
On reconsideration, the ULJ modified his reasoning but reached the same conclusions in both decisions. The ULJ ruled that benefits applicants who stop working because of a labor dispute are not eligible for benefits, unless an exception exists for applicants who stop working because of a lockout. The ULJ determined that, under Sunstar Foods, Inc. v. Uhlendorf, 310 N.W.2d 80 (Minn. 1981), a 25% reduction in base-pay rate, as well as benefit reductions, did not constitute a constructive lockout for the technicians and inspectors because their pay rate approximated that of the average technician in the industry, so that the terms imposed were not so unreasonable that the workers had no choice but to leave. In a separate decision, however, the ULJ determined that the cleaners and custodians were subject to a constructive lockout and thus eligible to receive unemployment benefits. He reasoned that their imposed pay reduction, although also reducing the base-pay rate by 25%, represented a greater impact because they had a pay scale near the average annual wage paid to a Minnesota worker. In this consolidated certiorari appeal, AMFA members appeal the determination as to the technicians and inspectors; Northwest appeals the determination as to the cleaners and custodians.
DECISION
In review of a determination of eligibility for unemployment-compensation benefits, this court may affirm the unemployment-law judge's decision, remand it for further proceedings, or reverse or modify it
if the substantial rights of the petitioner[s] may have been prejudiced because the findings, inferences, conclusion, or decision are:
(1) in violation of constitutional provisions;
(2) in excess of the statutory authority or jurisdiction of the department;
(3) made upon unlawful procedure;
(4) affected by other error of law;
(5) unsupported by substantial evidence in view of the entire record as submitted; or
(6) arbitrary or capricious.
Minn. Stat. § 268.105, subd. 7(d) (Supp. 2005).
Findings of the ULJ must be viewed in the light most favorable to the decision. White v. Metro. Med. Ctr., 332 N.W.2d 25, 26 (Minn. 1983). When reviewing questions of law, such as whether an employee had good reason to quit, this court conducts de novo review. Peppi v. Phyllis Wheatley Cmty. Ctr., 614 N.W.2d 750, 752 (Minn.App. 2000).
I
As a preliminary matter, AMFA members argue that the ULJ improperly refused to consider evidence that Northwest eliminated jobs in the bargaining unit and that Northwest's resumption of operations with replacement workers affirmatively ended the status of the applicants as employees who stopped working because of a labor dispute. Minnesota unemployment-benefits law provides that "[a]n applicant [for benefits] who has stopped working because of a labor dispute at the establishment where the applicant is employed shall be ineligible for unemployment benefits" for each week a labor dispute is in active progress and the applicant is participating or actively involved in the labor dispute. Minn. Stat. § 268.085, subd. 13b(a) (2004). The parties do not disagree with the ULJ's determination that all of the applicants initially became unemployed because of a labor dispute. See Minn. Stat. § 179.01, subd. 7 (2004) (defining labor dispute as "any controversy concerning employment, tenure or conditions or terms of employment. . . ."); Minn. Stat. § 268.085, subd. 13b(e) (2004) (stating that above definition applies for purposes of determining eligibility for unemployment benefits). But AMFA members maintain that Northwest's elimination of jobs for AMFA members and hiring of replacement workers effectively ended the labor dispute, so that the dispute was no longer in active progress, and members should not be deemed ineligible to receive unemployment benefits. We disagree.
Under Minnesota law, the hiring of replacement workers does not change the determination that a labor dispute is in active progress until the parties reach a settlement or union members unconditionally agree to return to work. See George A. Hormel Co. v. Asper, 428 N.W.2d 47, 54 (Minn. 1988) (stating that a labor dispute did not end when replacement workers were hired, so that applicants were disqualified from benefits until the union had made an unconditional offer to return to work); see also Johnson v. Wilson Co., 266 Minn. 500, 514,124 N.W.2d 496, 505 (1963) (stating that labor dispute ended when employees agreed to accept arbitrator's decision); Ayers v. E.F. Johnson Co., 244 Minn. 375, 382, 70 N.W.2d 296, 300 (Minn. 1955) (holding that, after replacement workers were hired, employees' act of submitting issue of right to reinstatement to arbitration did not create voluntary unemployment within meaning of unemployment-compensation act). The record shows that AMFA members continued to picket and state that they were on strike. Therefore, we conclude that, despite the hiring of replacement workers, AMFA members remained participants in a labor dispute in active progress for the purpose of determining their eligibility for unemployment benefits. See Minn. Stat. § 268.085, subd. 13(b) (2004) (stating that "[p]articipation [in a labor dispute] includes any failure or refusal by an applicant, voluntarily or involuntarily, to accept and perform available and customary work at the establishment").
II
We next address the ULJ's determinations as to AMFA members' eligibility for unemployment benefits. A statutory exception to ineligibility occurs if "the applicant stops working because of a lockout." Minn. Stat. § 268.085, subd. 13b(c)(2) (2004). Whether a lockout has occurred is a question of fact. Sunstar Foods, Inc. v. Uhlendorf, 310 N.W.2d 80, 83 (Minn. 1981). But we review decisions on undisputed facts as a matter of law. Ress v. Abbott Nw. Hosp., Inc., 448 N.W.2d 519, 523 (Minn. 1989). The Minnesota Supreme Court has adopted the definition, for unemployment-benefit purposes, of "lockout" stated in the Minnesota Labor Relations Act, which is "the refusal of the employer to furnish work to employees as a result of a labor dispute." See Sunstar, 310 N.W.2d at 83; Minn. Stat. § 179.01, subd. 9 (2004). A lockout may be either actual or constructive. Moore v. Allied Aviation Fueling Co., 385 N.W.2d 41, 44-45 (Minn.App. 1986).
Actual lockout
The first dispute concerns whether there was an actual lockout of specific AMFA members who were asked to leave their work locations early on the day of the strike deadline. The ULJ determined, by implication, that no actual lockout of these employees occurred. We agree. The record establishes that Northwest had valid security concerns about vandalism and that the workers who were asked to leave early were not denied pay or benefits. See id. at 45 (rejecting actual-lockout assertion when employees were sent home with pay during a shift immediately before a strike, stating that the company's actions "were not a refusal to furnish work to employees as a result of [a] labor dispute, but were only preliminary acts taken to avoid potential conflicts between supervisory employees brought in to perform the jobs of the employees whose strike date was imminent").
Constructive lockout
The Minnesota Supreme Court has recognized that, absent an actual lockout, a constructive lockout may occur on "the unilateral imposition by an employer of employment terms so unreasonable that the employees have no alternative but to leave." Sunstar, 310 N.W.2d at 83. In Sunstar, the supreme court upheld the Commissioner of Economic Security's factual determination that an employer's unilateral imposition of pay cuts of 21% to 26% operated as a constructive lockout, entitling employees who were members of a striking bargaining unit to unemployment benefits. Id. at 85.
In resolving the issue of whether there was a constructive lockout, the supreme court examined case law addressing whether a wage reduction gave an employee good reason to leave employment, in which case an employee would not be disqualified from receiving benefits. For instance, in Scott v. Photo Ctr., Inc., 306 Minn. 535, 536, 235 N.W.2d 616, 616-17 (1975), the supreme court held that a claimant had good cause to quit his employment after his employer imposed a 25% wage cut. And in Hessler v. Am. Television Radio Co., 258 Minn. 541, 549-51, 104 N.W.2d 876, 881-83 (1960), the supreme court held that an employee had no good cause to quit with wage cuts of 2% to 4%, but the court accepted the principle of applying the standard of good cause to quit to wage reduction. Under these cases, Sunstar recognized that imposed terms of wage reduction could, in certain circumstances, amount to a constructive lockout. Sunstar, 310 N.W.2d at 83-84.
Applying Sunstar, the ULJ found that Northwest imposed 25% pay cuts on both AMFA craft groups but reached disparate results on the issue of whether a constructive lockout occurred for each group. Citing the average wage paid to technicians in the nationwide airline industry, the ULJ found that the 25% pay cut imposed on the technicians and inspectors, who were generally paid at a higher level than the average worker, was not so unreasonable as to leave those workers no alternative but to leave. Accordingly, the ULJ denied unemployment benefits. But the ULJ determined that the same percentage pay cut imposed on the generally lower-paid cleaners and custodians meant that they would be receiving "a substantial amount less than the average paid Minnesota worker" and was therefore so unreasonable that it amounted to a constructive lockout, entitling them to unemployment benefits.
Sunstar abrogation claim
In its certiorari appeal of the ULJ's decision as to the cleaners and custodians, Northwest argues that recent changes in the terms of the "good cause to quit" statute have abrogated Sunstar, so that the ULJ erred in applying Sunstar and analyzing wage reduction to determine whether a constructive lockout occurred. In support of its position, Northwest notes that current Minnesota law provides an exception to disqualification from unemployment benefits if "the applicant quit the employment because of a good reason caused by the employer as defined in subdivision 3." Minn. Stat. § 268.095, subd. 1(1) (2004). Under that subdivision,
(a) A good reason caused by the employer for quitting is a reason:
(1) that is directly related to the employment and for which the employer is responsible;
(2) that is adverse to the worker; and
(3) that would compel an average, reasonable worker to quit and become unemployed rather than remaining in the employment.
(b) The analysis required in paragraph (a) must be applied to the specific facts of each case.
Minn. Stat. § 268.095, subd. 3 (2004).
Northwest points out that in 2004, the Minnesota legislature amended Minn. Stat. § 258.095, subd. 3(c), to delete a previous standard that stated that an employee had good reason to quit caused by the employer when the employer instituted a "substantial adverse change in the wages, hours, or other terms of employment." See 2004 Minn. Laws ch. 183, § 63, at 300 (deleting this language). This language stating the standard for good cause to quit had been added in 1999. See Minn. Stat. § 268.095, subd. 3(c) (Supp. 1999), enacted by 1999 Minn. Laws ch. 107, § 44, at 422. Northwest also notes a 2003 expansion of the exclusivity provision of the definition of "good reason to quit," observing that the legislature added language stating that "no other definition shall apply." See 2003 Minn. Laws, 1st Spec. Sess. ch. 3, art. 2, § 20, at 1477 (codified at Minn. Stat. § 268.095, subd. 3(f) (Supp. 2003)).
We reject Northwest's analysis. First, in Sunstar, the supreme court examined law regarding whether an employee had good cause to quit. Sunstar, 310 N.W.2d at 84. At that time, the legislature had not yet codified a standard for good cause to quit. But following that reasoning, we look to the present statutory language to determine what constitutes good reason to quit and thus, the currently applicable standard for determining whether a constructive lockout occurred. The plain language of Minn. Stat. § 268.095, subd. 3, articulates the statutory standard: that a good reason to quit caused by the employer is "a reason . . . that would compel an average, reasonable worker to quit and become unemployed rather than remaining in the employment." This definition, by its terms, does not exclude consideration of reductions in wages or benefits from a determination of reasons that would "compel an average reasonable worker to quit."
Absent ambiguity, we do not look beyond the plain language of a statute to discern legislative intent. Minn. Stat. § 645.16 (2004); U.S. Specialty Ins. Co. v. James Courtney Law Office, P.A., 662 N.W.2d 907, 910 (Minn. 2003). But even if we were to determine that the statutory language was ambiguous, and thus susceptible to interpretation, we would reach the same result. An examination of the legislative history of the 2004 amendments to Minn. Stat. § 268.095, subd. 3, reveals dual legislative concerns: broadening the definition of "good reason to quit" and assuring a reasoned, fact-based analysis of benefits availability on an individual basis. See Hearing on H.F. 2235 Before the House Comm. on Commerce (February 26, 2004) (statements of Rep. Tony Sertich). We also note that under prior law, the good reason had to be "significant," but the 2004 legislature deleted the word "significant" from the definition of a good reason caused by the employer for quitting. See 2004 Minn. Laws ch. 183, § 63, at 300 (codified at Minn. Stat. § 268.095, subd. 3 (2004)). Thus, the 2004 elimination of the specific provision on "adverse change in wages, hours or other terms of employment" language, along with the deletion of the word "significant" from the definition of good reason to quit caused by the employer, broadened the scope of the "good reason to quit" exception to disqualification from benefits for voluntary termination. See id. Strengthening the exclusivity provision merely emphasizes the requirement of a complete, fact-based analysis in determining whether an average, reasonable worker would be compelled to quit and become unemployed rather than stay in the employment when wages and benefits are reduced. See Minn. Stat. § 268.095, subd. 3(3). This is consistent with Sunstar and supports the ULJ's application of Sunstar in the decisions for both crafts.
Railway Labor Act rights
Northwest next argues that the ULJ's application of Sunstar, a private-employer case, contravened vested rights under the RLA, which governs the rights of the parties in this dispute with an airline employer. See Hawaiian Airlines, Inc. v. Norris, 512 U.S. 246, 252, 114 S. Ct. 2239, 2243 (1994) (stating that Congress enacted the RLA, 45 U.S.C. § 151a, to "promote stability in labor-management relations by providing a comprehensive framework for resolving labor disputes"). But Northwest fails to cite specific authority or to identify the RLA rights implicated by the ULJ's consideration of this state-law claim, which does not require the interpretation of the parties' collective-bargaining agreement. See, e.g., Hawaiian Airlines, 512 U.S. at 258, 114 S. Ct. at 2246 (holding that state-law whistleblower cause of action was not preempted by RLA, stating that parties' obligation under RLA to arbitrate disputes arising out of collective-bargaining agreement did not relieve employer of duty to comply with state-law whistleblower provision); Thomas v. Union Pac. R.R. Co., 308 F.3d 891, 893 (8th Cir. 2002) (stating that "[c]laims that revolve around the conduct or motive of the parties generally are not preempted because they do not require interpretation of the collective bargaining agreement"). Therefore, Northwest's argument must fail.
Unilateral imposition of terms
Northwest maintains, challenging the ULJ's decision in the custodians' and cleaners' case, that, even if Sunstar remains good law, a constructive lockout did not occur because Northwest did not unilaterally impose terms and conditions of employment. In Sunstar, after negotiations, union members voted to reject unilaterally imposed contract terms, established picket lines, and did not report for work. Sunstar, 310 N.W.2d at 82. Northwest attempts to distinguish Sunstar by arguing that, here, the terms and conditions became effective only after the prior bargaining agreement expired and AMFA members walked off the job. But under the RLA, the union was notified on August 19, 2005, of the terms that Northwest would impose if agreement was not reached by the time the cooling-off period expired. Therefore, those previously announced terms were imposed the next day, at the same time the walkout occurred. Northwest correctly points out that AMFA did not submit Northwest's offers for membership consideration, but it is undisputed that the AMFA negotiating committee had authority to determine whether to submit an offer to the membership. Therefore, the ULJ did not err in ruling that Northwest unilaterally imposed lower wages as terms and conditions of employment.
Northwest also argues that company-imposed terms cannot become unreasonable absent breach of an existing agreement and that no agreement was breached because after the cooling-off period, the previous collective bargaining terms no longer bound the parties. See, e.g., Moore, 385 N.W.2d at 46 (holding that potential elimination of overtime work did not amount to such a substantial change in circumstances so as to constitute a lockout, indicating application of "good cause to quit" standard in cases where there was "a substantial wage reduction, a reduction in benefits, or a breach of an employment agreement," and that in these cases, "the employer had breached an actual promise or agreement to provide those benefits") (citations omitted). But Moore is inapposite because, rather than the mere elimination of overtime, the record establishes a pay cut of 25% for AMFA members of both crafts. See id. (stating that decrease in overtime pay "is not of the substantial kind found in Sunstar to show a constructive lockout"). And these facts closely parallel those in Sunstar: the employer informed the union that the proposed contract would go into effect at a certain time, the union voted to authorize a strike in the event of an impasse, the union notified management it could not work under the new conditions, and a walkout occurred. Sunstar, 310 N.W.2d at 82.
Application of Sunstar
Northwest challenges the ULJ's determination that, under Sunstar, the 25% wage reduction, plus benefits reduction, constituted unreasonable terms so as to amount to a constructive lockout for the custodians and cleaners. AMFA members challenge the ULJ's determination that the technicians and inspectors, with the same percentage wage and benefit cuts, were not subject to a constructive lockout. The ULJ grounded his differential determinations as to the two crafts by reasoning that a 25% pay cut for a more highly paid employee does not have the same effect as the same percent pay cut does on a lower-paid employee.
The supreme court in Sunstar did not endorse a bright-line rule for determining when unilaterally imposed terms are so unreasonable that they would compel an average, reasonable worker to quit, but upheld the commissioner's determination that a 21% to 26% decrease in wages was sufficient to trigger the application of the lockout rule. Sunstar, 310 N.W.2d at 85. The current statute addressing good reason for quitting requires a fact-specific analysis. Minn. Stat. § 268.095, subd. 3; see also Cook v. Playworks, 541 N.W.2d 366, 369 (Minn.App. 1996) (stating that, under previous version of statute requiring good cause to quit, commissioner "must determine the reasonableness of an employee's action considering all relevant circumstances," including wage loss, change in job duties, reasonable career expectancies, and remaining chances for advancement).
Nonetheless, Minnesota appellate courts have uniformly held that imposed terms of wage reduction of 25% amount to a good reason to quit caused by the employer, absent indications of a deficient job performance. See, e.g., Scott, 306 Minn. at 535, 235 N.W.2d at 617 (holding that 25% wage reduction was good cause to quit); Danielson Mobil, Inc. v. Johnson, 394 N.W.2d 251, 253 (Minn.App. 1986) (holding that 19% wage reduction constituted good reason to quit); cf. Simonson v. Thin Film Tech. Corp., 392 N.W.2d 363, 365 (Minn.App. 1986) (holding that 16% wage cut, in addition to assignment to less-responsible position, was not good cause to quit attributable to employer); Cook, 541 N.W.2d at 370 (holding that 36% wage reduction was not good cause to quit when employee experienced demotion and pay cut because of inadequate job performance). Here, no claims of deficient job performance are implicated.
It is undisputed that Northwest's terms imposed on AMFA members of both crafts constituted 25% wage reductions, as well as benefit cuts. We agree with the ULJ that, under Sunstar, these substantial reductions were sufficient to amount to a lockout, entitling the custodians and cleaners to unemployment benefits. But we disagree with the ULJ's analysis that, under the same percent wage reductions and benefit cuts, a lockout with respect to the technicians and inspectors did not occur.
First, the ULJ used different standards to weigh the impact of the wage reduction on members of the two crafts. The ULJ analyzed the impact of the 25% wage reduction on the technicians and inspectors by comparing it to the average wage in the industry, but he analyzed the impact on the custodians and cleaners by comparing it to the wage of the average Minnesota worker. The ULJ made insufficient findings to support his choice of separate standards. Further, the reasoning for the ultimate decision by the ULJ — that a 25% wage reduction would have a greater impact on a lower-paid employee than on a higher-paid employee — does not provide a rational basis for distinguishing the impact of the wage reduction on the two crafts.
Second, the record shows that the highest-paid cleaners were paid approximately the same amount as the lowest-paid technicians. Thus, under the ULJ's reasoning, even though both would be subject to the same wage cut, a cleaner or custodian would be entitled to unemployment benefits, while a technician or inspector would not. The ULJ based this differential result on the fact that a cleaner at that wage level would be near the top of the pay scale and have little chance for advancement, while a technician would be at the lower end of the pay scale and have greater chance for advancement. The ULJ also noted a lack of evidence that technicians were employed at the lower pay level. But this differential is logically inconsistent and does not produce an equitable result for employees of the two crafts who may have experienced the same wage and benefit loss. On this record, we conclude the ULJ's determination that no constructive lockout occurred for the technicians and inspectors was arbitrary and capricious.
We therefore affirm the determination that the custodians and cleaners are eligible for unemployment benefits. But we conclude that the ULJ erred as a matter of law in determining that the technicians and inspectors were ineligible for benefits, and that determination is reversed.