Opinion
No. 38407
Decided June 16, 1967.
Labor unions — Collective bargaining agreement — Construction — Arbitration clause — Not applicable, when — Provision relating to vacation pay — Court proper forum — Termination of business not "discharge" of employee — Vacations "annually" — During "contract year" — Conflicting provisions — Pro rata vacation allowance.
1. Under a collective bargaining agreement between an employer and a labor union, an arbitration clause providing that in the event a satisfactory settlement of grievances and disputes that constitute an interpretation of the agreement cannot be satisfactorily settled by the employer, national officer or committee of the union, shall be referred to arbitration, has no application concerning the individual claim of a former employee for vacation pay where the employer goes out of business before the claim is made, and a court is the proper forum to determine the validity of such a claim under the terms of the agreement.
2. Under a collective bargaining agreement between an employer and a labor union, a provision relating to vacation pay to the effect "that any employee who is discharged for just cause shall forfeit all right to vacation," the term "discharged for just cause," applies only where the employer has a right to dismiss an employee for misconduct or dereliction of the employee, and the sale and termination of the business of the employer does not constitute such a discharge where the employee is not working by reason of the sale and termination of the employer's business.
3. Under the provisions of a collective bargaining agreement for a term of two years dated June 1, 1965, between an employer and a labor union relating to vacation pay, a provision in the agreement to the effect that all employees coming under the agreement shall be eligible for vacations " annually" during the "contract year," the term, "annually," means once a year during the contract year and a "contract year" begins June 1st and ends May 31st, unless there is a provision in the agreement to the contrary.
4. Where two sections of a labor agreement are in conflict, the provisions of the latter section prevail over conflicting provisions in a preceding section.
5. Under the provisions of a two-year collective bargaining agreement dated June 1, 1965, between an employer and a labor union relating to vacation pay which provides that employees shall be eligible to an annual vacation at their basic rate of pay according to a table based on the period of continuous employment prior to their eligibility date which is the anniversary date of their employment, an employee who entered the employment of the employer on November 14, 1946, and worked continuously for the employer until March 2, 1966, when the employer ceased operations and went out of business, is entitled to a pro rata vacation allowance from November 14, 1965, to March 1, 1966, inclusive, due and payable as of November 14, 1966, under a provision of the agreement to the effect that if an employee works from three to less than nine months from his eligibility date each year he shall receive a pro rata vacation allowance based on the number of months worked during the twelve month period prior to his eligibility if such employee has not been discharged for just cause or resigned his position.
Mr. George J. Demis and Mr. John L. Woodard, for plaintiff.
Messrs. Connolly Hillyer, for defendant.
In this case, the plaintiff Mary M. Hostetler, in her second cause of action seeks to recover from the defendant corporation, three weeks vacation pay under a two-year collective bargaining agreement dated June 1, 1965, between the defendant corporation, Quimby's Holsum Bakery, Inc., and Local No. 143 of the Bakery and Confectionery Workers International Union of America of which the plaintiff was a member in good standing. The plaintiff's first cause of action relating to alleged back wages was amicably settled between the parties. The parties waived a trial by jury and the matter was submitted to the court for final determination without the intervention of a jury.
The plaintiff was employed by the defendant corporation on November 14, 1946, and her employment with the defendant was continuous until March 2, 1966, on which date the defendant sold its assets and ceased operating its business. The corporation status of the defendant is now in the process of dissolution.
The principal provisions of Article VI of the agreement relating to vacations reads as follows:
" Section 1. It is agreed by the Employer that all employees coming under this Agreement shall be eligible for vacations annually on the following basis:
"One (1) to three (3) years of continuous service as of date of employment — one (1) week.
"Three (3) to eight (8) years of continuous service as of date of employment — two (2) weeks.
"Eight (8) years or more of continuous service as of date of employment — three (3) weeks.
"Twenty-five (25) years or more of continuous service as of date of employment — four (4) weeks during the first vacation year of the agreement as amended.
"Four weeks vacation — 22 years of service.
" Section 2. Members who become eligible for vacation during contract year shall be granted a vacation after their date of eligibility providing said member has worked continuously since his last eligibility date.
"* * *
" Section 5. However it is agreed that any employee who is discharged for just cause shall forfeit all rights to vacation.
" Section 6. If an employee works not more than three (3) months (13 weeks) from his eligibility date, he shall receive no vacation for that year. If he works more than three (3) months but less than nine (9) months (39 weeks) he shall receive one-twelfth (1/12) of a year's vacation for each month worked. If he works more than nine (9) months, he shall qualify for full vacation."
The defendant claims in its answer that the plaintiff is without legal capacity to sue for the reason that the plaintiff did not resort to the arbitration or grievance procedure provided for in the agreement.
It is provided in the contract that "in the event that a satisfactory settlement of grievances and disputes that constitute an interpretation or violation of this [the] agreement cannot be satisfactorily settled by the Employer, national officer or committee of the Union, it shall be referred to arbitration. * * * The award of the arbitrator shall not add to, substract from or modify the express terms of this [the] Agreement."
Even if the meaning of the agreement in this case is not clear, the field of inquiry as to its meaning is limited to the agreement itself. The provision of the agreement that the "arbitrator shall not add to, subtract from or modify the express terms of this agreement" is an expression of intention that the agreement is complete in itself and must be recognized and respected by both parties.
Where an employer goes out of business an arbitration clause of this character as it relates to vacation pay of an individual employee has no application. Under the agreement, only the union itself, or a committee of the union is authorized to file a grievance. It is not available to an individual employee.
A court is therefore the proper forum to determine whether the plaintiff in this case as an employee, is entitled to vacation pay under the terms of the agreement and the circumstances in this case.
The defendant also claims that Section 5 in the collective bargaining agreement dated June 1, 1965, providing that an "employee who is discharged for just cause shall forfeit all rights to vacation," and in effect at the time the defendant sold and closed its business on March 2, 1966, bars the plaintiff from claiming vacation pay.
In Hudson County Newspaper Guild v. Jersey Pub. Co., 23 N.J. Super. 419, 93 A.2d 183, it was held that as used in a collective bargaining agreement, the word "discharge" as it applies to forfeiture of vacation pay, indicates serverance at the instance of the employer of a particular employee for alleged fault, misconduct or incompetence of the employee.
Also in Adams v. Jersey Central Power Light Co., 36 N.J. Super. 53, 114 A.2d 776, it was held under a collective bargaining agreement concerning severance pay providing that an employee forfeited his right to serverance pay if the employee was "discharged for just cause," that said phrase of "discharged for just cause" applied only where the employer has a right to dismiss for misconduct or dereliction of the employee, and sale and termination of the business would not constitute such a discharge.
The court must therefore conclude that, under a collective bargaining agreement a provision relating to vacation pay to the effect "that any employee who is discharged for just cause shall forfeit all right to vacation," the term, "discharged for just cause," applies only where the employer has a right to dismiss an employee for misconduct or dereliction of the employee, and the sale and termination of the business of the employer does not constitute such a discharge where the employee does not work by reason of the sale and termination of the employer's business.
Section 1 of the agreement provides that "all employees * * * shall be eligible for vacations annually on the following basis * * *"
The word "annually" means yearly or once a year. See Phillips Petroleum Co. v. Harnly (Texas Civ. App.), 348 S.W.2d 856.
Does this word "annually" as used in Section 1, mean once during a calendar year or once during the contract year?
In Section 1, it is provided that an employee with 25 years of continuous service shall be entitled to four weeks vacation during the " first vacation year."
In Section 2, it is provided that "members who become eligible for vacation during the contract year" etc.
In Section 4 it is stipulated that not more than one (1) vacation shall be allowed during said contract year, except in cases of employees who were eligible and did not receive a vacation the previous year.
In Section 6, it is provided that if an employee works not more than three (3) months (13 weeks) from his eligibility date, he shall receive no vacation for that year.
The discriminate use of the words "annually," "contract year," "vacation year" and "year" in the agreement, leads the court to conclude that a qualified employee is entitled to a vacation once during each contract year but service to qualify for a vacation means service rendered during a period of 12 months immediately prior to the anniversary date of the employee's employment. In the instant case the plaintiff became eligible for a vacation on November 14, 1965, for service performed from November 14, 1964, to November 14, 1965. On November 15, 1965, the plaintiff started service for another vacation year which would have accrued on November 14, 1966, if she had worked continuously up to that time.
What are the plaintiff's rights concerning a vacation allowance for service performed subsequent to November 14, 1965, under the facts and circumstances of this case?
The agreement does not provide for severance pay nor is there specific provision regarding a vacation allowance where the employer goes out of business before an employee's next eligibility date.
In International Union v. L. T. Patterson Co., 82 Ohio Law Abs., 296, a labor union instituted the action to recover vacation pay claimed to be due employers under a collective bargaining agreement. Under the contract effective one year from its date, it was provided that vacation pay would be given employees "who prior to June 1st of the current year" had length of continuous employment of from six months to three years or more. The employer ceased operation of its business on March 5, because the business was being operated at a loss.
The court dismissed the case, holding that before an employee was entitled to vacation pay the employee was required to be in the employ of the company on June 1st. That decision was affirmed by the Court of Appeals and the Ohio Supreme Court. The court's decision in that case refers to a vacation for a calendar year. See International Union v. L. T. Patterson Co., 166 Ohio St. 148, 140 N.E.2d 318.
There is considerable difference between the Patterson case, supra, and the instant case. In the Patterson case it was specifically provided that under the contract dated July 1st, an employee had to be employed the succeeding June 1st to be entitled to vacation pay for the same calendar year. In the instant case it is clear from all the provisions of the agreement that there is a new eligibility date established each contract year for each employee and that eligibility date is the anniversary date of his original employment. In this case the last eligibility date was November 14, 1965, for which the plaintiff was granted a vacation allowance. Under the Patterson case, supra, this would seem to indicate that the plaintiffff would not be entitled to vacation pay for the vacation year beginning November 14, 1965, as she did not work after March 2, 1966. Her next eligibility date could not occur until November 14, 1966, at which time she was not working.
In Division of Labor Law Enforcement, Dept. of Industrial Relations v. Mayfair Markets, 102 Cal.App. (2d) Supp. 943, 227 P.2d 463, it was held that an employee has no right to a vacation allowance either in full or on a pro rata basis who is prevented from qualifying for a vacation because of the sale of an employer's business, since such a sale must be regarded as one of the hazards of the business world which could have been guarded against in the contract under the provision relating to vacation pay if the parties so desired.
However, in both the Patterson and Mayfair Market cases, supra, there was no provision in either contract for the payment of a vacation allowance upon a pro rata basis if an employee did not work full time since his last eligibility date.
The plaintiff claims that she is entitled to a pro rata vacation allowance for the vacation year beginning November 14, 1965, under the provisions of Section 6 of the contract.
Section 6 provides that if an employee works from three to less than nine months from his eligibility date each year, he shall receive a pro rata vacation allowance based on the number of months worked during the twelve-month period prior to his eligibility date.
Section 6 seems to be in conflict with Section 2 which provides that an employee shall be granted a vacation after his eligibility date providing said member has worked continuously since his last eligibility date. If Section 2 and Section 6 are in conflict, the provisions of Section 6 would prevail over a conflicting provision in Section 2 since it is a later provision in the agreement.
The court is of the opinion that Section 6 applies to a member of the union who is eligible to continue as a regular employee of the employer but is not permitted to work a full year for various reasons, among which may be sickness, injury, furlough, etc.
Some courts outside Ohio have held that a vacation allowance in effect is additional pay that has been earned but payment postponed until the employee is entitled to receive it, and is not a gratuity, unless there is a provision in the collective bargaining agreement to the contrary. The court feels there is no such provision to the contrary in the agreement in question and a liberal construction of the agreement justifies the view that it is earned additional pay.
The agreement in this case is dated June 1, 1965, and covered a period from that date until May 31, 1967. It was in full force and effect on November 14, 1966, and applied to all the members of the union whether they were working or not, unless they resigned or were discharged for just cause. No resignation or discharge is shown in this case. It cannot be unilaterally disregarded by the employer.
The court is therefore of the opinion that the plaintiff is entitled to a pro rata vacation allowance from November 14, 1965, to March 1, 1966, as provided by Section 6 of the agreement based on full months periods of at least thirty days, inclusive, due and payable as of November 14, 1966.
Judgment accordingly.