Texas Employment Commission

Brown Building Austin, Texas Opinion No. WW-13
Re: Effect of the Ford Motor Company - UAW-C10 supplemental unemployment benefit plan upon the Texas Unemployment ComGentlemen: pensation Act.

You have requested our opinion as to whether benefits paid from trust funds created by a contract between the Ford Motor Company and the UAW -CIO and a contract between General Motors Corporation and the IJAW-Cl0 to an unemp~loyed worker to supplement payments received from state unemployment compensation would effect a disqualification of such worker for state unemployment compensation under the provisions of the Texas Unemployment Corrlpensation Act, Article 5221b (Vernon’s Civil Statutes of Texas).

A review of the supplemental unemployment benefit plans in the two contracts demonstrates that they have no significant differences so far as your question is concerned; therefore, they will hereafter be treated as one and the same, and will be referred to as “the Plan”

. The companies will be referred to as “the employer”, the beneficiaries of the Plan will be referred to as “the applicant”, and the Texas Unemployment Compensation Act will be referred toas “theAct”.

The features ofthe Plan, in summary, and only so far as necessary to a disposition ofthequestions presented, are that the employer has agreed with the applicant, through his bargaining agent, to contribute to a trust fund over a period ofyears at the rate of 5cents for each hour for which the employee has received payment from the employer until the trust fund reaches a designated amount -- and thereafter only so much as is necessary to retain maximum funding, but never in excess ofthe 5.cent rate. The trust is non-contributory as to theemployee, and is administered by a trustee independently ofthe employer. The assets ofthetrust are for the sole benefit ofthe employee, and under no circumstances revert to, or can be received by, the employer. The purpose of the Plan is to supplement state system unemployment benefits to the monetary level agreed upon by,the.parties, and notto replace or duplicate them. The object ofthe Plan is the payment to an eligible applicant by the trustee from thetrust fund of such an amount as,Texas Employment C.ommission, page 2 (WW-13)

when added to the applicant’s state unemployment benefit and other compensation for any week in question, will equal a certain percentage ofhis weekly after-true straight time wage.

An applicant under the Plan is eligible for a supplemental benefit only if he is on lay-off from the employer with respect to theweek for which application is made and if: (,a) such lay-off occurred in consequence ofa reduction inforce oretemporary lay-off, including a lay-off because ofthe discontinuance ofa plant or other operation; (b) the applicant has registered at and has reported to an employment office maintained by the Texas Employment Commission, **a,nd**has not failed or refused to accept em,ploymentdeemed suitable under the Texas Employment **System,** and; (c) the applicant has received stats unemployment benefits not currently under protest by the company. Several other conditions precedent are set out-in the Plan, but are notdeemed to be material to this discussion. The Texas Unemployment Compensa,tion Act sets up certain requirements before an unemployed individual shall be eligib,le to receive benefits during **any** benefit period (Art. 522lb-2. V.C.S.). and further provide,s certain conditions which will disqualify, an unemployed individual from receiving benefits during any benefit period. (Art. 5221b3, V.C.S.). For the purposes ofthis opinion it is only necessaryto state that none ofthe conditions ofdisqualification include the psyment ofthe type of benefits under the Plan. However, to be eligible for benefits under theAct, an individual must be “unemployed..” The Act provides that “anindividual shall be deemed ‘totally ‘unemployed’ in any benefit period during which he performs no services and with respect towh+h nowages are payable tohim.” (Art. 5221b-17, V.C.S.). “W,ages” as used inthe Act is defined as “a11remuneration for personal services, includiagcommissions and bonuses and thecash value of all remuneration in any medium other thancash.” (Art. 5221b-‘17. V.C.S.).

The specific question that must be answered is whether an individual who receives the supplemental benefits from the trust fund established by the Plan is “totally unemployed” within the meaning of the Texas~Unemployment Compensation Act. As pointed outabove, the statute states that sn individual ,is ~%etaHyunecnple ad” in any benefit period during which (1) he performs no services~aad (, 1 ) “with respect towhich nowages are payable toh@n,” with “wages’ being defined a8 “all remuneration for personal,services,”

A laid-off employee, during a-period.of ‘by-off which results for reasons specified in the Plan, and meeting ail other eligibility requirements of the P&n, manifestly is performing **no** &wi~ei%. Herice, theapplicant meets thefirst requirement that “ha perfor&& servides.”Texas Employment Commission. page 3 (WW-13)

A more difficult problem arises in determining whether payments under the Plan are “wages”, as defined by the Act, and thereby prevent theappliicdhtfrom being ‘unemployed’ within the meaning of the “Act-. Itwill be notedthat, before an employee will be deemed employed, theAct requires that ‘wages” be payable to the “employee” with respect to the benefit period for which he seeks State Unemployment Compensation.
The Plan, thefunds collected and held in trust under the provisions ofthe Plan, and the payment ofthefunds to laid-tiff workers are very similar to the Texas Unemployment Compensation Act and the collection and distribution offunds thereunder. InFriedman v. American Surety Co. ofNew York, et al., Tex. 15l.S.%‘J.Ld570 (1941) th Supreme Court ofTexas held t&&e unsiloyment compensation >uf collected under the Texas Unemployment Compensation Act is a trust fund to be held by the State Treasurer as trustee for the benefit of a class ofemployees whose employers contribute by virtue ofthe excise tax levy. Indeclaring the Act to be constitutional, the Supreme Court stated that the benefits paid under the Act were “wages or compenaatioa” of the employee:
“It is true thatthe employers alone directly

create the unemployment fund, but it is created for the benefit oftheir employees. Therefore, the right of such,employees toenjoy or participate in the fund in times ofunemployment should be regarded as a part oftheir compensation or wages. All employees who **labor** or perform services for employers who are **covered** by this Act labor **or serve**  in part for theright to enjoy the benefit6 of this unemployment fund.

. . Those who come under its provision6 have labored or served for such privilege

. . . The right of a&employee covered by this Act to participate in thefund created thereby is a part ofthecompen6ation earned while he is employed.”

As “wages* is.defined by theAct as “all remuneration for personal se,rviceg~“,and in view ofthe Friedmrn ca6,edeclaring benefits ofthis nature to be “wages * or “compensations”,we are ofthe opinion that payments to an applicant under the provisionp’ ofthe Plan are susceptible ofbeing ClaEBffiCd as “remuneration for personal services” or “wages’ within the meaning of theAct. The Plan and the ultimate receipt of payments there.under is theresult ofbargaining between the employer and the bargaining 6gent of theemployee. Itwas **one** ofthe in@ucemente by which the employee agreed to perform service6 and labor **for** the employer. Under the rea6oning ofthe Supreme Court of Texas in the Friedman case we feel that such payment6 under the Plan can r8a6OIIablyr ssified a6 consideration or remuneration to the employee fbr ServiCsS-

Texas Employment Commission, page 4 (WW-1.3)

..

. :!operformed by him t&t&e employer, and therefore these payment6 are “wages” withinthe broad definition ofthat term given by the Texas Unemployment Compen&.tion Act.

However, as pointed out above, to render the individual ineligible these “wages” must be payable “with respect to,”thebenefit period in question. The El Paso Court of Civil Appeals had a similar question before it in Western Union pany v. Texas Employment Cominiss,ion, et al., 243 S. vth the services ofan employee because they es rn were no longer needed or required by the company. Under a contract of employment the company paid the individual a lump sum amount based upona fdimula oftotal prior service. This paxpent was called “severance pay’

. The individual thenapplied for stat6 unemployment compnsation. Itwas contended by the company thatthe receipt ofthis severance payment made the employee ineligible to receive benefits under theUnemployment Compensation Act because the sums of money received represented wages and should be allocated to the period immediately subsequant,to thedischarge, and therefore the employee was not unemployed within the &caning oftheAct. The employee took the po6itfon thatthe seQverancc,,.pay represented wages received with raepect to past services rrndered’and therefore did not make her ineligible under the provisions

‘of the Act. Both parties agreed thatthe payments were wages, and that question was not,decided by the Court. However., in discussing the question ofwhether the individual was Yotally unemployed.” under the definition givenby the statute, the Court stated thatthe employte:

‘L ”

. . . clearly, as is admitted, performed no services during the period, or any period sub6equent to her discharge to which the company would apply payments made to her. Having performed no services

‘/~ during such period nowages could be payable to her with respect to such period. Ifthe agreement that such Sum.8are wages be accurate, thenthewage6 1must be applicable to some period withrespect to Which and during which she did perform personal 6ervices for thecompany.” (Emphaeis added.)

,,,. The Court, having stated thatwage6 must be applicable to Some period “with respect towhich” and during which an employee performed personal service6 for the company, and that such severance pay wa6 allocable against the period inwhich itwaspearned, and notagainst a period during which theemployee’had performed no services, we feel thatthe same reasoning must apply to the sums received by an applicant under the provision6 ofthe Plan in question, The employee, or applicant, will perform no services during the benefit period, and therefore thefunds received under the provision6 ofthe Plan will be received because ofservices performed by theimployee to the company prior to hi6 lay-off. These funds must be allocable to the period during which the individualTaxa Employment Commi6sion, page 5 (WW-13)

performed services andwill not be “with respect to” the benefit period during which he i6 seeking state unemployment compen6ation, and will, therefore, not make him ineligible to receive state unemployment compensation.
For case6 similar to theWestern Union case cited above, see Inre Public Ledger, Inc., 161F.Zd 762.Ackerson, et al. v. Western Union Telegraph Co., et al., 48 N.W.2d 338‘(S.Ct Mi 1751) Dubose v. Maine kmployment Security Commission, 114A.‘2d 3:: (S.Ct.‘h%aine, 1455).

We are therefore ofthe opinion #at the receipt of supplemental unemployment benefits under the Plan will not render an individuel ineligible to receive benefit6 under the Texas Unemployment Compensation Act. We note in pa66ing thatthe 6ame general conclusion has been arrived at by a great majority of our si6t6r stskr who hsve con6idered the quartion.
SUMMARY

Receipt ofrrupplementel unemplbyment benefitr from trust funds accumulated and pald out und,erthe provisions of the contracts between Ford Motor Company and the UAW-C10 and General Motors Corporation and the UAW-CIO doe6 not preclude an individual from receiving benefit6 under the Texar Unemployment Compenration Act. Very truly yourr, WILL WILSON Attorney General

BY Will D. Davis **ASSiEkLt**
WDD:cm
APPROVED:
OPINION COMMITTEE H. Grady Chandler, Chairman