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 to as “the Act”. 

The features of the Plan, in summary, and only so far as 

necessary to a disposition of the questions presented, are that the employer has agreed with the applicant, through his bargaining agent, to 

contribute to a trust fund over a period of years at the rate of 5 cents 

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 of the 5. cent rate. The trust is non-contributory as to the employee, and is administered by a trustee independently of the employer. 

The assets of the trust are for the sole benefit of the 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 not to replace or duplicate them. The object of the Plan is the payment to an eligible applicant by the trustee from the trust 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 of his 

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 the week 

for which application is made and if: (,a) such lay-off occurred in consequence of a reduction in force ore temporary lay-off, including a lay-off 

because of the discontinuance of a 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,ployment deemed 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 not deemed 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 of this opinion it is only necessaryto state 

that none of the conditions of disqualification include the psyment of the 

type of benefits under the Plan. However, to be eligible for benefits under the Act, an individual must be “unemployed..” The Act provides that 

“an individual shall be deemed ‘totally ‘unemployed’ in any benefit period 

during which he performs no services and with respect to wh+h no wages 

are payable to him.” (Art. 5221b-17, V.C.S.). “W,ages” as used in the Act 

is defined as “a11 remuneration for personal services, includiagcommissions and bonuses and the cash value of all remuneration in any medium 

other than cash.” (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 out above, the statute states that sn individual ,is ~%etaHy unecnple ad” in any benefit period 

during which (1) he performs no services~aad (, 1 ) “with respect to which 

no wages are payable to h@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, 

the applicant meets the first 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 the appliicdht from being ‘unemployed’ within the meaning of 

the “Act-. It will be noted that, before an employee will be deemed employed, the Act requires that ‘wages” be payable to the “employee” with 

respect to the benefit period for which he seeks State Unemployment 

Compensation. 

The Plan, the funds collected and held in trust under the 

provisions of the Plan, and the payment of the funds to laid-tiff workers 

are very similar to the Texas Unemployment Compensation Act and the 

collection and distribution of funds thereunder. In Friedman v. American 

Surety Co. of New York, et al., Tex. 15l.S.%‘J.Ld 570 (1941) th 

Supreme Court of Texas 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 

of employees whose employers contribute by virtue of the excise tax levy. 

In declaring 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 that the employers alone directly 

create the unemployment fund, but it is created for 

the benefit of their employees. Therefore, the right 

of such, employees to enjoy or participate in the fund 

in times of unemployment should be regarded as a 

part of their compensation or wages. All employees 

who labor or perform services for employers who 

are covered by this Act labor or serve in part for 

the right 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 

the fund created thereby is a part of the compen6ation earned while he is employed.” 

As “wages* is.defined by the Act as “all remuneration for 

personal se,rviceg~“, and in view of the Friedmrn ca6,e declaring benefits 

of this nature to be “wages * or “compensations”, we are of the opinion 

that payments to an applicant under the provisionp’ of the Plan are susceptible of being ClaEBffiCd as “remuneration for personal services” or 

“wages’ within the meaning of the Act. The Plan and the ultimate receipt 

of payments there.under is the result of bargaining between the employer 

and the bargaining 6gent of the employee. It was one of the in@ucemente 

by which the employee agreed to perform service6 and labor for the employer. Under the rea6oning of the 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 of that 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,” the benefit 

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 es rn the services of an employee because they 

were no longer needed or required by the company. Under a contract of 

employment the company paid the individual a lump sum amount based 

upon a fdimula of total prior service. This paxpent was called “severance pay’. The individual then applied for stat6 unemployment compnsation. It was contended by the company that the receipt of this severance 

payment made the employee ineligible to receive benefits under the Unemployment Compensation Act because the sums of money received represented wages and should be allocated to the period immediately subsequant,to the discharge, and therefore the employee was not unemployed 

within the &caning of the Act. The employee took the po6itfon that the 

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 that the payments were wages, and that 

question was not ,decided by the Court. However., in discussing the question of whether the individual was Yotally unemployed.” under the definition givenby the statute, the Court stated that the 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 no wages could be payable to her 

with respect to such period. If the agreement that 

such Sum.8 are wages be accurate, then the wage6 

1 must be applicable to some period withrespect to 

Which and during which she did perform personal 

6ervices for the company.” (Emphaeis added.) 

,,,. The Court, having stated that wage6 must be applicable to 

Some period “with respect to which” and during which an employee performed personal service6 for the company, and that such severance pay 

wa6 allocable against the period in which it wasp earned, and not against 

a period during which the employee’had performed no services, we feel 

that the same reasoning must apply to the sums received by an applicant 

under the provision6 of the Plan in question, The employee, or applicant, 

will perform no services during the benefit period, and therefore the funds 

received under the provision6 of the Plan will be received because of services performed by the imployee to the company prior to hi6 lay-off. 

These funds must be allocable to the period during which the individual 
Taxa Employment Commi6sion, page 5 (WW-13) 

performed services and will 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 the Western Union case cited above, 

see In re Public Ledger, Inc., 161 F.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, 114 A.‘2d 3:: (S.Ct.‘h%aine, 1455). 

We are therefore of the 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 that the 6ame general conclusion has been 

arrived at by a great majority of our si6t6r stskr who hsve con6idered 

the quartion. 

SUMMARY 

Receipt of rrupplementel unemplbyment benefitr from trust funds accumulated and pald out und,er the 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