Case Name: DOERR v. UNIVERSAL ENGINEERING DIVISION, HOUDAILLE INDUSTRIES, INC
Court: Michigan Court of Appeals
Jurisdiction: Michigan
Decision Date: 1979-06-05
Citations: 90 Mich. App. 455
Docket Number: Docket No. 78-389
Parties: DOERR v UNIVERSAL ENGINEERING DIVISION, HOUDAILLE INDUSTRIES, INC
Judges: Before: Bashara, P.J., and V. J. Brennan and R. M. Maher, JJ.
Reporter: Michigan appeals reports; cases decided in the Michigan Court of Appeals.
Volume: 90
Pages: 455–476

Head Matter:
DOERR v UNIVERSAL ENGINEERING DIVISION, HOUDAILLE INDUSTRIES, INC
Docket No. 78-389.
Submitted February 8, 1979, at Lansing.
Decided June 5, 1979.
Leave to appeal applied for.
Plaintiffs, Carl Doerr and others, were employees of Universal Engineering Division, Houdaille Industries, Inc., in 1971. Plaintiffs were represented for collective bargaining purposes by the United Auto Workers Union. The UAW and the employer were bound by a collective bargaining agreement which had an expiration date of June 1, 1971.
On April 1, 1971, the employer gave notice of its intent to terminate the agreement at its expiration. A series of meetings between the UAW representatives and representatives of the company were held. During negotiations the union expressed a desire to continue working under the terms of the agreement beyond the date of expiration. The union, however, gave some indication that such continuation of work should be contingent on making any new agreement retroactive to the expiration date of the old contract.
On May 31, 1971, when an agreement had not been reached, the company carried out its earlier announced plan to lock out the employees. Two weeks later negotiations were resumed. The lockout was terminated on August 23, 1971. A new contract was signed and ratified on January 13, 1972. By its terms it was effective December 27, 1971.
References for Points in Headnotes
[1, 3, 10, 11, 13-15] 76 Am Jur 2d, Unemployment Compensation §§79, 81.
Unemployment compensation: application of labor dispute disqualification for benefits to locked out employee. 62 ALR3d 437. General principles pertaining to statutory disqualification for unemployment compensation benefits because of strike or labor dispute. 63 ALR3d 88.
[2.14] 76 Am Jur 2d, Unemployment Compensation § 78.
[3.15] 76 Am Jur 2d, Unemployment Compensation § 77.
76 Am Jur 2d, Unemployment Compensation §§ 93, 94.
16 Am Jur 2d, Constitutional Law §§ 531, 532.
13 Am Jur 2d, Statutes § 41.
16 Am Jur 2d, Constitutional Law §§ 494, 498.
16 Am Jur 2d, Constitutional Law § 172.
76 Am Jur 2d, Unemployment Compensation § 5.
76 Am Jur 2d, Unemployment Compensation § 11.
76 Am Jur 2d, Unemployment Compensation § 6.
During the lockout, the employees applied for unemployment compensation benefits. The multi-claimant benefit section of the Employment Security Commission determined that the unemployment was due to a "labor dispute in active progress” and that the employees did not qualify to receive benefits. This finding was affirmed by a hearing referee at an evidentiary hearing and by the Employment Security Appeal Board. The employees appealed to the Genesee Circuit Court, which upheld the Board’s determination that the unemployment was due to a "labor dispute in active progress”, but found that the applicable section of the Employment Security Act was unconstitutional in that it deprived the employees of equal protection under the law. The circuit court, Philip C. Elliott, J., on rehearing, reversed itself on the constitutional question and ruled that the employees were not entitled to benefits. The plaintiffs appeal alleging 1) that the finding that plaintiffs were unemployed due to a labor dispute in active progress is not supported by the evidence, 2) that the statutory provision under which the plaintiffs were disqualified from receiving benefits violates the equal protection clause of both the United States and Michigan Constitutions, and 3) that the Federal labor laws under the National Labor Relations Act preempt the rights of a state to disqualify employees affected by a labor dispute from receiving unemployment compensation benefits. Held:
1. The record indicates that the lockout was prompted almost entirely by economic factors. The Board’s determination that the unemployment of the plaintiffs was due to a "labor dispute in active progress” was not supported by competent, material and substantial evidence. The union continually expressed its willingness to work without a contract and the assertion that the new contract should be made retroactive to the expiration date of the old contract was not a demand conditioning the union’s offer to work without a contract. In reality the lockout was a disguised layoff and was not the result of a labor dispute. The plaintiffs are entitled to benefits.
2. That portion of the Employment Security Act which disqualifies from receiving benefits one who is unemployed due to a labor dispute in active progress is not violative of the equal protection clause of the Michigan Constitution or of the Federal Constitution. There is a rational basis for the classification made by the disqualification provision.
3. Federal labor law under the National Labor Relations Act has not preempted the legislative scheme found in the disqualification provision of the Employment Security Act.
Reversed in part and affirmed in part.
R. M. Maher, J., concurred. He agrees that the unemployment was not due to the labor dispute and that the employees are not disqualified from receiving unemployment benefits.
Bashara, P. J., dissents in part. He would hold that there was sufficient evidence presented to support the Appeal Board’s decision that the efficient cause of the plaintiffs’ unemployment was a labor dispute in active progress and that the plaintiffs were not qualified to receive unemployment compensation benefits. He agrees that there is no equal protection violation and that the National Labor Relations Act has not preempted the state from legislating in this area.
He would affirm the trial court.
Opinion of Brennan, J.
1. Unemployment Compensation — Employment Security Commission — Appeal Board — Findings of Fact — Labor Dispute — Benefits — Lockout.
A finding of the Employment Security Appeal Board that certain locked-out employees were unemployed as a result of a labor dispute in active progress and that, therefore, the employees were not entitled to unemployment compensation benefits was not supported by competent, material and substantial evidence where a review of the record indicates that the lockout was prompted almost entirely by economic factors and was really a disguised layoff.
Dissent by Bashara, P. J.
2. Unemployment Compensation — Labor Dispute — Words and Phrases — Statutes.
A "labor dispute” for purposes of the Employment Security Act is a controversy between an employer and its employees regarding such matters as hours, wages and conditions of employment.
3. Unemployment Compensation — Lockout — Labor Dispute — Cause-In-Fact Test.
A ”cause-in-fact” test is to be applied to determine whether claimants for unemployment compensation, who have been locked out by their employer, are unemployed due to a labor dispute in active progress or for some other reason; the application of this test is to ask whether claimants would have been unemployed despite the labor dispute.
4. Unemployment Compensation — Appeal Board — Findings of Fact — Evidentiary Support — Constitutional Law — Statutes.
Findings of the Unemployment Compensation Appeal Board must be left undisturbed as long as they are supported by competent, material and substantial evidence on the whole record (Const 1963, art 6, §28; MCL 421.38[1]; MSA 17.540[1]).
5. Constitutional Law — Statutes — Equal Protection — Rational Relation to Legitimate State Interest.
The test of the constitutionality of a statute, in face of an equal protection challenge, where the statute does not involve any discernible fundamental interest or affect with particularity any protected class, is whether the statute has a rational relation to a legitimate state interest.
6. Constitutional Law — Equal Protection — Rational Basis Test.
An equal protection inquiry under the rational basis standard employs a relatively relaxed standard reflecting an awareness that the drawing of lines that create distinctions is peculiarly a legislative task and an unavoidable one and that perfection in making the necessary classifications is neither possible nor necessary.
7. Constitutional Law — Equal Protection — State Constitution — Federal Constitution.
The equal protection clause of the Michigan Constitution affords the same rights as the equal protection clause in the Federal Constitution.
8. Constitutional Law — Statutes — Equal Protection.
The burden is on a party who challenges, on equal protection grounds, legislation dealing with property rights, not fundamental rights, to show that the classification is arbitrary and does not bear a rational relation to the object of the legislation.
9. Employment Compensation — Involuntary Unemployment — Labor Disputes — Neutrality of State — Equal Protection — Statutes.
Two purposes behind the Employment Security Act are (1) to provide interim unemployment benefits for those who suddenly find themselves unemployed through no fault of their own and (2) to insure that the state remains neutral in labor disputes; a provision in the act which excludes from the coverage of the act those who are unemployed due to a labor dispute in active progress has a rational basis and is not violative of equal protection (MCL 421.2, 421.29[8]; MSA 17.502, 17.531[8]).
10. Unemployment Compensation — Statutes — Preemption — Labor Disputes — Disqualification From Benefits — Federal Law.
Federal labor law under the National Labor Relations Act has not preempted the rights of states to disqualify employees affected by a labor dispute from receiving unemployment compensation benefits.
Opinion by Maher, J.
11. Unemployment Compensation — Employment Security Act — Disqualification From Benefits — Labor Dispute — Statutes.
A provision in the Michigan Employment Security Act which disqualiñes from beneñts those who are unemployed as a result of a labor dispute in active progress was not intended to disqualify from beneñts, regardless of circumstances, those who are unemployed as a result of unilateral action taken by their employer (MCL 421.29[8]; MSA 17.531[8]).
12. Unemployment Compensation — Michigan Employment Security Act — Intent — Construction — Statutes.
The Michigan Employment Security Act is intended to provide relief from the hardships caused by involuntary unemployment; the act, being remedial, must be construed liberally to achieve its purpose, and conversely, the disqualiñcation provisions are to be read narrowly (MCL 421.1 et seq.; MSA 17.501 et seq.).
13. Unemployment Security — Court of Appeals — Employment Security Act — Appeal and Error.
It is the responsibility of the Court of Appeals, when reviewing cases arising out of labor-management disputes and which involve the Michigan Employment Security Act, to assure that the purpose of the Employment Security Act is fulñlled without compromising the neutrality of the State of Michigan toward labor-management controversies; just as unemployment compensation beneñts may not be used to support employees during a strike, so too, denial of beneñts may not be used to strengthen the position of an employer who has locked out employees who are willing to work (MCL 421.1 et seq.; MSA 17.501 et seq.).
14. Unemployment Compensation — Employment Security Act — Employer’s Exemption — Labor Dispute.
An employer who seeks exemption from payment of unemployment beneñts under the Employment Security Act on the ground that the claimants’ unemployment was caused by a labor dispute in active progress bears the burden of proving that he is entitled to that exemption; the mere fact that negotiations for a labor contract are underway does not automatically bring a lockout within the labor dispute exception (MCL 421.29[8]; MSA 17.531[8]).
15. Unemployment Compensation — Employment Security Act — Disqualification — Labor Dispute — Lockout — Statutes.
The provision of the Employment Security Act which disqualiñes an employee from receiving unemployment compensation beneñts if the unemployment is due to "a labor dispute in active progress” includes only unemployment resulting from labor disputes in which the employee himself actively engages by refusing to work; the act was not intended to enforce a lockout by an employer by denying unemployment compensation beneñts to employees who are available for work, but who are denied work by their employer (MCL 421.29[8]; MSA 17.531[8]).
Marston, Sachs, Nunn, Kates, Kadushin & O’Hare, P.C. (by Charles Looman), and John A. Fillion and Jordan Rossen, for plaintiffs.
Dykema, Gossett, Spencer, Goodnow & Trigg (by James D. Tracy, Cameron H. Piggott and Baylee Reid), for defendant Universal Engineering.
Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, and Felix E. League, Assistant Attorney General, for defendant Michigan Employment Security Commission.
Amici Curiae:
Beaumont, Smith & Harris (by Dwight H. Vincent and J. Walker Henry), for Michigan Manufacturers Association, and others.
Before: Bashara, P.J., and V. J. Brennan and R. M. Maher, JJ.

Opinion:
V. J. Brennan, J.
The facts giving rise to the present controversy are set forth in the dissenting opinion of Judge Bashara. The question to be resolved is whether the unemployment of the plaintiffs at bar was the result of a labor dispute in active progress.
As Judge Bashara points out, the pertinent inquiry concerns the "efficient cause" of the unemployment. Accordingly, if the primary or controlling reason for the lockout is adverse economic conditions, then the resultant unemployment is not "due" to a labor dispute. As stated by Judge Bashara this is a question of fact. However, upon my review, the record sufficiently indicates that the lockout was prompted almost entirely by economic factors. Thus the Board's decision is not supported by "competent, material and substantial evidence".
The collective bargaining agreement in effect prior to the lockout provided it was to remain in force:
"until June 1, 1971 and thereafter for successive periods of sixty (60) days unless either party shall, on or before the 60th day prior to expiration, serve written notice on the parties of the desire to terminate."
On April 1, 1971, the employer served notice to terminate and proposed a meeting to "discuss the terms and conditions for the new agreement". At the first of some 20 meetings the union made clear its willingness to continue work under the terms of the prior contract. Throughout the negotiations, the employer painted a rather bleak economic picture of the industry with decreasing sales, in creasing competition from abroad and a declining profit level. This was emphasized repeatedly as was the fact that the employer had fallen to a loss position.
The union restated its willingness to work without a new contract with the "understanding" that any new agreement be retroactive. The union again made it clear that it had no intention to strike. Judge Bashara interprets the retroactivity aspect of the new agreement as a demand conditioning the union's offer to work without a contract. The record is unsupportive of this interpretation, and the union's communication is more readily interpreted as a mere optimistic assertion as to the retroactivity of any new contract. The fact that the new agreement as entered into was not retroactive is equally indicative of the nóndemand nature of the retroactivity.
In any event the factual determination as to the cause of the unemployment involves a balancing of the various factors mentioned above. The union's mere assertion of retroactivity, which occurred only once and was never mentioned by the employer as precipitating the lockout, is clearly outweighed by the fact that the employer, during an economic slowdown, terminated the contract and repeatedly emphasized the general adverse economic position of the industry. Upon due consideration of the above, I conclude that the lockout was really a disguised layoff and not the result of a labor dispute. The plaintiffs are therefore entitled to MESC benefits.
I concur in Judge Bashara's opinion relating to constitutionality and the rights of the states to enact their own unemployment compensation acts.
I will reverse.