Opinion ID: 2012156
Heading Depth: 1
Heading Rank: 1

Heading: employer may designate period during layoff for allocation of vacation pay

Text: That the employer may lawfully designate a period during a layoff for the allocation of vacation pay has been settled in this state. See Malone v Employment Security Commission, 352 Mich 472; 90 NW2d 468 (1958). See also Employment Security Commission v Vulcan Forging Co, 375 Mich 374; 134 NW2d 749 (1965). The employer in Malone designated a two-week period during a layoff and paid the employees various amounts of vacation pay in accordance with the union contract. This Court endorsed as correct the circuit court's holding that such payments constituted remuneration under § 48. [6] It is apparent that this was the very purpose of this part of § 48; i.e., to permit the employer to protect his employment experience rating account by substituting vacation pay for unemployment compensation payment. III  LTV HAS AUTHORITY TO DESIGNATE Having determined that an employer may designate a period during a layoff for the allocation of vacation pay, we must next determine whether LTV has the authority to make a designation of the period for allocation of such vacation pay. At this point it is necessary to recall that defendant made allocations from two sources  the unused earned and vested 1969 vacation time and the accelerated payment of pro-rata vacation allowance at the time of termination. Here we are concerned only with the former; the pro-rata allowances will be discussed in § V of this opinion. Section 48 provides that the period to which disqualifying payments are to be allocated may be: designated by the contract or agreement providing for the payment, or if there is no contractual specification of the period to which such payments shall be allocated, then for the period designated by the employing unit or former employing unit. Under § 48, then, the designation may be made in the employment contract or agreement but if it is not, the employer has the authority to make such a designation. The LTV-UAW agreement contains no contractual designation as to the 1969 vacation pay. Likewise it contains nothing which prohibits the employer from making such a designation. [7] Consequently, the employer, under § 48, has the authority to make such a designation. [8] IV  FOR THE PERIOD DESIGNATED We have established that LTV had the authority to designate a period for allocation of the 1969 vacation pay. The question remains whether LTV made an effective designation. In this case LTV did not notify its employees when it laid them off that it was designating all or a part of their layoff period for allocation of amounts paid    for a vacation or holiday. In fact it is not clear LTV directly notified its employees of the designation at any time. What appears to have happened is that some time after the layoff began when employees sought unemployment compensation, the MESC before responding to them inquired of LTV whether there was reason why compensation should not be paid. In reply LTV advised that they were allocating amounts of vacation pay for a designated period within the layoff. In turn MESC advised employees whether and when they might be entitled to unemployment compensation because of the amounts so allocated for the period designated. What is at issue is not how the amounts paid are allocated, but how the period is designated. The pertinent language of § 48 is: All amounts paid    for a vacation or a holiday    shall be deemed remuneration    for the period designated by contract    or if there is no contractual specification of the period to which such payments shall be allocated, then for the period designated by the employing unit or former employing unit   . (Emphasis added.) In determining whether LTV made an effective designation we are faced with the problem of ascertaining what the legislators intended when they provided that the employer may designate a period. Interpretation of the term designated in § 48 is a matter of first impression in this Court. The record before us is not as comprehensive as we would like in order to make a just legal and administratively viable decision. We therefore remand this particular issue to the appeal board to establish such a record. Upon the establishment of such record we will set the case down for argument on this specific issue and invite the parties to submit briefs. In attempting to arrive at a proper and practical construction of the statutory requirement of designation, it is important to conceptualize the statutory consequences of a given construction so that it will be in harmony with the whole purpose of the legislation. Obviously any interpretation will have specific consequences on both employee and employer. For example, if it is construed that the Legislature did not intend as an element of the term designated that the laid-off employee be notified in advance or contemporaneously with the commencement of the designated period that vacation pay is to be allocated so that he is not unemployed the employee may suffer as a result. An employee who is not unemployed is not required to report to the MESC. If an employee is not notified prior to the commencement of the designated period that he will be charged with receiving disqualifying vacation pay, he may assume that he is unemployed and may go through all the formalities of qualifying for unemployment compensation such as registering at the employment security office with the ever-present problem of long lines and endless delays. He must be seeking and available for suitable work. In short, by and large, he would be doing exactly the opposite of what he would be doing if he were on vacation. The effect on the employee when he is not notified prior to commencement of the designated period is dramatically illustrated by claimant Chennery's statement: If this decision [of the MESC denying benefits] is correct and I must take two weeks vacation then why do I have to report to the unemployment office during those two weeks? This is unfair   . On the other hand, if the term designated is construed as imposing stringent individual notice requirements upon the employer, situations might arise, such as when a part shortage necessitates immediate plant shutdown, where it is impossible for the employer to properly notify all of his employees. The employer would then be prevented from allocating the vacation pay and as a result his employment experience rating account might be adversely affected. It would be inappropriate for us to address the question (of what constitutes effective notice) without first giving the parties an opportunity to discuss the issues involved. A number of questions come to mind when examining the phrase period designated by the employing unit. In submitting briefs on this question the parties might consider, inter alia, the following: 1. To have effectively designated a period for allocation of vacation pay is it enough for the employer to make some in-house bookkeeping entry with notification to the MESC after the employee files a claim or must the employer notify the employee of the designation? 2. If notice to the employee is required must it come prior to the commencement of the designated period or may the employer ex post facto make a designation which nunc pro tunc changes the legal condition of an unnotified employee from unemployed, as he was and understood he was, with all the personal and legal requirements that involves, to being remunerated because paid    for a vacation or a holiday and not unemployed and not required to stand in line to register at the Employment Security Office, etc.? 3. If the employee must receive prior notification, what form must that notice take? Must there be oral or written individual notice to each employee or is a general notice posted at various locations in the plant sufficient? Must the notice specify the precise dates of the period for which each individual's vacation pay will be allocated or is it enough simply to provide that any vacation credit due will be applied at the time of layoff? 4. What has been the practice in this state with regard to notifying an employee that a portion of his vacation pay has been allocated to the layoff period? Do employers usually notify the about-to-be laid off workers or is it the custom that the MESC, upon being informed by the employer, will notify the employee that he is ineligible for a specified period? It is hoped that by building a more complete record and by responding to the questions set forth above the parties will assist this Court in reaching the correct result on this difficult, yet important issue.