Opinion ID: 2086024
Heading Depth: 1
Heading Rank: 2

Heading: Offset of Unemployment Compensation Benefits.

Text: Plaintiffs rely on Marshall Field & Co. v. NLRB (1943), 318 U. S. 253, 63 Sup. Ct. 585, 87 L. Ed. 744, and NLRB v. Gullett Gin Co. (1951), 340 U. S. 361, 71 Sup. Ct. 337, 95 L. Ed. 337, in support of their motion for review, in which they seek reversal of that part of the interlocutory judgment which permits the offset of any unemployment compensation benefits received by plaintiffs against their damages. These two cases hold that it was not error for the national labor relations board to refuse to allow employers, who had violated the National Labor Relations Act, to deduct unemployment compensation benefits received by their employees during the period for which the employers were required to pay back pay to such employees. It is significant that neither the Marshall Field nor Gullett Cases hold that the national labor relations board has no power to make deductions from such back-pay awards to cover unemployment compensation benefits. This distinction was pointed out in United Protective Workers v. Ford Motor Co. (7th Cir. 1955), 223 Fed. (2d) 49, 53, 48 A. L. R. (2d) 1285, in which the court stated: In Marshall Field & Co. v. N. L. R. B., 318 U. S. 253, 63 S. Ct. 849, 87 L. Ed. 1165, affirming N. L. R. B. v. Marshall Field & Co., 7 Cir., 129 F. 2d 169, 144 A. L. R. 394, the Supreme Court, held that the words `net earnings,' as used by the Board in describing what should be deducted from the amount of wages lost did not include state unemployment compensation payments. The Court expressly refrained from deciding whether or not the Board had the power to deduct only `wages,' because that question had not been raised before the Board. See 29 U. S. C. A. § 160 (e). But later in N. L. R. B. v. Gullett Gin Co., 340 U. S. 361, 71 S. Ct. 337, 95 L. Ed. 337, the Court held that it was within the discretion of the Board to award back pay without deducting unemployment compensation payments received during the period for which the back pay was due. However, there was no suggestion that the Board could not deduct such compensation payments in any case in which it thought that would best effectuate the purposes of the Act. The cases speak only of the National Labor Relations Board's power to award back pay under the Act without deductions of any amounts other than for wages or earnings received during the period. They are not decisive as to the propriety of deductions which should be made in determining the amount of damages in a common law action for damages for the breach of an employment contract. In United Protective Workers v. Ford Motor Co., supra , the employer breached a collective-bargaining contract by compulsory retirement of an employee at age sixty-five, as a result of which the employee received social-security and annuity payments he otherwise would not have received. The United States district court reduced the back-pay damages awarded to the employee by the amount of these social-security and annuity payments and the court of appeals affirmed. The latter court stressed the distinction between damages in tort and contract, noting that damages in tort have a flavor of punishing the tort-feasor. Therefore, in tort it is proper not to give a deduction for collateral payments received from other sources than the tort-feasor. [2] The fundamental basis for an award of damages for breach of contract is just compensation for losses necessarily flowing from the breach. Restatement, 1 Contracts, pp. 503 et seq., sec. 329; 5 Williston, Contracts (rev. ed.), p. 3762, sec. 1338. It is a corollary of this rule that a party whose contract has been breached is not entitled to be placed in a better position because of the breach than he would have been had the contract been performed. Blair v. United States (8th Cir. 1945), 150 Fed. (2d) 676, 678; United Protective Workers v. Ford Motor Co., supra, at page 53. If the instant plaintiffs were to recover as damages full back pay with interest for the period of employment lost by Weber's breach of contract, without deduction of the unemployment compensation benefits that they received for the same period, they would be placed in a better position than if the contract had not been breached. Under Wisconsin's Unemployment Compensation Act the benefits paid employees in plaintiffs' position are chargeable directly to the employer's account in the unemployment compensation fund administered by the industrial commission. Sec. 108.03, Stats. After the employer's account in the fund has reached a favorable reserve percentage, the employer's rate of contribution is reduced, and after the reserve percentage reaches 10 percent, the is relieved of further contributions until this reserve percentage is reduced. Sec. 108.18. We take judicial notice of the records of the industrial commission which show that most employers in Wisconsin have built up their accounts to the point where they have a favorable reserve percentage that has either freed them from further contributions for the time being, or has materially reduced their present contribution rate. The effect of payment of extensive benefits is to reduce the employer's reserve percentage and requires increased contributions until a favorable reserve percentage has again been re-established. We mention these facts to demonstrate that the payment of the extensive unemployment benefits to plaintiffs did embody an element of cost to Weber, which is a further reason for sustaining the circuit court's determination in allowing an offset of such benefits. Plaintiffs cite Bang v. International Sisal Co. (1942), 212 Minn. 135, 4 N. W. (2d) 113, and Billetter v. Posell (1949), 94 Cal. App. (2d) 858, 211 Pac. (2d) 621, which disallowed the offsetting of unemployment compensation against back-up damages awarded for breach of employment contracts. Neither case makes the careful analysis of the problem that was made by the Seventh circuit court of appeals in United Protective Workers v. Ford Motor Co., supra . The reason advanced in Bang v. International Sisal Co., supra , for disallowing the offset was that unemployment compensation benefits were intended to alleviate the distress of unemployment, not to diminish the amount which an employer must pay as damages in making whole a wrongfully discharged employe. We have no disagreement with this statement of the underlying objective of unemployment compensation benefits. However, this in itself hardly provides a justifiable reason for disallowing the offset. Billetter v. Posell, supra , merely advances the identical reason for allowing the offset that was stated by the Minnesota court in Bang v. International Sisal Co., supra , and cites the latter case as authority therefor. It is our considered judgment that the circuit court properly adjudged that the unemployment compensation benefits received by plaintiffs be offset against plaintiffs' damages. By the Court. That part of the interlocutory judgment from which appellant appealed is reversed; that part of said judgment as to which plaintiff-respondent moved for review is affirmed; and the cause is remanded for further proceeding not inconsistent with this opinion.