Court Opinion

ID: 9536710
Source: CourtListenerOpinion
Date Created: 2023-08-07 07:05:36.974512+00
Date Added: 2024-06-11T14:55:04.719734
License: Public Domain

CARTER, J.
I dissent.
The majority opinion fails to give the liberal construction required of unemployment insurance laws (Garcia v. Industrial Acc. Com., 41 Cal.2d 689, 693 [263 P.2d 8]), ignores the nature of dismissal pay and is contrary to the trend of authority elsewhere. It seems clear to me that where, as here, compensation for services performed is deferred until after an employee is discharged, and then paid to him, it does not constitute payment for such services during any period of time after discharge with respect to which wages are payable to him and hence he is entitled to unemployment compensation under Unemployment Insurance Code, section 1252, from the date of his discharge.
We must examine the collective bargaining agreement under which petitioner was entitled to dismissal pay, vacation pay and two weeks’ notice of discharge or pay, because the nature *614of those benefits is a factor in ascertaining the meaning of section 1252, infra, of the Unemployment Insurance Code, which defines “unemployment.” That agreement provides that employees may be discharged for cause or economy. When the employer contemplates a discharge the “employee shall be given two (2) weeks’ notice (or two (2) weeks’ pay in lieu thereof). ...”
“Section?. Dismissal Pay. (a) When an employee other than those exempted from the terms of this contract as herein provided is discharged, he shall receive a cash dismissal payment in a lump sum in accordance with the following schedule for years of continuous arid uninterrupted employment: . . ..
“(b) Prom the dismissal pay the publisher may deduct any levy or tax to which the employee is subject under local, state or federal legislation.
“ (c) Dismissal pay shall be computed at the highest weekly salary (exclusive of bonuses and payments for special work) for the fifty-two (52) weeks previous to discharge. . . . Vacations, (a) Employees shall receive one week’s vacation with pay after six months' continuous employment; two weeks’ vacation with pay after one year’s continuous employment. Employees who have been continuously employed for three years as of October 15th in the year which his vacation is scheduled shall receive three weeks’ vacation with pay.” (Emphasis added.) Thus it is seen the dismissal pay is payable in a lump sum and is computed on the length of prior service and the amount of pay during that service. This is, in effect, a payment of deferred wages or wages held back by the employer. It is not pay for the future after the employee is discharged. It is somewhat analogous to pensions which are considered as deferred compensation for services already rendered. (Wallace v. City of Fresno, 42 Cal.2d 180, 184 [265 P.2d 884].) No doubt, in the negotiations leading to the agreement in fixing wages, consideration was given to the dismissal pay.
In the above light we look at section 1252 which provides: “An individual is ‘unemployed’ in any week during which he performs no services and with respect to which no wages are payable to him. ...” (Unempl. Ins. Code, § 1252.) The employee—petitioner—performed no services and no wages were paid to him with respect to any week during which he performed no services because the dismissal pay was not for time after the discharge, it being deferred wages, and was not allocated to any week after discharge because *615it was payable in a lump sum. It may reasonably be said that the week with respect to which dismissal pay is payable, means weeks prior to the discharge during which the employee earned the benefits of the dismissal pay, and hence that pay is not for time after discharge; that the dismissal pay is like a compulsory savings plan and the employee who obtains the benefits of such a plan is no less eligible for unemployment compensation than a worker who can draw on his private savings. As I see the problem, the foregoing interpretation of the unemployment insurance law is soundly reasonable. That being the case, the liberal construction of those laws in favor of the employee, which is required (Garcia v. Industrial Acc. Com., supra, 41 Cal.2d 689, 693), compels the adoption of such construction of them. The majority seems to feel that if unemployment compensation is allowed in this case there will be a double payment for the same thing— involuntary idleness—one from the state and the other from the employer. That is not true. Assuming that the sums payable under the agreement are for unemployment, still it is reasonable to say that it is in addition to unemployment compensation inasmuch as the latter is no more than a bare subsistence. Moreover, the argument of the majority is based on the false premise that unemployment compensation is payable only where the employee is needy when obviously his financial standing has nothing to do with it. He is entitled to the compensation no matter how much he is worth and, as seen, the sum payable under the agreement is in effect compulsory savings from his past wages where the employer acts as banker. He is not, therefore, being paid double, for the payment under the agreement is from his own money. Certainly if the employer had deposited a portion of the employee’s wages in a trust fund to be paid to him only in the event of unemployment, it could not be claimed that he was not entitled to unemployment compensation. The provident as well as the improvident employee is entitled to unemployment compensation under the law. Why should he be any the less so when he is provident because an agreement between his union and his employer makes him so with the cooperation of his employer?
The construction of the statute in accord with the above discussion has been followed in other states. In Ackerson v. Western Union Tel. Co., 234 Minn. 271 [48 N.W.2d 338], it was held that employees discharged because of mechanization and paid “severance” pay based on the period of prior *616service under a collective bargaining agreement, the same as the dismissal pay here, were entitled to unemployment compensation under an unemployment compensation statute the same as ours. The court said: “Section 268.04, subd. 23, provides that an individual shall be deemed unemployed in any week in which he performs no service and with respect to which no wages are payable to him. It is clear that from the use of the conjunctive ‘and,’ before an individual may be deemed to be unemployed, two things must exist: (1) He must perform no service during the week; and (2) he must be paid no wages for the week. In the case now before us, the first of those requirements clearly exists. Upon election to receive severance pay, the employment was completely severed. No claim is made that other employment was obtained. The employe was registered for work. So far as her former employer was concerned, she could do as she pleased from the date of separation. Relator claims, however, that the second prerequisite to ‘unemployment’ is lacking, in that severance pay constitutes wages for the number of weeks following the employe’s separation which have been used to compute the amount thereof. . . . Suffice to say that it is the declared public policy of our state, as shown by the legislative declaration of public policy in the act, § 268.03, that benefits are intended to extend to those who are unemployed through no fault of their own. ... In the case now before us, relator was not only legally obligated under its contract to make the severance payments upon the election of the discharged employes to receive them, but the payments were not designated as wages for a specific future period of time. . . . Severance pay was in no way related to or dependent upon the employe’s employment status after separation. She received the payment even though she might secure a job the next day. It is true that the amount was measured by the length of service, but there may have been many reasons for adopting the length of service as the yardstick in determining the amount of severance pay due a discharged employe. ... It is undoubtedly true that one of the objectives of dismissal or severance pay, such as we have to deal with here, is to ease the employe’s financial burden while looking for a new job. However, there are other objectives which we must also keep in mind in considering the nature of such payment. Partial compensation for loss of seniority rights; loss of possible pension rights; compensation for retraining or acquiring new skills; and many others *617could be mentioned. Relator undoubtedly considered the desirability of retaining its trained personnel until the job of mechanization could be completed. It is reasonable to assume that in arriving at a contract by collective bargaining, under which relator became obligated to make such payments, it did so with full knowledge of the advantages to be gained by it in making such payments, without any strings tied to it, in return for the continued service of its employees until the time arrived when such services could be dispensed with.
“Relator argues that to allow claimants to recover benefits under these circumstances is to penalize relator by imposing a double liability under the contract, namely, payment of severance pay, and the adverse effect it will have upon relator’s contribution rate to the unemployment compensation fund. That may very well be true, but it strikes us that it is an argument which more properly should be addressed to the legislature than to the courts. Likewise, relator argues that payment of benefits gives the employe double benefits or double pay in allowing her to receive severance pay and at the same time collect unemployment benefits. That may or may not be true, depending upon the construction placed upon the nature of the severance pay. In any event, it is true, irrespective of the employment status of the employe after separation. If she procured a new position the day after separation, she would retain her severance pay and the wages so earned, and no one would contend that she should not he allowed to retain both. Unemployment compensation is merely intended to take the place of wages which could have been earned had she been employed.” (Ackerson v. Western Union Tel. Co., 234 Minn. 271 [48 N.W.2d 338, 340-342].)
To the same effect are Western Union Tel. Co. v. Texas Emp. Com., (Tex.Civ.App.) 243 S.W.2d 217; Dubois v. Maine Emp. Security Com., — Me. — [114 A.2d 359]; see Keystone Mining Co. v. Unemployment Comp. Board of Review, 167 Pa.Super. 256 [75 A.2d 3]. It has been well said in approving the Ackerson ease, supra-. “First, need or actual indigency is not a requirement for eligibility for compensation. Receipt of income from other sources does not disqualify a claimant, for the purpose of these laws is to supplement a person’s resources during periods of unemployment. Second, the claimant concededly would have received the severance payment even if she had obtained a new job immediately upon dismissal. Third, the contract specifi*618eally provided that acceptance of separation pay would terminate the employee’s service with the company—rendering further untenable the company’s position that the severance pay was in fact wages paid for the weeks subsequent to dismissal. Fourth, the reasons for unions seeking the inclusion of a severance-payment clause in working agreements extend beyond a mere attempt to ease the employee’s immediate financial burden while looking for a new job. Severance pay is also intended as partial compensation for loss of seniority rights, loss of possible pension rights, and compensation for retraining or acquiring new skills, the latter being especially applicable in the present case. From the employer’s viewpoint, severance pay clauses are included as a means of maintaining good will, both as to workers and to the community. These factors strongly suggest that the parties to the contract intended the severance payment clause to have no relation to the worker’s employment status after dismissal, and, more significantly, that the court reached the proper result in concluding that, in view of the terms of the contract, there should be no relation between eligibility for unemployment compensation and receipt of severance pay.” (100 U. Pa.L.Rev. 144, 145; see also 64 Harv.L.Rev. 681.)
The question here involved has broad implications in view of the so-called guaranteed annual wage arrangements which have been made notably in the automobile industry. In the Ford contract for illustration, there is a provision for payment to the employee when involuntarily laid off and such payment is defined as a supplementation which means the right to receive both payment from the employer and unemployment compensation from the state without reduction. Under unemployment insurance laws similar to ours, the state officials have said that such supplementation is proper in Connecticut, Delaware, Massachusetts, Michigan, New Jersey and New York. (2 C.C.H. Unemp. Ins. Rep. (Conn.) para. 8380; id. (Del.) para. 8088; 4 id. (Mass.), para. 8188; id. (Mich.) para. 8522; 5 id. (N.J.) para. 8271; 36 Lab. Rel. Rep. 715; 69 Harv.L.Rev. 362.) The attorney general of this state ruled on February 10,1956, that the employer’s payment under the Ford plan does not render the employee ineligible for unemployment compensation under our law. (27 Ops. Cal. Atty. Gen. 71.) The common theory in those determinations is that the payments by the employer are not wages paid with respect to the week for which unemployment compensation is sought. These official rulings should not be lightly brushed *619aside to the end that the guaranteed annual wage contracts, insofar as they purport to confer a benefit upon the employee, will be meaningless.
I would reverse the judgment.
Gibson, C. J., and Traynor, J., concurred.
Appellant’s petition for a rehearing was denied June 27, 1956. Gibson, C. J., Carter, J., and Traynor, J., were of the opinion that the petition should be granted.