Multiple Stimson Employees v. Stimson Lumber Co.

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No. 00-391

IN THE SUPREME COURT OF THE STATE OF MONTANA

2001 MT 56

MULTIPLE STIMSON EMPLOYEES,

Petitioner and Respondent,

v.

STIMSON LUMBER CO., BOARD

OF LABOR APPEALS, and MONTANA

DEPARTMENT OF LABOR AND INDUSTRY

Respondents and Appellants.

APPEAL FROM: District Court of the Fourth Judicial District,

In and for the County of Missoula,

The Honorable John W. Larson, Judge presiding.

COUNSEL OF RECORD:

For Appellants:

Robert C. Lukes, Garlington, Lohn & Robinson, Missoula, Montana

Kevin Braud, Special Assistant Attorney General, Helena, Montana

For Respondent:

Karl J. Englund, Attorney at Law, Missoula, Montana

Submitted on Briefs: November 30, 2000
Decided: April 5, 2001

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Filed:

__________________________________________

Clerk

Justice Terry N. Trieweiler delivered the Opinion of the Court.

¶1 Three hundred seventy nine employees of the Stimson Lumber Company filed for
unemployment insurance benefits following a week long shutdown of Stimson lumber
mills. The Montana Department of Labor and Industry denied their claims. The employees
appealed from the Department's decision. An appeals referee determined that the
employees were ineligible for unemployment insurance benefits. The employees then
appealed to the Board of Labor Appeals. The Board upheld the decision of the referee.
The employees filed a petition for judicial review in the District Court for the Fourth
Judicial District in Missoula County. The District Court issued an order which reversed
the Department's and Board's determination that the employees were ineligible for
unemployment benefits. Stimson, the Department, and the Board now appeal from the
order of the District Court. We affirm the order of the District Court.

¶2 The parties have raised several issues on appeal. We consolidate them for discussion as
follows:

1. Did the District Court err when it held that the Department incorrectly concluded
that as a matter of law the wages previously paid to the employees were properly
imputed to the shutdown period?

2. Did the District Court err when it failed to address the issue of whether the
employees were "voluntarily unemployed?"

3. Did the District Court err when it concluded that this action is not preempted by §
301 of the Labor Management Relations Act?

FACTUAL BACKGROUND

¶3 Stimson Lumber Company (Stimson) operates lumber mills in Libby and Bonner,

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Montana. The three hundred seventy nine employees who are parties to this suit are
represented by two local unions affiliated with the Lumber, Production & Industrial
Workers Union. Stimson and the local unions are parties to two collective bargaining
agreements which govern the terms and conditions of employment at Stimson. The
collective bargaining agreements for each mill contain an identical Article 9, which
governs the vacation benefits given to each employee.

¶4 Pursuant to Article 9 of the collective bargaining agreement, an employee's eligibility
for vacation pay and time off is a function of that employee's longevity with the company
and the number of hours worked during the "uniform vacation base year" from November
1 through the following October 31. Employees who have worked for a specified number
of years and work a specified number of hours during the vacation base year are entitled to
time off in the following year in addition to a specified amount of vacation pay.

¶5 Vacation pay is computed by multiplying the earned hours of vacation pay by the
employee's straight hourly wage as of the last payroll period preceding the end of the
vacation base year. Most of the employees at the Libby and Bonner mills opt to receive
their vacation pay in a lump sum on the first payday following November 1. Those who do
not elect to receive their vacation pay in November are able to receive it in increments at a
time "associated with the scheduling of their vacation." Employees are not required to take
time off as a condition to receipt of their vacation pay. If work is available, an employee
may choose to work rather than take time off.

¶6 The collective bargaining agreements gave Stimson the power to unilaterally schedule
time off by shutting down the mill. In October 1997, Stimson notified the Bonner and
Libby employees that it would shut down the mills for the week ending July 4, 1998. The
shutdown affected all but approximately thirty of the over five hundred Bonner employees
and all but about twenty four of the approximately three hundred thirty employees at
Libby.

¶7 When the employees applied for unemployment benefits, they were instructed by the
Montana Department of Labor and Industry (Department) to report their vacation pay as
earnings for the week of the shutdown. Most of the employees had received their vacation
pay in November 1997 and others had received it at other times prior to the shutdown. The
employees who then reported income for the week of the shutdown were denied eligibility
by the Department because they were not "totally unemployed" during the shutdown
period.

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¶8 The employees appealed to a referee who heard the appeal in October 1998. In
December of 1998 the appeals referee upheld the Department's determination. The
employees then filed an appeal with the Board of Labor Appeals (Board). Following a
hearing, the Board upheld the decision of the appeals referee.

¶9 The employees filed a petition for judicial review in the District Court for the Fourth
Judicial District in Missoula County. After receiving briefs and hearing argument, the
District Court issued an order on March 31, 2000. The District Court's order granted the
petition for judicial review, reversed the Department's and Board's determination that the
employees were ineligible for unemployment benefits, and remanded to the appropriate
administrative agency for decisions on each individual claim. This appeal by Stimson, the
Department, and the Board followed.

STANDARD OF REVIEW

¶10 The applicable standard of review is stated in § 39-51-2410(5), MCA. If the Board's
findings of fact are supported by the evidence, they are to be considered conclusive by this
Court. Zimmer-Jackson v. Dep't of Labor and Indus. (1988), 231 Mont. 357, 360, 752 P.2d
1095, 1097. The standard of review for questions of law is whether the Board's
conclusions of law were correct. Phoenix Physical Therapy v. Unemployment Ins. Div.
(1997), 284 Mont. 95, 99, 943 P.2d 523, 526.

DISCUSSION

ISSUE 1

¶11 Did the District Court err when it held that the Department incorrectly concluded that
as a matter of law the wages previously paid to the employees were properly imputed to
the shutdown period?

¶12 The primary issue in this case is whether the employees are eligible for unemployment
benefits for the week of the shutdown. Accordingly, both parties focus their argument on
the relationship between "vacation pay" and "time off," concepts which are similarly
defined in each collective bargaining agreement. Section 39-51-2104, MCA requires that
an individual must be "totally unemployed" to receive unemployment benefits. Section 39-
51-2101(1), MCA establishes two requirements for "total unemployment" - the individual
must perform no work and must earn no wages during the applicable period. Within this

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statutory framework, the critical issue on appeal is whether the employees earned wages
during the shutdown period. Should we agree with the Department's conclusion that the
employees received vacation pay for the time they were away from work, then those
employees earned wages during the shutdown and cannot be considered "totally
unemployed" within the meaning of Montana's unemployment benefits scheme.

¶13 Stimson, the Department, and the Board argue that the concepts of vacation pay and
time off are inextricably related. According to the Appellants, the vacation pay received
by the employees prior to the shutdown was properly attributed to the shutdown period.
Section 39-51-201(20)(a)(i), MCA defines wages to include payment for vacations. The
Appellants contend that because the employees earned wages during the shutdown, they
are ineligible for unemployment benefits pursuant to the requirements of § 39-51-2101(1),
MCA. The Appellants further urge this Court to reject the employees' contention that
vacation pay and time off are unrelated as contrary to public policy, since the employees
have attempted to turn the collective bargaining agreement into an opportunity to receive
double pay while on vacation.

¶14 The employees respond that the Department erred when it concluded as a matter of
law that the vacation pay received prior to the shutdown had to be imputed to the
shutdown period. The employees argue that the collective bargaining agreement does not
require that the employees take time off in order to receive vacation pay. Rather, vacation
pay is an entitlement once an employee works the specified number of hours during the
vacation base year. The employees underscore the distinct separation between the benefits
of vacation pay and time off with the following points: 1) Employees need not take time
off to receive vacation pay; 2) Employees who take no time off still receive vacation pay;
3) Employees who take no time off receive vacation pay and pay for working; 4) Vacation
pay is an entitlement whereas time away from work requires prior approval of the
employer; and 5) Vacation pay is paid at a lower hourly rate than employees earn on the
date of their time off.

¶15 We agree with the employees' position that the receipt of vacation pay is not
contingent on taking time off from work. Pursuant to the collective bargaining agreements,
vacation pay is attributed to hours worked during the vacation base year, not for the
vacation time actually spent away from work. Therefore, "vacation pay" is payment in
exchange for the employees' work in the vacation base year - even though time off may be
scheduled unilaterally by the employer when the mill is closed, the vacation pay received
is not compensation for time off during shutdown. The employees did not earn wages

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during the shutdown which would prevent them from qualifying for unemployment
benefits.

¶16 Stimson and the Department next contend that the former version of Rule 24.11.442(5)
(b), ARM, which has been amended since this case began, is dispositive on the issue of
whether vacation pay must be attributed to the time of the shutdown. At the time of this
dispute, the relevant portion of the rule provided: "Payments made for vacation taken by
the claimant are attributable to the period covered by the payment." Rule 24.11.442(5)(b),
ARM. According to the Appellants, this administrative rule attributes pay received by the
employees to the shutdown period. The Appellants further argue that the District Court
erred when it held that the rule was neither authorized nor implemented by the statutes at
issue - § 39-51-2101, MCA (defining total unemployment) and § 39-51-2104, MCA
(defining benefit eligibility).

¶17 However, having already concluded that attributing vacation pay to the shutdown
period constituted legal error in this case, we need not determine whether the rule was
properly implemented. For the reasons discussed above, the "period covered by the
payment" is not the shutdown period but the vacation base year. As a result, Rule
24.11.442(5)(b), ARM is inapplicable.

¶18 Appellants also make much of the fact that the employees in this action not only
received vacation pay but actually took time off from work. The Appellants suggest that
because the employees did not actually work during the shutdown yet still received
vacation pay, the vacation pay must cover the shutdown period. This observation,
however, does not affect our conclusion that the collective bargaining agreements clearly
correlate vacation pay to the hours worked in the vacation base year. Moreover, the vast
majority of the employees in this case received their vacation pay at the end of the
vacation base year in November 1997, not in those paychecks "associated with the
scheduling of their vacation." Consequently, the Department's conclusion that as a matter
of law the vacation pay received prior to the shutdown should be imputed to the shutdown
period was incorrect. Therefore, we hold that the District Court did not err when it
concluded that the conclusion of the Department was incorrect.

ISSUE 2

¶19 Did the District Court err when it failed to address the issue of whether the employees
were "voluntarily unemployed?"

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¶20 Stimson argues that the District Court erred when it failed to address the issue of
whether the employees, as parties to the collective bargaining agreements, agreed to the
mill shutdowns. Stimson contends that because the employees agreed to the shutdown and
because § 39-51-2101, MCA requires that the employees be "involuntarily unemployed,"
the employees in this case do not qualify for unemployment benefits. Rather, says
Stimson, the employees consented to the shutdowns in the collective bargaining
agreements and are thereby precluded from receiving unemployment benefits for the
shutdown period. Stimson relies on case law from other jurisdictions as authority for this
proposition.

¶21 The employees argue that the issue was not raised in the prior proceedings. In the
event that the issue was raised, the employees argue that their right to unemployment
benefits cannot be waived by a collective bargaining agreement. They note that § 39-51-
3102, MCA provides that an agreement to waive rights to unemployment benefits is void.
Furthermore, § 39-51-3103, MCA provides that no employer shall directly or indirectly
require or accept any waiver of any right secured by the unemployment benefit laws.

¶22 We agree with the employees' position. Admittedly, Stimson negotiated for the right
to shut down its mills. However, the issue here is whether the collective bargaining
agreement can waive rights insured by state law. Despite Stimson's contention that the
collective bargaining agreements do not purport to waive unemployment benefits, the
interpretation of the provisions for vacation pay and time off put forward by the
Appellants would do exactly that. The plain language of §§ 39-51-3102 and -3103, MCA
prevents Stimson from attributing vacation pay to the shutdown period and thereby
precluding its employees from collecting benefits provided for by state law on the grounds
that those employees voluntarily agreed to the shutdowns in the course of negotiating the
collective bargaining agreements. To the extent other jurisdictions have different
unemployment schemes, judicial interpretation of individual collective bargaining
agreements by courts in those jurisdictions is unpersuasive. In Montana, the application of
§§ 39-51-3102 and -3103, MCA to the facts before us leads us to conclude that the District
Court did not err when it failed to address the issue of whether the employees were
"voluntarily unemployed."

ISSUE 3

¶23 Did the District Court err when it concluded that this action is not preempted by § 301
of the Labor Management Relations Act?

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¶24 Stimson also argues that this case is preempted by § 301 of the Labor Management
Relations Act, codified at 29 U.S.C. § 185. Stimson contends that this action requires
interpretation of the collective bargaining agreement and the "interplay between several
contract provisions," and that, therefore, Section 301 preempts such an action because
interpretation of the terms of the contract could have one meaning for state law purposes
and another for federal law - "exactly the disparity that Section 301 was designed to
preclude." Stimson quotes language from the United State Supreme Court to support its
argument that § 301 preemption applies to "questions relating to what the parties to a labor
agreement agreed, and what legal consequences were intended to flow from breaches of
that agreement..." Allis-Chalmers Corp. v. Lueck (1985), 471 U.S. 202, 211, 105 S.Ct.
1904, 85 L.Ed.2d 206.

¶25 While we agree with this characterization of § 301 preemption, we do not agree that
preemption applies in this case. The Court in Allis-Chalmers additionally discusses the
limits of § 301 preemption:

Of course, not every dispute concerning employment, or tangentially involving a
provision of a collective bargaining agreement, is preempted by § 301 or other
provisions of the federal labor law ... In extending the preemptive effect of § 301
beyond suits for breach of contract, it would be inconsistent with congressional
intent under that section to preempt state rules that proscribe conduct, or establish
rights and obligations, independent of a labor contract.

Allis-Chalmers, 471 U.S. at 211-12.

¶26 The cases cited by Stimson, Anderson v. TW Corp. (1987), 228 Mont. 1, 741 P.2d 397
and Foster v. Albertsons, Inc. (1992), 254 Mont. 117, 835 P.2d 720, were actions by the
employee against the employer for alleged breach of the employment contract and implied
covenant of good faith and fair dealing. In contrast, the present action concerns eligibility
for unemployment benefits governed by state unemployment law. There is no question
about what the parties agreed to or what legal consequences were intended to flow from a
breach of the collective bargaining agreements. As a result, the present matter implicates
state rules which establish rights and obligations independent of the labor contract.
Therefore, it presents a question of state law and is not subject to § 301 preemption
analysis. The inclusion of those state agencies charged with determining unemployment
eligibility as parties to this case supports this conclusion. Accordingly, we hold that this
action is not preempted by § 301 of the Labor Management Relations Act. We affirm the

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order of the District Court and remand to the appropriate administrative agency for
decisions on each individual claim.

/S/ TERRY N. TRIEWEILER

We Concur:

/S/ KARLA M. GRAY

/S/ JAMES C. NELSON

/S/ JIM REGNIER

/S/ W. WILLIAM LEAPHART

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