Beverly Enterprises, Inc. v. Unemployment Compensation Bd. of Review

• Decision Date: 24 November 1997
• Citation: 702 A.2d 1148
• Parties: BEVERLY ENTERPRISES, INC., Petitioner, v. UNEMPLOYMENT COMPENSATION BOARD OF REVIEW, Respondent.
• Court: Pennsylvania Commonwealth Court

Page 1148

702 A.2d 1148

BEVERLY ENTERPRISES, INC., Petitioner, v. UNEMPLOYMENT COMPENSATION BOARD OF REVIEW, Respondent.

Commonwealth Court of Pennsylvania.

Argued Sept. 12, 1997.

Decided Nov. 24, 1997.

Bruce D. Bagley, Harrisburg, for petitioner.

Maribeth Wilt-Seibert, Asst. Counsel, Harrisburg, for respondent.

Before SMITH and FRIEDMAN, JJ., and MIRARCHI, Jr., Senior Judge.

SMITH, Judge.

Beverly Enterprises, Inc. (Beverly) petitions for review of the order of the Unemployment Compensation Board of Review (Board) that affirmed the order of the Referee who granted Claimant Sharon Dragovich and other former Beverly employees (collectively, Claimants) unemployment compensation benefits. In its petition, Beverly states that the Board erred by concluding that Claimants were not ineligible for benefits due to their willful misconduct and by determining that a lockout, rather than a strike, caused the work stoppage at fifteen of Beverly's nursing home facilities in Pennsylvania. Beverly also argues that the matter sub judice is preempted by federal law. The Board's order is affirmed based upon the following reasoning.

I

Claimants worked at nursing homes operated by Beverly throughout Pennsylvania. For each nursing home, Beverly had a separate collective bargaining agreement (CBA) with one of the three local unions that represented the bargaining unit employees, and all of these CBAs expired on November 30, 1995, with no new agreements reached despite negotiations. Beverly sought a written extension of the expired CBAs, but the unions refused; nonetheless, the unions and Beverly agreed to operate under the status quo while negotiations continued. A major issue in the negotiations was a demand by Claimants for one master labor management agreement instead of a separate contract for each facility.

On December 7, 1995, Beverly informed each of its facilities that it would not adhere to certain terms of the expired CBAs, including, among other things, provisions allowing for the deduction of union dues from employees' paychecks and making arbitration a part of Beverly's internal grievance procedure. The unions protested Beverly's unilateral changes and filed complaints with the National Labor Relations Board (NLRB) and with Beverly, alleging unfair labor practices in violation of federal law; these claims were pending when the Referee issued the decision in the case.

An impasse in negotiations developed in subsequent months, and, on March 14, 1996, the unions informed Beverly in writing that a work stoppage would commence on March 29, 1996. The next day, Beverly warned its union-member employees that they would be replaced if a strike occurred; Beverly also placed advertisements in newspapers for permanent replacement workers. On March 27, 1996, the unions offered a concession in their negotiating position and withdrew their demand for one master labor management agreement to cover all twenty of Beverly's facilities; Beverly refused the offer.

Following Beverly's refusal, the unions notified Beverly in writing that the planned stoppage would not begin until April 1, 1996 and that it would last three days. Beverly responded that the unions had not given sufficient notice of a strike under federal law and that any strike would therefore be illegal. Most union-member employees at fifteen of Beverly's facilities did not report to work on April 1, 1996, and picket lines were established at these nursing homes. Beverly filled most of the vacant positions with approximately 350 replacement workers, all of whom were hired as regular employees with the understanding that they would not be displaced by bargaining unit employees following the conclusion of the work stoppage.

On April 4, 1996, the union workers attempted to return to work unconditionally. Beverly informed most of them that they had been replaced and that work no longer existed for them there, although they would be formally retained on employee rolls and would be placed on a preferential hiring list and notified when positions became available. Claimants, all former Beverly employees displaced by replacement workers during the week ending April 6, 1996, filed for unemployment compensation benefits, and Beverly contested their eligibility. The Referee determined that Claimants were eligible for benefits, finding that they had not engaged in willful misconduct and that the work stoppage resulted from a lockout and not a strike. The Board affirmed the referee. This petition for review followed. ¹

II

Beverly first contends that the Board erred by concluding that Section 402(e) of the Unemployment Compensation Law (Law) ² did not apply to this case and that Claimants were not ineligible for benefits due to willful misconduct. In Canonsburg General Hosp. v. Unemployment Compensation Board of Review, 156 Pa.Cmwlth. 533, 628 A.2d 503 (1993), aff'd per curiam, 540 Pa. 531, 658 A.2d 790 (1995), this Court considered unemployment compensation claims under facts similar to those in the case sub judice. The Court held there that "where an employer hires permanent replacement employees [to fill striking workers' jobs], absent any evidence in the record and pertinent findings thereon that continuing work was available to the striking workers, the case must be considered as one where the employment relationship has been severed." Id., 156 Pa.Cmwlth. at 547, 628 A.2d at 510 (emphasis in original).

Thereafter, in Scozio Enterprises, Inc. v. Unemployment Compensation Board of Review, 691 A.2d 1042, 1046 (Pa.Cmwlth.1997), this Court concluded that "Canonsburg General Hosp. requires as a matter of law that the strikers be regarded as having been terminated" when such facts are present and that the cases are properly analyzed under Section 402(e) of the Law. Whether a claimant was discharged is a question of law, the resolution of which is dependent on the facts found by the Board. Pennsylvania Liquor Control Board v. Unemployment Compensation Board of Review, 167 Pa.Cmwlth. 386, 648 A.2d 124 (1994), appeal denied, 540 Pa. 615, 656 A.2d 120 (1995).

A.

The replacement workers hired by Beverly retained their jobs after the work stoppage ended; consequently, they were "permanent" replacements under the Canonsburg General Hosp. rationale. Also, following the work stoppage, Beverly informed the employees involved in the stoppage that there was no work immediately available to them. Beverly placed the displaced union workers on a preferential hiring list for future job openings, but the potential availability of work at some future time does not constitute "continuing work available to the striking workers" under Canonsburg General Hosp. Accordingly, Claimants' employment relationship must be considered by the Court as having been severed, thereby requiring the Court to apply Section 402(e) of the Law to this case. ³ Under the Pennsylvania Supreme Court's holding in Penflex, Inc. v. Bryson, 506 Pa. 274, 485 A.2d 359 (1984), where a claimant's employment is terminated by the employer during the course of a work stoppage, the question then becomes whether the claimant was discharged for willful misconduct.

Beverly maintains that Claimants caused their unemployment by engaging in willful misconduct, rendering them ineligible for benefits under Section 402(e). Specifically, Beverly argues that Claimants' strike violated the notice provisions of Section 8(g) of the Labor Management Relations Act (LMRA), 29 U.S.C. § 158(g), ⁴ and that the strike evinced Claimants' disregard for Beverly's interests. The Supreme Court explicitly rejected this argument in Penflex, where the claimants arguably failed to comply with the notice requirements of Section 8(d) of the LMRA, 29 U.S.C. § 158(d), ⁵ before initiating a work stoppage.

The Supreme Court held in Penflex that the claimants' strike was not unlawful because it did not constitute a breach of contract; the parties' collective bargaining agreement expired before the work stoppage began. The Court further refused to construe or to apply the LMRA in deciding whether the claimants had engaged in willful misconduct because to do so would represent an intrusion into the jurisdiction of the National Labor Relations Board. It would also require state courts to interpret federal law before they could determine whether a strike is illegal for purposes of deciding an employee's eligibility for unemployment compensation benefits. The Court therefore concludes that the unions' arguable violation of notice provisions of the LMRA does not constitute a basis for a finding of willful misconduct under Section 402(e) of the Law. ⁶

In holding that the claimants' strike did not constitute willful misconduct under Section 402(e) of the Law, the Supreme Court also stated in Penflex that:

Involvement in a strike, absent a prohibition contained in a valid collective bargaining agreement, may not properly be viewed as a disregard of standards of behavior which an employer has a right to expect. Workers have a right to engage in a lawful strike and, consequently, they retain a reasonable expectation of continued employment during the work stoppage....

Our holding today is a very narrow one which will not apply in most labor disputes. Specifically, employees are still ineligible for compensation benefits if they are dismissed for participation in a wildcat strike or one that otherwise contravenes the laws of this state or where, during the course of a legal strike, the employer directs his employees to return to work or suffer dismissal. In these two situations the errant employees have no reasonable expectation of continued employment and it is not unfair to conclude, when their improper labor activities culminate in discharge, that their unemployment has been voluntarily induced.

Id. at 295-296, 485 A.2d at 370. (Footnote omitted) (Emphasis added). Beverly argues that the case sub judice falls within the Supreme Court's express limitation on its...