Conon v. Administrator, Unemployment Compensation Act

• Decision Date: 05 April 1955
• Citation: 142 Conn. 236,113 A.2d 354
• Court: Connecticut Supreme Court
• Parties: Stella CONON et al. v. ADMINISTRATOR, UNEMPLOYMENT COMPENSATION ACT. Marie AMARAL et al. v. ADMINISTRATOR, UNEMPLOYMENT COMPENSATION ACT. Supreme Court of Errors of Connecticut

Page 354

113 A.2d 354

142 Conn. 236

Stella CONON et al. v. ADMINISTRATOR, UNEMPLOYMENT COMPENSATION ACT.

Marie AMARAL et al. v. ADMINISTRATOR, UNEMPLOYMENT COMPENSATION ACT.

Supreme Court of Errors of Connecticut.

April 5, 1955.

Charles L. Mandelstam, New Haven, with whom, on the brief, was Morris P. Glushien, New York City, for appellants-plaintiffs.

Harry Silverstone, Asst. Atty. Gen., with whom, on the brief, was John J. Bracken, Atty. Gen., for appellee-defendant.

Before BALDWIN, WYNNE, DALY and O'SULLIVAN, JJ., and ALCORN, Superior Court Judge.

ALCORN, Superior Court Judge.

These two appeals were presented together because they embrace an identical issue. The plaintiffs are representative of others in similar cases the decision of which turns upon the decisive issue here. The applicable facts are, in most respects, identical, while minor differences make the two cases representative of opposing extremes of the group which they represent. The attacks made on the commissioner's finding have been withdrawn. The issue is whether a payment described as a 'vacation check' received by the plaintiffs from an employer-financed fund administered by the plaintiffs' union is a 'payment by way of compensation for loss of wages' referable to a specific week for which the plaintiffs were unemployed within the meaning of § 7508(4)(a) of the General Statutes, as amended, Cum.Sup.1953, § 2314c.

The commissioner's unchallenged finding is as follows: The plaintiffs are employed in the ladies' garment industry. This industry is unique in that the demand for workers is subject to violent and unanticipated fluctuation. Changing dress styles make constant production and regular, uniform employment impossible. Production and employment normally experience an annual seasonal decline in late May or early June because of the change-over from summer goods to fall goods. The full production on fall styles generally is reached about the middle of July. Production in the industry is customarily carried on under what is called the jobber-contract system. The jobber selects designs and fabrics, cuts the material and sends it, with the necessary accessories, to the contractor, who then makes up the garment.

The plaintiffs, employed by contractors in Connecticut who were covered by the Unemployment Compensation Act, belong to a union affiliated with and within the jurisdiction of the International Ladies' Garment Workers' Union. The I.L.G.W.U., hereinafter referred to as the union, represents the overwhelming majority of production workers in the ladies' garment industry. Most of its membership is in New York City. The union advertises that one of the advantages of membership is 'paid vacations.' It owns and operates, on a nonprofit basis, a large hotel and resort for union members and their guests at rates which the workers are able to afford.

The contractors and jobbers are organized, as to each group, in associations of their own. The plaintiffs' employers belong to such a contractors' association. The jobbers for which the plaintiffs' employers work are members of jobbers' associations. The respective associations of contractors and jobbers and the union have made a series of agreements designed to stabilize the very volatile and unusual ladies' garment industry, to improve and modernize it and to establish conditions tending to secure continuity of employment for workers, fair wages and labor conditions, and methods for the peaceful adjustment of disputes. Because of the unique nature of the business, the agreements established rules and standards for the relations between contractors and jobbers as well as between them and their union member employees.

Contracts involving the dress industry in greater New York, which includes Connecticut, are negotiated and signed by a joint board comprising representatives of all the greater New York local unions. Another department of the union administers the contracts made with Connecticut contractors and jobbers. The union has had agreements with the respective associations of jobbers and contractors continuously since 1936. The contracts are substantially identical in form. Agreements made with the contractors' associations in 1941 provided: 'During the summer, when the vacation season begins, the representatives of the parties hereto shall meet for the purpose of working out regulations concerning the number of weeks as well as the time each worker may take a vacation.' Agreements made with the jobbers' associations in 1944 established a fund for reasons stated in the agreements as follows: 'In line with recent trends in which members of many industries have, through collective labor agreements, contributed toward a Fund for the payment of vacation and health benefits to workers, there is established by the parties hereto, a Health Fund for all members of the Union who are covered by this collective agreement to provide them with health benefits and contributions toward vacation benefits.' The fund is now known as the health and welfare fund. Agreements in 1944 extended the 1941 agreements to January 31, 1947. In agreements made in 1947, the clause quoted from the 1941 agreements was omitted and the following was substituted: 'Vacations shall be granted to workers in accordance with the rules and regulations promulgated by the Joint Board for the Health and Welfare Fund.' This is the provision now in effect.

The health and welfare fund is an irrevocable trust fund. It is administered under rules and regulations established solely in the discretion of the joint board. The agreements provide that it is to be administered for the sole purpose of providing members in 'all crafts covered by the collective agreement with health benefits and contributions toward vacation benefits in conformity with the Rules and Regulations of said 'Fund." The corpus of the health and welfare fund is made up entirely of contributions made by the jobbers, the contractors and another employer group, known as the manufacturers, which is not involved in the present controversy. The contributions are fixed under the agreements at a certain percentage of the wages paid by the jobber or contractor to his employees. From 1944 to 1950, inclusive, the figure was 3.5 per cent.; since January 1, 1951, it has been 4 per cent. The agreements between the union and the jobbers created the fund. The agreements between the union and the contractors provided for the employees' vacations. The jobbers make the payments to the fund. The payments are based upon the determined percentage of the amounts paid their own employees and the amounts paid the employees of their contractors. If, however, a contractor does work for a jobber who is not covered by the agreements with the union, the contractor pays his contribution directly to the fund. The contributions thus made are agreed not to be wages and are not subject to the withholding tax. The contractors who employed the plaintiffs paid the agreed 4 per cent contribution to the fund.

The union's joint board, the jobber and a committee of employees of the contractors working for the jobber agree on the piecework rate to be paid each contractor's employees. In like manner, the amount to be paid the contractor by the jobber is fixed; it consists of the employees' piecework rates plus a sum for overhead and a reasonable profit. That sum is fixed by agreement between the jobbers' association and the contractors' association. In addition to paying the contractor, the jobber transmits, for the contractor, the latter's unemployment taxes to the state of Connecticut and the federal government and his share of the old age insurance contributions to the federal government with respect to the wages paid by him to his employees.

The contractor prepares a Connecticut unemployment compensation tax return at the end of each calendar quarter showing the total wages paid by him and the tax due. He determines what proportion of the total tax is based on wages paid his non-production union employees and what proportion is based on wages paid his production union employees, the latter figure being that which is to be paid by his jobbers, and notifies them of the amount due. Both the jobber and the contractor then transmit to a union official known as the impartial chairman the respective amounts due, and he in turn, transmits them to the state along with the returns on which they are based. Remittance of the unemployment tax due the federal government is made in the same way. With respect to the old age insurance contributions to the federal government, the contractor withholds the employees' portion of the tax and transmits it to the impartial chairman, and the jobber transmits the employer's share of the tax to the impartial chairman. He then sends both remittances with the supporting returns to the federal authorities. The impartial chairman is an office created by the agreements and financed jointly by the union and the manufacturer groups. His function is to arbitrate disputes between the parties and to transmit the unemployment taxes and old age insurance contributions, as already described.

On or about February 25, 1952, the appropriate union agencies adopted a schedule of, and determined the basis of eligibility for, vacation benefits payable in 1952 to workers in the various crafts employed in shops which contributed to the health and welfare fund. The schedule of benefits is determined after the amount available is found by deducting from the total of contributions and earnings on investments the amounts necessary for reserves, administration expenses and disbursements for health and other welfare benefits. For a union member to be eligible for vacation benefits in 1952, his union dues had to be fully paid and he had to have worked for a union employer, but not necessarily the same employer, for any twenty-six weeks of the year beginning July 1, 1951. The plaintiffs met...