Di Re v. Central Livestock Order Buying Co.

• Decision Date: 27 January 1956
• Docket Number: No. 36711,36711
• Citation: 246 Minn. 279,74 N.W.2d 518
• Parties: Vincent M. DI RE, Respondent, v. CENTRAL LIVESTOCK ORDER BUYING COMPANY, Relator, Frank T. Starkey, Commissioner of Department of Employment Security, Minnesota, Respondent.
• Court: Minnesota Supreme Court

Page 518

74 N.W.2d 518

246 Minn. 279

Vincent M. DI RE, Respondent, v. CENTRAL LIVESTOCK ORDER BUYING COMPANY, Relator Frank T. Starkey, Commissioner of Department of Employment Security, Minnesota, Respondent.

No. 36711.

Supreme Court of Minnesota.

Jan. 27, 1956.

Syllabus by the Court.

1. Where a subsidiary corporation is formed to engage in one aspect of the livestock business formerly engaged in by the parent corporation because of the provisions of a Federal law, the Packers and Stockyards Act, 42 Stat. 159, § U.S.C.A., § 181, et seq., even though all the stock of the subsidiary is owned by the parent and the board of directors and the officers of the parent also constitute the board and are the officers of the subsidiary, under the circumstances of this case, the subsidiary corporation must be treated as a separate and distinct legal entity separate and apart from the parent corporation.

2. M.S.A. § 268.04, subd. 10(4), providing, in effect, that where two or more employing units are owned or controlled directly or indirectly by the same interests they will be treated as a single unit, was enacted for the limited purpose of preventing employers who would otherwise fall within the terms of the Unemployment Compensation Act from evading the statute through various forms of disintegrated ownership and control, and was not meant to cover a case such as this where it is sought to disregard the separate corporate entities in order to establish that the position offered by the parent and the one formerly held with the subsidiary were part of the same employment.

3. Where parent and subsidiary corporations are separate and distinct corporate entities and the employee's position with the subsidiary is terminated due to a reduction in its office staff, an offer to the employee of a position with the parent is not merely a transfer within the same employment but is an offer of employment by another employer; consequently, when the former position was abolished, the employee's services were terminated through no choice of his own and he was not, therefore, disqualified from receiving unemployment benefits under § 268.09, subd. 1(1), which statute provides for disqualification where the employee discontinues his employment voluntarily and without good cause attributable to the employer.

4. Swanson v. Minneapolis-Honeywell Regulator Co., 240 Minn. 449, 61 N.W.2d 526, holding that where an employee flatly refused to accept any work commencing at 7 or 7:30 a.m. she thereby made herself unavailable for work contrary to the provisions of § 268.08, subd. 1(3), is not controlling in the instant case since here the evidence failed to show that the employee's refusal to accept the proffered employment was based solely on his aversion to a quitting time of 6:30 p.m.

5. In determining whether offered employment is 'suitable work' within the meaning of § 268.09, subd. 1(5), the commissioner must first consider the prospects of the applicant obtaining local work in his customary occupation and if it is determined that there are no such prospects within a reasonable time then other work for which the employee is reasonably fitted by past experience and training is to be deemed 'suitable work.'

6. The commissioner erred in holding that the proffered employment was unsuitable solely because it was not substantially the equivalent of the work the employee had formerly been performing without first determining the employee's prospects of securing local work in his customary occupation within a reasonable period of time. A proper application of the statutory standards of 'suitable work' set out in § 268.09, subd. 1(5), requires that additional evidence be taken to determine whether the employee did have prospects of securing local work in his customary occupation and also to determine what is a reasonable length of time to seek such employment.

Harold Jordan, St. Paul, for relator.

Miles Lord, Atty. Gen., Harley G. Swenson, Asst. Atty. Gen., St. Paul, for respondent.

DELL, Chief Justice.

Certiorari to review a decision of the commissioner of employment security ¹ allowing the employee unemployment compensation benefits and charging the same to the employer's experience rating account.

The relator-employer, Central Livestock Order Buying Company, is a wholly owned subsidiary of Central Livestock Association, Inc. The former will be referred to as the subsidiary and the latter as the parent. The parent is a cooperative organization engaged in selling or consigning livestock on a commission basis for over 160,000 farmers from Minnesota, North and South Dakota, and from some points in Canada. Prior to 1941 the parent also engaged in the business of buying livestock for packers or for others who wished to use the livestock for 'feeding' purposes. Pursuant to the provisions of a federal law, the Packers and Stockyards Act, 42 Stat. 159, 7 U.S.C.A., § 181, et seq., the parent was required to segregate its buying and selling agencies, resulting in the formation of the subsidiary in 1941 for the purpose of handling the buying functions and activities which previously had been engaged in by the parent. All the stock of the subsidiary is owned by the parent, and the board of directors and officers of the parent also constitute the board and are the officers of the subsidiary. The parent has its main offices on the fifth floor of the Exchange Building in South St. Paul and the subsidiary has its offices on the fourth floor of the same building.

The employee, Vincent M. Di Re, commenced working for the subsidiary on June 1, 1953. His duties consisted of paying bills, making bank deposits, preparing trial balances, performing other bookkeeping work, and assisting Mr. Fearing, the branch office manager. He was paid at the rate of $250 per month and worked 40 hours a week with hours from 8:30 a.m. to 5:30 p.m. The employee, 45 years of age, had two years of business college as well as two years of training in business administration at a university. Prior to accepting employment with the subsidiary, the employee had 18 years of experience as a bookkeeper-accountant, including positions as a cost accountant at a rate of pay of $137 per week and as a cost analyst at the rate of pay of $300 per month.

Shortly before January 8, 1955, the employee was notified that a decrease in the company's business necessitated a reduction of the personnel in the office and that, therefore, his services would no longer be needed. His employment was not terminated by the employer because of any dissatisfaction with his services but solely because he had the least seniority of any person working in the office. He was told, however, that there was a position available for him in the office of the parent. This work consisted of checking and matching scale tickets and performing other clerical services. The hours of work offered by the parent were from 9:30 a.m. to 6:30 p.m. and the rate of pay was $250 per month. For reasons which will be discussed later, the employee refused to accept the position. This offer was renewed in a letter to the employee dated February 4, 1955, and was again refused.

On January 10, 1955, the employee filed a claim for unemployment compensation benefits with the Department of Employment Security. On February 2, 1955, a claims deputy of said department filed his determination holding that the claim was valid. Upon appeal and further hearing the decision of the claims deputy was affirmed by an appeal tribunal of the department, which decision, upon appeal, was likewise affirmed by the commissioner of employment security.

1. The subsidiary contends that the two companies must be deemed to be a single employer within the meaning of the Unemployment Compensation Act and that, therefore, the new position offered the employee was merely a 'transfer' within the same employment. It argues that the termination of the employment was the voluntary act of the employee and, since it was not for 'good cause attributable to the employer' under M.S.A. § 268.09, subd. 1(1), ² the employee is disqualified from receiving any benefits under the act. On the other hand, it concedes that, if the two companies were separate employers, then there was an Involuntary termination of the employment which would not disqualify the employee from receiving unemployment benefits under the provisions of said section.

A corporation is an artificial person, created by law, or under authority of law, as a distinct legal entity, with rights and liabilities which are independent from those of the natural persons composing the corporation. ³ Ordinarily two or more corporations are considered separate and distinct entities even though the same individuals are the incorporators of, or own stock in, the several corporations, and even though such corporations may have the same persons as officers. ⁴

In the instant case, due to the provisions of the Packers and Stockyards Act, the parent was faced with the choice of segregating its buying and selling activities or, in the alternative, of discontinuing one of these branches of its business altogether. It decided to separate the two functions and, as a result, the subsidiary was formed as a separate corporation in 1941. The two corporations were engaged in entirely different aspects of the livestock business. Their offices are on different floors of the Exchange Building and they maintain separate payroll records, as well as separate books of account. There is no question but that, if these corporations had been organized or used as an instrument to hinder, delay, or defraud creditors, or for any other wrongful purposes, then we would be justified in disregarding the separate and distinct corporate existence of the subsidiary. ⁵ However, in the instant case the subsidiary's separate existence was required because of the provisions of the Packers and Stockyards Act, 42 Stat. 159, 7 U.S.C.A., § 181, et seq., and...