John Morrell & Co. v. South Dakota Dept. of Labor, Unemployment Ins. Div.

• Decision Date: 30 September 1990
• Docket Number: No. 16581,16581
• Citation: 460 N.W.2d 141
• Parties: JOHN MORRELL & COMPANY, Employer and Appellant, v. SOUTH DAKOTA DEPARTMENT OF LABOR, UNEMPLOYMENT INSURANCE DIVISION, and Claimants Ray Handle, James M. Harris, Lawrence A. Hewer, Darwin Jaqua, Jim Knopf, Philip Langner, Jerome Nelson, Gerald Skilliman, et al., Appellees.
• Court: South Dakota Supreme Court

Page 141

460 N.W.2d 141

JOHN MORRELL & COMPANY, Employer and Appellant, v. SOUTH DAKOTA DEPARTMENT OF LABOR, UNEMPLOYMENT INSURANCE

DIVISION, and Claimants Ray Handle, James M. Harris,

Lawrence A. Hewer, Darwin Jaqua, Jim Knopf, Philip Langner,

Jerome Nelson, Gerald Skilliman, et al., Appellees.

No. 16581.

Supreme Court of South Dakota.

Argued Oct. 18, 1989.

Decided July 25, 1990.

Rehearing Denied Sept. 30, 1990.

Jeremiah D. Murphy, James E. McMahon, David L. Vickers of Boyce, Murphy, McDowell & Greenfield, Sioux Falls, for employer and appellant.

Harry H. Smith of Smith & Smith, Sioux City, Drew C. Johnson, Aberdeen, for appellees.

TUCKER, Circuit Judge.

This is an appeal from a circuit court order affirming the decision of the Department of Labor Unemployment Insurance Division (Department). Department awarded unemployment compensation benefits to claimants, employees of John Morrell & Company (Morrell). Department ruled that claimants were eligible for benefits after the strike ended and they unconditionally offered to return to work, but were unable to return since their positions had been filled by replacement workers. Morrell appeals to this court. We affirm.

FACTS

Claimants are members of Local 304A United Food and Commercial Workers Union (Local 304A) who worked full-time at the Morrell Meat Packing Plant in Sioux Falls, South Dakota, prior to May 1, 1987. On May 1, 1987, claimants honored a picket line set up at the Sioux Falls plant by union workers from a Sioux City Morrell plant. From May 1 to November 4, 1987, when the picket line was removed, Morrell hired a large number of permanent replacement workers in order to continue operations at its Sioux Falls plant. On November 4, 1987, the Sioux City union removed their picket line at the Sioux Falls plant, and the Sioux Falls Local 304A unconditionally offered to return to work on behalf of all of its members. At the time Morrell received the offer to return to work, the Sioux Falls plant was almost totally staffed by replacement workers. As a result, Morrell did not begin recalling union workers before January 4, 1988, and very few of the workers in claimants' class were placed back into the work force.

Morrell admits that it did not discharge, reprimand, or take any disciplinary action against the members of Local 304A for honoring the Sioux City picket line. Neither Morrell nor claimants believed that Morrell had fired the workers who honored the picket line nor had claimants quit their employment. Claimants were treated in all respects as employees who were not actively working.

Following Local 304A's unconditional offer to return to work, claimants began filing new or additional claims for unemployment benefits. Morrell challenged these claims. They were consolidated into a single case with twenty claimants, selected at random by the administrative law judge, serving as representative for all claimants.

After a hearing, the administrative law judge concluded that claimants were not entitled to benefits while they refused to cross the picket line. However, on November 4, 1987, when the picket line was removed and Local 304A made an unconditional offer to return to work, claimants became entitled to unemployment benefits. The circuit court affirmed this ruling.

On appeal, Morrell raises three issues:

ISSUE ONE: WERE CLAIMANTS UNEMPLOYED DUE TO A LABOR DISPUTE MAKING THEM INELIGIBLE TO RECEIVE UNEMPLOYMENT BENEFITS AFTER THE PICKET LINE WAS REMOVED AND CLAIMANTS

UNCONDITIONALLY OFFERED TO RETURN TO WORK?

ISSUE TWO: DID CLAIMANTS VOLUNTARILY LEAVE THEIR EMPLOYMENT WITHOUT GOOD CAUSE MAKING THEM INELIGIBLE TO RECEIVE UNEMPLOYMENT BENEFITS?

ISSUE THREE: WERE CLAIMANTS DISCHARGED OR SUSPENDED FOR WORK-RELATED MISCONDUCT MAKING THEM INELIGIBLE TO RECEIVE UNEMPLOYMENT BENEFITS?

ISSUE I

WERE CLAIMANTS UNEMPLOYED DUE TO A LABOR DISPUTE MAKING THEM INELIGIBLE TO RECEIVE UNEMPLOYMENT BENEFITS AFTER THE PICKET LINE WAS REMOVED AND CLAIMANTS UNCONDITIONALLY OFFERED TO RETURN TO WORK?

South Dakota's Unemployment Compensation law was enacted in 1936. The legislature's public policy goal was clear. It declared:

Economic insecurity due to unemployment is a serious menace to the health, morals, and welfare of the people of this state. Involuntary unemployment is therefore a subject of general interest and concern which requires appropriate action by the legislature to prevent its spread and to lighten its burden which so often falls with crushing force upon the unemployed worker and his family.... The legislature, therefore, declares that in its considered judgment the public good, and the general welfare of the citizens of this state require the enactment of this measure, under the police powers of this state, for the compulsory setting aside of unemployment reserves to be used for the benefit of persons unemployed through no fault of their own.

1936 S.D. Sess.L. ch. 3 § 2. South Dakota's unemployment compensation statutes include a labor dispute disqualification provision. SDCL 61-6-19. The labor dispute disqualification allows the state to be neutral in labor disputes. See In re Steelman, 219 N.C. 306, 13 S.E.2d 544, 547 (1941).

All interested parties who are involved in a claim for unemployment compensation ... must be dealt with on an impartial basis. The employment compensation fund should never be used to finance claimants who are directly involved in a labor dispute, nor should it ever be denied to claimants who are legally entitled to receive benefits ... None of the money accumulated in this fund should ever be dispersed for the purpose of financing a labor dispute nor should it be illegally withheld for the purpose of enabling an employer to break a strike.

Lawrence Baking Co. v. Michigan Unemployment Compensation Commission, 308 Mich. 198, 13 N.W.2d 260, 265 (1944); See also, Salenius v. Michigan Employment Security Commission, 33 Mich.App. 228, 189 N.W.2d 764 (1971); In re Sarvis, 296 N.C. 475, 251 S.E.2d 434 (1979).

South Dakota's labor dispute disqualification statute, SDCL 61-6-19 provides, in part:

An individual is not entitled to any benefits for any week with respect to which the secretary finds that his total or partial unemployment is due to a labor dispute. (emphasis added).

Morrell argues that claimants' initial unemployment and the hiring of replacement workers was due to a labor dispute, making claimants ineligible for benefits. Claimants argue that when the picket lines were removed and an unconditional offer to return to work was made on November 4, 1987, they became unemployed due to lack of available jobs.

Although this is a case of first impression in South Dakota, several other states have addressed this issue and their opinions on their statutes offer guidance to this court. These cases can be grouped into two categories: "stoppage of work" statutes and "labor dispute in active progress" statutes.

Under "stoppage of work" statutes, the mere hiring of permanent replacement workers, even without an abandonment of the strike or unconditional offer to work lifts the labor dispute disqualification. See Baugh v. United Telephone Co., 54 Ohio St.2d 419, 377 N.E.2d 766 (1978); Ruberoid Co. v. California Unemployment Ins. App. Bd., 59 Cal.2d 73, 27 Cal.Rptr. 878, 378 P.2d 102 (1963).

Under "labor dispute in active progress" statutes, an employee who has been permanently replaced must also show that he has abandoned the strike and unconditionally offered to return to work in order to lift the labor dispute disqualification. See In re Sarvis, supra; Special Products Company of Tenn. v. Jennings, 209 Tenn. 316, 353 S.W.2d 561 (1961); Skookum Co., Inc. v. Employment Division, 24 Or.App. 271, 545 P.2d 914 (1976), aff'd at 276 Or. 303, 554 P.2d 520 (1976); Burkart/Randall Division v. Daniels, 268 Ark. 375, 597 S.W.2d 71 (1980).

Under either of these accepted interpretations, claimants are clearly eligible for benefits when they ended the strike and unconditionally offered to return to work.

The administrative law judge and the circuit court adopted the analysis found in the "labor dispute in active progress" statutes. See Sarvis, supra, Special Products, supra, Randall, supra. In those cases, the courts' analysis focused on the current cause of the unemployment and not on the originating cause. Morrell argues that this causation analysis is inapplicable because the labor dispute disqualification statutes construed in those cases differ from SDCL 61-6-19. In those cases, the labor dispute disqualification statutes disqualified workers while their employment was caused by a labor dispute in "active progress." SDCL 61-6-19 does not have the expressed "active progress" qualifier. However, while Sarvis, supra, Special Products, supra, and Randall, supra, contained active progress language in their statutes, the active progress qualifier was not material to the causation analysis in those cases.

In Special Products, supra, the Tennessee Supreme Court's focus was on the current cause, not the status, of the labor dispute. It noted:

We find here that the employer considered the strike ended and that thereafter the unemployment of these individuals was not due to the strike, but because there were no jobs available to them at the time the strike was ended since the jobs had previously been filled.

Special Products, 353 S.W.2d at 563.

Similarly, in Sarvis, supra, the North Carolina Supreme Court framed the issue as "whether Employer's inability to reinstate previously replaced Employees after they abandoned their strike and unconditionally offered to return to work changed the cause of unemployment and lifted the disqualification for benefits." (emphasis added). Sarvis, 251 S.E.2d at 437. In Skookum, supra, the Court of Appeals of Oregon concluded that claimants' continued unemployment was "not due to a 'labor dispute,' " but was caused by the unavailability of work because their positions had been filled by replacement...