MEA/AFSCME Local 519 v. City of Sioux Falls

• Decision Date: 11 May 1988
• Docket Number: No. 15935,15935
• Parties: MEA/AFSCME LOCAL 519, Petitioner and Appellee, v. CITY OF SIOUX FALLS, Respondent and Appellant.
• Court: South Dakota Supreme Court

Page 164

423 N.W.2d 164

MEA/AFSCME LOCAL 519, Petitioner and Appellee, v. CITY OF SIOUX FALLS, Respondent and Appellant.

No. 15935.

Supreme Court of South Dakota.

Argued Feb. 18, 1988.

Decided May 11, 1988.

Linda Lea M. Viken of Finch, Viken, Viken & Pechota, Rapid City, for petitioner and appellee.

Roger A. Schiager of Schiager & Peters, Sioux Falls (Scott N. Peters of Schiager & Peters, Sioux Falls, on the brief), for respondent and appellant.

HENDERSON, Justice.

PROCEDURAL HISTORY

The plaintiff in this case, Sioux Falls Municipal Employees' Association (Union), filed grievance against the City of Sioux Falls (City) alleging that City had failed to implement vacation provisions of a collective bargaining agreement. After an administrative hearing, the South Dakota Department of Labor (Department) dismissed the grievance. Union appealed this departmental ruling to the circuit court for Minnehaha County, Second Judicial Circuit. The circuit court reversed the Department, and City then appealed to this Court, maintaining that the Department's findings of fact and conclusions of law were correct, and that the circuit court used the wrong standard of review. We reverse the circuit court.

In turn, Union asserts that both the circuit court and Department erred in holding that its submission of proposed findings of fact and conclusions of law to the departmental hearing officer was untimely. Union, however, filed no notice of review.

FACTS

In 1984 and 1985, the collective bargaining agreement ¹ between the Union and the City provided that vacation was earned in one calendar year, and taken in the following calendar year. The number of days earned by an employee was determined by reference to a schedule, which was based on the employee's years of prior service. The agreement also provided for a "bonus" vacation for long-term employees (fifteen years service and up) which consisted of an extra five days vacation earned at five-year intervals, to be taken at any time during the following five years of employment. Such bonuses were awarded after fifteen years, twenty years, twenty-five years, etc. Other sections relevant to this case are:

Section 30-137(e):

Such vacation for all employees shall be effective during the year the employee completes his service. The maximum vacation earned in any one (1) year shall not exceed the provisions of the above schedules. (Emphasis added.)

Section 30-139. When Taken.

Any vacation leave must be taken and completed within the year following the year such vacation was earned.... (Emphasis added.)

It is clear, and undisputed by the parties, that employees earned their regular vacation in one year and took it in the following year. If one completed her first year of service in 1984, she earned ten days of vacation, which she had to take in the 1985 calendar year. "Bonus" vacation worked similarly, except that it was earned in five-day increments, and taken in the following five years.

The Union and the City negotiated a new contract to govern their relationship for 1986 through 1988. This contract became effective in February 1986. The relevant part of the new contract was Article 23 (Vacations) which provided the same vacation schedule for employees with one through fifteen years of service and increased the scheduled vacation for more senior employees. The old and new schedules compared as follows:

                               OLD (1984/85)      NEW (1986/88)
                1 to 15 years  same               same
                16 years       20 days (maximum)  21 days
                17 years       20 days            22 days
                18 years       20 days            23 days
                19 years       20 days            24 days
                20 years       20 days            25 days (maximum)
                

The new contract eliminated the five-year, five-day bonus, except:

Any employee that has earned a bonus vacation prior to December 31, 1985, under the terms of the contract effective February 15, 1984, shall be entitled to use said bonus vacation prior to January 1, 1987. If not used, said bonus vacation shall be forfeited.

The new contract also contained identical language to City ordinance Sections 30-137 and 30-139, which the 1984/85 contract had included by reference.

During the negotiation of the new contract, Union traded the bonus provisions for greatly increased vacation for senior employees. When the new contract went into effect, Union noticed that City, in 1986, was allowing its employees to take the amount of vacation they had earned in 1985, according to the terms of the old contract. Vacation earned in 1986, to be taken in 1987, was accumulated at the rate specified in the 1986/88 contract.

Union filed a grievance alleging that City was not living up to the terms of the new contract. After the City Commission decided that there was no contractual basis for determining the length of vacations taken in 1986 by the new schedule, the matter proceeded to the Department of Labor.

The Department's hearing officer dismissed Union's grievance after a hearing held on October 6, 1986. In her decision, dated November 26, 1986, the hearing officer set out the provisions of both agreements and noted that they contained the same language to the effect that vacation was earned in one year and taken the next. As the new contract was not in effect when vacation was earned in 1985, for use in 1986, she reasoned that the new schedule applied to vacation earned in 1986, to be taken in 1987, and the City had not violated the new agreement.

The Union appealed to the circuit court, which reversed the Department. The court opined that the new vacation schedule superseded the old schedule, and the employees were entitled to vacations in 1986 determined according to the schedule contained in the 1986/88 agreement.

The City then brought the case to this Court.

DECISION

The essential issue in this case is whether the amount of vacation City's employees took in 1986 should have been determined by the schedule set out in the agreement for 1984/85, covering the year such vacation was actually earned, or whether the schedule in the 1986/88 agreement controls. The City argues that vacation taken in 1986 was earned in 1985, and the old schedule applied. Union argues that the new agreement superseded the old, and the number of vacation days taken in 1986 was controlled by the schedule in the new agreement, which took effect in 1986. We adopt the City's position.

The jurisprudence regarding the nature of paid vacations provided for in collective bargaining agreements is well settled. A frequently cited case is In re Wil-Low Cafeterias, Inc. (Kaftan v. Siegel ), 111 F.2d 429 (2d Cir.1940), where Judge Augustus N. Hand wrote:

A vacation with pay is in effect additional wages. It involves a reasonable arrangement to secure the well being of employees and the continuance of harmonious relations between employer and employee. The consideration for the contract to pay for a week's vacation had been furnished, that is to say, one year's service had been rendered prior to June 1, so that the week's vacation with pay was completely earned and only the time of receiving it was postponed.

In re Wil-Low, 111 F.2d at 432. This understanding that vacation benefits are earned at one time and taken later has echoed through decades to the present time. Teamsters Local Union 688 v. John J. Meier Co., 718 F.2d 286, 289 (8th Cir.1983); Smith v. Kingsport Press, Inc., 366 F.2d 416, 419 (6th Cir.1966); Schober v. Schober, 692 P.2d 267, 268 (Alaska 1984); Suastez v. Plastic Dress-Up Co., 31 Cal.3d 774, 779-82, 647 P.2d 122, 125-26, 183 Cal.Rptr. 846, 849-50 (1982); Davis v. Eagle Products, Inc., 501 N.E.2d 1099, 1106 (Ind.App.1986). As the Supreme Court of California observed in Suastez: " 'Many tribunals have taken the view that vacation pay is simply an alternate form of wages, earned at the time of other wages, but whose receipt is delayed.' " Suastez, 31 Cal.3d at 779, 647 P.2d at 125, 183 Cal.Rptr. at 849 (quoting Local Union No. 186 v. Armour & Co., 446 F.2d 610, 612 (6th Cir.1971), cert. denied, 405 U.S. 955, 92 S.Ct. 1170, 31 L.Ed.2d 231 (1972)). Most cases discussing the matter concern dismissed employees or plant closings, where employees are not paid for vacation earned in the past. For example, in City of Hammond v. Conley, 498 N.E.2d 48 (Ind.App.1986), the defendant city attempted to avoid paying terminated employees for vacation by asserting that their vacation was earned in the same year it was taken. As the employees had not worked a full year in the year they were terminated, the defendant argued they were due no vacation pay. The court rejected the city's argument, holding that the vacations in question were earned the previous year, where it was specified that a condition for earning vacation was that an employee be on the payroll on January 1 of the year vacation was taken. City of Hammond, 498 N.E.2d at 50-51.

The Supreme Court of Oregon, however, has considered the same issue that presents itself here, in Pfeifer v. A.F. Lowes Lumber Co., 206 Or. 115, 291 P.2d 744 (1955). Pfeifer concerned successive collective bargaining agreements, the older of which provided that an employee was entitled to two weeks of vacation if he had five years of continuous service prior to April 1 of the year vacation was taken. A new contract, effective as of April 1, 1952, reduced the prior service requirement to three years. The plaintiff, an employee, claimed the new contract controlled vacations taken in 1952 (the year the new contract took effect), a contention the court rejected:

At the close of work on March 31, 1952, eligibility for vacation and vacation pay during the year 1952 became fixed and vested. In the absence of express agreement between the parties to the contrary, neither party could escape the rights and obligations fixed as of that date. The right vested in the employee; the obligation was determined as to the employer.

Pfeifer, 291 P.2d at 748 (citations omitted). In Pfeifer,...