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

• Decision Date: 03 April 1997
• Citation: 691 A.2d 1042
• Parties: SCOZIO ENTERPRISES, INC., Petitioner, v. UNEMPLOYMENT COMPENSATION BOARD OF REVIEW, Respondent. (Two Cases).
• Court: Pennsylvania Commonwealth Court

Page 1042

691 A.2d 1042

SCOZIO ENTERPRISES, INC., Petitioner, v. UNEMPLOYMENT COMPENSATION BOARD OF REVIEW, Respondent. (Two Cases).

Commonwealth Court of Pennsylvania.

Argued Feb. 6, 1997.

Decided April 3, 1997.

David E. Brier, Philadelphia, for Petitioner.

Sarah C. Yerger, Assistant Counsel, for Respondent.

Before DOYLE and SMITH, JJ., and NARICK, Senior Judge.

SMITH, Judge.

In these consolidated cases Scozio Enterprises, Inc. (Employer) petitions for review of orders of the Unemployment Compensation Board of Review (Board) that affirmed decisions of a referee determining that Kimberly L. D'Amico, as representative claimant, and Rita M. Farrell (Claimants) were not ineligible for unemployment compensation benefits for specified weeks under Section 402(d) of the Unemployment Compensation Law (Law), Act of December 5, 1936, Second Ex.Sess., P.L. (1937) 2897, as amended, 43 P.S. § 802(d).

I.

Employer questions whether the Board's finding that it was reasonable for striking workers to believe that they were permanently replaced was supported by substantial evidence. In addition, Employer questions whether the Board erred in holding that Employer severed the employment relationship with the striking employees by hiring permanent replacements, when Employer repeatedly and unequivocally announced that positions were still available to all strikers.

The Board found that Claimants worked at Employer's Shop 'N Save under a contract between Employer and the United Food and Commercial Workers International Union, Local 23 (Union). When the contract expired, the parties agreed on January 26, 1995 to a day-to-day extension, subject to a right of either side to terminate on 72 hours' written notice. Employer issued a letter to all employees February 21, stating that Employer had been training replacement workers. In the event of a strike the replacement workers might become permanent, and those current workers whose jobs were permanently filled would have no right to return. The union initiated a work stoppage on February 23; Employer began hiring replacement workers in order to continue operations.

On March 15 Employer sent a letter stating that it intended to begin to hire permanent replacements and to convert temporary employees to permanent status. Employer sent a letter March 24 stating that there were still some positions available for those who wished to return to work, but Employer could not guarantee for how long, as more temporary replacement workers were made permanent. At the end of April, pursuant to a request from the Union, Employer provided a listing of 55 original employees who continued working after the work stoppage and 52 hired since then and indicated that all were permanent. Based on this list, it was reasonable for many of the striking workers to believe that they had been permanently replaced and no longer had employment to which to return after the work stoppage ended. On May 9 Employer sent another letter, stating that some positions were still open, but those could be filled shortly; Employer did not clarify which employees had been permanently replaced and which had not.

Claimants filed claims for unemployment compensation benefits on August 25, 1995. The Job Center denied benefits for the weeks ending February 25, March 4 and March 11 and granted benefits for the weeks ending March 18, March 25 and April 1. Following a hearing on Employer's appeal, the referee affirmed as to the first three weeks and reversed and denied benefits as to the latter three. On Claimants' appeal the Board noted that the analysis of eligibility for unemployment compensation focuses on the immediate cause for the unemployment and that proper cause must be established for each week for which benefits are claimed. The Board determined that Claimants had been permanently replaced in regard to the latter three weeks, and it granted benefits. The parties agree that only those three weeks are the subject of the present petition for review. ¹

II.

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 a situation where an employer informed striking employees that some of them had been permanently replaced. Applying the rationale of Penflex, Inc. v. Bryson, 506 Pa. 274, 485 A.2d 359 (1984), the Court concluded that where an employer hires permanent replacements, absent evidence in the record and pertinent findings that continued work remains available to the striking workers, the employment relationship is severed.

In cases where an employer hires permanent replacements, the permanently replaced or terminated employees no longer have a direct interest in the work stoppage for purposes of Section 402(d), relating to an employee's ineligibility for benefits in any week in which the unemployment is due to a work stoppage because of a labor dispute, other than a lockout. Rather, the cases are properly analyzed under Section 402(e), 43 P.S. § 802(e), relating to unemployment due to willful misconduct connected with one's work. ² Canonsburg General Hosp. The Court further held that where an employer chooses to replace only some employees, the burden is on the employer to demonstrate which employees it has replaced, because that information is solely within the employer's knowledge. If the employer fails to meet this burden, benefits are due to all striking employees.

In the present case, Employer first contends that the Board's Finding of Fact No. 25 was central but that it is not supported and in fact is contradicted by the evidence of record. That Finding refers to the list Employer provided the Union in late April, characterizing those hired after the strike as "permanent." The Board found that "[b]ased on this list, it was reasonable for many of the striking workers to believe that they had been permanently replaced and no longer had employment to return to after the work stoppage ended." Board's Decision, Finding of Fact No. 25. Employer notes that its March 15 letter to striking employees ended with the statement: "Remember--the best way to protect your job is to fill it now." N.T., Employer's Ex. 4. Employer then selectively quotes from the letter of March 24 as follows: "... we still have enough positions available for those who may want to return to work." Employer notes that the list was not created until the end of April and therefore could not affect perceptions before March 18.

As a separately stated argument, Employer emphasizes that it did not sever the employment relationship because continuing work remained available to the striking employees, citing Canonsburg General Hosp Employer...