Whelan's, Inc. v. Kansas Dept. of Human Resources

• Decision Date: 27 April 1984
• Docket Number: No. 55748,55748
• Citation: 681 P.2d 621,235 Kan. 425
• Parties: , 116 L.R.R.M. (BNA) 2379, 26 Wage & Hour Cas. (BNA) 1250, 101 Lab.Cas. P 55,479, 122 Lab.Cas. P 56,955 WHELAN'S, INC., and Vernon Jarboe, an individual, Appellees, v. KANSAS DEPARTMENT OF HUMAN RESOURCES, et al., Appellants, William F. Abbott, et al., Intervenors/Appellants.
• Court: Kansas Supreme Court

Page 621

681 P.2d 621

235 Kan. 425, 116 L.R.R.M. (BNA) 2379,

26 Wage & Hour Cas. (BNA) 1250,

101 Lab.Cas. P 55,479, 122 Lab.Cas. P 56,955

WHELAN'S, INC., and Vernon Jarboe, an individual, Appellees, v. KANSAS DEPARTMENT OF HUMAN RESOURCES, et al., Appellants William F. Abbott, et al., Intervenors/Appellants.

No. 55748.

Supreme Court of Kansas.

April 27, 1984.

Syllabus by the Court

1. Under the test of Farmer v. Carpenters, 430 U.S. 290, 51 L.Ed.2d 338, 97 S.Ct. 1056 (1977), the state alone has jurisdiction over wage issues since they are not protected under the National Labor Relations Act, do not affect national labor policy, and are of great local concern.

2. The preemption doctrine is not to be applied in a manner which "sweeps away state-court jurisdiction." The United States Supreme Court mandates the doctrine not be applied in a "literal, mechanical fashion." See Sears, Roebuck & Co. v. Carpenters, 436 U.S. 180, 56 L.Ed.2d 209, 98 S.Ct. 1745 (1978).

3. In an appeal from an order enjoining the Kansas Department of Human Resources from considering a wage issue under the Kansas Wage Payment Act it is held: The injunction should be dissolved because a wage issue peripheral to an unfair labor practice issue is not preempted by the National Labor Relations Board's resolution of the labor issue. The two issues are distinct and therefore separate from each other. The unfair labor practice issue is preempted by the NLRA and the wage issue is a state issue over which the NLRB has no jurisdiction.

Arnold Berman, Chief Counsel, Lawrence, argued the cause and was on the brief for the appellants Kansas Dept. of Human Resources, et al.

Thomas H. Marshall of Blake & Uhlig, P.A., Kansas City, argued the cause and was on the brief for intervenors/appellants William F. Abbott, et al.

Richard D. Anderson of Colmery, McClure, Letourneau, Entz & Merriam, P.A., Topeka, argued the cause and was on the brief for the appellees.

HERD, Justice:

This is an appeal by the Kansas Department of Human Resources (KDHR) from a decision of the Shawnee County District Court enjoining the KDHR from proceeding under a wage claim made pursuant to K.S.A. 44-313 et seq., on the theory that the KDHR action is preempted by the action of the National Labor Relations Board (NLRB).

Appellee Whelan's, Inc. is a company doing business in the State of Kansas and is subject to the provisions of K.S.A. 44-313 et seq. Appellee Vernon Jarboe is the chief executive officer of Whelan's Inc. and is subject to the provisions of K.S.A. 44-313 et seq., as found in K.S.A. 44-323(b). Intervenors are employees of Whelan's.

For a number of years, Whelan's maintained a collective bargaining relationship with its employees' designated bargaining agents, Truck Drivers Local No. 696, Carpenters Local No. 1940 and Carpenters Local No. 1445. On August 31, 1981, the collective bargaining agreements of Truck Drivers Local No. 696 and Carpenters Local No. 1940 expired. Negotiations on new agreements continued with work uninterrupted through late October, 1981. On October 12, 1981, Whelan's implemented a ten percent wage reduction for all employees from that contained in the expired collective bargaining agreements. Then on November 18, 1981, Whelan's reduced wages an additional fifteen per cent. On October 26, 1981, each of the employees who are intervenors in this action went on strike.

On December 9, 1981, an unfair labor practice charge was filed with the NLRB (Case No. 17-CA-10751) by Truck Drivers Local No. 696, alleging Whelan's refused to pay accrued vacation benefits to striking employees in retaliation for their striking activities.

The NLRB then asserted its jurisdiction over the unfair labor practice charge. On January 20, 1982, general counsel for the NLRB issued a Complaint and Notice of Hearing, finding probable cause of a violation of the National Labor Relations Act (NLRA), 29 U.S.C. § 151 et seq., due to Whelan's refusal to pay striking employees their vacation pay.

On March 4, 1982, Whelan's executed a settlement agreement of the unfair labor practice charge, agreeing to pay all striking employees their accrued vacation pay at the current reduced wage rate. The settlement agreement was approved by the regional director of the NLRB on March 31, 1982. Before the settlement agreement was approved, the regional director considered and rejected arguments by the Union that the vacation pay should have been calculated at the wage rate in existence when the vacation time was accrued, which was prior to the wage cuts. The Union refused to enter into the settlement agreement because of the wage rate at which the accrued vacation pay was computed. The reduced amount of vacation pay was then paid to all striking employees by Whelan's. On June 18, 1982, the acting regional director advised the Union and Whelan's the terms of the settlement agreement had been carried out and the file was closed. No appeal was taken.

Thereafter, intervenors in the instant matter filed a claim for wages under K.S.A. 44-313 et seq. with the KDHR, alleging their accrued vacations should be paid at the wage rate in existence at the time the vacation wages were earned. The matter was set for hearing by the KDHR.

Appellees filed an action in Shawnee County District Court asking for a permanent injunction prohibiting the KDHR from proceeding with an administrative determination of the wage claims filed by intervenors. Appellees maintain the action by the KDHR is barred on the grounds of federal pre-emption. The District Court on June 28, 1982, directed that all proceedings on the merits of the claims of the intervenors before the state agency be stayed pending a determination by the agency regarding pre-emption.

On November 24, 1982, the decision of the agency was rendered. The agency determined the claims of the intervenors were not pre-empted by the NLRA nor by the actions of the NLRB in connection with unfair labor practice charges which were filed by the Truck Drivers Local No. 696.

On April 12, 1983, the district court reversed the decision of the agency and concluded, as a matter of law, the claims of the intervenors were not within the jurisdiction of the agency. The court then granted the permanent injunction requested by appellees. The KDHR appeals.

The sole issue here is whether the district court erred, as a matter of law, when it held the KDHR was pre-empted by the NLRA from acting on the wage claims filed by the intervenors pursuant to K.S.A. 44-313 et seq.

The enactment of the NLRA in 1935 marked a fundamental change in this nation's labor policies. Congress expressly recognized collective organization of segments of the labor force into bargaining units which were capable of exercising economic power comparable to that possessed by employers could produce benefits for the entire economy. Congress decided the benefits of collective bargaining would outweigh the occasional costs of industrial strife associated with the organization of unions and the negotiation and enforcement of collective bargaining agreements. The previous notion that union activity was an illegal "conspiracy" and that strikes and picketing were examples of unreasonable restraints of trade was displaced by an unequivocal national declaration of policy establishing the legitimacy of labor unionization and encouraging collective bargaining. Gorman, Labor Law 1-6 (1976).

The new federal statute protected the collective bargaining activities of employees and their representatives and created a regulatory scheme to be administered by an independent agency which would develop experience and expertise in the labor relations area. The new agency was denominated NLRB. The United States Supreme Court promptly decided the federal agency's power to implement the policies of the new legislation was exclusive, making the states powerless to enter overlapping rules. State labor law was pre-empted by the NLRA. See Bethlehem Co. v. State Board, 330 U.S. 767, 775-77, 67 S.Ct. 1026, 1031-32, 91 L.Ed. 1234 (1947).

The pre-emption principle is derived from the supremacy clause of Article 6 of the United States Constitution. Additionally, Article 1, Section 8 of the Constitution provides Congress with the exclusive authority to regulate any conduct affecting interstate commerce. By virtue of this authority, federal law may pre-empt or supersede any state law on the same subject. In passing federal legislation under the commerce clause, Congress has discretion to determine the extent to which a federal statute is to pre-empt or permit state regulation in the same field. Hence, the constitutional basis for the NLRA is the commerce clause. The pre-emption in this area arose from the interest in uniform development of the national labor policy which required that matters which fell squarely within the regulatory jurisdiction of the NLRB be evaluated exclusively by the agency. The Supreme Court recognized this in Garner v. Teamsters Union, 346 U.S. 485, 74 S.Ct. 161, 98 L.Ed. 228 (1953).

Until recently, Kansas has held state law is pre-empted by the NLRA from regulation of labor-management disputes. See Inland Industries, Inc. v. Teamsters & Chauffeurs Local Union, 209 Kan. 349, 496 P.2d 1327 (1972); Hyde Park Dairies v. Local Union No. 795, 182 Kan. 440, 321 P.2d 564 (1958); and Asphalt Paving v. Local Union, 181 Kan. 775, 317 P.2d 349 (1957).

In 1959, the United States Supreme Court articulated a test to determine when the NLRA would pre-empt state law. The need for such a test was necessary since despite the general pre-emption of state law by the NLRA, Congress still left much to the states, " ' "though Congress has refrained from telling us how much." ' " San Diego Unions v. Garmon, 359 U.S. 236, 240, 79 S.Ct. 773, 776, 3 L.Ed.2d 775 (1959), quoting Garner, 346 U.S. at 488, 74 S.Ct. at 164. The test to determine if the States must defer to the NLRB is whether an activity is arguably subject to § 7...