Rich Manufacturing Corp. v. Lindsey

137 N.W.2d 140, 376 Mich. 241, 1965 Mich. LEXIS 216

• Court: Michigan Supreme Court
• Decided: October 4, 1965
• Docket: Calendar 1, Docket 50,554
• Status: Published

Opinions

Dethmers, J.

This is an unemployment compensation case. The appeal here is by employees, defendants, from a circuit court order denying benefits.

Involved is the eligibility of defendants for unemployment insurance benefits for the period from June 30, 1961, to July 17, 1961. During that time the employer, plaintiff-appellee, closed its plant. Defendants say this was an attempt by plaintiff to impose a vacation involuntarily upon its employees. Defendants were members of a labor union which had a collective bargaining agreement with plaintiff containing, inter alia, the following provisions :

“Eligible employees may take their vacations once during each calendar year upon application under the following procedure:

“(a) Applications made between January 1st and May 31st shall be granted in the order in which application is made.

“(b) Applications made between June 1st and December 31st shall be granted on a seniority basis. Such applications under this provision must be made at least 30 days before the starting date of the vacation.

“(c) It is understood that no classification shall be reduced by vacation leaves under either (.a) or (b) above so as to impede the ordinary course of production. Any vacations denied shall be determined under (a) by denying the latest application and under (b) by denying the' application of the junior employees.

- “(d) Only one application shall be accepted from' any employee during a calendar year. If an employee desires to split his vacation period, the .dates for all time to be taken must be, indicated on this one application. In the event an application is denied, the employee may reapply.

“(e) The date of vacation payment may not be prior to June 25th' of any calendar year.”

“Section 6. If production does npt .permit the granting' of time off from work, the company agrees to pay a bonus in lieu of vacations. " The amount of the bonus to be compúted -according' to sections 1 through 5 above. Such bonus in lieu of Vacations will be paid on the last pay day before July 4, 1959, to those employees who are eligible.”

“Any employee, otherwise qualified, who is laid off and who has worked at least 6 months since the last May 31st, shall be given a check in lieu of vacation to be computed according to the applicable percentage under this article, upon giving the company a 10-day notice.”

Plaintiff had posted notice to employees that it would close for annual vacation on June 30th and reopen on July 17th. The plant was closed on June 30th and on that date defendants received payments from plaintiff in amounts calculated according to the labor agreement’s vacation plan. Plaintiff’s president testified that management had expected an increase in business after the 4th of July and they found it advantageous to get vacations out of the way so that attendance thereafter would be good and production would not be broken by employees being off for vacation.

Plaintiff contends that payments made on June 30th were vacation payment and, hence, defendants were not unemployed within the meaning of the act because, under the meaning of section 48 of the Michigan employment security act (CLS 1961, § 421.48 [Stat Ann 1960 Rev § 17.552]) there had been remuneration payable to them with respect to the period in question.

Defendants’ position is that the payments to them represented a bonus due them under the labor agreement, and, accordingly, these were not remuneration with respect to that period so as to disqualify them for unemployent compensation benefits.

Applicable is Renown Stove Company v. Unemployment Compensation Commission, 328 Mich 436, as relates to the claimants in that case belonging to the International Molders & Foundry Workers’ Union, employed under an agreement providing for paid vacations during a mutually agreed upon time with, an alternative in the employee to elect to receive a bonus in lieu of vacation. In upholding their rights to unemployment compensation benefits, this Court said (p 443):

“It will be noted that under the contract the employer did not have the option of laying employees off for 1 or 2 weeks, declaring the layoff to be a vacation and designating the 40 or 80 hours’ pay in lieu of vacation provided for in the contract, to be, in fact, vacation pay; on the contrary, the option rested with the employees to elect whether they would take vacation with pay or a bonus of 40 or 80 hours’ pay in lieu of vacation with pay. The employees covered by this contract exercised their option and elected to receive a bonus * * * as they had a right to do under the contract. The payment so received was, therefore, a bonus and not vacation pay and, in consequence, the employees involved did not receive a vacation with pay.”

In this case of Rich, too, employees had the right to select their period of vacation or, under certain circumstances, to receive a bonus in lieu of vacation. The reasoning above quoted from Renown applies to the very comparable facts in this case.

As for the contract before us, its provision for bonus in lieu of vacation, if the employer deemed production to be such as not to permit vacations, would have entitled claimants to the bonus even though they had performed services during and received remuneration for every week in the year. We think that, under Hubbard v. Unemployment Compensation Commission, 328 Mich 444, this provision of the agreement and the facts in this case call for holding that the June 30th payments were bonus.

Decision of the circuit court is reversed and the ruling of the appeal board granting benefits to defendants herein is affirmed, with costs to them.

Kelly, O’Hara, and Adams, JJ., concurred with Dethmers, J. Black, J., concurred in result.