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decided: July 1, 1965.


Appeal from order of Superior Court, March T., 1964, No. 33, reversing decision of Unemployment Compensation Board of Review, Nos. B-1-D-547 and B-1-A-8026, in case of Department of Labor and Industry of the Commonwealth of Pennsylvania, Bureau of Employment Security v. Unemployment Compensation Board of Review, Freeman Lybarger, Arthur W. Mattocks et al.


Jerome H. Gerber, with him Sidney G. Handler, for appellants.

Morley W. Baker, Assistant Attorney General, with him Walter E. Alessandroni, Attorney General, for Department of Labor and Industry, Commonwealth of Pennsylvania, Bureau of Employment Security, appellee.

M. H. Goldstein, Michael Brodie, and Goldstein and Barkan, for interested party, under Rule 65.

Bell, C. J., Musmanno, Jones, Cohen, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Roberts. Mr. Justice Eagen dissents. Dissenting Opinion by Mr. Justice Musmanno. Dissenting Opinion by Mr. Justice Cohen.

Author: Roberts

[ 418 Pa. Page 473]

This is an appeal from a finding by the Superior Court that claimant-appellants were not entitled to unemployment compensation benefits under the provisions of the Pennsylvania Unemployment Compensation Law.*fn1

Claimants are members of Local 591, ILGWU, and are employed as chain machine operators by Talon, Incorporated, in Meadville, Pennsylvania. In 1961, the pertinent year for purposes of this case, the terms and conditions of claimants' employment were dictated by a contract negotiated through the collective bargaining process between their union and Talon. That contract provided, in part:

"Section 2: Working Schedule (a) Beginning in January 1961, the Chain Machine personnel shall be employed as follows: 1. In January, the Company will

[ 418 Pa. Page 474]

    adjust personnel, retaining by seniority the number of operators required to maintain production at the level of a normal 40-hour week. 2. Employees with sufficient seniority to remain at work shall be kept as operators until the pay period when their gross earnings received from the Company since January amount to five thousand dollars ($5,000), plus-or-minus fifty dollars ($50). Such operators will then go on layoff for the remainder of the year or until all younger operators have been recalled, and additional ones are required in seniority order. 3. Younger operators on layoff will be recalled in seniority order in sufficient number to maintain production at the level of a normal 40-hour work week for the remainder of the calendar year. 4. At the first of the year, the younger operators will be laid off and older operators recalled in seniority order from layoff to maintain the schedule at a normal 40-hour work week. These operators will continue working until they have received gross earnings of five thousand dollars ($5,000), plus-or-minus fifty dollars ($50), when they will be laid off and younger operators called in, as set forth in Items 2 and 3, above."

In 1961, claimants reached the specified $5,000 wage limitation in early October. Pursuant to the above contractual arrangement, they were "laid off" and the work which they had been performing was assigned to substitutes with less seniority. Claimants then filed applications for unemployment compensation benefits. In November, the Bureau of Employment Security found them ineligible for benefits because they were unavailable for suitable work under § 401(d)*fn2 and because

[ 418 Pa. Page 475]

    they had voluntarily left work under § 402(b)(1)*fn3 of the Pennsylvania Unemployment Compensation Law.

Section 401(d) provides: "Compensation shall be payable to any employe who is or becomes unemployed, and who -- . . . . (d) Is able to work and available for suitable work . . . ."

Section 402(b)(1) provides: "An employe shall be ineligible for compensation for any week -- . . . . (b)(1) In which his unemployment is due to voluntarily leaving work without cause of a necessitous and compelling nature . . . ."

From the Bureau's finding of ineligibility under the above two sections, claimants appealed to the Unemployment Compensation Board of Review which assigned the matter to a referee. After a hearing, the referee reversed the Bureau's finding of ineligibility under § 402(b)(1) (voluntary quit) but affirmed the Bureau's decision that the employees were ineligible for benefits under § 401(d) (availability for work). Claimants then appealed the referee's decision to the Board of Review which reversed the referee and held that the claimants were eligible for benefits. The Bureau of Employment Security appealed the Board's decision to the Superior Court*fn4 which reversed the Board and found claimants ineligible for benefits under both sections, reaching thereby the same result as the initial determination by the Bureau. 203 Pa. Superior Ct. 336, 201 A.2d 310 (1964). Claimants, joined by Talon, filed a petition for allocatur which we granted.*fn5 203 Pa. Superior Ct. xxxix.

[ 418 Pa. Page 476]

Careful review of the record, the briefs and the oral arguments in this case convinces us that the order of the Superior Court must be affirmed on the ground that claimants voluntarily left work and that unemployment compensation benefits are therefore precluded under § 402(b)(1) of the Act.

In arriving at our determination of these appeals, we are aided considerably by the guidelines set forth in the Legislature's declaration of public policy found in § 3 of the Act.*fn6 That section is not merely a perfunctory preface but is, rather, the keystone upon which the entire Act rests and the basis upon which the individual sections of the Act must be interpreted and construed. Barclay White Co. v. Unemployment Compensation Bd. of Review, 356 Pa. 43, 50 A.2d 336 (1947), cert. denied, 332 U.S. 761, 68 S. Ct. 63; Harris Unemployment Compensation Case, 185 Pa. Superior Ct. 235,

[ 418 Pa. Page 477138]

A.2d 207 (1958); Fazio Unemployment Compensation Case, 164 Pa. Superior Ct. 9, 63 A.2d 489 (1949); Michalsky Unemployment Compensation Case, 163 Pa. Superior Ct. 436, 62 A.2d 113 (1948). More particularly, the relationship between § 3 and § 402(b)(1) is close and complementary, calling for the construction of § 402(b)(1) in the light of the fuller, more comprehensive, and more explicit language of § 3. Dept. of Labor and Industry v. Unemployment Compensation Bd. of Review, 148 Pa. Superior Ct. 246, 24 A.2d 667 (1942), allocatur refused, 148 Pa. Superior Ct. xxiii; Labor and Industry Dept. v. Unemployment Compensation Bd. of Review, 133 Pa. Superior Ct. 518, 3 A.2d 211 (1938), allocatur refused, 133 Pa. Superior Ct. xxxiii.

The § 3 declaration of public policy persuades us that legally sustaining the program of planned unemployment agreed upon by Talon and claimants would contravene the language and intent of § 402(b)(1). Such a determination would also violate the policy upon which the Act is based and would surely provide a method by which the effectiveness of the program of unemployment compensation benefits would eventually be nullified.

An examination of the § 3 declaration of public policy reveals that the Act is aimed at conditions arising out of "involuntary unemployment", the very concept with which § 402(b)(1) is concerned. The use of the word "involuntary" in the declaration of public policy section is enlightening because the Legislature equates that word with the phrase "through no fault of their own." Can it reasonably be said that claimants in the instant case found themselves unemployed "through no fault of their own"? Obviously not. The terms of their employment contract were considered by them, voted upon by them, and agreed upon by them

[ 418 Pa. Page 478]

    with their employer through their union bargaining agents.*fn7

Clarification of the word "involuntary" further particularizes the kind of situation which the Act is designed to alleviate. It is to provide protection against the "hazards of unemployment." Clearly this refers not to unemployment arranged, agreed upon, and sanctioned by the employer and employee but, rather, to unemployment which is attendant upon the vicissitudes of the economic climate.*fn8 The purpose of the Act is to prevent the worker from becoming the innocent pawn of forces and movements beyond his control. Suffice it to say that this is a large enough undertaking without increasing the burden upon the unemployment compensation system by adding to its protective cover situations of "unemployment" devised by the employer and his employee which, by contract, are made virtually certain to occur and reoccur at regular intervals. Surely, at this stage of experience with the system, it must be obvious that a great and basic difference exists, economically and legally, between the nature of involuntary unemployment as contemplated by the Act and that "unemployment" continuously and deliberately planned and created by the contract arrangement involved at Talon.

[ 418 Pa. Page 479]

It has been pointed out that one of the purposes of the Unemployment Compensation Law was to encourage the reduction of unemployment through the incentive of reduced employer contributions to the unemployment compensation fund for those who achieve a stabilization of employment in their businesses. See Sturdevant Unemployment Compensation Case, 158 Pa. Superior Ct. 548, 563, 45 A.2d 898, 906 (1946). Although we recognize that this secondary aim must not take precedence over the paramount objective of providing relief to employees who leave work through no fault of their own, we are equally convinced that the employer and employee must not be permitted to create "unemployment" in order to secure payments from the unemployment compensation fund by means of a contractually agreed upon system which does not discourage unemployment but actually creates and fosters it on a periodic and continuing basis.

In concluding that claimants voluntarily left their employ within the meaning of § 402(b)(1), we take cognizance of Gianfelice Unemployment Compensation Case, 396 Pa. 545, 153 A.2d 906 (1959), which claimants urge upon us as authority for the proposition that their labor agreement with Talon has no bearing upon the issue of the voluntariness of their leaving. That case, however, is completely distinguishable from the instant case both on its facts and its underlying policy rationale and can not be deemed to be controlling in the instant situation.

Gianfelice involved a man who, having attained the age of 68, became subject to the terms of an employerunion contract under which an employee, after reaching the age of 68, could continue work only with the consent of the employer. Not obtaining that consent, claimant filed for unemployment compensation benefits shortly after his 68th birthday. In holding that this retirement provision of claimant's employment contract

[ 418 Pa. Page 480]

    did not make the retirement voluntary, the Court's decision carefully and wisely limited the language in the case to its facts.

In Gianfelice the Court felt that the labor agreement was entered into in order to restrict the employer's right to dismiss at will until the employee reached a certain age and that it could not be said that by seeking this protection against arbitrary dismissal by the employer, the employee voluntarily quit once he reached the age where his employer could dismiss at will.

Here the situation is exactly the opposite. Employees who, on the basis of seniority, would ordinarily have the right to work as long as work existed, gave up that right and agreed that upon reaching the $5,000 wage mark, they would relinquish their positions to junior employees.*fn9

Unlike Gianfelice, the instant case does not present a situation where an employee merely becomes available for retirement against his will. Instead, what is presented here is a planned, intentional system of unemployment devised for the purpose of seeking to create eligibility for benefits from the unemployment compensation fund. The retirement situation in Gianfelice can in no way be analogized to the contrived periodic "lay-offs" involved here and the contemplated inclusion of payments from the unemployment compensation fund in the claimants' yearly employment benefits. This "lay-off" comes not as the result of any considerations for the proper performance of work or

[ 418 Pa. Page 481]

    the lack of work*fn10 but, instead, upon the mere receipt of $5,000 in wages, an arbitrarily fixed amount, in any one year. In addition, re-employment was not only certain in this case, but guaranteed by contract on a regular, scheduled basis.

The § 3 clarification of the word "involuntary" as meaning "through no fault of their own" brings out a major distinguishing characteristic between the present case and Gianfelice. In the latter case it could be said that claimant lost his position through no fault of his own. Indeed, the agreement which he, through his union, entered into, prolonged the period during which retirement and unemployment would not occur. The agreement made him secure in his job until he reached a certain age, at which time he could be retired. In the instant case, on the other hand, we find not an effort to prolong the happening of an inevitable event which gives rise to unemployment but the creation of a new kind of event, a new condition which will, by mutual consent, automatically result in laying off workers. Surely then, it can not be said that claimants were laid off through no fault of their own. It was their ratification of the employment agreement

[ 418 Pa. Page 482]

    which created the entire set of circumstances of which they now claim to be the "victims." It was part of their agreed plan that upon reaching the $5,000 wage limit they would ...

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