No. 18 E.D. Appeal Docket 1982, Appeal from the Order of the Commonwealth Court dated December 15, 1981, entered at No. 613 C.D. 1980, Reversing the Order of the Unemployment Compensation Board of Review dated February 29, 1980, entered at Appeal Nos. B-79-3-F-877 to 996, etc.,
Nix, C.j., and Larsen, Flaherty, McDermott, Hutchinson, Zappala and Papadakos, JJ. McDermott, J., concurs in the result. Hutchinson, J., filed a dissenting opinion in which Flaherty, J., joined.
We are again faced with a question of whether employees involved in a work stoppage are ineligible for unemployment
compensation benefits under the terms of section 402(d) of the Pennsylvania Unemployment Compensation Law, Act of December 5, 1936, P.L. 2897, as amended, 43 P.S. § 802(d) (1964). The specific issue is whether our test for ineligibility as set forth in our decision in Vrotney Unemployment Compensation Case, 400 Pa. 440, 163 A.2d 91 (1960) is to be modified where the employer's unilateral action altering the status quo represented a "benefit" to the employees.
The instant dispute arose when 258 employees,*fn1 represented by Local 730 of the United Association of Journeymen and Apprentices of the Plumbing and Pipe-Fitting Industry ("Union"), who had been employed by appellant Trane Company ("Employer") prior to a work stoppage, were denied unemployment compensation benefits by the Office of Employment Security on the ground that their unemployment was the result of a labor dispute other than a lockout. 43 P.S. § 802(d) (1964). That decision, affirmed by the Unemployment Compensation Board of Review ("Board"), was appealed to the Commonwealth Court. A three-judge panel of that court, one judge dissenting, reversed and remanded to the Board for the computation of benefits. Local 730, United Association of Journeymen and Apprentices of Plumbing and Pipe-Fitting Industry v. Commonwealth, Unemployment Compensation Board of Review, 63 Pa. Commw. 195, 437 A.2d 1055 (1981). We granted allocatur and now affirm.
The relevant facts, as determined by the Board's referee, may be summarized as follows. Shortly before the expiration of an existing collective bargaining agreement ("Agreement"), the Employer and the Union began negotiations on a new contract. Although the parties were unable to reach
a new agreement prior to expiration, the Union offered to continue working for a reasonable period of time under the terms and conditions of the expired Agreement pending the outcome of the ongoing negotiations. The Employer permitted the employees to continue to work under the terms and conditions of the Agreement until June 15, 1979. On that date, during a meeting with Union representatives, the Employer presented a list of changes in economic terms and conditions of employment, including an across-the-board hourly wage increase and enhanced fringe benefits, which it intended to implement the following Monday (June 18). The Union refused to present the list to its membership for a vote, and the Employer implemented its proposals as scheduled. The employees continued to work under these changed terms and conditions until July 20, 1979. On the following day, the Union membership, having been apprised of the Employer's economic proposals, voted to reject them and to stop work. The parties ultimately arrived at a new collective bargaining agreement on October 9, and work resumed on October 10, 1979.
The dispute, during the negotiations, centered on wages and fringe benefits. It appears that the parties were tentatively in agreement as to the non-economic items prior to the April 2 expiration date. The altered status unilaterally imposed by the Employer, effective June 18, represented the wage and fringe benefit increases which were part of the package offered by the Employer and rejected by the Union at that point in the negotiations.*fn2 Between June 18 and July 21 the employees remained at work under the improved wage and fringe levels. This change in status was placed before the Union membership on July 21, at which time the Union membership rejected the offer and the work stoppage began.
Section 402(d) of the Pennsylvania Unemployment Compensation Law provides in pertinent part as follows:
An employe shall be ineligible for compensation for any week --
(d) In which his unemployment is due to a stoppage of work, which exists because of a labor dispute (other than a lock-out) at the factory, establishment or other premises at which he is or was last employed: . . . . 43 P.S. § 802(d) (1964) (emphasis supplied).
The test for determining whether a work stoppage is the result of a lockout or a strike is well-established:
Have the employees offered to continue working for a reasonable time under the pre-existing terms and conditions of employment so as to avert a work stoppage pending the final settlement of the contract negotiations; and has the employer agreed to permit work to continue for a reasonable time under the pre-existing terms and conditions of employment pending further negotiations? If the employer refuses to so extend the expiring contract and maintain the status quo, then the resulting work stoppage constitutes a 'lockout' . . . .
Vrotney Unemployment Compensation Case, supra 400 Pa. at 444-445, 163 A.2d at 93-94 (1960).
Accord, Fairview School District v. Commonwealth, Unemployment Compensation Board of Review, 499 Pa. 539, 454 A.2d 517 (1982); Borello v. Unemployment Compensation Board of Review, 490 Pa. 607, 417 A.2d 205 (1980); Unemployment Compensation Board of Review v. Sun Oil Co., 476 Pa. 589, 383 A.2d 519 (1978); Philco Corporation v. Unemployment Compensation Board of Review, 430 Pa. 101, 242 A.2d 454 (1968).
The rationale for employing this test to determine eligibility for benefits under section 402(d) was explained by the Vrotney Court as follows:
In the very delicate and sensitive negotiations which are involved in the development of a new collective bargaining agreement to replace one that is nearing its expiration, all parties must be sincere in their desire to maintain the continued operation of the employer's enterprise. The law contemplates that collective bargaining
will be conducted in good faith, with a sincere purpose to find a basis for agreement. Neither an adamant attitude of "no contract, no work" on the part of the employees, nor an ultimatum laid down by the employer that work will be available only on his (employer's) terms, are serious manifestations of a desire to continue the operation of the enterprise.
Id. 400 Pa. at 443-444, 163 A.2d at 93.
As this Court stated in Philco Corporation v. Unemployment Compensation Board of Review, supra:
Since the purpose of our unemployment compensation system is to compensate an individual when work has been denied him through no fault of his own, logically the test of whether a work stoppage resulted from a strike or a lock-out requires us to determine which side, union or management, first refused to continue operations under the status ...