Petition — Hawaiian Telephone Co. v. Department of Labor & Industrial Relations
Supreme Court brief1980
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—_ ‘YS APR 24 1980
Supreme Court of the United States
OcToBER TERM, 1979 1 inne diet
(a
No. €9-1699
SS
HAWAIIAN TELEPHONE COMPANY,
and
HAWAII EMPLOYERS COUNCIL, CHAMBER OF COM-
MERCE OF THE UNITED STATES, anD CHAMBER OF
COMMERCE OF HAWAII,
vs.
STATE OF HAWAII DEPARTMENT OF LABOR AND
INDUSTRIAL RELATIONS, ROBERT K. HASEGAWA,
THOMAS S. BROWN,
Petitioners,
and
INTERNATIONAL BROTHERHOOD OF ELECTRICAL
WORKERS, AFL-CIO LOCAL 1357, INTERNATIONAL
BROTHERHOOD OF ELECTRICAL WORKERS, AFL-
CIO LOCAL 1260, ann HAWAII STATE FEDERATION
OF LABOR, AFL-CIO,
Respondents.
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ANTHONY G. SOUSA RAYMOND M. TORKILDSON
General Counsel JARED H. JOSSEM i
Hawaiian Telephone Company TORKILDSON, KATZ, JOSSEM
1177 Bishop Street & LODEN
Honolulu, Hawaii 1512 Amfac Building
Of Counsel 700 Bishop Street
VINCENT J. APRUZZESE Honolulu, Hawaii 96813
FRANCIS A. MASTRO Attorneys for Petitioner
APRUZZESE & McDERMOTT Hawaiian Telephone
Independence Plaza Company
500 Morris Avenue LAWRENCE M. COHEN
Springfield, New Jersey 07081 JEFFREY S. GOLDMAN
Attorneys for the Chamber of FOX AND GROVE, CHARTERED
Commerce of the United States 233 South Wacker Drive
and the Chamber of Com- Chicago, Illinois 60606
merce of Hawaii Attorneys for Petitioner Hawaii’
Employers Council
Gunthorp-Warren Printing Company, Chicago e Financial 6-6565
INDEX
PAGE
REE SR TS Ne ae oe Or ee 2
IR ot Ce RUG Cae yh Geiss ake poe scecss 2
| EERE EEE 2
| Constitutional and Statutory Provisions Involved........ 2
| Se sic lewcawkin sand ss ccceces 4
| Reasons for Granting the Writ...................... 6
A. The Decision Below Conflicts with the Decisions
of Other Courts of Appeals................ 6
| B. The Decision Below Misinterpreted Hicks v.
Miranda and Other Decisions of This Court.... 7
ee 10
Appendices
Appendix A, Decision of the Court of Appeals for the
Ninth Circuit in Case No. 76-1584 and Case No.
PR ES ns bo Vivek wig eae ess sco oes Al
Appendix B, Order dated March 24, 1980 in Case
No. 76-1584 and Case No. 76-2056 granting
Appellees’ Motion for a Stay of Mandate, United
States Court of Appeals for the Minth Circuit... .. A8
Appendix C, Opinion of the United States District
Court for the District of Hawaii dated July 12, 1974
granting plaintiff's prayer for a Preliminary Injunc-
ee SS cy A9
Appendix D, Declaratory Judgment and Order, dated
October 14, 1975, of the United States District
Court for the District of Hawaii in favor of Hawai-
ian Telephone Company and Hawaii Employers
Nd er aia ie Pe ee ce ce A24
ii
TABLE OF AUTHORITIES
| Cases
Batterton v. Francis, 432 U.S. 416 (1977) .......... 6
Colorado Springs Amusement Ltd. v. Rizzo, 524 F. 2d
571 (3rd Cir. 1975) cert. denied 428 U.S. 913 (1976) 7
Fusari v. Steinberg, 419 U.S. 379 (1975) ........... 7
Gibson v. Berryhill, 411 U.S. 564 (1973) ... SDs ace nee 7
Hicks v. Miranda, 422 U.S. 332 (1975) ....... 2, 6, 7, 9, 10
Kimbell, Inc. v. Employment Security Commission of New
Mexico, 429 U.S. 804 (1976) .......... 2, 6, 7, 8, 9, 10
Mandel v. Bradley, 432 U.S. 173 (1977) ............ 7
Meadow Gold Dairies v. Wiig, 50 Haw. 225, 437 P. 2d
PaT GEER Wakes Gra ass CAMA Ala Wie ee MB ew 4
N. L. R. B. v. MacKay Radio and Telegraph Co., 304 U. S.
DAT SARS ORS oH aS EN ERE TES CES CR SER 5
New York Telephone Co. v. New York Department of
Labor, 566 F. 2d (2nd Cir. 1977) aff'd 440 U.S. 519
CERPMRAGas Sage GNSS NG chy CA Reb ebhae cis os 6
New York Telephone Co. v. New York Department of
Labor, 440: U.'S. S19 C1979): 2s OS cccee, 10
Ohio Bureau of Employment Service v. Hodory, 431 U. S.
STE CESSES 0s cn Nake ee I ie MCHA Bb ie RAED 6 6,9
Super Tire Engineering Corp. v. McCorkle, 550 F. 2d 903
(3rd Cir.) cert. denied 434 U.S. 827 (1977) ....... 6
Constitutional Provisions and Statutes
Article VI, Clause 2, United States Constitution ....... 2
Labor-Management Relations Act of 1947, 29 U.S.C.
FSR Aire bP ule sae ie UE AEE eR oh oe wu 3
Fe > Sassi ne rue plameeere nh eaeee Ge eS Eee 3, 4
a I OE OY
ili
Other Sources
Appellees Answer Brief, Kimbell, Inc. v. Employment
Security Commission of New Mexico, New Mexico Su-
prome Court, Case No: 10323 ci. oc icc ce cleebe
Brief for the Chamber of Commerce of the United States
of America As Amicus Curiae, Kimbell, Inc. v. Employ-
ment Security Commission, United States Supreme
CE Fe Free ee Oink a Saw ea CRGs + heave
Comment, The Precedential Weight of a Dismissal by The
Supreme Court For Want of a Substantial Federal Ques-
tion: Some Implications of Hicks v. Miranda, 76 Colom.
Ri I RENT oT. eos eee ame bokans
Memorandum For The United States As Amicus Curiae,
Kimbell, Inc. v. Employment Security Commission,
United States Supreme Court No. 75-1452 .........
Motion of Appellee To Dismiss Appeal, Kimbell, Inc. v.
Employment Security Commission, United States Su-
DOWN SUNS TO, FO TSE gc ais k ovis ww cas Cob acess
GS RP POON: 8928 LISTS) 8 oak fcc vlewee sales
Supplemental Brief in Response To Memorandum For
The United States As Amicus Curiae, Kimbell, Inc. v.
Employment Security Commission, United States Su-
OO Ie Pes FP INO 5656 i tk eek ca wecns
IN THE
Supreme Court of the Anited States
OCTOBER TERM, 1979
HAWAHAN TELEPHONE COMPANY
and
HAWAII EMPLOYERS COUNCIL, CHAMBER OF COM-
MERCE OF THE UNITED STATES, anpD CHAMBER OF
COMMERCE OF HAWATI,
Petitioners,
vs.
STATE OF HAWAII DEPARTMENT OF LABOR AND
INDUSTRIAL RELATIONS, ROBERT K. HASEGAWA,
THOMAS S. BROWN,
and
INTERNATIONAL BROTHERHOOD OF ELECTRICAL
WORKERS, AFL-CIO LOCAL 1357, INTERNATIONAL
BROTHERHOOD OF ELECTRICAL WORKERS, AFL-
CIO LOCAL 1260, ann HAWAII STATE FEDERATION
OF LABOR, AFL-CIO,
Respondents.
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
Joint Petitioners respectfully pray that a writ of certiorari
issue to review the judgment of the United States Court of Ap-
peals for the Ninth Circuit entered in this case on March 10,
1980.
2
QPINIONS BELOW
The opinion of the Court of Appeals, not yet reported, appears
as Appendix A hereto. The Court’s subsequent order of March
10, 1980, granting a stay of mandate, is reproduced as Appendix
B. The initial opinion of the District Court granting a prelimi-
nary injunction was entered on July 12, 1974, and is reported at
378 F.Supp. 791. Appendix C. The District Court’s final
opinion, entered on October 14, 1975, and a final declaratory
judgment and order, as amended, entered on February 9, 1976,
are reported at 405 F. Supp. 275. Appendix D.
JURISDICTION
The opinion and judgment of the United States Court of
Appeals for the Ninth Circuit issued on March 10, 1980.
App. A. The jurisdiction of this Court is invoked under 28
U.S.C. § 1254(1).
QUESTIONS PRESENTED
Whether, under the doctrine of Hicks v. Miranda, 422 U.S.
332 (1975), this Court’s summary dismissal of the appeal in
Kimbell, Inc. v. Employment Security Commission, 429 U. S.
804 (1976), requires that the lower courts sustain, notwith-
standing federal preemption considerations, any special accom-
modations in aid of labor unions under “American Rule” state
unemployment compensation schemes, despite the impact of
those special accommodations upon the core of federal labor
policy, i.e. free collective bargaining, and despite the absence of
any Congressional approval of such special accommodations.
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
Article VI, Clause 2, of the United States Constitution
provides:
3
This Constitution, and the Laws of the United States
which shall be made in Pursuance thereof; and all Treaties
made, or which shall be made, under the Authority of the
United States, shall be the supreme Law of the Land; and
the Judges in every State shall be bound thereby, any
Thing in the Constitution or laws of any State to the
Contrary notwithstanding.
In pertinent part, the Hawaii Employment Security Law
(Haw. Rev. Stat. Ch. 383) provides:
§ 383-30 Disqualification for Benefits. An individual
shall be disqualified for benefits . . .
(4) Labor dispute. For any week with respect to which
it is found that his unemployment is due to a stoppage of
work which exists because of a labor dispute at the factory,
establishment or other premises at which he is or was last
employed; provided that this paragraph shall not apply if it
is shown that: —
(A) He is not participating in or directly interested
in the labor dispute which caused the stoppage of
work; and
(B) He does not belong to a grade or class of
workers of which, immediately before the commence-
ment of the stoppage, there were members employed
at the premises at which the stoppage occurs, any of
whom are participating in or directly interested in the
dispute; provided that, if in any case separate branches
of work, which are commonly conducted as separate
businesses in separate premises, each such department
shall, for the purpose of this subsection, be deemed to
be a separate factory, establishment or other premises.
Section 1 of the Labor Management Relations Act, 1947
(29 U.S.C. § 141), provides:
Short title; Congressional declaration of purpose and policy
* * * * *
(b) Industrial strike which interferes with the normal
flow of commerce and with the full production of articles
and commodities for commerce, can be avoided or sub-
4
stantially minimized if employers, employees, and labor
organizations each recognize under law one another’s
legitimate rights in their relations with each other, and
above all recognize under law that neither party has any
right in its relations with any other to engage in acts or
practices which jeopardize the public health, safety, or
interest.
It is the purpose and policy of this chapter, in order to
promote the full flow of commerce, to prescribe the legiti-
mate rights of both employees and employer in their
relations affecting commerce, to provide orderly and peace-
ful procedures for preventing the interference by either
with the legitimate rights of the otker, to protect the rights
of individual employees in their relations with labor organi-
zations whose activities affect commerce, to define and
proscribe practices on the part of labor and management
which affect commerce and are inimical to the general
welfare, and to protect the rights of the public in connec-
tion with labor disputes affecting commerce.
STATEMENT OF THE CASE
Within one week after commencing an economic strike
against Hawaiian Telephone Company (“HAWTEL”) in May,
1974, over 3,000 strikers, none of whom was permanently
replaced, filed claims for unemployment compensation benefits,
which would have substantially replaced their lost wages. There- _
after, while the strike was still in progress, the Hawaii Depart-
ment of Labor and Industrial Relations (“HDLIR”) waived the
normal requirement that these claimants seek or register for
work, accepted their claims on “mass claim sheets” signed at
picket lines or at their union’s office, and commenced an ad-
ministrative investigation into the HAWTEL’s strikebound
operations.’ App. C, p. Al3; App. D, p. A51. Shortly after
1. Hawaii law (see p. 3, supra) permits strikers to receive
unemployment benefits only where there has not been a “stoppage
of work”, i.e., a “substantiai curtailment” of the employer’s produc-
tive operations. App. A, p. A2; Meadow Gold Dairies v. Wiig,
50 Haw. 225, 437 P.2d 317 (1968).
5
the 35-day strike ended, with all strikers returning to their
jobs, HAWTEL brought this action, in the United States
District Court for the District of Hawaii, seeking to prevent
the HDLIR from obtaining and providing to the striking union
information about its strike-bound operations, as well as to
prevent the payment of over $1.2 million in benefits at the
Company’s expense. The complaint alleged that, under the
Supremacy Clause of the United States Constitution, Hawaii’s
striker benefit scheme was preempted because it impinged upon
HAWTEL’s right to successfully exercise its federal right to
maintain productive operations during a strike. See, e.g., N. L.
R.B. v. MacKay Radio and Telegraph Co., 304 U.S. 333,
345 (1938).
Reviewing essentially undisputed facts, the District Court
granted HAWTEL a preliminary injunction and entered an
opinion on July 12, 1974. App. C.
After pretrial conferences which resulted in numerous factual
Stipulations, the case was tried before the District Court in
October and December, 1974. The District Court received
extensive additional evidence concerning the nature and im-
pact upon the process of collective bargaining of Hawaii’s
policy of providing confidential business data to unions and
money to their striking members only when the State determines
that an employer has maintained productive operations in spite
of a strike. The Court subsequently entered a declaratory order
declaring that the challenged Hawaii law was invalid. App. D.?
On appeal, the Court of Appeals reversed. It held that this
Court’s summary disposition “for want of substantial federal
2. The District Court found that the availability of tax-free
benefits to strikers at HAWTEL’s expense, as well as the company’s
required disclosure of detailed operating information useful to the
union, “irreconcilably intrudes into the federal process of free
collective bargaining.” App. D, p. A53. The Court further con-
cluded that “Congress has never even inferred that it approves this
anomalous situation,” and found that Hawaii’s law “fundamental[ly]
differ[s]” from the New York and Rhode Island type of unemploy-
ment acts “in the scope of [its] application.” App. D, pp. A53, A45.
None of these findings were disturbed on appeal.
oo wee > ee
6
question” in Kimbell, Inc. v. Employment Security Commission,
429 U.S. 804 (1976), was “controlling” under the doctrine of
Hicks v. Miranda, 422 U.S. 332 (1975). The lower court
agreed with the reasoning of the Third Circuit in Super Tire .
Engineering Corp. v. McCorkle, 550 F.2d 903 (3rd Cir.),
cert, den. 434 U.S. 827 (1977), which had similarly found
Kimbell to be “a binding precedent,” and distinguished New
York Telephone Co. v. New York Dept. of Labor, 566 F.2d
388 (2d Cir. 1977), affd 440 U.S. 519 (1979), which had
“determined that Kimbell was not a binding precedent in the
case before it.” The Court of Appeals, therefore, did not address
the “merits” of the Hawaii law. App. A, p. A3.
REASONS FOR GRANTING THE WRIT
A. The Decision Below Conflicts with the Decisions of
Other Courts of Appeals
The decision below raises a substantial question with respect
to the effect of a summary dismissal under the Hicks doctrine.
In the area at issue—whether state unemployment compen-
sation statutes improperly impinge upon federal labor law
—the courts of appeals have drawn conflicting conclusions.
The Court below, as well as the Third Circuit, concluded that
under Hicks, this Court’s summary disposition of Kimbell “al-
ready determined the issue before us . . . . [That decision con-
stituted] a rejection of the substantive contention that federal
labor policy precludes such [unemployment] compensation.”
App. A, p. A5, quoting Super Tire, 550 F.2d at 908. By
contrast, the Second Circuit in New York Telephone rejected
the argument that Kimbell was controlling. 566 F.2d at 391,
n. 2. In that Court’s view, Ohio Bureau of Employment Serv-
ice v. Hodory, 431 U.S. 471, 475, n.3 (1977) and Batterton
v. Francis, 432 U.S. 416, 424, n.7 (1977) provided inter-
vening guidance which stripped Kimbell of effect as precedent.
7
The instant case provides a desirable vehicle to resolve a sig-
nificant conflict between the lower courts as to the “somewhat
opaque” (Gibson v. Berryhill, 411 U.S. 564, 576 (1973))
effect of a summary disposition under Kimbell.
B. The Decision Below Misinterpreted Hicks v. Miranda and
Other Decisions of This Court
1. This Court in a letter to Senator DeConcini dated June
22, 1978, reiterated “. . . we know from experience, our sum-
mary dispositions often are uncertain guides to the courts bound
to follow them and not infrequently create more confusion than
clarity.”* The precedential value of such decisions, accordingly,
is strictly limited to the particular facts and issues most narrowly
resolved. Under no circumstances “should [a summary dis-
missal] be understood as breaking new ground.” Mandel v.
Bradley, 432 U.S. 173, 176 (1977). More specifically, Hicks
mandates that each court “ascertain what issues had been
properly presented . . . and declared by this Court to be with-
out substance.” Hicks, 422 U.S. at 345, n.14. Only after
determining the exact “reach and conteat” of the Supreme
Court’s summary action, which is itself an issue of “real sub-
stance”, is a court free to consider itself bound by a sum-
mary dismissal. Hicks, 422 U.“. at 345 n. 14. Indeed, this
Court has expressly disapproved the actions of courts that
failed, as in the instant case, to undertake such a “precise
analysis”. Fusari v. Steinberg, 419 U.S. 379, 388 n.15
(1975).*
The factual presentation made by the Petitioners before the
District Court renders the instant case wholly inapposite to
Kimbell. That case arose from a state administrative hearing in
3. 65 ABA Journal 1328 (1979).
4. See also Comment, The Precedeniial Weight of a Dismissal
by The Supreme Court For Want of a Substantial Federal Question:
Some Implications of Hicks v. Miranda, 76 Colum. L. Rev. 508
(1976); Colorado Springs Amusement Ltd. v. Rizzo, 524 F.2d
571, 576, n. 13 (3rd Cir. 1975), cert. den. 428 U.S. 913 (1976).
8.
which the employer, unlike HAWTEL, made no effort to adduce
any evidence as to the actual impact of New Mexico’s unemploy-
ment compensation system upon employers operating under the
federal labor laws. Instead, the employer in Kimbell relied
entirely upon the assumption that the disputed payments had
“pervasive effect”.° The factual record in Kimbell, in marked
contrast to the evidence that HAWTEL presented, was devoid
of any evidence of impact on employers, prompting the Attorney
General of New Mexico to assert in his Motion to Dismiss that
“THIS CASE DOES NOT PRESENT AN APPROPRIATE
RECORD UPON WHICH TO REVIEW THE FEDERAL
QUESTION PRESENTED” since:
[T]jhere is not a scintilla of evidence in the record of this
case to support consideration of questions posed by the
First Circuit Court of Appeals in its Grinnell [Corp. v.
Hackett, 475 F.2d 449 (list Cir.), cert. denied, 414
U. S. 858 (1973)] and ITT [Lamp Division v. Minter,
435 F.2d 989 (ist Cir. 1970), cert. denied, 402 U.S.
933 (1971)] opinions. No such evidentiary record was
attempted by the Appellants in the State courts, nor
could such a record have been established in this case since
the labor dispute had been settled before the Employment
Security Commission decided that the striking claimants
were entitled to any unemployment benefits. Motion of
Appellee to Dismiss Appeal, filed in Kimbell, Inc. v.
Employment Security Commission of the State of New
Mexico, U.S. Sup. Ct. No. 75-1452, p. 8.
See also in this connection Memorandum for the United States
as Amicus Curiae, filed in Kimbell, Inc. v. Employment Security
Commission, Sup. Ct. No. 75-1452, pp. 8-10; Brief for the
Chamber of Commerce of the United States of America as
Amicus Curiae, filed in Kimbell, Inc. v. Employment Security
Commission, Sup. Ct. No. 75-1452, pp. 18-25; Supplemental
Brief in Response to Memorandum for the United States as
5. See, Appellees Answer Brief, p. 26, Kimbell, Inc. v. Employ-
ment Security Commission of New Mexico, New Mexico Supreme
Court, Case No: 10323.
9
Amicus Curiae, filed in Kimbell, Inc. vy. Employment Security
Commission, Sup. Ct. No. 75-1452, pp. 8-11. In short, the
employer in Kimbell was requesting judgment in its favor on
the pleadings asserting that the requisite evidentiary record had
not been made. There is no such defect, however, in the present
record. On this basis alone, the court below erred in its con-
clusion that Kimbeii is dispositive of the instant case.
2. Hicks also recognized that even where this Court has
considered a federal question to be insubstantial, the question so
remains “except when doctrinal developments indicate other-
wise.” Jd. at 344. The Ninth Circuit, however, has nevertheless
disregarded the doctrinal developments articulated by this Court
in Ohio Bureau of Employment Service v. Hodory, supra, and
New York Telephone v. New York Department of Labor, 440
U.S. 519 (1979). Indeed, if Kimbell was as broad a precedent
as found by the court below, there would have been little reason
for this Court to have granted certiorari in New. York Telephone.
New York Telephone provides a significant doctrinal develop-
ment: it requires a court to focus not on “whether Congress,
explicitly or implicitly has ruled out such assistance .. .” in a
general sense, but, rather, on whether there is Congressional
intent to tolerate the “more direct regulation of labor-manage-
ment relations at issue in [this] case.” 440 U. S. at 550 (Opinion
of Justices Blackmun and Marshall, concurring). There are
manifold differences between the New York unemployment com-
pensation scheme and the Hawaii system at issue here: for
example, (a) unlike New York, Hawaii extracts confidential
employer information during a strike, (b) unlike New York,
Hawaii waives for strikers the requirements of registration for,
availability for, and search for suitable work, (c) unlike New
York, actual or implied job loss is irrelevant in Hawaii, and (d)
unlike New York, in Hawaii the employer fully replenishes its
reserve account for benefits paid to strikers. The “fortuity” that
New York’s type of law, which confers a benefit on a broadly
defined class of unemployed persons, has been deemed condoned
10
by Congress “should not obscure a difference in reasoning that
could prove important in some other preemption case.” New
York Telephone, 440 U.S. at 549 (Opinion of Justices Black-
mun and Marshall, concurring in the judgment). This case is
that “other preemption case.” It is a case, therefore, which
should have been addressed on its merits in light of New York
Telephone, rather than summarily disposed of under Kimbell—a
case rendered an historical anecdote by New York Telephone.
This Court should clarify the applicable legal standard under
which special accommodations intended to assist a striking union
by a state under the guise of an unemployment statute, unlike |
New York’s, will be evaluated. If Kimbell is to be this Court’s
only guidance on an issue so vital to the survival of the collective
bargaining process in accord with the Ninth Circuit’s Hicks
analysis, then the “blank check” feared by Mr. Justice Powell’s
dissent in New York Telephone (440 U.S. at 565-566), has |
now been provided. |
CONCLUSION
For all of the foregoing reasons, this petition for writ of
certiorari should be granted.
Respectfully submitted,
ANTHONY G. SOUSA
General Counsel JARED H. JOSSEM
Hawaiian Telephone Company TORKILDSON, KATZ, JOSSEM
1177 Bishop Street & LODEN
Honolulu, Hawaii 1512 Amfac Building
Of Counsel 700 Bishop Street
VINCENT J. APRUZZESE Honolulu, Hawaii 96813
FRANCIS A. MASTRO Attorneys for Petitioner
APRUZZESE & McDERMOTT Hawaiian Telephone
Independence Plaza Company
500 Morris Avenue LAWRENCE M. COHEN
Springfield, New Jersey 07081 JEFFREY S. GOLDMAN
Attorneys for the Chamber of FOX AND GROVE, CHARTERED
Commerce of the United States 233 South Wacker Drive
and the Chamber of Com- Chicago, Illinois 60606
merce of Hawaii Attorneys for Petitioner Hawaii
Employers Council
RAYMOND M. TORKILDSON
Al
APPENDIX A
UNITED STATES CourRT OF APPEAIS
For the Ninth Circuit
Filed March 10, 1980
Hawaiian Telephone Co., etc. 7
Appellee,
and
Hawaii Employers Touncil et al.,
Intervenors,
vs.
State of Hawaii Dept. of Labor ‘ No. 76-1584
& Industrial Relations, et al.,
Defendants,
International Brotherhood of Electrical
Workers, AFL-CIO, Local 1357, etc.,
et al.,
Intervenors and Appellants. -
Hawaiian Telephone Co., etc. ?
Appellee,
and
Hawaii Employers Council et al.,
Intervenors, ‘
VS.
State of Hawaii Dept. of Labor .
& Industrial Relations, et al., No. 76-2056
Appellants,
and
International Brotherhood of Electrical
Workers, AFL-CIO, Local 1357, etc.,
et al.,
Intervenors. J
A2
OPINION
Appeal from the United States District Court
for the District of Hawaii
Martin Pence, District Judge, Presiding
Argued and submitted November 14, 1979
Before: WRIGHT and GOODWIN, Circuit Judges, and Mur-
RAY*, District Judge.
PER CURIAM:
The Hawaii Department of Labor appeals a judgment which
struck down, on federal preemption grounds, a state statute!
compelling employers under certain conditions to finance strikes
against themselves. The Hawaii law permits strikers to collect
unemployment compensation if their strike does not substantially
curtail’ the productive operations of their employer.
In 1974, a number of Hawaiian Telephone Company em-
ployees went on strike. When the strike ended the Hawaii
Department of Labor began an inquiry to determine whether
the strike had “substantially curtailed” the Company’s. produc-
tive operations. If the strike had not done so, the Department
would have had to order retroactive employment benefits paid to
* The Honorable William D. Murray, Senior United States District
Judge for the District of Montana.
1. Haw. Rev. Stat. § 383-30 (1978 Code) Disqualification for
Benefits. “An individual shall be disqualified for benefits:
* % oa v *
“(4) Labor Dispute. For any week with respect to which it is
found that his unemployment is due to a stoppage of work
which exists because of a labor dispute at the factory,
establishment or other premises at which he is or was last
employed; .. .”
2. The Hawaii Supreme Court has interpreted the phrase “stop-
page of work” to mean a “substantial curtailment” of the employer’s
productive operations. Meadow Gold Dairies v. Wiig, 50 Haw. 225,
437 P.2d 317 (1968).
A
A3
the Company’s striking employees. The Company under the
statute would then have had to replenish the state employment
compensation fund in an amount equal to . distributions to
the strikers. Prior to completion of the departmental inquiry,
however, the Company sought an injunction in the district court
to bar the Hawaii Department of Labor from continuing with its
investigation. The Company alleged that Congress, in enacting
the National Labor Relations Act, had preempted state laws
permitting strikers to collect unemployment benefits. The district
court agreed, and declared Hawaii’s law void.
The wisdom or even the fairness of Hawaii’s economic legis-
lation is not before us. We do not pass upon its merits, The only
issue before us is federal preemption: specifically, whether our
determination of the question of federal preemption in this case
is controlled by the Supreme Court’s summary dismissal of the
appeal in Kimbell v. Employment Security Commission, 429
U.S. 804 (1976). |
Denial of certiorari imports nothing about the merits of a
case. “Summary disposition of an appeal, however, either by
affirmance or by dismissal for want of a substantial federal
question is a disposition on the merits.” C. A. Wright, Hand-
book of the Law of Federal Courts 551 (3d edition 1976).
Although a summary affirmance is “an affirmance of the judg-
ment only . . . [and] not necessarily [of] the reasoning by which
it was reached[,] . . . [slummary affirmances and dismissals for
want of a substantial federal question without doubt reject the
specific challenges presented in the statement of jurisdiction
.. .” Mandel v. Bradley, 432 U.S. 173, 176 (1977). Con-
sequently, they “prevent lower courts from coming to opposite
conclusions on the precise issues presented and necessarily de-
cided.” Id. See also Hicks v. Miranda, 422 U.S. 332, 344-345
(1975); In re Northwest Homes of Chehalis, Inc., 526 F.2d
505, 506 (9th Cir. 1975), cert. denied sub nom. Hansen v.
Weyerhaeuser Co., 425 U.S. 907 (1976).
A4
- The Hawaii statute alleged to be preempted (and the inter-
pretation given that statute) is identical to the New Mexico
statute against which the same claim was raised in Kimbell v.
Employment Security Commission, supra.* Both statutes were
challenged in their respective states by employers on grounds
of federal preemption. The courts of first instance in Hawaii
and New Mexico found that the National Labor Relations Act
indeed had preempted these state laws providing for compensa-
tion to strikers at company expense. Hawaiian Telephone Co.
v. Hawaii Department of Labor, 405 F.Supp. 275 (D. Haw.
1976); Kimbell, Inc. v. Employment Security Commission,
(Dist. Ct. of N. M., Bernalillo County). The Hawaii appellants
appealed to this court. The New Mexico appeal went to the
New Mexico Supreme Court, which reversed by a summary
order. Kimbell, Inc. v. Employment Security Commission, No.
10323 (unreported order of the New Mexico Supreme Court,
Dec. 29, 1975).* On appeal to the United States Supreme
Court, the jurisdictional statement put the question:
“, . . Does the grant of unemployment compensation
benefits to strikers by the state of New Mexico contravene
the Supremacy Clause of Article VI of the Constitution
of the United States by disrupting the operation of federal
labor policy requiring state neutrality in the collective
bargaining process?”
3. The New Mexico statute provided that an applicant for
unemployment compensation would be disqualified from receiving
benefits “for any week with respect to which . . . his unemployment
is due to a stoppage of work which exists because of a labor dispute
at the factory, establishment, or other premises at which he is or was
last employed .. .” 1975 N. M. Laws Ch. 351, §1 (codified at
N.M. Stat. Ann. § 59-9-5(d) (Supp. 1975); current version at
N. M. Stat. Ann. § 51-1-7(D) (1979). The New Mexico Supreme
Court had interpreted the phrase “stoppage of work” to mean a
“substantial curtailment” of the employer’s, productive operations.
Albuquerque-Phoenix Express v. Employment Security Commission,
88 N. M. 596, 544 P. 2d 1161 (1975).
(Note: a 1979 amendment eliminated the work stoppage language
from this code provision. )
4. The substance of the challenge is unaffected by the fact that
in Hawaii a federal court adjudicated the federal preemption issue,
while in New Mexico a state court adjudicated the issue.
AS
See 44 U.S.L.W. 3612. The Supreme Court dismissed the
appeal for want of a substantial federal question. Kimbell v.
Employment Security Commission, 429 U.S. 804 (1976).
Following this sequence of events, the Third Circuit in Super
Tire Engineering Co. v. McCorkle, 550 F.2d 903, 905-908
(3d Cir.) cert. denied 434 U.S. 827 (1977), concluded that
Kimbell was a binding precedent controlling the case before it.
In Super Tire the Third Circuit was confronted with a New
Jersey statute allowing welfare benefits for strikers. The em-
ployers of the strikers had challenged the statute as inconsistent
with and therefore precluded by federal labor policy. The court
dismissed their claim with these words:
“, . « [T]he [United States] Supreme Court has already
determined the issue before us and we are bound by its
determination. The Court [in Kimbell] determined that no
substantial federal question was presented by a claim that
state unemployment compensation to strikers is contrary
to federal labor policy. Logically subsumed in that ulti-
mate determination is a rejection of the substantive con-
tention that federal labor policy precludes such compensa-
tion.” 550 F. 2d at 908.
The Second Circuit, however, in New York Telephone v.
New York Department of Labor, 566 F. 2d 388 (2d Cir. 1977),
aff'd. 440 U.S. 519 (1979), determined that Kimbell was not
a binding precedent in the case before it. 566 F.2d at 391
n. 2.° In New York Telephone the Second Circuit was faced
with a New York statute allowing unemployment compensation
to strikers, and a challenge to that law by the employers of
the strikers on grounds of preemption.
The challenged New York law differed from the New Mexico
law in that New York paid compensation to strikers even if
5. Note 2, 566 F. 2d at 391, contains a clerical error. The New
Mexico Supreme Court’s Kimbell decision did not reverse Albu-
querque-Phoenix Express, Inc. v. Employment Security Commission,
88 N. M. 596, 544 P. 2d 1161 (1975). Rather, the court relied on
the latter case in reversing the judgment of the lower state court
in Kimbell.
A6
their strike completely closed their employer’s operations. The
statute in Kimbell had permitted payment of unemployment bene-
fits to*Strikers only if the strike caused something less than a
total closure of the employer’s business.
Unlike the New York law before the Second Circuit, the
Hawaii statute challenged here is identical to the New Mexico
statute. Because it is, we follow Kimbell. In doing so we do not
determine the maximum scope of Kimbell’s precedential effect:
whether, for instance, we would find Kimbell controlling in cir-
cumstances like those in Super Tire. All we decide is that Kim-
bell must be followed here. If Kimbell is not controlling in a
situation like this one, where the two state laws are identical,
Kimbell, for practical purposes, would have no force as prece-
dent.
In New York Telephone Co. v. New York Department of
Labor, 440 U.S. 519 (1979), the Supreme Court held that
federal labor law did not preempt the New York statute. Al- .
though no opinion of the Court commanded a majority of the
justices, six justices agreed on the central point in issue—
Congress, in enacting the Social Security Act, intended to
tolerate New York’s law allowing unemployment compensation
to strikers, As a result, there is nothing in the Supreme Court's
opinion aerogating from the reasoning which underlies Kimbell.
The vitality of Kimbell’s precedential force therefore remains
unimpaired. The New York Telephone plurality opinion in fact
took note of the cuurt’s Kimbell holding in a footnote. 440 U. S.
519, 534 n. 24.°
6. The footnote reads:
“. . . It is true that only Rhode Island has a statutory pro-
vision like New York’s that allows strikers to receive benefits
after a waiting period of several weeks. See Grinnell Corp. v.
Hackett, 475 F.2d 449, 457-459 (CAl1 1973). But most
States provide benefits to striking employees who have been
replaced by nonstriking employees, and many States, pursuant
to the so-called ‘American rule,’ allow strikers to collect benefits
so long as their activities have not substantially curtailed the
(Footnote continued on next page.)
A7
The Supreme Court in Kimbell held that New Mexico was
free to assert its own policy in the compensation of striking em-
ployees. In New York Telephone, the same court held that New
York was equally free to do so.? We must conclude that Hawaii
also has the power to carry forward its own policy in this field.
Reversed.
(Footnote continued from preceding page.)
productive operations of their employer. See Hawaiian Tele-
phone Co. v. Hawaii Dept. of Labor and Industrial Relations,
405 F. Supp. 275, 287-288 (D. Hawaii 1976), cert. denied,
435 U.S. 943. For example, in Kimbell, Inc. v. Employment
Security Commission, 428 U.S. 804, this Court dismissed for
want of a substantial federal question an appeal from the
Supreme Court of New Mexico which had held that a retroactive
post-strike award of unemployment benefits to strikers under
the ‘American rule’ was not pre-empted by federal labor law.”
7. In addition, it should be noted that New York’s statute is
arguably less consistent with federal labor policy than is Hawaii’s.
(The Supreme Court’s plurality in New York Telephone even seemed
to imply this when it recognized that “unlike” states such as New
Mexico and Hawaii, New York had “concluded that the community
interest in the security of persons directly affected by a strike out-
weighs the interest in avoiding any impact on a particular labor
dispute.” 440 U.S. 519, 534.) The New York law permits unem-
ployment compensation to strikers even if their strike completely
closes an employer’s business. The Hawaii law, on the other hand,
allows unemployment benefits to strikers only if their strike causes
less than a substantial curtailment of the employer’s work.
A8
APPENDIX B
UNITED STATES COURT OF APPEALS
for the Ninth Circuit
Filed March 24, 1980
Hawaii Telephone Company, 7
a Hawaii corporation,
Plaintiff/ Appellee,
Hawaii Employers Council, et al.,
Intervenor/ Plaintiff/ Appellees,
VS.
No. 76-1584)
State of Hawaii Department of Labor P 76-2056)
and Industrial Relations, et al.,
Defendants/ Appellants,
and
International Brotherhood of Electrical
Workers, AFL-CIO, Local 1357, et al.,
Intervenor/Defendant/ Appellants. |
ORDER ON MOTION FOR STAY OF MANDATE
(Rule 41(b) Fed. R. App. P.)
Upon due consideration of appellee motion for stay of the
mandate of this Court in the above cause pending the filing,
consideration and disposition by the Supreme Court of the
United States of a petition for writ of certiorari, such petition to
be filed in the Clerk’s Office of the Supreme Court of the
United States on or before April 24, 1980,
It Is ORDERED that the motion for stay of mandate be, and the
same is hereby granted.*
/s/ Alfred Goodwin
United States Circuit Judge
CA9-003 (12/3/79) Judge Goodwin
* In the event that the motion for stay of mandate and the petition
for writ of certiorari are granted, then this stay will continue pending
the final disposition of the case by the Supreme Court of the
United States.
AQ
APPENDIX C
Opinion Granting Preliminary Injunction
[378 F. Supp. 791]
UNITED STATES DISTRICT COURT
D. Hawaii
Civ. No. 74-140
July 12, 1974
HAWAIIAN TELEPHONE COMPANY, Individually and on behalf
of all employers engaged in interstate commerce within
the State of Hawaii, who are subject to the Hawaii Employ-
ment Security Law,
—
Plaintiff,
Vv.
STATE OF HAWAII DEPARTMENT OF LABOR
AND INDUSTRIAL RELATIONS ef al.,
Defendants,
and
INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS,
AFL-CIO, Loca 1357,
Intervenor-Defendant.
Jared H. Jossem, Raymond M. Torkildson, Torkildson, Katz
& Conahan, Honolulu, Hawaii, for plaintiff.
George Pai, Atty, Gen., Roy M. Miyamoto, Deputy Atty.
Gen., State of Hawaii, for defendants.
James A. King, Edward H. Nakamura, Bouslog & Symonds,
Honolulu, Hawaii, for intervenor-defendant.
Al0
Opinion Granting Preliminary Injunction
| DECISION
PENCE, Chief Judge.
Plaintiff, Hawaiian Telephone Company (TELCO), a public
utility, with a state-granted monopoly over telephone communica-
tions, seeks injunctive relief against the defendants who operate
and direct the State of Hawaii Department of Labor and In-
dustrial Relations (DLIR).
Defendant DLIR, and its director, Hasegawa, with its senior
examiner of the Unemployment Insurance Division, Brown,
administer HRS Chapter 383, Hawaii's unemployment com-
pensation laws.
By stipulation, IBEW Local 1357 (Union), the union which
represents the employees of TELCO, has intervened. Although
other sections therefor were alleged, the basis for this court’s
jurisdiction is under 28 U.S.C. §§ 1331 and 1337.
TELCO is certainly “in commerce” under § 1337 and the
question raised is equally certain a federal one under § 1331.
The aggregate amount which TELCO would have to pay in to
‘the state’s unemployment fund if the state’s position is sustained
would be over $832,000. If more were needed, as indicated in
Almacs, Inc. "v. Hackett, 312 F.Supp. 964, 967 (D.R.I.
[792]
1970): “in equity suits the value to. be measured for jurisdictional
purposes is the value of the right sought to be protected, here
the right to bargain collectively free from state interference, a
right which cannot as of this time clearly be valued at less
than $10,000.”
TELCO allegations satisfy the jurisdictional requirements of
both §§ 1331 and 1337. Since TELCO’s action is primarily
based upon a claim of federal legislative supremacy, a single
judge may hear this case.
All
Opinion Granting Preliminary Injunction
Applicable State Law
HRS Chapter 383-30, Disqualification for Benefits, provides
that an individual shall be disqualified for unemployment benefits
under “(4) Labor dispute. For any week with respect to which
it is found that his unemployment is due to a stoppage of work
which exists because of a labor dispute at the . . . establishment
. .. at which he is or was last employed.”
In Interisland Resorts v. Akahane, 46 Haw. 140, 377 P. 2d
715 (1962), the Supreme Court of Hawaii, fundamentally rely-
ing upon the fact that Hawaii’s Employment Security Law had
its origin in the British Unemployment Insurance Acts, of 1911,
adopted the British Umpires construction of the term “stoppage
of work” as referring “ ‘not to the cessation of the workman’s
labour, but to a stoppage of the work carried on in the...
premises at which the workman is employed.’ ” 46 Haw. at 147,
377 P. 2d at 720. Akahane was an organizational strike. Imme-
diately after being struck the hotel was able to prevent closing
down of hotel operations with the help of supervisors and hotel
guests, and within a week had hired replacements for the strikers.
The strikers in fact were out of their jobs.
In Gaspro v. Labor & Ind. Rel. Comm’n., 46 Haw. 164, 377
P. 2d 932 (1962), in a similar organizational strike, Gaspro
was almost completely shut down for about five weeks, i.e., until
it hired new employees to permanently replace the strikers. Here,
too, the strikers were out of their jobs.
In Meadow Gold Dairies v. Wiig, 50 Haw. 225, 437 P. 2d
317 (1968), the Dairies with the assistance of non-bargaining
unit members and femporary replacements were able to carry
on about 82% of their business. The Unemployment Com-
pensation Appeals Referee, applying Akahane, found that there
had been no “ ‘substantial curtailment of the business activities
at the employer’s establishment: . . 2” (50 Haw. at 227, 437
Al2
Opinion Granting Preliminary Injunction
P. 2d at 319) and paid unemployment compensation to the
strikers.
When employees of the Hawaiian Electric Company, a public
utility, struck in February of 1974, because Hawaiian Electric
continued to generate and sell electricity during the strike,
they were deemed not to be disqualified. The Department of
Labor paid unemployment benefits in excess of $100,000 to
the striking employees.
Unemployment benefits are paid out of a state fund which is
maintained in part by payroll taxes levied against the em-
ployers. Subject to a limitation that the employer’s tax cannot
exceed 3% of the annual payroll, the state law permits an em-
ployer’s favorable experience to give him a lower tax. For
example, TELCO’s taxes for 1974 were but 1.6% of annual
payroll. In the event that unemployment benefits are paid to its
striking employees, those benefits will then be charged against the
employer’s account and increase its tax rate and contribution.
Findings of Fact
TELCO is an employer engaged in interstate commerce sub-
ject to the jurisdiction of the NLRB, the Federal Social Security
Act, and the Hawaii Revised Statutes, Chapter 383, the Employ-
ment Security Law, and related rules, insofar as unemployment
benefits thereunder may be provided to employees on strike.
On April 30, 1974, the collective bargaining agreements be-
tween TELCO and the Union, for the TELCO employees repre-
sented by it, terminated. One week later, on May 7, some 3,300
[793]
employees of TELCO struck TELCO, left their jobs, and
established picket lines at the employer’s various places of
business in Hawaii.
The Union’s first strike bulletin, issued on the very day of the
strike, stated among other messages:
/ .
Page
"
.
Al13
Opinion Granting Preliminary Injunction
“Your shop steward will . . . be able to answer basic ques-
tions about unemployment compensation . . . .”
On May 8, the second day of the strike, an article appeared
in the Honolulu Star-Bulletin, an evening newspaper, with the
largest circulation, entitled “Strikers Can Qualify for Jobless
Pay.” On that same day, the Department of Labor posted an
18” x 30” sign on the glass front of its Unemployment Insur-
ance Division, stating:
“Hawaiian Telephone Strikers
Contact your Union to File
Your Claim”
On Kauai the Union chairman set up a Saturday, May 11,
meeting with state officials to assist the Union in filling out
“mass applications” for unemployment benefits. Before that
Saturday, the Union was provided with mass claim sheets for
unemployment compensation by the State Department of
Labor. The May 11, 1974 Union strike bulletin said:
“Our crews are hard at work gathering information and
completing forms for unemployment compensation. If you
have not applied, contact your picket captain immediately
and he or she will make arrangements for you to meet
with one of our union members assigned to processing un-
employment compensation applications.”
During the strike over 3,000 employees who were not working
because of the labor dispute signed or had their names placed
on the mass claim sheets. Also during the strike the Union,
through its officers and members, advised its employees regard-
ing the procedures for filing claims for state unemployment
benefits and filed the mass claim applications at the Union’s office
in Honolulu. Substantially all the claims for benefits filed with
the DLIR were filed by the Union via the mass claim sheets.
On May 28, 1974, the striking members voted to reject a
company proposal and it was not until June 13, 1974 that a
second company proposal was accepted. TELCO’s striking
Al4
Opinion Granting Preliminary Injunction
employees began to return to work on June 14, 1974. The
strike had lasted thirty-eight (38) days.
At a meeting at the Honolulu office of the DLIR on June 17,
1974, defendant Brown, senior examiner of the DLIR, sched-
uled an informal predetermination hearing for June 27, at
which TELCO and the Union were to supply data to enable
Brown to determine, with respect to the TELCO strikers, solely
whether they were disqualified for unemployment benefits be-
cause their “unemployment is due to a stoppage of work which
exists because of a labor dispute at the . . . establishment . . . at
which he is . . . employed.” HRS Chapter 383-30(4). The only
issue before Brown would have been whether a “stoppage of
work”! can be established by TELCO. Unless TELCO were to
be able to convince Brown that it had experienced a “substantial
curtailment of operations” during the strike, the strikers would
be paid unemployment compensation for all strike lost time, save
the first seven days. Thereafter in accordance with the provi-
sions of the state act, TELCO would be forced to replenish the
state’s unemployment compensation fund by paying therein
some $832,000.
After the instant complaint was filed, the Pacific Business
News of June 20, 1974 reported that John Guzman, business
manager of the Union, stated for publication that the Union
had notified its members that they could expect to receive
unemployment benefits for the period of the strike and that
“a lot of the workers have already spent the money without
actually getting it and this is worrying our people.” More-
[794]
1. As that phrase had been interpreted and applied by the state
in Akahane, supra, and expanded in Gaspro, supra, and Meadow
Gold, supra.
Al5
Opinion Granting Preliminary Injunction
over, Guzman was reported as saying that TELCO’s opposition
to the payment of unemployment benefits manifested an anti-
union attitude on the part of TELCO. The Union has not
denied these reports.
Although the strike has ended, TELCO and the Union still
have a collective bargaining agreement, but TELCO, by state
law, is nevertheless still forced into the position of litigating
before the DLIR the question of whether its employees who
struck should be entitled to receive unemployment compensa-
tion benefits. If the benefits are paid they would be charged
against TELCO’s account, thus forcing TELCO to pay some
$832,000 in additional unemployment tax contributions, dur-
ing 1975. The position of the DLIR is that if the information
requested of TELCO did not show a “stoppage of work” as
interpreted by the Hawaii decisions, supra, and the strikers
were otherwise eligible, they would be paid unemployment
benefits for the four weeks and three days of the strike remain-
ing after the first excluded week.
Legal Issues
The underlying question is whether Hawaii's DLIR is wrong-
fully intruding in a labor dispute by making available unem-
ployment benefits to strikers who would qualify therefor under
the Hawaii Unemployment Compensation laws. The problem
is whether such state action as has been heretofore taken in
Meadow Gold and Hawaiian Electric alters the relative eco-
nomic strength of Union vs. employer and thus enters the field
preempted by the national policy guaranteeing free collective
bargaining, in violation of the Supremacy Clause of the Con-
stitution. Although the strike is ended, the problem is certainly
not moot inasmuch as the state proposes to proceed with its
hearings to determine whether or not TELCO’s operations and
revenues were substantially disturbed by the strike and whether
or not the strikers are entitled to unemployment compensation.
Al6
Opinion Granting Preliminary Injunction
Although there is no certain evidence as to the extent which
the hope of receipt of unemployment compensation by the
strikers affected the continuation of the strike, nevertheless
from the activities of the Union in assisting in mass applica-
tions for benefits as well as the Union’s characterization of
TELCO’s opposition to payment of unemployment benefits as
manifesting “an anti-union attitude on the part of TELCO”,
strong inferences could be drawn that the Union at least felt
that the receipt of unemployment compensation was of con-
siderable importance in its arsenal of strike weapons.
None of the striking employees has as yet been actually
determined to qualify for unemployment benefits because (a)
there has as yet been no determination that TELCO’s business
has been substantially curtailed, ie., that TELCO had 20%
or more decline in revenue (which was indicated as a possibly
relevant base in Meadow Gold), nor (b) has there been any
actual processing of the strikers’ applications to see if any has
a per se disqualification under the state act. Assuming, how-
ever, that TELCO cannot show that its net revenue was sub-
stantially disturbed, then it is clear that almost if not all of the
strikers would qualify for unemployment benefits. It therefore
follows that the issue of irreparable harm arises because the
prospective provision of economic aid to the strikers with a con-
comitant tax penalty upon the employer could be held to im-
permissibly and adversely affect the collective bargaining
process.
Legal Analysis
It is now well settled that state laws may not be used to re-
strict activities protected by either § 7 or § 8 of the NLRA, 29
U.S.C. §§ 157, 158.2 The instant problem, however, is one
2. See Garner v. Teamsters Local 776, 346 U.S. 485, 74 S. Ct.
161, 98 L.Ed. 228 (1953); Building Trades Council v. Kinard
(Footnote continued on next page.)
Al7
Opinion Granting Preliminary Injunction
[795]
which does not arise out of activities specifically protected or
proscribed under those two sections. Hawaii’s unemployment
laws, like those of the other states, were fostered by the national
unemployment insurance legislative policy of the 1930’s and
were enacted following The Depression. All of the then 48
States enacted such laws in 1936 and 1937. Hawaii’s Act was
passed in 1939. There was no question that the states intended
to be “neutral” in labor disputes.*
The notion of state neutrality ignores the realities of state and
national governmental intervention in labor relations by means
of minimum wage laws, workmen’s compensation, the Wagner
Act and the Taft-Hartley Act. The federal as well as the state
legislative purpose for unemployment pay is “to provide real
security against the hazard of unemployment—the weekly
benefits should be sufficient to cover the basic necessities of most
claimants and their families without requiring them to resort
to relief. . . .”* The definition of an unemployed individual
in most of the state laws does not distinguish between the in-
dividual who is totally unemployed and without wages, the one
who has no regular job, but picks up some work and earnings,
and the individual who has not been separated from his regular
(Footnote continued from preceding page.)
Construction Co., 346 U.S. 933, 74 S.Ct. 373, 98 L.Ed. 423
(1954); San Diego Building Trades Council v. Garmon, 359 U.S.
236 (1959); Teamsters Local 20 v. Morton, 377 U. S. 252, 84 S. Ct.
1253, 12 L. Ed. 2d 280 (1964).
3. As noted by Shadur in his article on “Unemployment Benefits
and the ‘Labor Dispute’ ”, U. Chi. L. Rev. 294, 296 (1949-50), this
view of “neutrality” is notable at least for its age, having been a
basis in the 1911 British Act.
4. Unemployment Insurance Legislative Policy—Recommenda-
tions for State Legislation—1962, U. S. Department of Labor, Bureau
of Employment Security, No. U-212, at 10.
Al8
Opinion Granting Preliminary Injunction
employment but has had his hours cut and his wages substantially
reduced.°
As pointed out by Archibald Cox in his Harvard Law Re-
view article on “Labor Jaw Preemption Revisited” :®
“An appreciation of the true character of the national labor
policy expressed in the NLRA and LMRA indicates that in
providing a legal framework for union organization, col-
lective bargaining, and the conduct of labor disputes,
Congress struck a balance of protection, prohibition, and
laissez faire in respect to union organization, collective
bargaining, and labor disputes that would be upset if a
state could also enforce statutes or rules of decision resting
upon its views concerning accommodation of the same
interests.”
The basic and ultimate problem before this court is to deter-
mine whether or not Hawaii’s own Unemployment Compensa-
tion Act as intepreted, interferes with the working out of the
national policy of encouraging self-organization and collective
bargaining without state interference in the use of the economic
weapons available to both labor and management.
The factual situation found in both Akahane and Gaspro
is not involved here. Each of those cases arose out of an organi-
zational strike. Within a relatively short time in each case the
strikers had lost their jobs—permanently. The same was not
true in Meadow Gold, and, as here also, the strikers knew that
sooner or later they would return to their old jobs. Their un-
employment was temporary and self-induced.
Times have changed since the 1930’s and 1940’s and 1950’s
when the big employers had massive economic muscle, and
fractionated unions had little. Today a company union or a
purely local union, as a practical matter, no longer exists. Local
units are almost uniformly but a segment of a nation-wide union.
One no longer talks of the giant employers—it is of the giant
5. Id. at 9.
6. 85 Harv. L. Rev. 7, 1352-53 (1972).
Al9
Opinion Granting Preliminary Injunction
unions, the IBEW, ILWU, UAW, Teamsters, AFL-CIO. In this
local case the IBEW had over 3,300 members out on strike
against TELCO.
[796]
As in Allen-Bradley v. Board, 315 U.S. 740, 62 S. Ct. 820,
86 L. Ed. 1154 (1942), in the context of this case it is not
necessary to treat Hawaii’s Unemployment Compensation Act
as an inseparable whole. Here the focus is on only one narrow
segment of that Act and its intepretation by Hawaii’s courts.
The sole question is whether the stoppage of work section, supra,
as Hawaii has actually treated it, conflicts with the NLRA.
Certainly the NLRA was not designed to preclude a state from
‘GWing aid to a striker who had actually lost his job, as in
Lawrence Baking Co. v. Michigan City, 308 Mich. 198, 13
N. W. 2d 260 (1944), and in Akahane and Gaspro. Here, how-
ever, TELCO strikers’ jobs were not at all terminated; employ-
ment was only suspended for the duration of the strike. Both
management and Union and its striking members knew that
resumption of employment upon the end of the strike would
follow “as the day the night.”
As said by Justice Frankfurter in dissent in Hill v. Florida,
325 U.S. 538, 552, 65 S.Ct. 1373, 1380, 89 L. Ed. 1782
(1945), in this state-federal conflict “we ‘are in the domain
of government and practical affairs” and state action may not
be stifled “unless what the State has required, in the light of
what Congress has ordered, would truly entail contradictory
duties or make actual, not argumentative, inroads on what
Congress has commanded or forbidden.”
It is in the context of today’s realities and “practical affairs”
in labor-management collective bargaining which, as this court
sees it, has brought out The Court’s opinion in Super Tire Engi-
neering Co. Vv. McCorkle, 416 U.S. 115, 94 S. Ct. 1694, 40
L. Ed. 2d 1 (1974). There, employers whose plants were struck,
A20.
Opinion Granting Preliminary Injunction
brought suit for injunctive and declaratory relief against New
Jersey’s state policy of holding workers engaged in an economic
strike as eligible for public assistance through its welfare pro-
gram. The employers claimed that the regulations according
benefits to striking workers were invalid because they interfered
with the federal labor policy of free collective bargaining
expressed in the Labor Management Relations Act. Prior there-
to, the district court, following the “well-settled law” set forth in
ITT Lamp Division v. Minter, 435 F.2d 989 (1st Cir.), cert.
denied, 402 U.S. 933, 91 S.Ct. 1526, 28 L.Ed.2d 868
(1971), ruled that the appropriate forum for the problem was
Congress and that the New Jersey practice of giving aid to strik-
ing workers did not violate the Supremacy Clause. The com-
plaint was then dismissed. On appeal, the court did not reach the
merits but remanded the case with instructions to vacate and
dismiss for mootness. 469 F. 2d 911, 922 (3rd Cir. 1972).
To the surprise certainly of this court, the court stated:
“, . . New Jersey has declared positively that able-bodied
striking workers who are engaged, individually and collec-
tively, in an economic dispute with their employer are
eligible for economic benefits. This policy is fixed and
definite. It is not contingent upon executive discretion.
Employees know that if they go out on strike, public funds
are available. The petitioners’ claim is that this eligibility
affects the collective-bargaining relationship, both in the
context of a live labor dispute when a collective-bargaining
agreement is in process of formulation, and in the ongoing
collective relationship, so that the economic balance be-
tween labor and management, carefully formulated and
preserved by Congress in the federal labor statutes, is
altered by the State’s beneficent policy toward strikers.
It cannot be doubted [emphasis added] that the availability
of state welfare assistance for striking workers in New
Jersey pervades every work stoppage, affects every collec-
tive-bargaining agreement, and is a factor lurking in the
A21
Opinion Granting Preliminary Injunction
background of every incipient labor contract. The question,
of course, is whether Congress, explicitly or implicitly, has
[797]
ruled out such assistance in its calculus of laws regulating
labor-management disputes. In this sense petitioners allege
a colorable claim of injury from an extant and fixed policy
directive of the State of New Jersey. That claim deserves a
hearing.” Super Tire, 416 U.S. 115, 94 S. Ct. 1694, 1699,
40 L. Ed. 2d 1 (Footnote omitted. )
What The Court found concerning the pervasive effect of
the availability of state welfare assistance during strike-induced
work stoppages upon collective bargaining agreements and in-
cipient labor contracts in New Jersey have in this TELCO case
been shown as having equal or greater effect. As indicated here-
tofore, the labor leaders themselves instantly assisted all strikers
in filing applications for unemployment compensation and, when
this present action was started, condemned TELCO’s action as
manifesting an anti-union attitude.
Hawaii’s requirements here gave to the strikers the expecta-
tion of receiving (after the first week) about $280,000 per week
for each week the strike continued. TELCO on the other hand
was faced with the problem of trying to keep its own business
operations from completely collapsing, knowing that if the opera-
tions were not ultimately found to have been substantially cur-
tailed, i.e., cut by at least 20%, they would have to pay (after
the first week) about $190,000 per week in unemployment tax
contributions for each week of the strike. Moreover, such tax
“contribution” payments, even if ultimately refunded by the state
would be returned without interest!"
7. HRS Chapter 383-76.
A22
Opinion Granting Preliminary Injunction
Conclusions of Law
It is in the above “domain of government and practical
affairs” that this court n.ust rule upon TELCO’s present request
for a preliminary injunction.
From the preceding facts and analysis, it appears to this
court that, in dollars and cents, TELCO will instantly be faced
with the costs of presenting its case to the DLIR on the quantum
of business injury it suffered during the strike. From the actions
of the DLIR from the outset of the strike, as well as from its
February Hawaiian Electric ruling, TELCO has reasonable
grounds to believe that the DLIR will find that its operations
were not “substantially” impaired and it will be ordered to “con-
tribute” some $832,000 into the state’s unemployment fund
—with no certainty that that money will be returned (without.
interest) via rate increase or otherwise.®
Guzman’s statements to the press clearly show the solid
impact of TELCO’s present challenge of the state act upon
TELCO’s labor-management relations.
This court finds that TELCO’s showing of threat of irrep-
arable harm, if the requested preliminary restraint is not granted,
is sufficient to comply with the first of the four factors involved
in preliminary injunction proceedings set forth in King v. Saddle-
back Junior College, 425 F.2d 426 (9th Cir. 1970), cert.
denied, 404 U. S. 979, 92 S. Ct. 342, 30 L. Ed. 2d 294 (1971).
As to the second factor, this court finds that the impact of a
temporary restraint upon the state in its processing of the strikers’
claims and determining TELCO’s liability will be almost nil.
8. The state’s argument that TELCO can suffer no monetary
harm because it may charge off increased payments against the rate-
making scheme and may get an increase in rates, borders on the
frivolous. Not only does TELCO not have any- absolute assurance
that it will be able to so pass on such expenses to the public, but the
argument bypasses the basic legal problem posed and the effect of
the decision in this case on employer who, not having a state-
controlled monopoly, must operate under America’s free and harshly
competitive economic scheme.
A23
Opinion Granting Preliminary Injunction
While the strikers themselves undoubtedly could use the antici-
pated unemployment compensation, there has developed no
[798]
inference that any are now on welfare. All have been regularly
employed since June 13 (at higher pay), and all may reasonably
expect that such employment will certainly continue.
This court’s analysis of the legal inferences to be drawn from
Super Tire, in the context of what would appear to have been a
weaker case than that of TELCO’s, induces this court to find
TELCO has demonstrated a reasonable probability of success
on the merits and so has satisfied the third factor.
There is no question as to the fourth factor. The Court in
Super Tire recognized the public interest manifestly involved in
labor-management disputes vis-a-vis state assistance to striking
workers.
In short, TELCO’s case is so closely analogous to Super Tire
that this court would feel mandated thereby to state, as did The
Court, TELCO’s “claim deserves a hearing.”
Ruling
TELCO’s prayer for a preliminary injunction is granted.
TELCO’s ability to pay in full for any costs and damages
that might be suffered by either the state or the Union cannot be
questioned. TELCO’s bond, therefor, is fixed in the sum of
Ten Dollars ($10.00).
TELCO’s attorneys will prepare the necessary order.
All counsel will confer, within the next ten (10) days after
the filing of the order, upon a schedule for briefing and argument
of the underlying question here involved: Whether Congress
explicitly or implicitly has ruled out Hawaii’s statutory scheme
of unemployment assistance in its federal calculus of laws regu-
lating labor-management disputes. A hearing on such scheduling
will be held on Friday, July 26, 1974, at 9:00 a.m.
A24
APPENDIX D
Declaratory Judgment and Order
Nov. 17, 1975
As Amended Feb. 9, 1976
[405 F. Supp. 275]
UNITED STATES DISTRICT COURT
D. Hawa
Civ. No. 74-140
Oct. 14, 1975
HAWAIIAN TELEPHONE COMPANY, a Hawaii Corporation,
Plaintiff,
and
HAWAt EMPLOYERS COUNCIL, CHAMBER OF COMMERCE OF
THE UNITED STATES, and CHAMBER OF COMMERCE OF
HAWAII,
Intervenor-Plaintiffs,
VS.
STATE OF HAWAII DEPARTMENT OF LABOR AND
INDUSTRIAL RELATIONS et al.,
Defendants,
and
INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS,
AFL-CIO Locat 1357, et al.,
Intervenor-Defendants.
A25
Declaratory Judgment and Order
[276]
Jared H. Jossem, R. M. Torkildson, Torkildson, Katz &
Conahan, Honolulu, Hawaii, for plaintiff and intervenor-plaintiff
Hawaii Employers Council; Lawrence M. Cohen, Lederer, Fox
& Grove, Chicago, Ill., for intervenor-plaintiff Hawaii Employers
Council.
Edward Jaffe, Cades Schutte Fleming & Wright, Honolulu,
Hawaii, and Gerard C. Smetana, Borovsky, Smet2aa, Ehrlich
& Kronenberg, Washington, D.C., for intervenor-plaintiffs
Chamber of Commerce of the U. S. and Chamber of Commerce
of Hawaii.
Ronald Y. Amemiya, Atty. Gen., of Hawaii, Frank Yap, Jr.,
Deputy Atty. Gen., Honolulu, Hawaii, for defendants.
Edward H. Nakamura, James A. King, Bouslog & Symonds,
Honolulu, Hawaii, for intervenor-defendant IBEW. Local 1357.
Benjamin C. Sigal, Shim, Sigal & Tam, Honolulu, Hawaii,
for intervenor-defendant IBEW, Local 1260, and Hawaii State
Federation of Labor.
DECISION
PENCE, District Judge.
Plaintiff Hawaiian Telephone Company (TELCO) alleges
that the potential payment of unemployment compensation to
TELCO strikers by the State of Hawaii Department of Labor
and Industrial Relations (DLIR) impermissibly infringes upon
and interferes with TELCO’s nghts to engage in free collective
bargaining, a field of activity preempted by Congressional regula-
tion. This court granted a preliminary injunction against the
DLIR in a previous decision on the same case. See Hawaiian
Telephone Company v. State of Hawaii, 378 F.Supp. 791
(D. Haw. 1974). The jurisdictional basis, applicable state law,
[277]
A26
Declaratovy Judgment and Order
preliminary findings of fact’ and legal analysis set forth in that
decision are incorporated in this decision without repetition here.
Several union and employer organizations have intervened
in this action.? The “hearing” mandated by Super Tire Eng.
Co. v. McCorkle, 416 U.S. 115, 124, 94 S.Ct. 1694, 40
L. Ed. 2d 1 (1974) has been lengthy.
Evidentiary Issues
If the First Circuit’s observation in ITT Lamp Division of
Int. Telephone & T. Corp. v. Minter, 435 F. 2d 989, 994-95
(1970),
that welfare programs, supplying unmet subsistence needs to
families without time limitation, address a more basic social
need than does unemployment compensation, which at-
tempts to cushion the shock of seasonal, cyclical, or tech-
nological unemployment by making available time limited
benefits to individual workers, varying in relation to their
prior earnings and without reference to demonstrated need
~
is accepted as true, then, as argued by plaintiffs, it would
appear that The Court eliminated the need for a factual inquiry
as to whether Hawaii’s interpretation and implementation of its
unemployment act affects the collective bargaining process,
when The Court stated in Super Tire:
The petitioners’ claim is that [eligibility for public funds]
affects the collective-bargaining relationship, both in the
context of a live labor dispute when a collective-bargaining
agreement is in process of formulation, and in the ongoing
_1. Most of this court’s preliminary findings were subsequentl
stipulated by the parties. Pretrial Order, Oct. 1, 1974. ‘ r
2. Local 1357, International Brotherhood of Electrical Workers,
AFL-CIO, which represents employees of TELCO; Local 1260,
IBEW, AFL-CIO, which represents employees at Hawaiian Electric
Company; Hawaii State Federation of Labor, AFL-CIO; Hawaii
Employers Council, an association serving 650 employers in the field
of industrial and labor relations; and the Chambers of Commerce of
Hawaii and the United States.
A27
Declaratory Judgment and Order
collective relationship, so that the economic balance be-
tween labor and management, carefully formulated and
preserved by Congress in the federal labor statutes, is
altered by the State’s beneficent policy toward strikers. It
cannot be doubted that the availability of state welfare
assistance for striking workers in New Jersey pervades
every work stoppage, affects every collective-bargaining
agreement, and is a factor lurking in the background of
every incipient labor contract. (416 U.S. at 124, 94 S.
Ct. at 1699)
Nevertheless, this court believed and therefore has ruled
that an evidentiary hearing would be of assistance in the ultimate
resolution of the problem before this court.
FINDINGS OF FACT
Expert Testimony
Both plaintiff and defendants proffered experts on the effect
of the payment of unemployment compensation to strikers.
For the plaintiffs, Glenn D. Meyers*® in essence testified that
employee decisionmaking with respect to negotiations and strikes
is properly analyzed in cost-benefit terms. The employee com-
pares what he expects to get in the way of settlement with his
costs, primarily net lost wages due to striking, taking into account
receipt of any outside funds. The defendants’ expert conceded
that money is a factor in determining behavior.*
Meyers examined the economic statistics of the TELCO dis-
pute and determined that “the break-even point for the striker
seeking an additional 1% increase would be two weeks without
[278]
[unemployment] benefits, and about five weeks if benefits are
3. Dr. Myers is an economic consultant and teacher, specializing
in labor economics. Trial transcript [Tr.] Oct. 2-3, at 1-3.
4. Tr. Dec. 10-17, at 587.
A28
Declaratory Judgment and Order
received.” His model assumed that the receipt of state benefits
affects only the worker’s perception of cost.
The primary thesis of Stanley H. Ruttenberg, defendants’
expert,” was that if unemployment compensation were a sig-
nificant factor in collective bargaining, it would influence wages
to be higher or strikes to be longer in those states which provide
benefits than in those which do not. If statistics demonstrate the
contrary, they prove that unemployment insurance is not a
significant factor.’
The data upon which Ruttenberg based his hypothesis was
founded primarily upon the strike experience in Rhode Island
and New York, in which unemployment benefits are paid to all
strikers after waiting periods of 7 weeks and 8 weeks respec-
tively. He compared this material with statistics for the balance
of the United States, and also for 9 large industrial states, and
concluded that the availability of unemployment compensation
for strikers is not a factor in collective bargaining since strikes
were not significantly longer in Rhode Island and New York
than elsewhere.°®
This court could give Ruttenberg’s evidence little weight be-
cause of the many variables that were involved in the length of
strikes, e. g., local union strength or regional economic condi-
tions, see Grinnell Corp. v. Hackett, 475 F.2d 449, 459 (lst
Cir. 1973), and his control groups include states that pay un-
5. Partial Tr. Oct. 2, at 3-4; Tr. Oct. 2-3, at 136-37.
6. Mr. Ruttenberg is a labor economist and consultant, former
Assistant Secretary of Labor for Manpower, and former economic
advisor to Secretary of Labor W. Willard Wirtz. Tr. Dec. 10-17,
at 283-86.
7. Id. at 322-23.
8. R.I.G.L. §§ 28-44-14 and -16 (Supp. 1971); N. Y. Labor
Law §§ 590(9), 592(1) (McKinney 1965).
9. Tr. Dec. 10-17, at 334, 336-37, 339; Local 1260 Exhibits 3-6.
SA SN te tte
A29
Declaratory Judgment and Order
employment benefits to strikers.‘° Moreover, the. unemployment
scheme for strikers in Rhode Island and New York is so different
from Hawaii’s as to make his thesis irrelevant. The same general
criticism of uncontrolled variables applies to Ruttenberg’s wage
comparison studies.
Neither expert was of major assistance to the court, although
the court believes that Meyers’ thesis had a greater degree of
validity than Ruttenberg’s.
Statistical Findings
Thirteen out of 272 strikes (4.8% ) in Hawaii between 1964
and 1973 resulted in compensation paid to strikers.” During
that period 16.1% of the total man-days lost due to strikes oc-
curred in strikes in which compensation was paid.!? In all but
one case, unemployment benefits were received after the strike
had been settled."*
Between 1966 and 1972, the average duration of strikes for
which strikers received unemployment compensation was 64.4
days. During the same period, the average length of strikes for
which benefits were not paid was 29.9 days."* From this rela-
tively narrow base, it would appear that the availability of un-
employment compensation does tend to lengthen the duration of
strikes in Hawaii.
[279]
10. E.g., Hawaii, and Michigan, see Dow Chem. Co. v. Taylor,
57 F.R. D. 105 (E. D. Mich. 1972).
11. Local 1260 Exhibits 2, 13 (court’s computations). The data
unfortunately include all strikes, whether within the national juris-
diction or not.
12. Ibid.
13. Tr. Dec. 10-17, at 656-58.
14.. Local 1260 Exhibits 2, 13 (court’s computations). The latter
figure omits all those strikes lasting less than six days, since Hawaii
has a one-week waiting period before any benefits are payable.
A30
Declaratory Judgment and Order
The TELCO Balloting
The strike began on May 7, 1974. On May 28, 1974, the
TELCO employees rejected by a 2-to-1 margin a first tentative
agreement that had been reached by the negotiators.*® Follow-
ing this rejection, Director of Labor Hasegawa was paraphrased
in an article in the Honolulu Advertiser on June 1 as stating:
[T]he company has challenged every claim for unemploy-
ment compensation—“which they have every right to do.”
He said a hearing between the company and union
representatives may be held in about two weeks.'®
On June 5 another tentative agreement was reached and sub-
mitted to the membership for balloting by mail. On June 13
this second agreement was approved by more than 3-to-1.1"
Plaintiffs not implausibly contend that the sudden shift in
vote was caused by the company challenge to the payment of
unemployment compensation with a concomitant dampening of
the employees anticipation of the state’s monetary aid.
Raymond Victor, assistant business manager of Local 1357,
testified that the shift was due to the shortening of the contract
period and that the second ballot was not taken at a mass
meeting but by mail.
This court could not find that either theory was necessarily
valid.
The Employer Perspective
Donald M. Kuyper, Vice President of Personnel for TELCO,
testified that the potential availability of unemployment bene-
fits affected his company’s offers. As negotiations were about to
begin, Kuyper was aware that benefits had just been paid in
15. Pretrial order, Oct. 1, 1974, at 13-14.
16. Id. at 14-15; Plaintiffs’ Exhibit 15.
17. Pretrial order, Oct. 1, 1974, at 15-16.
is eee to th
A31
the Hawaiian Electric Company strike,’* and that the potential
cost to TELCO as a result of increased payroll taxes, if bene-
fits were paid, was in excess of $100,000." He was under the
impression that the union at TELCO had been checking on the
availability of welfare and unemployment benefits,2° and the
possibility of strikers getting unemployment benefits was of
“major significance . . . going into negotiations.”
After the strike had begun, Kuyper observed that the union
was actively assisting strikers to file their unemployment claims.”
Although Kuyper did not make such a calculation during
negotiations, the contribution formulae are readily available
for any employer to estimate his increased tax exposure for
any length strike for which its employees receive benefits. In
TELCO’s case, the increase is $754,000, over the two years
following the strike.** When compared with the estimated extra
[280]
$320,000 the initial contract would have cost the company, the
18. Tr. Oct. 1, at 69. Bargaining began just after the award of
benefits to Hawaiian Electric Company strikers of approximately
$100,000 was announced.
19. Tr. Oct. 1, at 105. Since Hawaii’s unemployment compen-
sation statute bases employer contributions on their experience
ratings, i.e., the amount of benefits paid their employees, an em-
ployer’s decision to keep operating during a strike may lead to an
increase in his tax rate. See H.R.S. §§ 383-63 to -70 (1968 &
Supp. 1974).
20. Tr. Oct. 1, at 71.
21. Jd. at 72: “The closeness of the Electric Company case was
certainly in my mind; in addition to that, however, there were other
factors that I think were also very relevant. One was that we had
come through a recent period of layoffs, there was a great concern
for job security. Secondly, there had been a lot of articles in the
paper in relationship to the cost of living—the increased cost of
living and also, of course, many articles in relationship to the controls
coming off, so that those three plus the unemployment benefits were
probably the four most significant things that I had in mind as we
entered the negotiations.”
22. Id. at 73-74, 82-83.
23. Pretrial order, Oct. 1, 1974, App. A (lodged Sept. 18,
1975). .
A32
Declaratory Judgment and Order
magnitude of this tax burden leads to the inescapable inference
that there will be occasional instances where it is cheaper for
an employer to accede to union demands he otherwise would
have rejected, than to run the risk of a prolonged strike.
Bernard T. Eilerts, Executive Vice President of the Hawaii
Employers Council during the TELCO strike and at the time
of trial, with a background of extensive experience in advising
employers and participating directly in bargaining, testfied
that the potential availability of unemployment insurance is
generally considered in determining bargaining strategy.”
Eilerts concluded that the potential availability of benefits
lengthened the TELCO strike and generally leads to higher
settlements where the employer realizes it has to keep operat-
ing during a strike.”®
Neither management witness could quantify the impact of
Hawaii’s unemployment insurance law on collective bargaining.”"
The very fact that the employers reasonably perceive the
potential or actual availability of benefits as an aid to their
bargaining adversary itself evidences an effect upon the collec-
tive bargaining process.
The Hawaii “stoppage of work” test requires an inquiry into
how much the employer’s business was curtailed.*® This adminis-
trative study by the state unemployment division requires
exhaustive examinations as to the volume, cash flow, and services
affected.” In other words, the state seeks to determine how
effective the strike has been, which is precisely one of the things
24. Tr. Oct. 1, at 150, 158, 160-63.
25. Id. at 154, 155-56, 164, 274, 278-79.
26. Id. at 274-75.
27. Id. at 250-52, 275, 299, 339, 341.
28. See Meadow Gold Dairies v. Wiig, 50 Haw. 225, 437 P. 2d
317 (1968).
29. Pretrial order, Oct. 1, 1974, at 10.
AO Rt a ae ee
es
ee ee
A33
Declaratory Judgment and Order
a union would be curious to know—as it considers whether to
continue the dispute, and what its bargaining position will be.
But for the state involvement, TELCO would not give this infor-
mation to the union.*°
The Union Perspective
Employee finances are an important aspect of strike planning
because they are key determinants of how long the employees
can stay away from work. As a result, many unions in Hawaii
send questionnaires to their members to help them analyze their
resources in preparation for a potential strike.*!
Defendants’ expert, Mr. Ruttenberg, conceded that (1) the
existence of a strike fund may be a significant factor in the results
of collective bargaining;** (2) the existence of a large available
source of funds during a strike is used by unions to impress
employers that the union has the resources to back up a threat
to strike;** and (3) the loss of income to strikers is a factor in
the minds of strikers when deciding whether to accept an em-
ployer’s collective bargaining offer.** In short, he admitted that
a fair summary of his position was that the amount of money a
striker is losing “goes through his mind along with other factors
and it may have an impact on his decision or does have an
impact . . .”;* and that the source of a striker’s funds, whether
it be unemployment compensation or union benefits from a strike
30. Tr. Oct. 1, at 83-84.
31. Tr. Dec. 10-17, at 183, 232, 250.
32. Id. at 465-66.
33. Id. at 467.
34. Id. at 581-83.
35. Id. at 586.
A34
Declaratory Judgment and Order
fund, makes no difference with respect to the impact on the
[281]
striker’s decision.*®
The benefits potentially available to TELCO strikers consti-
tuted a large percentage of their net take-home pay.*”
Various union officials testified that no thought was given to
the availability of unemployment compensation either in prepa-
ration for negotiations, during negotiations, or during the course
of strikes.** However, Local 1357’s assistant business manager,
Raymond Victor, was asked by a TELCO employee about the
possibility of benefits, at a membership meeting a few months
before the TELCO strike. Victor testified that he told the
employees “there’s no way to determine whether anybody is
going to ge paid.”*® Then he said he supposed that the employee
was trying to tell us to get the information before time so
that they would know whether they should make up their
mind to strike or not....
. . . IT assume he was asking that question to determine
whether they should usc that as a factor whether they
wanted to consider going on a strike.*°
While certainly not conclusive, a necessary inference to be
drawn from his testimony is that at least one union official
believed unemployment benefits to be a potentially important
36. Id. at 587. Notwithstanding the foregoing admissions, Rutten-
berg maintained in his testimony that funds offsetting wage losses
were not important “when the chips are down.” Jd. However, he
could not name a single other writer who supports his position, id.
at 491-95, and could not explain how other well-recognized experts
have taken a diametrically contrary position, see id. at 487, 647-48.
37. See Pretrial order, Oct. 1, 1974, App. B.
‘ 38. Tr. Dec. 10-17, at 51, 151-52, 155-56, 166, 215-16, 229.
39. Id. at 51.
40. Id. at 60-61.
FO RE 0 Os re Ne a —
Ses eet Rae
ee ee ene
A35
Declaratory Judgment and Order
factor, or thought that some of the membership believed them
to be potentially important.**
After the TELCO strike was settled and this case was about
to come to trial, a leaflet was distributed to TELCO workers
bearing the typewritten attribution “Gwen Pascua,’ a shop
steward for Local 1357.** The leaflet was a call to rally in protest
against the employer’s legal action:
[T]he ink was hardly dry on the contract when the
G.T.&E. bosses showed us what they thought of the
truce. They sent their fancy lawyers to federal court to sue
the State to prevent payment to us of our unemployment
compensation, which we were entitled to under State law.
By our labor we earned the profits and paid the state taxes
that finance the State Unemployment Fund. Now the com-
pany, with the help of the courts and their Big Business
allies in Hawaii, and all over the U. S., is trying to rob us
of our benefits, to the tune of hundreds of thousands of
dollars, and trying to undermine our ability and right to
strike in the future.
* ok
We must realize that all workers in Hawaii and in 25
other states will be hurt by a bad decision by Judge Pence.
Don’t we have a responsibility to carry our struggle through,
now that the bosses have picked up the club to use against
us and all workers, and beat back this attack and defend
our right and ability to strike? Don’t we have a responsi-
bility to the many workers who supported us when we were
on strike to make sure that our bosses’ action in court
[282]
* * *
doesn’t cripple their own strikes in the future?
41. No amount of union disclaimer was capable of convincing
all members that “there’s no way to determine whether anybody is
going to get paid.” Some of the membership apparently believed they
would be eligible for benefits. Tr. Oct. 1, at 261-62.
42. Id. at 88-91; Plaintiffs’ Exhibit 42. Defendants did not
dispute that she was the author of the leaflet, nor her position with
the intervenor-defendant union, nor that she was acting within the
scope of her authority as a steward.
43. Plaintiffs’ Exhibit 42.
A36
Declaratory Judgment and Order
Since some union participants believe unemployment compen-
sation to be a potentially important factor, this court cannot
conclude that it is entirely extraneous to the collective bargain-
ing process.
Factual Conclusions
From the preceding, as well as the facts found in this court’s
prior decision, this court finds: (1) 16.1% of total man-days
lost are attributed to strikes in which compensation was paid;
(2) the presence of potential unemployment benefits probably
tends to lengthen strikes; (3) the employer’s approach to bar-
gaining is affected by the potential additional tax burden; (4)
potential increases in tax contributions tend to make employers
settle when they otherwise would not; (5) unions are given
access to valuable confidential information about the success of
strikes during the course of state administrative hearings on
benefits; the appealability of those hearings is used as a bargain-
ing chip; (6) employee finances are key determinants of the
success of strikes and strike threats; (7) unemployment benefits,
if granted, provide a large percentage of striking workers’ take-
home pay; (8) union members and officials perceive that unem-
ployment benefits contribute to their ability to strike and main-
tain it. Therefore, this court finds that Hawaii’s unemployment
insurance statute as interpreted by the Hawaii Supreme Court
palpably affected the labor relations between TELCO and the
IBEW, and similarly affects all other Hawaii employers and
unions in every collective bargaining conflict and “is a factor
lurking in the background of every incipient labor contract’
where the employer may desire to carry on business during
a strike.
44. Super Tire Eng. Co. v. McCorkle, 416 U.S. 115, 124, 94
S.Ct. 1694, 40 L. Ed. 2d 1 (1974).
dst A DR ttle BORA sett enna
aoe
A37
Declaratory Judgment and Order
ANALYSIS OF THE FACTS AND THE LAW
The Social Security Act of 1935 did not set up a federal
unemployment compensation system. Rather it made it possible
for the states to establish their own systems and to provide
incentives for them to do so.*®* State legislatures had considered
the matter of unemployment compensation prior to the Congres-
sional enactment but most of them had defeated such bills,
fearing that a tax to finance their systems would handicap their
industries in competition with those of other states.*®
Congress overcame this problem and accomplished its objec-
tive primarily by imposing a national payroll tax on employers
against which a credit is allowed for contributions made by them
to qualifying state unemployment compensation funds.*?
While this country’s unemployment insurance scheme is a
cooperative state-federal venture, see Steward Machine Co. v.
Davis, 301 U.S. 548, 587-89, 57 S. Ct. 883, 81 L. Ed. 1279
(1937), the mere fact that the unemployment laws are under a
federal umbrella does not in itself alter the preemption problem.
See Nash v. Florida Industrial Commission, 389 U.S. 235,
88 S.Ct. 362, 19 L. Ed. 2d 438 (1967). The role Congress
[283]
played in shaping the nature of state laws is materially relevant
to the subject of Congressional intent to preempt, see infra.
It must be kept in mind that this is not a case of conflict between
45. S. Rep. No. 628, 74th Cong., Ist Sess. 12 (1935).
46. Id. at 11; Steward Mach. Co. v. Davis, 301 U.S. 548,
587-89, 57 S. Ct. 883, 81 L. Ed. 1279 (1937).
47. S. Rep. No. 628, 74th Cong., Ist Sess. 12 (1935); see 26
U.S.C. A. §§ 3301-09 (1967, Supp. 1975) (Unemployment Tax
Act); 42 U.S.C. A. §§ 501-04 (1974) (grants to states for unem-
ployment compensation administration) ; id. §§ 1101-08 (unemploy-
ment trust fund). If a state unemployment compensation law does
not meet federal standards, the tax credit to its industries is denied.
26 U.S.C. A. §§ 3302(a)(1), 3304 (1967, Supp. 1975).
A38
Declaratory Judgment and Order
two federal laws: the statute being challenged is not the Social
Security Act but rather the Hawaii Employment Security Law
as interpreted by its courts.*®
Labor Law Preemption
The law of labor preemption to date has focused on state
interference with employee activity protected or prohibited by
the federal labor laws.*® The principles of those cases, however,
provide initial steps in analyzing whether state interference with
employer activity, or state assistance to employee activity, is
likewise preempted.
It is now axiomatic that state laws may not interfere with
employee activities protected or prohibited by $$ 7 and 8 of
the N. L. R. A.®° Under the Supremacy Clause, since the Act
guarantees federal rights, state laws that conflict with the federal
legislation are invalid. See Garner v. Teamsters Local 776, 346
U.S. 485, 490-91, 74 S. Ct. 161, 98 L. Ed. 228 (1953); San
Diego Building Trades v. Garmon, 359 U.S. 236, 79 S. Ct.
773, 3 L.Ed. 2d 775 (1959); Motor Coach Employees v.
Lockridge, 403 U.S. 274, 276, 91 S.Ct. 1909, 29 L. Ed. 2d
473 (1971). The Garmon principle, however, is not a constitu-
tional rule. Retail Clerks Local 1625 v. Schermerhorn, 375
U.S. 96, 103, 84 S. Ct. 219, 11 L. Ed. 2d 179 (1963).
Local 20, Teamsters v. Morton, 377 U.S. 252, 256-61, 84
S. Ct. 1253, 12 L. Ed. 2d 280 (1964), sets out a basic rationale
for analyzing previous labor law cases and bringing them within
a unified system of preemption analysis.°' Morton dealt with
48. See New York State Dep’t of Social Serv. vy. Dublino, 413
U.S. 405, 93 S. Ct. 2507, 37 L. Ed. 2d 688 (1972).
49. See Cox, Labor Law Preemption Revisited, 85 Harv. L. Rev.
1337 (1972).
50. 29 U.S.C. A. §§ 157, 158 (1973 & Supp. 1975); see Cox,
supra note 49, at 1340-51, and cases cited therein.
51. See Cox, supra note 49 at 1350-51.
A39
Declaratory Judgment and Order
union activity that was clearly neither protected nor prohibited
by federal labor laws, so the issue did not fit within any of the
previous cases. The Court ruled, id. at 259-60, 84 S.Ct. at
1258:
Allowing [the activity] is a part of the balance struck by
Congress between the conflicting interests of the union, the
employees, the employer and the community. . . . If the
Ohio law . . . can be applied to proscribe the same type
of conduct which Congress focused upon but did not pro-
scribe . . . the inevitable result would be to frustrate the
congressional determination . . . and to upset the balance of
power between labor and management expressed in our
national labor policy.
Professor Archibald Cox, in preemption,” finds the key Con-
gressional labor policies are the right to organize and to strike;
and the solution of labor differences through collective bargain-
ing enforced by economic sanctions.
It must be recognized that there is both an explicit and an
implicit framework to the labor laws. The Taft-Hartley Act**
explicitly forbids certain employer and union activities. Im-
pliedly, the fact that there is no duty to reach agreement—
merely a duty to bargain in good faith"*—means there is freedom
to bring economic pressure to bear on collective bargaining.
[284]
See American Ship Building Co. v. NLRB, 380 U.S. 300, 85
S. Ct. 955, 13 L. Ed. 2d 855 (1965).
Congress, sometimes through the NLRB, attempts to balance
the competing interests. Atl rules involve “nice judgments”® as
52. See id. at 1351-59.
53. Labor Management Relations Act of 1947, ch. 120, 61 Stat.
136 (codified in scattered sections of 18, 29 U.S.C.A.).
54. 29 U.S.C.A. § 158(d) (1973 & Supp. 1975).
55. Cox, supra note 49, at 1353.
A40
Declaratory Judgment and Order
to whether one approach or another would be more likely to
obtain Congressional objectives. Nevertheless, the states, after
Morton, cannot erforce their own views as to what the proper
balance of those interests might be. Even in the absencé of
direct conflict between state and federal laws, the national
scheme preempts the state power to act.*®
While Morton explains the prior cases that deal with state
infringement upon employee activity, it also applies to the issues
that now face this court: state aid to employee activity or in-
fringement of employer activity.™
The underlying problem in every preemption case is to de-
termine the outer limits of Congressional concern; beyond these,
there is no preemption. A court cannot “declare pre-empted all
local regulation that touches and concerns in any way the com-
plex interrelationships between employers, employees, and un-
ions; obviously, much of this is left to the States.” Motor Coach
Employees v. Lockridge, supra 403 U.S. at 289, ‘91 S. Ct.
at 1919.
Congress passes the federal labor laws within a larger frame-
work of state law that creates property rights and regulates
general welfare under the Tenth Amendment. State laws fall
outside the limits of Congressional preemption if they
apply to the general public . . . without regard to whether
the individual is an employer, union, or employee con-
cerned with unionization or a labor dispute.
56. There is no part in the formula for a “balancing” of federal
and state interests, as suggested by the First Circuit in Grinnell Corp.
Vv. Hackett, 475 F. 2d 449 (1st Cir. 1973), and ITT v. Minter, 435
F. 2d 989 (ist Cir. 1970).
Head v. New Mexico, 374 U. S. 424, 83 S. Ct. 1759, 10 L. Ed. 2d
983 (1963), and Buck v. California, 343 U. S. 99, 72 S. Ct. 502, 96
L. Ed. 775 (1952), inquire only as to whether there is a conflict
between the statutes, but do not balance the interests underpinning
them. Likewise, all the labor cases cited in the text supra do not
refer to a weighing of interests.
57. See text accompanying notes 3-43 supra.
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Declaratory Judgment and Order
* ok * * a
It is only where the state law . . . is based upon an accom-
modation of the special interests of employers, unions,
employees, or the public in employee self-organization, col-
lective bargaining, or labor disputes that the likelihood that
its application . . . will upset the balance struck by
Congress is so great as to require exclusion of state law
unless Congress has provided otherwise.**
The “stoppage of work” test of striker eligibility for unem-
ployment compensation, as interpreted by the Hawaii Supreme
Court, inquires directly into the success or failure of a strike to
close down an employer’s business, e.g., benefits may be paid
only if the employer keeps its operation substantially ongoing.
See Hawaiian Telephone Co. v. State of Hawaii, 378 F. Supp.
791, 792 (1974) (decision on preliminary injunction). By focus-
ing on the effect of collective action by employees upon the
employer’s business operations when the parties are in the throes
of a collective bargaining conflict, it impinges upon “the very
subject addressed by Congress in the NLRA,” and therefore is
preempted,” unless Congress has provided otherwise.®°
[285]
Congressional Intent
At the very inception of the problem of trying to find “the
intent of Congress,” it must be recognized that for the most part,
“the principle of pre-emption that informs our general national
labor law was born of [the Supreme] Court’s efforts, without the
aid of explicit congressional guidance.” Motor Coach Employees
v. Lockridge, supra, 403 ‘U.S. at 286, 91 S.Ct. at 1918. The
cooperative federal-state nature of our unemployment laws,°
58. Cox, supra note 49, at 1355-56.
59. Id. at 1357.
60. Motor Coach Employees v. Lockridge, 403 U.S. 274, 297,
91 S. Ct. 1909, 29 L. Ed. 2d 473 (1971).
61. See notes 45-48 supra and accompanying text.
A42
Declaratory Judgment and Order
however, has from time-to-time brought forth expressions of
Congressional views on the payment of unemployment benefits
to strikers.
Congess itself, in formulating the District of Columbia laws
has always excluded strikers from unemployment benefits.
Congress passed the first provision simultaneously with the
Social Security Act of 1935.
Congressioual creation of policy for the District of Columbia,
however, cannot be taken as an absolute in gauging its intent
nationally. Because the District has no Congressional vote,
Congress legislates for the District in a relative political vacuum,
compared with political pressures upon it in formulating na-
tional legislation. At the most, one can conclude that Congress
might have wished the District’s policy upon the states if it did
not have to heed its several constituencies.
Defendants argue that the Social Security Board, “certainly
knowing the intent of Congress, approved state laws providing
for unemployment compensation for strikers.”** This fact is
immaterial, since the Board was mandated to approve all state
laws that met minimum conditions specified by Congress.
Defendants also point to Congressional inaction in 1935 on
several recommendations that state laws be required to deny
benefits to strikers. Careful examination of the legislative
record, however, does not reveal whether Congress ever expressly
62. Since 1935, the law in the District of Columbia, although
amended, has always excluded strikers. Act of Aug. 28, 1935, ch.
794, § 10(a)(6), 49 Stat. 946; Act of June 4, 1943, ch. 117,
§ 10(f), 57 Stat. 100; Act of Aug. 31, 1954, ch. 1139, § 10(f),
68 Stat. 988.
63. Brief for Locals 1260 and 1357, and Hawaii State Federa-
tion of Labor, at 25.
64. S. Rep. No. 628, 74th Cong., Ist Sess..47 (1935); see 26
U.S.C. A. § 3304(a) (1967, Supp. 1975).
65. Hearings on S. 1130 Before the Senate Comm. on Finance,
74th Cong., Ist Sess. at 228, 472, 959 (1935).
A43
Declaratory Judgment and Order
considered these recommendations, all of which were contained
in lengthy written reports, and none of whose proponents urged
them upon the Congressional attention during hearings.
Subsequent Congresses considered various proposals to elim-
inate benefits to strikers. All the legislative history argued by the
parties here was fully explored by the First Circuit in Grinnell,
supra, at 454-57, in the context of a challenge of the Rhode
Island law which, similar to New York’s, provided for payment
of unemployment benefits to strikers after a six-week waiting
period subsequent and in addition to the general waiting period
for all unemployed claimants.
For the purpose of this decision, the Grinnell opinion’s refer-
ence to Nixon’s proposal in 1969 to deny unemployment bene-
fits to strikers must be amplified. Nixon’s message accompanying
the proposal explained the strike provision as follows:
Workers on Strike.—The unemployment tax we require
employers to pay was never intended to supplement strike
funds to be used against them. A worker who chooses to
exercise his right to strike is not involuntarily unemployed.
[286]
In two States, workers on strike are paid unemployment
insurance benefits after a certain period. This is not the
purpose of the unemployment insurance system.
I propose a requirement that this practice of paying
unemployment insurance benefits to workers directly en-
gaged in a strike be discontinued.
Hearings Before the Committee on Ways and Means of the
House of Representatives on H. R. 12625, 91st Cong., 1st Sess.
12 (1969).
The draft amendment contained the following provision to
be inserted after paragraph (6) of § 3304(a) of the Internal
Revenue Code:
66. Id. at 113, 121, 133, 223, 237, 238, 463, 959.
A44
Declaratory Judgment and Order
(10) compensation shall not be paid by reason of the
expiration of a specified period of time te an individual
who has been disqualified under a labor dispute disqualifi-
cation provision in such State law; (emphasis added)
(id, at 25)
Similarly, the Taft-Hartley Act as passed by the House con-
taining a provision that would have removed a striker from
the status of employee if he was receiving unemployment com-
pensation (see Grinnell and briefs) was also aimed at New
York and Rhode Island statutes, even though the language was
broad enough to affect strikers in Hawaii today.
The House provision, deleted in conference with the Senate,
read:
employee . . . shall also include any individual whose work
has ceased as a consequence of a current labor dispute
(unless such individual has been replaced by a regular
replacement, or has obtained other regular and sub-
stantially equivalent employment, or is receiving unemploy-
ment compensation from any State)... .
1 NLRB Legislative History of the LMRA 161 (1947).
The House Committee Report accompanying the bill ex-
plained the purpose of the provision as follows:
A few States pay strikers after the fifth, sixth, or seventh
week of a strike. This clearly is a perversion of the pur-
poses of the social security laws .. . . We therefore have
provided that a striker’s status as an “employee” stops
when he starts receiving unemployment compensation
from any State. He may receive relief from his union,
from local welfare funds, or from charity without losing
that status. (Emphasis added)
Id. at 303-04.
The minority report, id. at 359, said:
The bill apparently intends to discourage States from
paying unemployment compensation to strikers by penaliz-
A45
Declaratory Judgment and Order
ing employees who accept unemployment compensation.
Under the Social Security Act, however, the determination
of those matters was advisedly left to the States.
From this court’s analysis it seems unmistakable that by
Congressman Mills’ statement upon the 1969 legislation—
“There are two States . . . which pay unemployment benefits
when employees are on strike” (Grinnell, at 455 )—he was re-
ferring to the New York and Rhode Island type of unemploy-
ment acts, acts which have a fundamental difference from
Hawaii’s, in the scope of their application.
There is no point in this decision to retrace the same road
toward determination of Congressional intent that was so labor-
iously trudged by Judge Coffin in Grinnell. On the broad prob-
lem of payment of unemployment compensation to strikers,
this court agrees with Grinnell, at 457 that “unambiguous
Congressional intent is lacking” and (at 454):
the existing legislative record is not sufficiently clear to
establish Congressional intent either way, it strongly indi-
cates Congressional awareness, the availability of op-
portunities to act, and Congressional action in closely re-
lated matters which would prove relevant should the
evidence on infringement and state interests be closely
balanced, (Emphasis added)
[287]
The “Work Stoppage” Provision
Neither from Grinnell nor from this court’s own research is
there any evidence that Congress was ever aware of the “work
stoppage” problem imposed by the unemployment compensation
act adopted in Hawaii and some other states.
As heretofore indicated, H.R. S. § 383-30 disqualifies one
for benefits under “(4) Labor dispute. For any week .. . this
his unemployment is due to a stoppage of work which exists
because of a labor dispute at the . . . establishment . . . at which
he is . . . employed.”
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Declaratory Judgment and Order
“Like most other aspects of the Draft Bill, the stoppage of
work requirement had its origin in the British Unemployment
Insurance Acts”,® social legislation which preceded the Ameri-
can acts by over 20 years. It was natural therefore for the
American courts to look to the decisions of the British Umpires
for precedent in the interpretation of what superficially appears
to be simple language. Unfortunately, where employees and em-
ployers are at odds, “nothing is simple.” Shadur® continues:
When this country’s fifty-one statutes were adopted, the
phrase had long since acquired a settled construction from
the British Umpires as referring “not to the cessation of
the workman’s labour, but to a stoppage of the work car-
ried on in the factory, workshop or other premises at which
the workman is employed.” It is scarcely surprising that
the overwhelming majority of appellate decisions in the
United States have adopted the same interpretation. (Foot-
notes omitted. )
That this “settled construction” may have not been so simple
and finite as stated by Shadur and assumed by American courts
is shown in the July 1946 study of “Principles Underlying
Labor-Dispute Disqualification” made by Marsile J. Hughes of
the Illinois Division of Placement and Unemployment Compen-
sation at the request of the Federal Bureau of Employment
Security and sent to state unemployment agencies. After making
a detailed analysis of the “Analytic Guide to Decisions by the
[British] Umpire”, Hughes states:
[I]t is apparent that the British authorities in determining
whether a stoppage of work existed looked first to see
whether any job vacancies were created by the dispute.
* * * * *
Under the British interpretation of the word “stoppage”
the individual is disqualified for benefits if his unemploy-
67. Shadur, Unemployment Benefits and the “Labor Dispute”
Disqualification, 17 U. Chi. L. Rev. 294, 308.
68. Ibid.
A47
Declaratory Judgment and Order
ment is due to a trade dispute so long as the job which he
held continues to be vacant. It would be necessary for the
claimant to show that the job vacancy had been filled in
some way in order to effect a termination of his disqualifi-
cation. Vacancies might be terminated by the return of the
worker, by the hiring of a replacement, or by a readjust-
ment of work operations.
Hughes’ conclusions validate plaintiffs’ contention that the
Umpires’ interpretation of “stoppage of work” would preclude
payment of benefits to strikers unless they were permanently
replaced or their jobs were eliminated.
American Decisions
Assuming the plaintiffs’ version of the Umpires’ decisions to
be correct, it appears that the American courts that first con-
sidered the issue were correct in their results but used imprecise
conclusitory language, just as did Shadur, with an almost in-
escapable overbroadening of the British rule.
The earliest case cited is Magner v. Kinney, 141 Neb. 122,
2 N. W. 2d 689 (1942). This involved a strike that began after
an impasse in collective bargaining. There is no evidence that
the strikers were replaced, and the action decreased total busi-
ness transacted by the employer more than 30 per cent. The
[288]
court adopted what it believed to be the Umpires’ construction,
viz., “ ‘stoppage of work,’ . . . is a substantial curtailment of
work in an establishment, not the cessation of work by the .. .
claimants.” 2 N. W.2d at 692. The court concluded that 30
per cent curtailment of business was “substantial” and denied
benefits.
Lawrence Baking Co. v. Michigan Unemployment Compen-
sation Commission, 308 Mich. 198, 13 N. W. 2d 260 (1944),
69. M. Hughes, Principles Underlying Labor-Dispute Disquali-
fications 26 (1946).
A48
Declaratory Judgment and Order
is repeatedly cited as the leading case on the issue. The case
arose from an organizational strike, in which 16 union members
of plaintiffs 98 employees went on strike, disrupting operations
for about 15 minutes. The employer “immediately” hired re-
placements and notified the strikers of this fact. Lawrence Bak-
ing did not rely directly on incorrect reading of the Umpires’
construction of work stoppage, although it quoted at length
from Magner. Rather, it argued that the interpretation given
Nebraska’s law by the Magner court is part of the evidence
that Michigan intended the same construction when it later
adopted similar statutory language. 13 N. W. 2d at 262-63. The
court affirmed the award of benefits to the strikers, the same
result that would have obtained had the Umpires’ approach
been followed, since the strikers had been replaced.
By the time the Hawaii Supreme Court ruled in Inter-Island
Resorts v. Akahane, 46 Haw. 140, 377 P. 2d 715 (1962), the
American version of the work stoppage test was firmly en-
sconced, and broad enough to provide benefits to employees
who had not been replaced after going on strike. An organ-
izational strike had been called against the Kona hotel. During
the first two days, the hotel operated with the help of supervisors
and guests. Service was somewhat curtailed but the hotel re-
mained open. Later in the week, the employer hired some re-
placements and full operations resumed. The union was in-
formed that 11 positions were still vacant; 32 employees had
begun the strike. The positions were not accepted.
As to those employees who had been replaced, the British
Umpires’ interpretation of work stoppage would allow payments
of benefits. The Hawaii court went further, however, and found
all the claimants to be eligible under the American work stop-
page test. The same general pattern reoccurred in Gaspro v.
Labor & Ind. Rel. Comm'n, 46 Haw. 164, 377 P.2d 932
(1962), viz., an organizational strike, Gaspro shut down tempo-
rarily, then permanent rehire and business continued. The
strikers lost their jobs.
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Declaratory Judgment and Order
_ The holdings of both Akahane and Gaspro would have been
justified under the British construction of “work stoppage.”
‘ It was with Meadow Gold Dairies v. Wiig, 50 Haw. 225, 437
P. 2d 317 (1968), that Hawaii, like many other state courts
having similar “stoppage of work” clauses in their unemployment
acts, went far beyond the British rule and gave benefits to
strikers—without regard to job loss—when the employer was
able to keep up substantial (about 80% in Hawaii) operations.
The Legal Issue
Meadow Gold and the subsequent state awards anent the
Hawaiian Electric strike thus have with certainty in Hawaii
created the problem now before this court: Has Hawaii’s inter-
pretation and application of the “stoppage of work” clause in its
Unemployment Compensation Act so impermissibly altered and
affected the relative economic strength of union versus employer
in their bargaining relationship, as to thereby encroach upon
and into the field pre-empted by the NLRA in violation of the
Supremacy Clause of the Constitution?
Congressional Intent and the Issue
As heretofore found, even in the broader problem of payment
of benefits to strikers, where the issue of “work stoppage” is not
involved, a clear determination of “Congressional intent” cannot
{289]
be made. Moreover, on the question of work stoppage and pay-
ment to strikers, not even a whisper of “Congressional intent”
has been heard. The best that can be said is that its intent is
ambiguous in this labor law area. Although any clarity of Con-
gressional intention be lacking, the court must nevertheless
decide whether Hawaii’s law impermissibly interferes in a feder-
ally preempted field. Under the preemption doctrine, state legis-
A50
Declaratory Judgment and Order
lation may be invalid even if it does not directly interfere with
federal legislation."” When the legislative schemes underlying
the Social Security Act and the N. L. R. A. are compared, it is
apparent that in the labor area, except in the narrow area in
which the states’ traditionally intense interest in public order
survives, Congress intended to preempt the labor field.”
Employers’ “Rights”
Plaintiffs have maintained and defendants have denied that
an employer has a right under the N. L. R. A. to keep his busi-
ness operating during a strike. True, there is no specific state-
ment in the N. L. R. A. that an employer has such a right.
That right exists, nevertheless. As the Ninth Circuit said in
Hawaii Meat Co. v. NLRB, 321 F. 2d 397, 400 (1963): “No
case holds that a struck employer may not try to keep his
business operating; on the contrary, it is quite clear that he has
the right to do so.” In accord are NLRB v. Mackay Co., 304
U. S. 333, 345, 58 S. Ct. 904, 82 L. Ed. 1381 (1938), as well
as NLRB vy. Erie Resistor Corp., 373 U.S. 221, 232, 831 S. Ct.
1139, 10 L. Ed. 2d 308 (1963).
SYNTHESIS OF FACTS
(as found here and in this court’s prior decision)
A. Employees
1. No striker’s job was ever in jeopardy.
70. See Conceptual Refinement of the Doctrine of Federal Pre-
emption, 22 J. Pub. L. 391 (1973); Note, Federal Preemption, 1966
Duke L. J. 484.
71. Cox, supra note 49, at 1358. Hawaii’s interest in paying
unemployment benefits to strikers is in no way analogous to state
interest in preventing violence on the picket line, see San Diego Bldg.
Trades Council v. Garmon, 359 U. S. 236, 79 S. Ct. 773, 3 L. Ed. 2d
775 (1959), and therefore not within the public order exemption.
A51
Declaratory Judgment and Order
2. Before the strike, at least some employees were con-
cerned about receiving unemployment benefits.
3. During the strike, almost all 3000 strikers applied for
and expected to get benefits.
4. The benefits would provide for a large percent of a
striker’s regular pay, i.e., needs.
5. Strikers, after filing of the instant suit, condemned the
action as diminishing “our ability to strike.”
6. Ruttenberg acknowledged impact of benefits.
B. Employers
1. TELCO states possible payment of benefits and addi-
tional tax burden affected bargaining offer.
2. TELCO’s negotiator stated it was a factor in the talks.
3. TELCO was ordered by the state to divulge its financial
and operative facts to the state (and union) during
the strike.
4. TELCO was facing a possible tax “contribution” of
over $190,000 per week of strike, with no assurance
of recovery, while it kept business operating.
C. State
1. State actively assisted union and strikers in filing claims.
[290]
2. State demanded disclosure of TELCO’s earnings and
other financial data during strike.
3. If an employer closes down operations during a strike,
the state pays no benefits to strikers.”
72. A vital facet of the factual inquiry before this court is not
whether benefits are paid to strikers. Rather, under Grinnell, it is
whether the payment of money in fact affects the collective bargain-
ing process or is extraneous to that process.
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Declaratory Judgment and Order
CONCLUSIONS
It was unquestionably the intent of Congress that collective
bargaining, free from state interference, should be the founda-
tion of the federal labor policy. Local 24, Teamsters v. Oliver,
358 U.S. 283, 79 S. Ct. 297, 3 L. Ed. 2d 312 (1959); Local
20, Teamsters v. Morton, 377 U.S. 252, 84 S. Ct. 1253, 12
L. Ed. 2d 280 (1964). Employer and employees alike have a
right to the benefit of every privately furnished economic
weapon available in implementing their respective bargaining
positions, in carrying on or opposing a strike. Contributions by
fellow unions and employers are permitted.”* Unless the state
activity is but a peripheral concern of the Act or there is an
overriding state interest, a state may not assist either party in a
labor dispute, i.e., interfere with collective bargaining,” a state
must be neutral.
For a State to impinge on the area of labor combat designed
to be free is quite as much an obstruction of Federal policy
as if the State were to declare picketing free for purposes of
or by methods which the federal Act prohibits. Garner v.
Teamsters, 346 U.S. 485, 500, 74 S. Ct. 161, 98 L. Ed.
228 (1953).
Under Hawaii’s law, when the avowed objective of closing
down the employers plant” is achieved by the union, no benefits
73. Kennedy v. Long Island Rail Road Co., 319 F. 2d 366 (2nd
Cir. 1963); Air Line Pilots Assn. International v. C.A.B., 163
U.S. App. D. C. 451, 502 F. 2d 453 (1974).
74. Linn v. Plant Guard Workers, 383 U.S. 53, 86 S. Ct. 657,
15 L. Ed. 2d 582 (1966); Plumbers’ Union v. Borden, 373 U.S.
690 (1963); Automobile Workers v. Russell, 356 U.S. 634, 78
S. Ct. 932, 2 L. Ed. 2d 1030 (1958); John Hancock Mutual Life
Insurance Co. v. Commissioner of Insurance, 349 Mass. 390, 398,
208 N. E. 2d 516, 522 (1965).
75. Henry B. Epstein, state director of the U.P. W., Tr. Dec.
10-17, at 207, 229.
oe
4
A53
Declaratory Judgment and Order
may be paid the strikers. The state is then neutral. When, how-
ever, the employer is successful in resisting t:.2 union attack, and
keeps his business in substantially full operation, the state, after
the first week of the strike, takes sides against the employer, and
for the strikers. As indicated, it sets about giving great financial
assistance to the strikers, and extracting valuable (to the strikers)
financial and other information, as well as burdening the em-
ployer with future increased tax burdens. The strikers’ position
when a strike is called, with the state’s assist, becomes one of
“heads I win, tails you lose”!
On its face, therefore, Hawaii’s statute irreconcilably intrudes
into the federal process of free collective bargaining.
It cannot with any validity be argued that Hawaii’s law
implements any necessary “state purpose”. The striker picket-
ing a closed-down shop is just as in need of benefits as is the
striker picketing a shop in full operation. Nevertheless Hawaii
now gives aid to the latter but none to the former.
Congress has never even inferred that it approves this ano-
malous situation. In the absence of any Congressional approval,
it can only be said that Hawaii’s statute impermissibly intrudes
into the area of labor law fully occupied by the N. L.R. A.
The application of Hawaii’s law also clearly frustrates Con-
gress’ ukase that the collective bargaining process must be free
from state interference. Hawaii’s statutory scheme for unem-
ployment assistance to strikers therefore cannot stand, but must
be stricken down.
[291]
TELCO’s prayer for a permanent injunction is granted.
Plaintiffs will prepare the order. TELCO’s bond is cancelled.
A54
Declaratory Judgment and Order
AMENDED DECLARATORY JUDGMENT AND ORDER
FOR PERMANENT INJUNCTION
It is hereby ordered and declared that defendants’ payment
or consideration for payment of claims for unemployment
comrensation benefits for periods of unemployment incurred
by claimants’ participation in a strike against an employer en-
gaged in interstate commerce, as Hawaii Revised Statutes,
Section 383-30(4), has been and is now applied, constitutes
an unlawful and impermissible infringement upon the scheme
of collective bargaining established and preempted by Con-
gress, in violation of the supremacy clause of the Constitution
of the United States;
It is further ordered and declared that H. R. S. § 383-30(4),
insofar as it presently is administered to disqualify other claim-
ants unemployed due to a labor dispute, is valid;
It is further ordered and declared that the State of Hawaii
Department of Labor and Industrial Relations and its Director
and employees shall permanently cease and refrain from in-
vestigating, processing, disclosing information regarding em-
ployer operations, or making payment upon claims for unem-
ployment compensation filed by or on behalf of any individual
employed by Hawaiian Telephone Company whose unemploy-
ment during the period from May 7 to June 16, 1974, was due
to a labor dispute at the factory, establishment or other prem-
ises of Hawaiian Telephone Company during such period, or
by or on behalf of any other individual employed by any
other employer engaged in interstate commerce or in an indus-
try affecting interstate commerce, as such employer or indus-
try is defined by the National Labor Relations Act, if such
individual’s unemployment is due to a labor dispute at the
factory, establishment or other premises of such employer;
eat lO A Dic NRA pm Me
A55
Declaratory Judgment and Order
It is further ordered and declared that nothing herein shall
prevent or enjoin any person from filing any claim for State
of Hawaii unemployment benefits;
It is further ordered and declared that with respect to labor
disputes involving an employer engaged in interstate commerce
or in an industry affecting interstate commerce as defined in
the National Labor Relations Act and related claims for unem-
ployment compensation benefits requiring application of H. R. S.
§ 383-30(4) arising after the entry of this Judgment, the De-
partment of Labor and Industrial Relations shall refrain from
investigating such claims until leave of court is obtained for
good cause, upon at least 48 hours advance notice to the em-
ployer and labor organizations involved in said labor dispute;
It is further ordered and declared that the Director of the
State of Hawaii Department of Labor and Industrial Relations
shall, effective December 1, 1975, advise all claimants for
unemployment compensation that claims will not generally be
processed nor benefits paid for periods during which claimant
is on strike or otherwise not working due to participation in a
labor dispute with an employer engaged in interstate commerce
or an industry affecting interstate commerce;
It is further ordered and declared that there being no just
reason for delay, that Count If of the Complaint herein shall
be and hereby is ordered dismissed without prejudice. In the
event plaintiffs renew Count II, no finding of laches or statute
of limitations shall bar relief otherwise found herein to be
appropriate, provided timely renewal is made by plaintiffs sub-
sequent to any dissolution or modification of these orders.
It is further ordered and declared that the Clerk shall enter
this Amended Order as the final Judgment herein in lieu of any
prior Judgment entered and that each party shall bear its own
costs of these proceedings.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.