AMERICAN HAWAIIAN CO ET AL v. CALIFORNIA EMPLOYMENT COMMISSION ET AL

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District Court of Appeal, First District, Division 2, California.

AMERICAN–HAWAIIAN S. S. CO. ET AL. v. CALIFORNIA EMPLOYMENT COMMISSION ET AL.

Civ. 12068.

Decided: August 13, 1942

Brobeck, Phleger & Harrison, of San Francisco, for petitioners. Earl Warren, Atty. Gen., John J. Dailey, Deputy Atty. Gen., Maurice P. McCaffrey and Glenn V. Walls, both of Sacramento, and Gladstein, Grossman, Margolis & Sawyer, of San Francisco, for respondents.

The group of petitioners, all engaged in the business of operating terminal facilities or transporting freight by water to and from ports on San Francisco bay, comprise an association known as the Dock Checkers Employers' Association of San Francisco, and as such were parties to a written contract covering terms and conditions of employment with the Ship Clerks' Association, Local 38–90, International Longshoremen's Association. This contract was in full force and operation on November 10, 1939, when the union called a strike against all members of the employers' association. The strike continued until January 3, 1940, and thereafter approximately one hundred and twenty–five of the employees who had been on strike applied for and were granted unemployment benefits by the respondent commission. The petitioners pursued all the statutory remedies before the commission for a proper adjustment of the controversy, but the commission by a vote of three members to two, ordered that these benefits be paid. Each of the petitioners has at all times been an employer under the terms of the Unemployment Insurance Act, Stats.1935, p. 1226; as amended, Deering's Gen.Laws, 1937 and Supps. 1939, 1941 Act No. 8780d, and as such employer has been required to pay to the respondent commission his employer contributions to the unemployment insurance fund administered by the commission. After pleading their beneficial interest in the administration of the fund the petitioners alleged that they have exhausted all their administrative remedies to no avail and that the respondent commission threatens to pay the benefits to the employees named, and to charge petitioners' accounts in the unemployment fund with such deductions. Alleging that all these payments are in violation of the plain terms of the Unemployment Act, and that they have no other remedy, the petitioners seek this writ of mandate to require the respondent commission to vacate its order of payment of such benefits, and to refrain from charging their accounts with such payments.

The respondent commission appeared generally with all other respondents by demurrer and answer, and thereafter, by stipulation of the parties, the individual employees affected by the controversy appeared by demurrer, answer, and other pleas which do not require consideration. The cause was fully argued and briefed and settles down to the simple question of law––whether the order and award of the commission was within the terms of the statute.

There is no substantial or real controversy as to the facts. Whatever denials were made in the answers were submitted without proof. By stipulation the entire record of the proceedings before the commission was received in evidence, with the reservation of the right to try before the court the question whether the trial of this proceeding was to be confined to such record or whether the parties should have the right to try the whole controversy de novo. This issue was not argued, however, and though the right to a trial de novo was sustained in Laisne v. California State Bd. of Optometry, 19 Cal.2d 831, 123 P.2d 457, the parties did not avail themselves of that privilege. However, the record of the proceedings before the commission does not controvert any of the material facts upon which the controversy rests and we may treat the proceedings now as though submitted on the demurrers to the petition.

A brief statement of these facts will suffice to lay the background for the question of law upon which the whole controversy rests. The petitioners employ a number of men known as dock checkers to perform clerical services in connection with the handling of cargoes. The checkers involved here, known as “casual daily checkers” work on an hourly basis for various employers as their services are required. They are all dispatched to work through the joint hiring halls maintained by the union and the employers' association. An employer can obtain checkers only through these halls, and when the men finish a job they report to the hall for the next assignment. Some of the checkers have a preference, but otherwise they are dispatched in turn in an effort to equalize earnings. The volume of work during the periods herein mentioned was normally sufficient to furnish full employment to all checkers available, though there was not sufficient work to require the services of each checker on each day, and on most days there were some checkers who did not perform a full day's work because they had completed the work to which they had been last dispatched and were awaiting a new assignment. On November 10, 1939, at 6 p. m., the checkers involved went on strike against petitioners, and remained on strike until January 3, 1940. When the strike began they were either not actually at work or were working for an employer not subject to the strike. They applied for unemployment insurance benefits for the period from November 10, 1939, to January 3, 1940, and respondent commission affirmed an award of a referee totaling in excess of $13,000.

Petitioners argue that the claimants left their work because of a trade dispute within the meaning of the Unemployment Insurance Act, section 56(a), which provides that an individual is not eligible for unemployment benefits “If he left his work because of a trade dispute and for the period during which he continues out of work by reason of the fact that the trade dispute is still in active progress in the establishment in which he was employed.” They contend that any unemployment of the claimants during the period in question was due to their refusal to work for petitioners after their union had called a strike; and that to hold that a man employed on an hourly or daily basis who is not actually on the job at the moment a strike begins is not covered by the statute would defeat its purpose, that if he has actual employment, under a rotational or some other system of employment, and goes on strike, he is disqualified.

The respondents seek to support the award upon the ground that, because of the casual nature of the employment, there was no legal relation of employer and employee existing at the time the strike became effective at the close of the working day of November 10th, and that a checker was not an employee who “left his work because of a trade dispute” within the terms of section 56(a) of the act.

In the interpretation of an act of this character it is first important to look to the purpose and intention of the Legislature in enacting the legislation. Here the purpose is expressly declared in section 1 of the act, as amended in 1939, Gen.Laws Supp.1939 Act 8780d, to be the “compulsory setting aside of funds to be used for a system of unemployment insurance providing benefits for persons unemployed through no fault of their own, and to reduce involuntary unemployment and the suffering caused thereby to a minimum.” (Emphasis ours.) This section was enacted as a “Declaration of state policy” opening with the clause reading, “As a guide to the interpretation and application of this act the public policy of this State is declared as follows:”

Section 56 of the act reads: “An individual is not eligible for benefits for unemployment, and no such benefit shall be payable to him under any of the following conditions:

“(a) If he left his work because of a trade dispute and for the period during which he continues out of work by reason of the fact that the trade dispute is still in active progress in the establishment in which he was employed.

“(b) If without good cause he has refused to accept suitable employment when offered to him, or failed to apply for suitable employment when notified by the district public employment office.”

The clear meaning of section 56 is that if the applicants have refused to accept suitable employment they are not “persons unemployed through no fault of their own” just as one who has left his work because of a trade dispute is beyond the contemplation of the act. The clear meaning of the first section of the act as applied to conditions arising under section 56(a) is stated in Bodinson Mfg. Co. v. California E. Com., 17 Cal.2d 321, at page 328, 109 P.2d 935, at page 940, where the Supreme Court said: “In brief, disqualification under the act depends upon the fact of voluntary action, and not the motives which led to it. The legislature did not seek to interfere with union principles or practices. The act merely sets up certain conditions as a prerequisite to the right to receive compensation, and declares that in certain situations the worker shall be ineligible to receive compensation. Fairly interpreted, it was intended to disqualify those workers who voluntarily leave their work because of a trade dispute. Co–respondents in this proceeding in fact ‘left their work because of a trade dispute’ and are consequently ineligible to receive benefit payments. It follows that the Commission's decision was erroneous as a matter of law and should be annulled.”

Section 13(b) of the act provides that employment is not “suitable” if the position offered is “vacant due directly to a strike, lockout, or other labor dispute.” But this clause is limited by the preceding clause to one “refusing new work” under these conditions. Here the undisputed evidence is that the claimants were not offered “new” work after the strike, but that they refused to accept assignments to the same “work” or jobs, in which they had been employed for many years. The whole story is that they voluntarily refused to cross the picket lines.

Upon the conclusion of the hearings before the commission three members gave a decision in favor of the employees, and two members dissented. The majority based their ruling upon the expressed view that “There was no legal relationship of employer and employee existing between the claimant and any employer at the time of the commencement of the trade disputes. * * *” The two dissenting members––Henry F. Grady and Ansley K. Salz––filed a minority opinion in which they called for a fair and impartial adherence to the statute. They pointed out that the basis of the trade dispute was the failure to reach a new contract, as a result of which the checkers' union called a strike and picketed the docks; and that the failure of the employees to secure employment during the period of the strike was of their own choosing. The peculiar nature of the employer–employee relationship in this case, and the speciousness of the grounds upon which the majority based its findings is covered by the portion of the minority opinion from which we quote: “It is pertinent to point out that the employer–employee relationship in this case is more complicated than in ordinary industries, due inherently to the intermittent nature of the work to be performed, and due to the contractual regulation for rotation and equalization of work assignments from many shipping concerns among a limited group of employees. The true situation herein is clear enough for applying the plain intent of the Legislature, and the guide to interpretation of the act set up in section 1 thereof.

“If the decision of the majority in this case stands, then it follows that if the union herein were to declare a strike at a time when practically all job assignments were completed, it could be assured of benefits being paid to all members of the union not on actual job assignments at the moment, thus assuring it of strike benefits to a large proportion of the registered union checkers. This would circumvent the provisions of 56(a) and be contrary to the plain intent of the act, and an injustice to all other individuals having an interest in the California State Unemployment Compensation Trust Fund who would be unable to obtain such benefits.

“A new technique in strikes on the San Francisco waterfront or other harbors where similar working conditions prevail would naturally follow the majority decision; thus,

“1. The waterfront unions are principally industrial unions.

“2. The Supreme Court has ruled that failure to cross a picket line because of union principles is a disqualifying act under Section 56(a).

“3. If one local union in an industrial union establishes a picket line, no other local will cross it; thus, they will be disqualified.

“4. Therefore, if instead of a local union striking, the industrial union comprising all the locals strikes as a body at a moment when longshore work is at a minimum, the disqualification set up in Section 56(a) will apply only to the few employees who happen to be engaged on job assignments. In this manner, large sums of money could be drawn from the California State Unemployment Compensation Insurance Fund during a trade dispute by a group of individuals who, in furtherance of a trade dispute, had voted not to perform their usual work, but who could not under the Act be said to have left their work, because the words ‘left their work’ were so narrowly construed as to mean only actually leaving job assignments on which they happened to be engaged at the moment.

“Such a narrow interpretation, which follows the decision of the majority in this case, would be ruinous to the Fund and contrary to the basic intent and principle of the Act as set forth by the Legislature of the State of California.”

As to respondents' argument that the petitioners are not entitled to relief in these proceedings and that the court is without power to review the proceedings before the commission little need be said. The same point was raised in the Bodinson case, supra, 17 Cal.2d page 330, 109 P.2d 935, page 941, and decided adversely to respondents. There the court said: “Indeed, it seems to us that elemental principles of justice require that parties to the administrative proceeding be permitted to retain their status as such throughout the final judicial review by a court of law, for the fundamental issues in litigation remain essentially the same. * * * Furthermore, it seems apparent that the employer whose reserve account is affected is the only person having sufficient incentive to challenge a decision awarding benefits. Action by this employer provides the only procedural guarantee that the Commission can be held by legal process to comply with the requirements of the statute under which it operates.” And in Laisne v. California State Board of Optometry, 19 Cal.2d 831, 844, 123 P.2d 457, 465, where the same question was raised, the court said: “In regard to the numerous cases containing language to the effect that administrative agencies may make findings of fact and the reasons of expediency given therefor, it must again be pointed out that it is not the fact–finding power alone that is involved in the present situation. It is the facts found plus the order based thereon depriving a person of a property right which is the full exercise of the judicial power.” But a clearer statement of the principle here involved is found in the dissenting opinion in the Laisne case from which we quote, page 868 of 19 Cal.2d, page 477 of 123 P.2d: “A review upon the issues of law would, of course, include such questions as whether the agency has regularly pursued the authority vested in it, whether it has acted arbitrarily and whether there is substantial evidence to support its determinations of fact. Our decisions have recognized that administrative rulings on questions of law cannot be accorded finality. Such questions may be determined conclusively only by a court exercising constitutional judicial power.”

Here the real issue is whether, when there is no substantial dispute in the facts, a court may by proceedings in mandamus, set aside an erroneous conclusion of law based upon such facts. The rule has always been accepted in this state that mandamus is the proper remedy to relieve the party beneficially interested in the acts and decisions of administrative bodies which are shown to have been arbitrary, capricious, or in violation of law. This rule is adhered to in the Bodinson case, supra, and by both the majority and minority in the Laisne case, supra.

Respondents contend that the writ should not issue because petitioners have failed to exhaust the administrative remedies provided in the act and cite Abelleira v. District Court of Appeal, 17 Cal.2d 280, 109 P.2d 942, 132 A.L.R. 715, as authority. The petitioners do not quarrel with the rule of the case cited but contend that it is not applicable here because they have exhausted all these remedies. The respondents rest their argument on section 41.1 of the act which was added by Stats. 1941, p. 2535; Deering's Gen.Laws, 1941 Supp., Act 8780d, and which provides that the commission shall furnish each employer with itemized statements showing the charges to his account and his contribution rate for the succeeding rating period, and gives the employer sixty days to protest any of these items. Subdivision (d) provides: “In the event that the determination in any protest proceeding is rendered against the employer” (Italics ours.) he may bring an action to recover the amount claimed as an overpayment. Section 45.10, which was added in 1939, and upon which respondents also rely, is similar to section 41.1 in that the right of action therein referred to is expressly limited to the adjustment of contributions paid under protest. Neither section has any relation to a proceeding such as we have here to determine the right of an employee to be paid benefits under the terms of the act and thus deplete the trust fund to which the petitioners have made their statutory contributions. The right of the employer–contributor to test the validity of payment of benefits by mandamus is expressly confirmed in the Bodinson case, supra, where at page 325 of 17 Cal.2d, page 938 of 109 P.2d the supreme court said: “The statute does not provide its own procedure for testing whether a particular decision of the Commission awarding benefits is consistent with the authority delegated to the Commission under the act. The only express provision for court review is made by section 45.10, * * * which permits an employer to contest the legality of the contribution sought to be enforced against him by paying it under protest and then suing to recover the amount so paid. It does not follow from this, however, that the courts are without power to review a decision awarding unemployment benefits when it is alleged that the Commission has violated the plain provisions of the statute under which it functions.”

For the reasons given the order or award of the respondent commission should be vacated and annulled and the accounts of the petitioners should be relieved of charges for the benefits included in that award.

Let a peremptory writ issue as prayed.

NOURSE, Presiding Justice.

STURTEVANT and SPENCE, JJ., concurred.