POSNER v. GRUNWALD MARX INC

Reset A A Font size: Print

District Court of Appeal, Second District, Division 1, California.

Jerome POSNER, Manager of Los Angeles Joint Board, Amalgamated Clothing Workers of America, Petitioner and Appellant, v. GRUNWALD—MARX, INC., a California corporation, Defendant and Respondent. *

Civ. 24968.

Decided: December 29, 1960

Wirin, Rissman, Okrand & Posner, Paul M. Posner, Los Angeles, for appellant. Hill, Farrer & Burrill, Ray L. Johnson, Jr., Los Angeles, for respondent.

Petitioner unsuccessfully sought an order below under a collective bargaining agreement directing arbitration (Code of Civil Procedure, § 1282).1 From a judgment dismissing the proceeding, petitioner has appealed; the record consists of a clerk's transcript and designated exhibits.

On October 1, 1953, petitioner-union and defendant-company entered into a written collective bargaining agreement covering wages, hours and working conditions; the company recognized the union as the exclusive bargaining agent for its employees. The agreement contained the customary no-strike no-lockout and arbitration provisions. The issue sought to be arbitrated relates to portions of paragraph 9 of the agreement concerning vacations and vacation pay: ‘(a) Vacation Period—It is mutually agreed that there shall be a vacation period of one week in each calendar year. The period for computation shall be the period ending with the last pay period in June in each year. The vacation period shall be the first week in July unless the Company and the Union shall mutually agree upon some other period. When the vacation period occurs during a week in which a paid holiday falls, employees now entitled to receive pay for such a holiday shall be paid for such holiday in addition to their vacation pay. (b) Eligibility and Pay—1. All employees who (1) have been on the payroll of the company for at least nine (9) months prior to the commencement of the vacation period, and (2) are on such payroll at the commencement of the vacation period are eligible for a paid vacation as hereinafter provided.’ Another paragraph of the agreement, 11(a), provided for six paid holidays, including Decoration Day (May 30th), eligibility therefor being defined as follows: ‘* * * In order to be eligible for a paid holiday, employees must work the last working day before the holiday and the first working day following the holiday. If the employee did not work either of these days due to illness or lay-off, he shall be entitled to holiday pay. In case of illness the company may require proof of illness.’

On October 23, 1956, the agreement was renewed and extended by the parties through September 30, 1959; the only change from the earlier agreement provided for a second week's vacation pay for an employee who had worked over three years—formerly an employee had to work in excess of four years to secure such additional pay.

On or about May 29, 1957, defendant moved the company plants from Los Angeles County to Phoenix, Arizona; its employees were ‘terminated.’ The petition alleged (and the court found) that at the time of the move and termination there were on the company payroll approximately 175 employees who had been on said payroll at the commencement of the vacation except for the removal of the company's plants, and that by reason of said removal the company had failed and refused to pay the employees their vacation pay.

It was further alleged that a dispute had arisen between the parties on or about May 29, 1957, concerning employees who had worked during the week of May 29th, but who were unable to work that day (May 29th) and the day following Decoration Day because of the removal of the company plants; the company, it was alleged, refused and failed to pay holiday pay for Decoration Day, and arbitration of that additional issue was likewise sought.

The trial court denied the petition. Though it found as true all the material allegations of the petition, and various affirmative defenses (save the first) as untrue, the effect of its decision was to find as true the allegations of the first affirmative defense that the petition ‘fails to state facts sufficient to constitute a cause of action in that it fails to allege that the company acted illegally, arbitrarily or in bad faith in discharging its employees before the employees were eligible for vacation pay.'2 In its conclusions of law, the trial court concluded that while there was an arbitration provision in the bargaining agreement and while the company had refused to arbitrate in accordance therewith, the company was not in default since ‘The wording of the collective bargaining agreement is without ambiguity as to vacation pay and holiday pay’; implicit in such conclusion is the determination that there was no arbitrable issue. The judgment declared that the defendant was ‘not in default in proceeding thereunder,’ and ordered the proceeding dismissed.

‘The question of the existence of an agreement to arbitrate and of the scope of the arbitration permissible under that agreement are issues which, in the first instance, the code refers to judicial action.’ Wetsel v. Garibaldi, 159 Cal.App.2d 4, 7, 323 P.2d 524, 527. “When one of the parties (as here) is resisting such an order (to arbitrate), the court must make two principal determinations * * *. First was a valid agreement to arbitrate ever made by the parties and is it still operative? Secondly, does the dispute that now exists fall within the terms of that agreement, reasonably interpreted?' (Citation).' Local 659, I.A.T.S.E. v. Color Corp. of Amer.,47 Cal.2d 189, 195, 302 P.2d 294, 297. Citing United Steel Workers of America v. American Manufacturing Co., 363 U.S. 564, 80 S.Ct. 1343, 4 L.Ed.2d 1403, appellant suggests that we reject, as the cited case assertedly does, the ‘Cutler-Hammer Doctrine’ (Internat. Assoc. of Machinists etc., v. Cutler-Hammer, Inc., 271 App.Div. 917, 67 N.Y.S.2d 317); however, it is held in this state that “the mere assertion by a party of a meaning of a provision which is clearly contrary to the plain meaning of the words cannot make an arbitrable issue' (Internat. Assoc. of Machinists etc., v. Cutler-Hammer, Inc., supra, 67 N.Y.S.2d 318).' Pari-Mutuel Employee's Guild, etc. v. L. A. Turf Club, 169 Cal.App.2d 571, 579, 337 P.2d 575, 580. To the same effect is Griggs v. Transocean Air Lines, 176 Cal.App.2d 843, 849, 1 Cal.Rptr. 803. Pursuant to the plain mandate of Section 1282, Code of Civil Procedure, the trial properly made the required ‘threshold determination of arbitrability’ (McCarroll v. Los Angeles County Dist. Council of Carpenters, 49 Cal.2d 45, 65, 315 P.2d 322, 333); we are of the opinion that it correctly concluded that there was no arbitrable issue as to vacation pay.

Appellant challenges the determination below that the ‘wording of the collective bargaining agreement is without ambiguity as to vacation pay and holiday pay.’ Vacation clauses usually specify certain conditions which an employee must meet in order to qualify for a paid vacation. (Annotation 30 A.L.R.2d pp. 353 et seq.) They include (1) length of service, (2) employment at a specific date or period, and (3) the time of taking the vacation. In some cases only (1), supra, is present (Div. Labor L. Enf., etc. v. Ryan Aero. Co., 106 Cal.App.2d Supp. 833, 236 P.2d 236, 30 A.L.R.2d 347); in others, both (1) and (2), supra, exist (Division of Labor L. Enf. v. Standard Coil Products Co., 136 Cal.App.2d Supp. 919, 288 P.2d 637); while in Wamsutta Mills, Inc., 34 Lab.Arb. 158, cited by appellant, condition (3) above is found. In this state the courts have adopted the condition precedent (as opposed to the vested right) test where required to do so by the plain language of the contract concerning vacation pay. Division of Labor L. Enf. v. Anaconda Copper Min. Co., 138 Cal.App.2d 92, 97, 291 P.2d 169; Division of Labor L. Enf. v. Standard Coil etc. Co., supra, 136 Cal.App.2d Supp. 923, 288 P.2d 637, 640. In Standard Coil, supra, the portion of the collective bargaining agreement relating to ‘Vacations and Holidays' provided that the employee must be in the active employ of the company at the start of the vacation period which was later defined to be between June 1st and September 15th. Said the Court: ‘There is no doubt or ambiguity about the meaning of these provisions. While it is true that ‘Courts are disinclined to construe the stipulations of a contract as conditions precedent, unless compelled by the language of the contract plainly expressed’ Div. of Labor L. Enf. v. Ryan Aero. Co., 1951, 106 Cal.App.2d Supp. 833, 835, 236 P.2d 236, 30 A.L.R.2d 347, yet in this case we are so compelled. To be entitled to a vacation in any year an employee must be ‘in the active employ of the company’ on June 1 of that year. No such conditions existed in the contract construed in Div. of Labor L. Enf. v. Ryan Aero. Co., supra, on which plaintiff relies in support of its construction of the contract, and the rule of that case does not apply here (emphasis added).' Appellant has attempted to distinguish Standard Coil, arguing that the bargaining agreement was assertedly silent on the length of employment, and thus there was no forfeiture of accrued and earned vacation pay; however, the basis of the decision is found in the statement that ‘an individual who accepts employment or continues his employment, after it (the agreement) becomes effective, does so on the and conditions thereby fixed (emphasis added).’ 136 Cal.App.2d Supp. at page 922, 288 P.2d at page 639. Nor do we think that certain language in City of Long Beach v. Allen, 143 Cal.App.2d 41, 44, 300 P.2d 360 (relied on by appellant) compels a contrary view, since that case involved substantial performance under a contract of employment with certain pension rights—pension provisions are liberally construed to effectuate their beneficent purposes. In Division of Lab. L. Enf. v. Anaconda Copper Min. Co., supra, 138 Cal.App.2d 92, 97, 291 P.2d 169, 173, the court again employed the condition precedent test; certain employees failed by one month to meet the requirement of five years' employment entitling them to vacation pay. Said the court: ‘The contract, in so far as is shown by the record before us, contains no fixed period of employment and the employment of plaintiff's assignors could therefore be terminated at the will of either party (citation). The parties to the contract here involved agree therein as to the conditions under which vacation pay would be paid and since plaintiff's assignors failed to qualify under the terms of the agreement they cannot require defendant corporation to allow such pay (citations).’ The Supreme Court denied a hearing, and the decision's rationale is all the more persuasive.

In other jurisdictions, it has been held that the qualifications, specified in the contract as necessary to bring about eligibility for vacation pay, constitute conditions precedent which must be met in full. Thus, in Treloar v. Steggeman, 1952, 333 Mich. 166, 52 N.W.2d 647, 648, the contract provided for compensation in lieu of vacations to ‘employees on the seniority list of the company (defendant) on December 1, 1947, who will have completed at least six months' work since December 1, 1946,’ to be payable on December 20. Plaintiff contended that the defendant's voluntary cessation of operations before December 1, 1945, could not justly deprive him ‘of the earned vacation money due.’ The court said (52 N.W.2d 647, 649): ‘Plaintiff claims that the agreement should be liberally construed in his favor. The agreement clearly prescribes a condition precedent to vacation pay that the employee shall be on the seniority list of December 1, 1947, as well as having completed at least 6 months work since December 1, 1946. The two conditions precedent are clearly stated and there is no doubtful meaning to be resolved in plaintiff's favor. We must apply the clear provisions of the agreement as we find them. It was competent for the parties to fix and agree upon December 1, 1947, as the eligibility date and it is not for the court to advance the eligibility date to suit the convenience or wishes of one party to the agreement. It is not for us to review or redetermine the considerations that led to the fixing of the date as December 1, 1947 (emphasis added).’ Appellant makes no mention of this case is his reply brief, although the reference thereto in respondent's brief is by no means a passing one; it is pointed out, however, that the result reached in Botany Mills v. Textile Workers Union, 42 N.J.Super. 327, 126 A.2d 389, cited by respondent, was subsequently overturned (in certain of its aspects) in Botany Mills v. Textile Workers Union, 50 N.J.Super. 18, 141 A.2d 107, while another New Jersey case, Textile Workers Union, etc. v. Firestone Plastics Division, 6 N.J.Super. 235, 70 A.2d 880, also relied on by respondent, is assertedly out of harmony with the later Botany Mills case, 141 A.2d 107. We shall refer to the last-mentioned decision presently. In Pattenge v. Wagner Iron Works, 275 Wis. 495, 82 N.W.2d 172, 176, the court denied an award of vacation pay to employees who failed to meet the qualifying requirements: ‘One of the contractual conditions of eligibility for vacation pay was that the employee must have been ‘in the continuous service of the company for at least twelve months next prior to June 1st, the eligibility date.’ All but four of the plaintiffs clearly met this test * * * The trial court found as facts that plaintiffs * * * were hired on June 6, 12, and 26, 1950, respectively. Hence, apparently, they had not been in the continuous service of the company for at least twelve months next prior to June 1, 1951, and did not meet that requirement of eligibility for vacation pay.' Again, despite respondent's reference to the case just cited, appellant does not mention the decision in its reply brief. Several other authorities, mostly arbitrator's decisions, are cited by respondent; they all in effect support the position contended for, namely, that there must be a concurrence of all eligibility requirements or conditions before vacation pay may properly be demanded.

The Botany Mills case, 141 A.2d 107, erroneously referred to as a decision of the New Jersey Supreme Court, is said to support the position taken by appellant; it does not, as claimed, reject the Cutler-Hammer Rule. There the intermediate appellate court held that the position of each disputant was reasonably tenable in light of the contract's language; further, that vacation pay is in the nature of deferred compensation, earned (and accruing) in part each week the employee works; with respect to the company's claim that an employee was not entitled to vacation pay until he had employee status on a certain date (April 15, 1956), and that his right to vacation pay did not mature until that date, the court stated its inability to perceive the difference between ‘maturation’ and ‘accrual.’ Interestingly enough, however, the New Jersey court cites Div. of Labor L. Enf. v. Ryan Aero. Co., supra, 106 Cal.App.2d Supp. 833, 236 P.2d 236, which case was expressly distinguished in Division of Labor L. Enf. v. Standard Coil etc. Co., supra, 136 Cal.App.2d Supp. 919, 288 P.2d 637, heretofore discussed. We see no valid reason otherwise for following the rule of the Botany Mills case, 141 A.2d 107, particularly in light of relevant California statutory and decisional law.

Finally, we are not persuaded that Pari-Mutuel Emp. Guild, etc. v. L. A. Turf Club, supra, 169 Cal.App.2d 571, 337 P.2d 575, may validly be distinguished. Appellant contends that even under the Cutler-Hammer doctrine, applied as it was in the Pari-Mutuel case, there is no repugnancy between the union's claim and the terms of the agreement. It is argued that the failure in the bargaining agreement to provide for the contingency of the plant's removal, foreseeable or not, requires an interpretation by an arbitrator (in the light of industrial practice or other criteria) to determine the intent of the parties under the circumstances. It is not seriously contended, however, that the removal of the plants was other than bona-fide; in fact, as subsequently pointed out, the court implicitly found that performance by the employees was not excused on that ground. The court properly made the ‘threshold determination of arbitrability’ (McCarroll v. Los Angeles County Dist. Council of Carpenters, supra, 49 Cal.2d 45, 65, 315 P.2d 322, 333), as to this aspect of the case, which determination was consistent with the applicable law of this state hereinafter discussed.

It is next contended that by moving its plants, the respondent prevented the employees from being on the payroll at the commencement of the vacation period; hence, appellant says, performance of the condition that they be on the payroll was excused. The California law is quite clear that the closing of his business by an employer prior to the commencement of a vacation period does not excuse performance by the employees; the same is apparently the rule in New York (Re Kosoff, 276 App.Div. 621, 96 N.Y.S.2d 689) and in New Jersey (Machine Printers, etc. v. Merrill, etc., 12 N.J.Super. 26, 78 A.2d 834.) In Div. of Labor Law Enforcement, etc. v. Mayfair Markets, 102 Cal.App.2d Supp. 943, 227 P.2d 463, the very same claim was rejected. Said the court (102 Cal.App.2d Supp. at page 948, 227 P.2d at page 465): ‘The contract under consideration here contains no fixed period of employment, and the employment could be terminated at the will of either party. Lab.Code, § 2922. Plaintiff's assignor was not prevented from performing his contract and thus entitled to enforce the same within the meaning of Sections 1511 and 1512 of the Civil Code because, as is conceded by the plaintiff, the employer's termination of the employment was lawful, was not arbitrary, and was not done in bad faith. The sale of its business by defendant was not unjustified and is conceded to be bona fide and not made in order to defeat the employees' rights. The sale was one of the hazards of the business world which the parties could well have guarded against in the contract relating to vacation pay had they so desired. Therefore, Section 1511 of the Civil Code, concerning the prevention of performance by one party is not applicable.’

In Anaconda Copper Mining Co. case, supra, 138 Cal.App.2d 92, 291 P.2d 169, the contention that recovery for vacation pay should be had on the basis of substantial performance due to the fact that the employer had prevented full performance by closing its plant was rejected. Appellant argued that under the doctrine of substantial performance his assignor was entitled to twelve days' vacation pay. Again quoting from the opinion (138 Cal.App.2d at page 97, 291 P.2d at page 173): ‘* * * The contract, in so far as is shown by the record before us, contains no fixed period of employment and the employment of plaintiff's assignors could therefore be terminated at the will of either party. Division of Labor Law Enforcement, etc. v. Mayfair Markets, 102 Cal.App.2d Supp. 943, 948, 227 P.2d 463. The parties to the contract here involved agreed therein as to the conditions under which vacation pay would be paid and since plaintiff's assignors failed to qualify under the terms of the agreement, they cannot require defendant corporation to allow such pay. Civ.Code § 1439; Division of Labor Law Enforcement, etc. v. Mayfair Markets, 102 Cal.App.2d Supp. 943, 947, 227 P.2d 463; 12 Am.Jur. Contracts Sec. 296.’

Next, it is claimed that respondent has waived its right to object to the arbitrability of the issues involved because of a certain letter written by it dealing with one objection to arbitrability. Contrary to the settled rule (Purefoy v. Pacific Auto Indemnity Exchange, 5 Cal.2d 81, 91, 53 P.2d 155), appellant failed to allege said waiver; furthermore, it seems that appellant made no request to amend his pleadings (to allege waiver) after demurrers and an answer were filed raising as a defense the question of arbitrability in all of its aspects. Furthermore, it does not appear that appellant was misled by any act of respondent, nor that his position was altered to his damage in reliance on any alleged waiver.

Respondent advances another reason for sustaining the determination that it is not in default, although the trial court rejected the argument thus made. At the time of the trial herein, it seems that eleven former employees filed a complaint with the Department of Industrial Relations in an attempt to recover wages; such claims were assigned in writing to that agency for collection and are the basis for appellant's demand for arbitration herein. Relied on is Association of Westinghouse Salaried Employees v. Westinghouse Electric Co., 348 U.S. 437, 75 S.Ct. 489, 99 L.Ed. 510, where the court, recognizing that the right to wages was a personal right of the employee, denied the union the right to sue. The case, however, is distinguished in Textile Workers Union of America v. Lincoln Mills, 353 U.S. 448, 77 S.Ct. 912, 917, 1 L.Ed.2d 972 (footnote 6): ‘Association of Westinghouse Salaried Employees v. Westinghouse Electric Corp., 348 U.S. 437, 75 S.Ct. 488, [489] 99 L.Ed. 510, is quite a different case. There the union sued to recover unpaid wages on behalf of some 4000 employees. The basic question concerned the standing of the union to sue and recover on those individual employment contracts. The question here concerns the right of the union to enforce the agreement to arbitrate which it has made with the employer.’

The judgment is affirmed.

FOOTNOTES

1.  Code Civ.Proc. § 1282: ‘A party aggrieved by the failure, neglect or refusal of another to perform under an agreement in writing providing for arbitration may petition any superior court of the county or city and county where either party resides, for an order directing that such arbitration proceed in the manner provided for in such agreement. Five days' notice in writing of the hearing of such application shall be served personally upon the party in default. The court shall hear the parties, and upon being satisfied that the making of the agreement or such failure to comply therewith is not in issue, shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. If the making of the agreement or the default be in issue an order shall be made directing a summary trial thereof. Where such an issue is raised, the party alleged to be in default, may, on or before the return day of the notice of application, demand a jury trial of such issue, and if such demand be made, said court shall make an order referring the issue or issues to a jury called and impaneled in the manner provided for the trial of actions at law. If no jury trial be demanded said court shall hear and determine such issue. If the finding be that no agreement in writing providing for arbitration was made, or that there is no default in proceeding thereunder, the proceeding shall be dismissed. If the finding be that a written provision for arbitration was made and there is a default in proceeding thereunder, an order shall be made summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.’

2.  Apparently no express finding was made to the above effect; however, appellant does not make a point of the failure to do so, conceding that ‘(i)n substance and effect the trial court upheld the first affirmative defense of no cause of action being alleged in the third amended petition.’ (Opening Brief, p. 4.)

LILLIE, Justice.

WOOD, P. J., and FOURT, J., concur.