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U.S. DEPARTMENT OF LABOR
Employment and Training Administration
Washington, D. C. 20213

CLASSIFICATION

UI

CORRESPONDENCE SYMBOL

TURL

ISSUE DATE

June 7, 1979

RESCISSIONS

 

EXPIRATION DATE

May 31, 1980

DIRECTIVE

:

UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 24-79

 

TO

:

ALL STATE EMPLOYMENT SECURITY AGENCIES

 

FROM

:

DON A. BALCER
Acting Administrator
Field Operations

 

SUBJECT

:

U.S. Supreme Court Decision in New York Telephone Company Case Upholding Constitutionality of New York Law Granting Benefits to Unemployed Strikers' After Eight Week Ineligibility Period

 

  1. Purpose To inform SESAs of the Court's decision and its meaning for State law provisions disqualifying strikers for benefits.

  2. Reference New York Telephone Company, et al v. New York State Department of Labor, et al, U.S. Supreme Court, No. 77-961, March 21, 1979.

  3. Background The Communication Workers of America, AFL-CIO; representing about 70 percent of the nonmanagement employees of companies affiliated with the Bell Telephone Company, recommended a nationwide strike in June 1971 when negotiations for a labor contract had reached an impasse. The strike began on July 14, 1971, and lasted only a week for most workers. In New York, however, the 38,000 union members employed by the New York Telephone Company remained on strike for seven months.

    Under the New York unemployment insurance law, benefits are suspended for seven weeks in addition to the waiting week if an individual's loss of work is caused by "a strike, lockout, or other industrial controversy in the establishment in which he/she was employed." After the eight-week period the striking employees began to collect benefits amounting, in the ensuing five months, to more than $49 million. A substantial portion of that amount was charged to the employer's experience-rating account.

    The employer brought suit against the State agency in the United States District Court for the Southern District of New York seeking a ruling that the New York provision authorizing the payment of benefits to strikers was in conflict with the Federal labor law and is, therefore, invalid. The employer also sought an injunction against the State law provision and an award recouping the increased contributions paid as a result of the benefits paid to the strikers. The District Court granted the relief sought, holding that the benefits paid had a measurable impact on the strike's progress, and their payment conflicted "with the policy of free collective bargaining established in the Federal labor laws and is, therefore, invalid under the Supremacy Clause of the United States Constitution." The Court of Appeals for the Second Circuit reversed, upon appeal, noting that Congress had not expressly forbidden State unemployment benefits for strikers.

  4. Court's Decision The U.S. Supreme Court, upon further appeal, affirmed the Court of Appeals decision by a 6 to 3 majority, although the majority was unable to agree upon a single rationale for the decision. They all agreed, however, that the National Labor Relations Act does not preempt the New York law, for the State law does not regulate or prohibit any conduct subject to the jurisdiction of the National Labor Relations Board, nor does it interfere with employee rights protected under the Labor Act. The general purpose of the State law is to provide an efficient means of insuring employment security in the state. The benefits paid "are not a form of direct compensation paid to strikers by their employer: they are disbursed from public funds to effectuate a public purpose." The fact that employer contributions are based on experience-rating does not alter that conclusion. The Court was convinced from a review of the Labor Act and its legislative history that "Congress intended the several States to have broad freedom in setting up the types of unemployment compensation that they wish." Congress was "aware of the possible impact of unemployment compensation on the bargaining process. The omission of any directiro concerning payment to strikers in either the National Labor Relations Act or the [original] Social Security Act [especially the labor standards not in section 3344(a)(5) of the Federal Unemployment Tax Act,] implies that Congress intended that the States be free to authorize, or to prohibit, such payments."

    The dissenting three justices concluded that the "New York law. . . alters significantly the bargaining balance prescribed by Congress" in the Labor Act. In the labor standards "Congress did explicitly forbid the States to condition unemployment compensation benefits upon acceptance of work as strikebreakers, members of company unions, or nonunion employees, thereby indicating an intention to prohibit interference with the collective-bargaining balance struck in the NLRA." The minority argued for a decision holding that the New York law contravenes Federal law.

    The Court's decision means that not only the New York and Rhode Island provisions which allow payment of benefits to strikers after a period of suspension of entitlement, but also State law provisions which allow payment of benefits when there is no stoppage of work due to a labor dispute, are not preempted by the national labor policy. There is no requirement, by reason of the Court's decision, that existing provisions of State laws for disqualification for unemployment caused by a labor dispute be changed. The Court's decision merely leaves undisturbed the New York provision, and others, authorizing the payment of benefits for strikers after the suspension of benefit rights for a specified period.

  5. Action Required.  State Administrators are requested to inform appropriate staff of the information contained in this UIPL.

  6. Inquiries Questions should be directed to your regional office.