Arbitration Letter

Did the company violate Article 12 of the parties' agreement by not paying vacation pay in 2008 to employees who worked sufficient hours in 2007 to be eligible for vacation but were permanently laid off in 2007 due to the closing of the Jonesville Plant?

As plainly provided in Sections 12.1 and 12.4 of the parties' agreement, vacation pay is not a purely economic benefit, but only is payable in connection with or "in lieu of" time taken off for actual vacation. Thus it was not a violation of Article 12 to deny vacation pay in 2008 to employees who worked enough hours in 2007 to be eligible for vacation but were permantly laid off before the end of that year, because in 2008 they had no work from which time could be taken off, and the grievance must be denied.

On September 13, 2007 the Company's predecessor, Hillsdale Automotive LLC, sent the Union a WARN Act notice that it would close its Jonesville Plant and there would be "indefinite layoffs" of bargaining unit employees in November and December. Subsequent notices in November and December revised the timing of some of the layoffs, and a letter dated December 6, 2007 to employees who already had been laid off informed them their "status has been changed from 'layoff' to 'permanent layoff', without any likelihood of recall." That letter also said they would be "paid for all earned but unused vacation," referring to vacation for which they were eligible in 2007 based on hours worked in 2006 pursuant to Article 12 of the 2006- 2011 agreement, but "entitlement to any and all other Company benefits [would] end immediately, " including (but not then specified) vacation benefits employees would have been eligible for in 2008 based on hours worked in 2007. The Union submitted a grievance on January 8, 2008 alleging the Company had violated Article 12 "by refusing vacation pay that was already earned" in 2007.

Section 12.1 contains a Vacation Allowance schedule for employees with at least one year of continuous employment. The allowances range from 40 to 200 hours for lengths of service ranging from less than three years to 25 or more years, with eligibility for them to be established as follows:

To be eligible for full vacation benefits as set forth above during any calendar year, an employee must have worked not less than one thousand hours during the preceding calendar year. Employees who have worked less than one thousand hours will have their vacation pay and vacation time pro-rated as follows:

It is the intent of the parties that each employee entitled to a vacation shall be required to take his vacation, except those employees who are entitled to more than two weeks of vacation shall be permitted to receive pay in lieu of time off for any vacation in excess of two weeks. Employees who elect to receive pay in lieu of vacation and notify the company of their intent prior to the March 30th selection period will be paid their unused vacation pay on or before July 15th.

An employee entitled to a vacation shall receive his vacation pay on the pay day prior to the start of his vacation, provided that the employee notifies the Company at least ten working days prior to the pay day. Employees who request and are granted vacations during this period will receive their pay upon returning to work.

The Union presented evidence that in 2006 LeAnn Czarnecki got vacation pay based on vacation eligibility achieved by hours worked before indefinite layoff in 2005. A letter the Company sent to her in March 2006 said it "was necessary for us to pay this out due the closure of the Industrial Drive Plant and the fact that you last worked at Industrial Drive." Czarnecki testified that as far as she knew she had no recall rights when she was laid off on November 29, 2005 and she was never recalled.

Regional Human Resource Manager Bruce Clements said he understood Czarnecki may have had recall rights, to the Jonesville Plant, and that was why she got the payin 2006. He named several other employees also indefinitely laid off in 2005 after working enough hours to be eligibile for vacation who did not get vacation pay in 2006, but acknowledged he had no firsthand knowledge of those situations because he had no responsibility for the Hillsdale Automotive facilities in 2005 or 2006.

In light of the WARN notice that was issued on September 13, 2007 and the impending closure of the Jonesville operations which is presently anticipated to occur in April of 2008, the Company and Union agree that the termination of Brian Gillette on July 19, 2007 shall be changed to a permanent layoff. As a permanent layoff, the parties understand and agree that he is no longer entitled to any benefits under the contract, now or in the future, except his vested pension. Further, the parties agree that he shall not be entitled to any recall rights. As a permanent layoff, the parties agree that he will be entitled to unemployment benefits without challenge.

The Company argues this is a clear expression of the parties' mutual understanding that employees permanently laid off in 2007 in connection with the impending Jonesville Plant closing would not receive vacation pay in 2008. But the Union argues the terms of the Gillette settlement were peculiar to that case and meant only to resolve the grievance protesting his discharge, not to have a broader application. Witnesses for both parties also agreed that over the years employees who were discharged or voluntarily terminated their employment did not get vacation pay in the year after termination, even if they worked enough hours in the year of termination to establish eligibility under Section 12.1, and the Company sees that as further evidence that this grievance lacks merit.

The Union argues all employees who worked enough hours in 2007 to be eligible for vacation benefits were entitled to vacation pay in 2008 under the plain language of Section 12.1, even if indefinitely or permanently laid off before the end of 2007, and cites the Czarnecki case as proof of proper past application of that provision and acknowledgment by management of its plain meaning.

The Company argues the hours-worked/eligibility provisions of Section 12.1 must be read in combination with the further requirements of Section 12.4 and 12.7 that employees must take their vacation in order to receive vacation pay. In its view, that necessarily means a person no longer employed in the year when a vacation would be taken has no entitlement to vacation pay, and it cites published arbitration decissions to that effect. The Company also sees support for its position in the undisputed practice of not paying vacation pay to persons whose employment was terminated before the end of the year in which they worked enough hours to establish vacation eligibility, and argues the Czarnecki case was an exception to that practice based upon a reasonable expectation that she might be recalled to work within the year following her indefinite layoff.

Section 12.1 of the agreement does not provide clear, literal support for the Union's position, as it claims. It establishes contractual formulas to become "eligibile for vacation" or "full vacation benefits" and refers to such benefits as "vacation allowance" stated in terms of days and hours, but not dollars. The only reference in Section 12.1 to vacation pay is in the paragraph between the vacation allowance table and another table correlating percentages of "vacation eligibility" with hours worked in a calendar year by employees who worked less than 1,000 hours. But it merely says such employees "have theirvacation pay and vacation time pro-rated" according to the latter table; it does not refer to vacation pay as a purely economic entitlement payable without relation to continued employment and utilization of "vacation time."

At the first two vacation allowance levels listed on the first table (5 and 10 days) it would be a contractual impossibility to disconnect vacation pay from vacation time, because Section 12.4 recites "the intent of the parties that each employee entitled to a vacation shall be required to take his vacation, except those employees who are entitled to more than two weeks of vacation shall be permitted to receive pay in lieu of time off for any vacation in excess of two weeks." The import of this provision is clear and inescapable: employees with less than seven years of service can only get vacation pay by taking vacation, which means none of the short-service former employees on whose behalf this grievance was submitted could have any claim for vacation pay, because after their employment ended there was no work from which they could take a vacation.

For active employees with at least seven years of service, it was possible to be paid for as few as two and as many as fifteen days "in lieu of time off for... vacation." But that possibility could not be disconnected from vacation time either, because what they got would be pay "in lieu of" (meaning in place of, as a substitute for, or as an alternative to) "unused vacation." To avail himself of that substitution of pay for time off, an employee had to notify the Company of intent to do so before March 30, in which case they were to "be paid their unused vacation pay on or before July 15." Thus the same rationale applies to longer-service employees: it was impossible for them to take time off in 2008, when they no longer had work to take time off from, so they could have no contractual claim to cash payment in place of such time off.

In opening statement, the Union claimed Section 12.1 had been clearly, consistently applied before 2007 in a manner consistent with its position. But it presented evidence of only one case, Czarnecki, which the company plausibly explained was an exception. to the rule, not an embodiment of the rule consistently applied. Clements also testified without contradiction that in several other cases of indefinite or permanent layoff contemporaneous with Czarnecki's no vacation pay was provided even though enough hours had been worked in the qualifying year to establish eligibility for vacation. Thus there is no convincing evidence that Sections 12.1 and 12.4 mean, or ever have been applied or mutually construed as though they mean, something other than what they literally say.

But there is evidence that the parties previously understood and applied those provisions in a manner consistent with their plan meaning: namely, the Gillette settlement and the undisputed fact that employees whose employment terminated for other reasons after working enough hours to qualify for vacation eligibility never received pay in lieu of the vacation they could have taken the next year if their employment had continued.

The parties could have adopted contract language clearly stating that vacation pay is a purely economic benefit, earned as a matter of irrevocable entitlement as soon as one works the contractually specified number of hours in a qualifying calendar year, whether or not his employment continues in the next year when vacation time would be scheduled and taken. The arbitrator has seen such contracts, but this is not one of them, and absent such clear language, the Union's position lacks contractual support.

To sustain that position would be to "add to or... modify" the agreement, which would be an abuse of arbitral authority as defined in Section 7.2 Step 4.f. Sticking to the plain words of Section 12.1 and 12.4, as I must, it only can be concluded that the Company did not violate Article 12 by denying vacation pay in 2008 to employees who were laid off permanently in 2007 after and although they worked enough hours that year to be eligible for vacation benefits. Therefore the grievance must be denied.