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Pacific Coast Services
and the International
Brotherhood of Teamsters, Warehouse Local 860
Date: December 23, 1988
Arbitrator: Luella E. Nelson
Citation: 1988 NAC 101
the matter of arbitration between:
Brotherhood of Teamsters, Warehouse Local 860
Pacific Coast Services
LUELLA E. NELSON, Arbitrator
OPINION AND AWARD
Arbitration arises pursuant to Agreement between TEAMSTERS, WAREHOUSE AND
MISCELLANEOUS UNION, LOCAL 860, a/w INTERNATIONAL BROTHERHOOD OF TEAMSTERS,
CHAUFFEURS, WAREHOUSEMEN AND HELPERS OF AMERICA ("Union"), and PACIFIC
COAST SERVICES, ("Employer"), under which LUELLA E. NELSON was
selected to serve as Arbitrator and under which her Award shall be final and
binding upon the parties.
Hearing was held on August 12 and September 9 and 26, 1988, in San
Francisco, California. The parties were afforded full opportunity for the
examination and cross-examination of witnesses, the introduction of relevant
exhibits, and for argument. Both
parties filed post-hearing briefs on or about November 21, 1988.
On behalf of the Union:
M. Rongone, Esquire (Andrew H. Baker, Esquire, on brief), BEESON, TAYER, SILBERT
100 Bush Street, Suite 1500,
San Francisco, CA 94104-3982.
On behalf of the Employer:
P. Haffer, Esquire,
CHICKERING & GREGORY, P.C.,
Two Embarcadero Center, Seventh Floor,
San Francisco, CA
Whether or not Pacific Coast Services, Inc., or Pacific Coast
Distributing Company, is liable for vacation pay to the following employees: Bruno Pacini, Edward Garcia, John McInerney, and Robert
SECTIONS OF AGREEMENT
SECTION 14. VACATIONS
14.1Vacation Benefits. ...
Regular employees who work continuously for the same Employer for five
(5) full years shall thereafter be entitled to an annual vacation of three (3)
weeks with pay after each full year period of continuous service.
Regular employees who have worked continuously for the same Employer for
fifteen (15) full years or more shall thereafter be entitled to an annual
vacation of four (4) weeks with pay after each full year period of continuous
14.2Vacation Pay. ... All vacation payments shall be computed on the basis of time
worked from each individual employee's anniversary date of employment and not
from the contract vacation period or from the date of the employee's last
14.5Prorated Vacation. Earned
vacation pay shall be granted on a prorated basis to employees whose services
terminate for any cause after six (6) months of consecutive employment. ....
case involves vacation pay accrued during 1983 which, under the Agreement, was
payable in 1984. The Employer does
not object to the amount of vacation pay calculated for each employee, but does
contest whether it remains obligated to pay the sums in question in light of its
sale of the business.
Employer purchased the business involved in this proceeding in May 1983 as an
ongoing concern. The prior owner
was signatory to the Agreement, and the Employer continued to operate under its
terms. On January 17, 1984, the
Employer sold its assets to T.F.W. Inc. (herein called TFW).
1984, the Union began corresponding with the Employer's owner, William Meyer,
and its former general manager, Harry Kraatz, concerning vacation pay accrued
but not paid during 1983. The
Employer consistently took the position that the vacation pay was owed to
employees by TFW as part of its purchase of the business, while the Union
asserted that the Employer remained liable for the sums in question. The Agreement does not contain a successor clause.
Negotiations Between The Employer and TFW
McCormack, who was the Employer's Sales Manager and later the General Manager
for TFW, conducted the face-to-face negotiations with the Employer on TFW's
behalf. Sophia Lovre, TFW's general
partner and chief operating officer, had the final authority to agree to the
purchase terms for TFW.
issue of assuming the Agreement was never discussed explicitly during
negotiations, but Meyer, Kraatz, and McCormack believed that TFW would assume
the Agreement. Lovre was aware of
the Agreement but was never asked to assume it, and never mentioned her
intention to re-negotiate the Agreement to the Employer.
Neither side informed the Union of the pending sale of the business.
The Asset Purchase Agreement
Bill of Sale and Assignment between the Employer and TFW provided, in relevant
part, for the transfer to TFW of assets including "contracts."
The Asset Purchase Agreement provided, in relevant part, for TFW's
purchase of assets including "contracts" and assumption of liabilities
including "trade liabilities ... and payables incurred in the ordinary and
usual course of business by Seller between January 1, 1984 and the date of
Closing." The Asset Purchase
Agreement further provided for TFW's assumption of payroll tax liability for
wages paid to employees between January 1, 1984, and the date of closing, and
averred that the Employer was not in default on any of the contracts to be
testified that the Asset Purchase Agreement specifically referred to payroll tax
liabilities because the payroll taxes on wages paid after January 1 had not yet
been remitted to the taxing authorities as of the date of closing, and the
accountants wanted this item separated out.
In his view, TFW's agreement to assume all liabilities, payables, and
contracts makes it liable to pay the vacation pay. McCormack testified that TFW's agreement to assume all
"contracts" included the Agreement and that the Agreement was also an
asset because it was a stable ongoing situation.
TFW's Operation of the Business
the formal transfer of ownership did not occur until January 17, the new owners
were on the premises earlier, and retained all of the employees.
On February 3, TFW sent a telegram to the Union informing it that TFW had
purchased the Employer's assets, disavowing any collective bargaining agreement,
and inviting the Union to engage in negotiations with TFW for a new Agreement.
The Union and TFW signed a new agreement in May.
dispute exists concerning the conditions under which employees worked pending
re-negotiation of the Agreement. According
to Lovre, during negotiations for a new Agreement, employees continued to
receive their former rate of pay and TFW made pension and health and welfare
contributions, but employees lost some contractual holidays, their seniority,
and their vacation pay. McCormack
recalled that the new terms and conditions of employment were implemented at
some time after TFW purchased the company.
and Meyer recall that McCormack met with employees before the sale became final
and assured them of their job security and, to some degree, of the continuation
of the Agreement. Lovre testified
that McCormack told employees at the time TFW took over operations that TFW was
starting as a fresh company and would negotiate a new Agreement with the Union,
but that for the time being things would remain as they were.
Lovre was not at the meeting or meetings where McCormack conveyed this
information. McCormack did not
testify concerning what, if any, information he gave employees concerning their
pay or work status.
former employees testified that they were first informed of the sale of the
business on the day the Union met with the Company to negotiate a new Agreement.
On the same day, employees learned the terms of the new Agreement,
including a reduction in pay and the loss of some contractual benefits, their
seniority, and their vacation benefits; and their pay immediately dropped.
OF THE UNION
Employer is liable for the vacation pay that accrued during 1983.
The Asset Purchase Agreement with TFW did not shift this liability.
Assuming arguendo that TFW agreed to accept liability for the vacation
payments, the Employer could not shift its liability without the Union's
consent, which was not given. Thus,
if the asserted assumption of liability by TFW is viewed as a novation, it was
invalid because not all parties agreed to it--in particular, the Union did not
agree to release the Employer from its obligation.
the Employer has not attempted to show that the employees were not eligible for
vacation pay in 1983 or that the vacation pay obligation in question accrued
after the Employer sold its business to TFW.
Instead, it has merely sought to show that it transferred the obligation
by the sale of its business to TFW. The
Employer bears the burden of proving circumstances which warrant its release
from its obligations under the Agreement.
case is analogous to one where an employer goes out of business during the term
of an agreement. In such cases, an
employer may successfully resist demands for payment of vacation benefits that
accrued before the closure only by establishing either (1) that the collective
bargaining agreement provides that the employer is not liable for accrued
vacation pay after closure, or (2) that the employer and the union agreed to
modify the agreement so as to relieve the employer of its obligation.
The Employer here has not sought to establish either circumstance, and
neither exists. The Agreement unambiguously provides that employees accrue
annual vacation pay based on years of service, and nothing in the Agreement
affects this right in the event of a sale of the business. It is also undisputed that the Union did not agree to relieve
the Employer from its obligation to pay the benefits in question.
is unnecessary for the Arbitrator to determine whether TFW actually agreed to
assume liability for the 1983 vacation benefits. In any event, the Employer did not establish that any such
agreement occurred. The Asset
Purchase Agreement describes the assets sold and liabilities assumed.
The liabilities listed in the Asset Purchase Agreement are unrelated to
1983 vacation payments. Indeed, the only language relating to payment of employment
obligations is language covering payroll taxes and business expenses incurred in
the normal course of business between January 1, 1984, and the closing date.
This language plainly does not shift liability for vacation benefits
accrued in 1983.
obligation to make payments for accrued vacation was a liability, not an asset.
Although the Asset Purchase Agreement lists "contracts" among
the assets transferred, a collective bargaining agreement is not a
"contract" in the ordinary sense of the term.
By introducing testimony concerning the parties' intent, the Employer has
conceded that the Asset Purchase Agreement is ambiguous, at best, concerning the
inclusion of the Agreement among the "assets" purchased by TFW.
The only evidence on this score concerns TFW's alleged assumption of the
terms of the Agreement as of the date of the sale, not any agreement to assume
responsibility for vacation payments accrued before the sale.
On the contrary, the Employer warranted in the Asset Purchase Agreement
that it was not in default on any contracts at the time of sale.
Further, none of the Employer's witnesses could point to any statement by
TFW indicating that it was assuming the Agreement, or by the Employer's
principals indicating their intent to transfer liability to TFW, and McCormack
testified to the contrary. No
evidence exists that Lovre ever agreed to assume the Employer's liabilities
under the Agreement, and Lovre testified to the contrary.
functioned under the Agreement for nearly five months after purchasing the
company until the new collective bargaining agreement was executed.
It did not notify the Union of its intention to abrogate the Agreement
and re-negotiate its terms until several weeks after the purchase of the
company. Therefore, TFW assumed the
Agreement until such time as a new agreement could be negotiated and executed.
terms of the Asset Purchase Agreement obligate TFW to pay any accrued vacation
pay to the employees. The Agreement
plainly is a "contract" which was assumed with all other
"contracts," and just as plainly is a "trade liability."
McCormack confirmed that all parties understood that the Agreement was
among the contracts and liabilities to be assumed.
it was TFW's firing of the employees and re-negotiation of the Agreement which
resulted in the obligation to pay vacation pay. In so doing, TFW acted contrary to the Union's interests, in
contrast to the Employer's good treatment of employees.
Lovre's testimonial attempt to pervert the clear language of the Asset
Purchase Agreement is consistent with this pattern.
McCormack had no personal or business reason to falsify his testimony or
to side with the Employer in this dispute, yet his testimony confirmed TFW's
liability for the vacation pay and substantiated the lack of any liability by
Union has proceeded against the wrong party in this case.
Although the employees are entitled to vacation pay for 1983, they are
not entitled to receive it from the Employer, but rather must receive it, if at
all, from TFW. Accordingly, the Arbitrator must deny the grievance.
parties recognize, the Arbitrator's jurisdiction is limited to determining
whether the Employer is obligated to pay vacation pay under the Agreement, and
does not extend to issuance of an order directing TFW to perform any act.
Similarly, although considerable time was spent litigating the circumstances
in which TFW took over the business, the Arbitrator has no authority to
determine whether TFW was obligated to adhere to the terms of the
Agreement--either as a successor under the Burns
doctrine developed under the National Labor Relations Act, or as a contractual
duty owed to the Employer by virtue of its agreement to buy the business.
Any determination of TFW's successorship status and obligations in these
contexts must come from the forums empowered to enforce the NLRA or the contract
between the Employer and TFW. The
inquiry here is merely into the Employer's obligation, if any, under the
It is well
settled that, unless otherwise provided in the contract, vacation benefits
constitute a form of deferred compensation which, like wages, survives the
closing or sale of the business. Western
Ports Crating Co., 82 LA 874 (Gentile, 1984). Where, as here, the contract explicitly provides for pro rata
payment of vacation upon termination "for any cause," the parties have
expressed a clear intent to treat vacation benefits as deferred compensation.
general, mutual consent or operation of law is required in order for one party
to a collective bargaining agreement to be relieved of its obligations
thereunder. Thus, an employer
seeking to shift such obligations to a third party bears the burden of proving
either that the third party has actually performed in its stead or that the
union has agreed to accept performance from the third party and release the
employer from its obligation. The
possibility that a third party may have defaulted on an obligation owed solely
to the employer has no bearing on the employer's continued obligation to
Employer does not dispute that it was bound to the Agreement, that vacation pay
liability accrued during 1983 and was payable in 1984, or that the calculations
of the amount due are correct. To a
large extent, therefore, the elements of the Union's case are undisputed.
The major dispute here amounts to an affirmative defense that, although
the Employer otherwise would have been obligated under the Agreement to pay the
accrued vacation pay for 1983, it was relieved of this liability by virtue of
the Asset Purchase Agreement with TFW.
language of the Asset Purchase Agreement is susceptible to conflicting
interpretations regarding assumption of the Agreement, and evidence concerning
negotiations between the company principals and communications with employees
is in dispute. However, even a
clear and explicit agreement that TFW would undertake the Employer's obligations
under the Agreement would not end the inquiry, because an essential party to the
Agreement has not been brought into the process. The Agreement contains no successorship clause, and it is
undisputed that the Union did not receive or agree to accept TFW's performance
of the Employer's obligations under the Agreement. Therefore, the Employer simply has not been excused from
performance, and its obligations under the Agreement remain unsatisfied.
employees' entitlement to vacation pay arose out of their performance of work
under the Agreement, not by TFW's later negotiation of a new collective
bargaining agreement. Under the
provisions of Section 14.5, they were entitled to a pro rata share of their
vacation benefits at the time of their termination as employees of the Employer,
when the business was sold. Therefore,
under the Agreement, the Employer is liable for vacation pay to the employees.
No finding is made concerning whether TFW bears any obligation to
indemnify the Employer for its liability in this matter.
Pacific Coast Services, Inc., and Pacific Coast Distributing Company are
liable for vacation pay to the following employees:
Bruno Pacini, Edward Garcia, John McInerney, and Robert Robbins.
LUELLA E. NELSON - Arbitrator
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