Wisconsin Labor and Industry Review Commission --
Summary of Wisconsin Court Decision relating to Unemployment Insurance

Subject: Paul M. Murphy v. LIRC and Miron Construction Company, Inc., Case No. 06 CV 125 (Wis. Cir. Ct., Oconto Co., June 18, 2007)

Digest Codes: UW 980 - Retirement Pay;   UW 990 - Trust fund (welfare plan)

The full text of the entire court decision is reproduced below.

PAUL MURPHY, Plaintiff

v.

STATE OF WISCONSIN LABOR & INDUSTRY REVIEW COMMISSION
AND
MIRON CONSTRUCTION CO. INC, DEFENDANTS

Plaintiff is a member of the Wisconsin Carpenter's Union and has worked as a millwright for a number of years. He is receiving a monthly pension payment from the Wisconsin Carpenters' Pension Fund (WCPF) in the gross amount of $2,500.00 ($2,153.27 per month after subtraction of withholding). When he worked for defendant Miron Construction Company as a millwright that employer paid him a "Normal Hourly Rate" for his wage, and also made hourly-based contributions to various funds on his behalf, including a contribution to the WCPF. The contribution to the WCFF was made without deduction for any federal or  state taxes, and no unemployment insurance tax was paid on the amount contributed. The amounts Miron Construction was required to pay to plaintiff, and to the WCPF, were negotiated between plaintiff's union and the Associated General Contractors (AGC) of Wisconsin. Each time the employee receives his monthly pension payment from the WCPF that payment is subject to federal and state income tax withholding, but again no deduction is made for unemployment insurance tax, which is a tax levied only against employers.

In a decision issued on March 17, 2006, defendant Labor and Industry Review Commission found that as of the week ending January 15, 2005 (week 3 of 2005), and pursuant to Wis. Stat. § 108.05(7)(e),  ⁽¹⁾   plaintiff's weekly claims for unemployment insurance benefits are subject to a dollar-for-dollar offset by the weekly amounts he receives in pension benefits from the WCPF (the gross weekly amount is $577.00). On April 13, 2006, plaintiff filed a pro se summons and complaint naming the commission as the defendant and requesting judicial review of the commission's decision. Plaintiff subsequently obtained counsel and filed an amended petition for judicial review that included both the commission and Miron Construction as defendants. Both defendants answered and waived objection to the form of plaintiff's petition. Such waiver was necessary because plaintiff inaccurately described the petition as a proceeding under Wis. Stat. § 227.52 and 227.53, when in fact the exclusive statutory method for requesting judicial review of a commission decision is set forth in Wis. Stat. § 102.23. ⁽²⁾  Accordingly, the provisions of Wis. Stat. § 102.23 apply to this judicial review of the commission's decision.

Plaintiff asserts that the commission erred in applying the offset provision of Wis. Stat. § 108.05(7)(e), to the facts of his case. He asserts that Wis. Stat. § 108.05(7)(f) is applicable.  ⁽³⁾   He argues that the hourly-based contributions made to the WCPF were contributions that he himself made, and that Miron Construction acted only as a conduit for transfer of these contributions to the WCPF. The commission and Miron Construction assert that the contnbutions were made by Miron Construction, and that Wis. Stat. § 108.05(7)(e), is applicable.

This case presents mixed questions of fact and law. Questions of fact arise concerning the collective bargaining process between plaintiff's union  ⁽⁴⁾ and AGC. However, the primary question is the legal question concerning which of the two statutory subsections is applicable to the facts.

The standard of review for the commission's findings of fact is well settled. Wis. Stat. § 102.23(1)(a), provides that the fmdings of fact. made by the commission acting within its powers shall, in the absence of fraud, be conclusive. The court may not substitute its judgment for that of the commission as to the weight or credibility of the evidence on any fmding of fact, and the commission's findings of fact must be upheld if they are supported by credible and substantial evidence. Princess House, Inc. v. DILHR, 111 Wis. 2d 46, 53, 330 N.W.2d 169 (1983); Weibel v. Clark, 87 Wis. 2d 696, 705, 275 N.W.2d .686 (1979); McGraw-Edison, Co. v. ILHR Dept., 64 Wis. 2d 703, 709, 221 N.W.2d 677 (1974).

Although a reviewing court is not bound by the commission's determination of a question of law, the court must determine which of three levels of deference is applicable to that determination: Great weight, due weight, or de novo review. Jicha v. DJLHR, 169 Wis. 2d 284, 290, 485 N.W.2d 256 (1992).

Great weight deference is due if: (1) the agency is charged by the legislature with the duty of administering statutes; (2) the agency interpretation is one of long standing; (3) the agency employed its expertise or specialized knowledge in forming its interpretation; and (4) the agency's interpretation will provide uniformity and consistency in the application of the statute. Racine Harley-Davidson, Inc. v. State, 2006 WI 86, ¶16, 278 Wis. 2d 508, 692 N.W.2d 670. Due weight deference is due when the agency has some experience in an area but has not developed the expertise that necessarily places it in a better position than a court to make judgments regarding the interpretation of the statute. Id. at ¶18.

Plaintiff asserts that great weight deference should not be accorded to the commission's decision because its interpretation of Wis. Stat. § 108.05(7), as it relates to contributions made by construction contractors to union pension funds, is allegedly not of long standing. Four commission decisions (including plaintiff's) were cited to the court on this precise issue, the earliest of these being issued on December 8, 2000, and they are all consistent in their interpretation. In addition, the commission has issued numerous decisions interpreting the statutory scheme of Wis. Stat. § 108.05(7), albeit not addressing the precise factual circumstances of the case before the court.  The court concludes that the commission's interpretation is of sufficient long standing to be entitled to great weight defereence. When great weight deference applies a reviewing court will sustain the commission's reasonable statutory interpretation even if it concludes that another interpretation is equally reasonable, or even more reasonable, than the commission's. Id. at ¶17.

However, even if the due weight standard of revIew were applied in this case, the court would reach the same result. ⁽⁵⁾

Plaintiff alleges that the only wage item negotiated between his union and AGC is the "Normal Hourly Total" to be paid for each hour worked by a carpenter, millwright, or pile driver. He further alleges that after the "Normal Hourly Total" is negotiated, his union representatives unilaterally determine how much of that figure will be allocated to the WCPF, and then they inform AGC of their decision. According to plaintiff, the AGC contractors then simply follow the union's dictate and contribute this hourly amount to the WCPF, making the contractors mere conduits through which the employees' "own funds" pass on their way to the WCPF. In other words, plaintiff asserts that the money contributed to the WCPF was his own money, and therefore his pension is composed entirely of his own contributions. The court cannot accept plaintiff's allegations or arguments.

There were two administrative hearings held in this matter, but neithe:r of them included firsthand testimony concerning AGC's actual role in the wage and pension allocation process. ⁽⁶⁾  Pension plans and retirement benefits are compulsory subjects of collective bargaining. Malone v. Wright Motor Corp., 435 US 497, 504, 98 S. Ct. 1185, 1189 L. Ed. 2d 443 (1978); Domestic Linen Supply and Laundry Company v. Center States Pension Fund International Brotherhood of Teamsters, et al, 722 F. Supp. 1472, 1477, 132 L.R.R.M. 2769 (1989); Inland Steel Company v. NLRB, et al, 170 F. 2d 247, 255, 22 L.R.R.M. 2506 (1948).

The commission's factual inference that allocation of certain amounts to the WCPF was a bilateral process, involving AGC as well as the Union, is supported by credible and substantial evidence. It may be that plaintiff's union representatives routinely make the first proposal of the amount to be allocated, and perhaps in most instances AGC agrees to those original proposals. However, as a mandatory subject of collective bargaining, pension payments would have to be reviewed and agreed to by AGC before they could become part of the collective bargaining agreement. There certainly could be instances in which AGC might disagree with an allocation proposed by a small number of union negotiators.  ⁽⁷⁾

The pension allocation amounts are in fact set forth in the relevant collective bargaining agreement, submitted as Exhibit 2 at the administrative hearing held on February 2, 2006. Article VIII, Section 8.1 of that agreement provides in relevant part:

Each employer covered by this Agreement shall pay for each hour worked by all employees covered by this Agreement the sums per hour specified in Section 7.1, Article VII, Wage Rates', to the following Funds:

a. The Wisconsin Carpenter's Pension Fund"

(emphasis added).

Article VII, Section 7.1 sets forth the specific dollar amounts to be paid per hour of work to each employee and to the various funds, including the WCPF. There is no ambiguity here. The AGC employers are contractually obligated to make a specific payment to the WCPF for each hour worked by each union employee. The pension fund payment comes out of the employer's pocket without ever having been placed into the employee's pocket, and without income tax or F.I.C.A. withholding.

By contrast, Article VII, Section 7. 1 provides that amounts for Working Dues and Vacation are to be deducted from the employee's hourly wage and are subject to income tax and FICA withholding. In addition, Article X, Section 10.1 of the collective bargaining agreement provides that if an employer becomes delinquent in the payment of sums it is required to contribute to the WCPF or to other funds, that employer shall become obligated for such delinquencies and for liquidated damages in an amount equal to 20 percent of the payments which are overdue. Section 10.6 of the collective bargaining agreement provides that employers who are delinquent in their contributions to any fund may also be required to post a surety bond to cover future payments. It was unmistakably Miron Construction who made the contributions to the WCPF on plaintiff's behalf, and Miron Construction who would have been liable for not timely making them. In accord with this holding are several state supreme court cases decided under facts and law that for all relevant purposes are identical to the case at hand. Douglas B. Morris v. Job Service North Dakota, 2003 N.D. 45, 658 N.W.2d 345; Anthony Cardarelli v. Rhode Island Department of Employment and Training, 674 A. 2d 398 (R.I. 1996); Ruben J. Edinger v. Washington Employment Security Department, 58 Wn. App. 525; 793 P. 2d 1004 (Wash. 1990); and Frank E. Belmont v. State of Alaska Department of Labor, 745 P. 2d 75 (Alaska 1987). ⁽⁸⁾

Additionally, the commission has correctly noted that the Wisconsin Legislature routinely conforms Wisconsin's Unemployment Insurance Law (Chapter 108) to the federal guidelines found in the Federal Unemployment Tax Act (FUTA). ⁽⁹⁾   This is because when a state's unemployment insurance laws comply with federal standards, private employers in that state receive a substantial tax credit against their federal unemployment tax payments. However, if the state law does not comply with federal standards, then private employe:rs in the state lose this tax credit and the state itself faces the loss of federal funds for unemployment insurance purposes. DILHR v. LIRC, 161 Wis. 2d 231, 247-48, 476 N.W.2d 545 (1991); Milwaukee v. DILHR Department,106 Wis. 2d 254, 260, 316 N.W.2d 367 (1982).

The U.S. Code (26 USC 3304(a(15)) requires the pension offset applied by the commission in this case.  However, that statute does allow states to reduce the offset based on "contributions made by the individual for the pension."  ⁽¹⁰⁾    In conformance with the federal statute, Wis. Stat. § 108.05(7) establishes the same pension offset requirement, with an exception for pension amounts "funded by the claimant's contributions' (Wis. Stat. § 108.05(7)(e)). Plaintiff asserts that his interpretation of Wis. Stat. § 108.05(7), as it applies  to his case, results in conformity with the federal statute. He bases this assertion on his argument that he is the one who made the contributions to the WCPF.  However, for the reasons previously explained, the court has rejected that argument. The commission would have been out of conformity with the federal law had it not required offset of plaintiff's weekly unemployment benefits by the amount of his weekly pension, which was entirely funded by employer contributions.

Support for the commission's interpretation of what constitutes conformity with the federal law may also be found in the U.S. Department of Labor's Unemployment Insurance Program Letter No. 22-87, Change 2, Question 4, dated February 3, 2003, quoted in the commission's decision.  That Program Letter specifically rejects plaintiff's argument that giving up wages for increased contributions to a pension plan makes the contributions the employee's own. Publications of the U.S. Department of Labor, which administers the Federal Unemployment Tax Act, are relevant in interpreting the legislative intent of Wisconsin's Unemployment Insurance Statutes. DILHR v. LIRC, 161 Wis. 2d at 247-48.

Plaintiff additionally argues that the commission's interpretation of the statutes is contrary to the legislative intent to "liberally construe" the unemployment insurance statutes in order to effect broad coverage for workers. However, the courts have noted that when a specfic statute embodies the legislative intent to deny payment of unemployment benefits, that intent must be upheld. Berry v. LIRC, 2l3 Wis. 2d 397, 403-04, 570 N.W.2d 610 (Ct. App. 1997); McGraw-Edison Company v. ILHR Department 72 Wis. 2d 99, 106, 240 N.W.2d 148 (1976).

Finally, it should be noted that the position of the commission and the U.S. Department of Labor promotes sound policy. Employers do not pay unemployment insurance taxes on contributions that they make to pension funds such as the WCPF.  ⁽¹¹⁾    In addition, since unemployment insurance tax is only assessed against employer payrolls, no unemployment insurance tax is deducted from pension amounts when they are paid out to employees. Thus, were an employee to be allowed to collect full unemployment benefits, and at the same time be allowed to collect pension payments that were untaxed by the unemployment insurance system, the unemployment insurance system would in effect be used to help subsidize the employees retirement rather than his unemployment. On the other hand, when an employee elects to contribute a portion of his taxed, payroll wage to a pension fund or plan, that contribution has been subjected to the unemployment insurance tax. When that employee receives his pension payout it has previously been taxed for unemployment insurance purposes, and therefore should not offset unemployment benefits.

The commission's decision issued in this matter on March 17, 2006, is hereby affirmed. As of the week ending January 15, 2005 (week 3 of 2005), unemployment benefits otherwise payable to the plaintiff for any week of partial or total unemployment are reduced or eliminated by his weekly pension payment of $577.00. It is so ORDERED and ADJUDGED. This is a final document for purposes of appeal.

Dated in Oconto, Wisconsin this 18 day of June, 2007

/s/ Michael T. Judge
Circuit Court Judge
Oconto County

(1)( Back ) Wis. Stat. § 108.05(7)(e) provides:

"(e) Total employer funding. If no portion of a pension payment actually or constructively received by a claimant under this subsection is funded by the claimant's contributions, the department shall reduce the weekly benefits payable for a week of partial or total unemployment by an amount equal to the weekly pension amount if:

1. The claimant has base period wages from the employer from which the pension payment is received; and

2. The claimant has performed work for that employer since the start of the claimant's base period and that work or remuneration for that work affirmatively affected the claimant's eligibility for or increased the amount of the pension payment.

(2)( Back ) Wis. Stat. § 108.09(7)(a) provides:

"(7) JUDICIAL REVIEW. (a) The department or either party  may commence action for the judicial review of a decision of the commission under this chapter after exhausting the remedies provided under this section if the party or the department has commenced such action in accordance with s. 102.23 within 30 days after a decision of the commission is mailed to a party's last-known address."

(3)( Back ) Wis. Stat. § 108.05(7)(f) provides in relevant part:

"(f) Partial or total employee funding. If any portion of a pension payment actually or constructively received by a claimant under this subsection is funded by the claimant's contributions, the department shall compute the benefits payable for a week of partial or total unemployment as follows:

2. If the pension payment is received under another retirement system, the claimant has base period wages from the employer from which the pension payment is received, the claimant has performed work for that employer since the start of the claimant's base period, and that work or remuneration for that work affirmatively affected the claimant's eligibility for or increased the amount of the pension payment, the department shall reduce the weekly benefits payable for a week of partial or total unemployment by 50% of the weekly pension amount, or by the percentage of the employer's contribution if acceptable evidence of a contribution by the employer other than 50% is furnished to the department"

(4)( Back ) Northern Wisconsin Regional Counsel cf the United Brotherhood of Carpenters and Joiners of America.

(5)( Back ) Plaintiff also asserted that the commission's position concerning the role that the Internal Revenue Code should play in interpreting unemployment insurance statutes has been inconsistent. Plaintiff cited a digest summary of a 1978 circuit court decision that affirmed a commission decision, which found that in that particular case the amount of the individual's retirement payments fmanced by his own contributions could not be estimated with reasonable accuracy. In affirming the commission, the circuit court appears to have stated that the provisions of the Internal Revenne Code do not control for unemployment insurance purposes. The context of this statement is unclear from the digest summary, but it is clear that Wisconsin's unemployinent insurance system is based on the Federal Unemployment Insurance System set forth in the Internal Revenue Code at 26 U.S.C. 3301, et. seq., and that the digest summary of this circuit court decision does not provide evidence of inconsistency by the commission in its interpretation of the statutes.

(6)( Back ) John Thurston, the Administrative Manager of the WCPF, and Mert Summers, a Business Representative of plaintiff's union, each testified that the union representatives "tell the contractors" how much of the "Normal Hourly Total" they should allocate and pay to the WCPF. However, neither of these individuals alleged any personal involvement in the collective bargaining negotiations.

(7)( Back ) Even were it to be found that the AGC employers always agreed with the union's determination of what contribution should be paid to the WCPF, that would not change the fact that the contribution is always made by the employer, not by the employee.

(8)( Back ) Plaintiff cited several cases for the alleged proposition that "pension payments should not reduce unemployment benefits," but having read the cases cited, the court finds them to be inapplicable to the issue at hand.

(9)( Back ) FUTA may be found as part of the Internal Revenue Code at 26 USC § 3301, et. seq.

(10)( Back ) 26 USC 3304(a)(a)(15) provides in relevant part:

"(15) the amount of compensation payable to an individual for any week which begins after March 31, 1980, and which begins in a period with respect to which such individual is receiving a governmental or other pension, retirement or retired pay, annuity or any other similar periodic payment which is based on the previous work of such individual shall be reduced (but not below zero) by an amount equal to the amount of such pension, retirement or retired pay, annuity, or other payment, which is reasonably attributable to such week except that --

(B) the State law may provide for limitations on the amount of any such reduction to take into account contributions made by the individual for the pension, retirement or retired pay, annuity, or other similar periodic payment;

(11)( Back ) See 26 USC 3306(5).

[ Search UC Decisions ] - [ UC Digest - Main Index ] - [ UC Legal Resources ] - [ LIRC Home Page ]

uploaded 2007/06/25