Picture it: You employ a union workforce, and your labor negotiations are not going well. The old labor agreement expired weeks ago. Employees have continued to work under the expired contract terms, although neither party has offered a formal extension for any fixed period. The parties are approaching stalemate, so you make a last, best and final offer. The union rejects your final offer but makes no counteroffer in return. You notify the union that you plan to implement your final offer, and in turn, the union votes to strike. The next day, rather than reporting to work, bargaining unit members instead band together to form a picket line outside your facility. They march around with protest signs held high, ranting and raving at all vehicles passing through your gates. The strike continues 24 hours a day, while you continue operations using salaried staff and temporary workers. Amidst all this friction and stress, you receive a Labor Dispute Questionnaire from the Ohio Department of Job and Family Services (ODJFS) seeking information about the work stoppage to determine whether the strikers are eligible for unemployment compensation. You are puzzled, and you ask yourself: “Is it really possible that the same employees who are refusing to work may also force me to subsidize their strike?” The answer is, yes, it is indeed possible under Ohio’s unemployment laws, depending on the facts of the case.
Ohio’s unemployment compensation scheme is intended “to provide financial assistance to an individual who had worked, was able and willing to work, but was temporarily without employment through no fault or agreement of his own.” Irvine v. Unemp. Comp. Bd. of Review, 19 Ohio St. 3d 15, 17 (1985). To promote this policy, Ohio law disqualifies employees from receiving unemployment compensation if they are unemployed “due to a labor dispute other than a lockout....” Ohio Rev. Code § 4141.29(D)(1)(a). Lockouts are the only type of labor dispute whereby employees are unemployed through no fault of their own. In contrast, employees who participate in an organized strike have intentionally become unemployed in a calculated effort to put economic pressure on the employer.
Lockouts differ greatly from strikes. The Ohio Supreme Court defines a lockout as “a cessation of the furnishing of work to employees or a withholding of work from them in an effort to get for the employer more desirable terms.” Zanesville Rapid Transit, Inc. v. Bailey, 168 Ohio St. 351, 354 (1958). Under federal labor law, a lockout traditionally means the employer has physically barred employees from the workplace or otherwise made it impossible for employees to perform work. While federal labor law gives employers the right to lock out employees after making a wholehearted effort to bargain in good faith, employees who are locked out in this literal sense will almost always be entitled to unemployment compensation.
The Ohio Supreme Court defines a strike as “a cessation of work by employees in an effort to obtain more desirable terms....” Leach v. Republic Steel Corp., 176 Ohio St. 221, 224 (1964). Though they are able, strikers refuse to work because they are trying to put economic pressure on the employer. They are therefore unemployed due to their own volition, and Ohio unemployment compensation “does not exist to protect employees from themselves, but to protect them from economic forces over which they have no control. When an employee is at fault, he is no longer the victim of fortune’s whims, but is instead directly responsible for his own predicament.” Tzangas v. OBES, 73 Ohio St. 3d 694, 698-99 (Ohio 1995). Therefore, as valid as their bargaining position may be, employees who go on strike should not be entitled to unemployment benefits to fund their cause.
But Ohio’s unemployment compensation scheme recognizes a third type of labor dispute – a legal fiction known as a “constructive lockout.” Here, the employer does not actually prevent employees from working but instead unilaterally implements new terms “that the employees could not reasonably be expected to accept.” Id. at 354-55. Employees who go on strike to avoid and protest these new employment terms are found to be constructively locked out from their jobs, and they will be eligible for unemployment compensation.
Whether a particular labor dispute constitutes a strike or a constructive lockout may be determined by considering one of two seminal standards: (1) the “status quo” test announced in Bays v. Shenango, which involves a determination of which party first changed the status quo by refusing to continue the terms of the expired labor agreement; or (2) the “reasonableness” test announced in Zanesville Rapid Transit v. Bailey, which involves a determination of whether a party who changed the status quo nonetheless acted reasonably under the circumstances. See 53 Ohio St. 3d 132 (1990); 168 Ohio St. 351 (1958).
To reconcile Bays and Zanesville, courts have held that the Bays status quo test applies when negotiations are ongoing and each party sees movement to be made, while the Zanesville reasonableness test applies when negotiations have ceased and the parties have reached impasse. See, e.g., Johnson v. Ohio Bur. of Emp. Serv., 82 Ohio App. 3d 293 (1993). In Bays, the employer created a lockout when during ongoing negotiations it discontinued a cost-of-living adjustment that had been required under the expired contract; the employer was the first party to “refuse to allow work to continue for a reasonable time under the existing terms and conditions of employment while negotiations continue[d].” Bays, 53 Ohio St. 3d at 135. Conversely, in Zanesville, the employer did not create a lockout after it unilaterally implemented its final offer after negotiations had ceased because the change in terms was reasonable given the employer’s financial situation. 168 Ohio St. at 355-56.
In any labor dispute, an ODJFS hearing officer will conduct a full evidentiary hearing and issue a global decision on the issue of benefit eligibility, which will apply to all strikers. If strikers are awarded unemployment compensation, at least two undesirable consequences will result. First, the award will likely make the employer’s unemployment tax rate soar to new heights because long-term labor disputes can result in the payment of hundreds of thousands of dollars (and in some cases, millions of dollars) in benefits. Second, the award will likely prolong the labor dispute, as strikers have less of an incentive to compromise at the bargaining table when their protest is being subsidized. Employers who work closely with legal counsel during the collective bargaining process will be in the best position to contest an application for unemployment benefits should a strike situation arise.