FITZGERALD, J.
In both of these cases, the employer locked out its employees upon the expiration of their collective bargaining agreement after negotiations to arrive at a new agreement had been unsuccessful. We granted leave to appeal to decide whether the employees are entitled to unemployment compensation where they were locked out in spite of their willingness to continue working during contract negotiations. In both cases, the Michigan Employment Security Commission (MESC) Referee, the MESC Appeal Board and the circuit court found for the employer and the Court of Appeals reversed, finding for the employees.
I
These cases require us to examine the labor dispute disqualification provision of the Employment Security Act (ESA), MCL 421.29(8); MSA 17.531(8), as it applies to the lockout situation. The statute provides in pertinent part:
"An individual shall be disqualified for benefits for any week with respect to which his total or partial unemployment is due to a labor dispute in active progress, or to shutdown or start-up operations caused by that labor dispute, in the establishment in which he is or was last employed, or to a labor dispute, other than a lockout, in active progress, or to shutdown or start-up operations caused by that labor dispute, in any other establishment within the United States which is functionally integrated with the establishment and is operated by the same employing unit."
A finding of disqualification under the above provision is not the end of the inquiry. The statute further provides that an individual shall not be disqualified unless he is "directly involved" in the dispute. Section 29(8)(a) sets forth four criteria by which the requisite involvement is determined. It is only after both of these findings have been made that a claimant may be disqualified from receiving unemployment benefits under this provision. Thus, in order for appellees in the present cases to be disqualified, it must be shown that their unemployment was due to a labor dispute in which they were directly involved.
Baker v General Motors Corp, 409 Mich. 639; 297 N.W.2d 387 (1980); Scott v Budd Co, 380 Mich. 29; 155 N.W.2d 161 (1968).
II
Appellees and amicus AFL-CIO argue that the type of lockout involved here is not intended to be included within the terms of the statutory labor dispute disqualification. They rely on the general purpose of the statute expressed in MCL 421.2; MSA 17.502, to provide benefits to workers who are involuntarily unemployed. Because appellees were willing to continue working during contract negotiations, appellees claim that they were involuntarily unemployed. Appellees and amicus AFL-CIO, as well as the Smith panel in the Court of Appeals, rely heavily on National Gypsum Co v Administrator, Louisiana Dep't of Employment Security, 313 So.2d 230 (La, 1975). Finally, appellee Smith argues that the commission, the trial court and appellants have misread § 29(8) by "contending that a disqualification results from their reading of the phrases, `or to a labor dispute, other than a lockout, in active progress, or to shutdown or start-up operations caused by that dispute * * *' as if the [italicized] `or' was `and'".
We do not distinguish, as does appellee Doerr, between offensive and defensive lockouts because the Legislature has not chosen to do so. See Memco v Maryland Employment Security Administration, 280 Md. 536, 546; 375 A.2d 1086, 1092-1093 (1977).
At the outset, we reject plaintiff Smith's construction of the statute. Such a construction would render the labor dispute clauses redundant. This violates the basic rule of statutory construction that, if at all possible, no word should be treated as mere surplusage or rendered nugatory. Scott v Budd Co, 380 Mich. 29, 37; 155 N.W.2d 161 (1968); Stowers v Wolodzko, 386 Mich. 119, 133; 191 N.W.2d 355 (1971).
A plain reading of the first sentence of § 29(8) indicates that it is composed of two clauses in which the Legislature sets forth two discrete types of disqualification. The first disqualification applies to labor disputes in the establishment in which a claimant is or was last employed. The second disqualification applies when the labor dispute (other than a lockout) occurs in a functionally integrated establishment operated by the same employing unit. In the instant cases we are concerned only with the first disqualification clause.
See Lewis, Unemployment Compensation Law in Labor Disputes: Michigan Compared with Seven Selected States 1936-1964 (Kalamazoo: The W.E. Upjohn Institute for Employment Research, 1964); 6 Unemployment Ins Rep (CCH) 25, 255.
It is significant that the Legislature chose to qualify the labor dispute disqualification in the second clause by excepting lockouts while it left intact the labor dispute disqualification in the first clause without similar qualification. First, it indicates that the Legislature understood that a lockout is one form of a labor dispute since it would have been unnecessary to include the lockout exception in the second clause had it been otherwise. Second, it leads us to conclude that the Legislature intended to exempt lockouts from the labor dispute disqualification for claimants who are unemployed due to a labor dispute at a functionally integrated establishment, while it did not intend to so exempt claimants who are unemployed due to a labor dispute at an establishment in which they are or were last employed. If the Legislature had intended to exclude lockouts in the first clause, it could have explicitly done so as it did in the second clause.
Ibid.
Further support for our conclusion is provided by § 29(7)(a) of the act which states that an individual shall not be disqualified for benefits for refusing to accept work, "[i]f the position offered is vacant due directly to a strike, lockout, or other labor dispute". (Emphasis added.) Numerous other jurisdictions have considered similar provisions in their unemployment statutes to be a legislative recognition that the lockout constitutes one form of labor dispute.
See, e.g., Adams v Industrial Comm, 490 S.W.2d 77 (Mo, 1973); In the Matter of Usery, 31 N.C. App. 703; 230 S.E.2d 585 (1976); Buchholz v Cummins, 6 Ill.2d 382; 128 N.E.2d 900 (1955); Schoenwiesner v Board of Review, 44 N.J. Super. 377; 130 A.2d 648 (1957); In the Matter of North River Logging Co, 15 Wn.2d 204; 130 P.2d 64 (1942); Henzel v Cameron, 228 Or. 452; 365 P.2d 498 (1961); Nelson v Texas Employment Comm, 290 S.W.2d 708 (Tex Civ App, 1956).
"Nearly all of the 51 statutes employ the term `labor dispute' or its equivalent, but only a few attempt any definition or limitation of those words. However, one clue as to meaning has been inserted in every statute in order to satisfy the minimum requirements of the Federal Social Security Act. The state statutes provide without exception that benefits shall not be denied to an otherwise eligible employee if he refuses to accept new work when the position offered is vacant due to a `strike, lockout, or other labor dispute,' such a job not constituting `suitable work.' This phrase indicates not only that `strikes' and `lockouts' are species within the genus `labor dispute' but also that a statutory `labor dispute' may exist in the absence of the strike or lockout manifestations." (Footnotes omitted.)
Shadur, Unemployment Benefits and the "Labor Dispute" Disqualification, 17 U Chi L Rev 294, 300 (1950).
We agree that the inclusion of such language in our own statute is probative of the Legislature's intention to include lockouts within the labor dispute disqualification.
In response to the argument that we should adhere to the general purpose of the statute, i.e., to provide benefits to individuals involuntarily unemployed, in construing § 29(8) to exclude lockouts because individuals who are locked out are involuntarily unemployed, we refer to Noblit v The Marmon Group, 386 Mich. 652, 654-655; 194 N.W.2d 324 (1972):
"The Employment Security Act is intended to provide relief from the hardship caused by involuntary unemployment. That is the broad legislative purpose. It deserves liberal application by the courts.
"But equally deserving of judicial cognizance and respect are the specifics of the Employment Security Act.
"It would have been simple enough for the Legislature to provide unemployment benefits for all persons involuntarily unemployed.
"The legislative process is more complex than merely a forum in which broad goals are agreed upon. The Employment Security Act is a detailed legislative enactment, embodying the ultimate agreement of the Representatives and Senators upon a scheme of unemployment compensation, and reflecting their compromise of various policy considerations affecting the circumstances under which other policy considerations warranted the conclusion that no benefits should be paid at all.
"The Legislature has declared that benefits shall not be paid when
"`* * * unemployment is due to a labor dispute which was or is in progress in any department or unit or group of workers in the same establishment.' MCL 421.29(8)(a)(iv); MSA 17.531(8)(a)(iv).
* * *
"There is no question that the unemployment of the truck drivers was involuntary. Likewise, there is no question that the involuntary unemployment of the truck drivers was a category of involuntary unemployment which the Legislature has specifically excluded from eligibility for unemployment compensation benefits."
The courts of other states which have been presented with this argument in the lockout context have disposed of it similarly:
"Under a well-established canon of statutory construction, the foregoing section makes an exception to the generally declared purpose of the act to provide compensation in all cases of involuntary unemployment. In re Steelman, 219 N.C. 306; 13 S.E.2d 544 (1941). For the rule is that: `Where a statute expresses first a general intent, and afterwards an inconsistent particular intent, the latter will be taken as an exception from the former and both will stand.' 1 Lewis' Sutherland Statutory Construction (2d ed), § 268, p 513; Rodgers v United States, 185 U.S. 83; 22 S Ct 582; 46 L Ed 816 (1902); Crane v Reeder, 22 Mich. 322 (1871)." In the Matter of North River Logging Co, 15 Wn.2d 204, 207-208; 130 P.2d 64 (1942). See, also, Lawrence Baking Co v Unemployment Compensation Comm, 308 Mich. 198; 13 N.W.2d 260 (1944).
"This labor dispute clause is a departure from the general idea of relief from involuntary unemployment. The question of voluntariness in such a case is not the test." Buchholz v Cummins, 6 Ill.2d 382, 386-387; 128 N.E.2d 900, 903 (1955).
See, also, Adams v Industrial Comm, supra; In the Matter of Usery, supra; In the Matter of North River Logging Co, supra; Nelson v Texas Employment Comm, supra.
Finally, we find that National Gypsum Co v Administrator, Louisiana Dep't of Employment Security, supra, is distinguishable. In that case, the Louisiana court concluded that the labor dispute disqualification in their statute only applied to unemployment resulting from labor disputes in which the employee himself actively engages by refusing to work. First, Louisiana's statutory labor disqualification provision differs from Michigan's in that it does not contain the phrase "labor dispute, other than a lockout". Second, as the court itself recognized, National Gypsum is a minority holding. The great weight of authority in other jurisdictions is that a lockout is one form in which a labor dispute may be manifested. We are impressed not only with the fact that the majority holds this view, but also by the reasoning upon which the majority is based.
Barnes v Employment Security Board of Review, 210 Kan. 664; 504 P.2d 591 (1972); Adams v Industrial Comm, supra; In the Matter of Usery, supra; Olusczak v Florida Industrial Comm, 230 So.2d 31 (Fla App, 1970); Buchholz v Cummins, supra; Sweeny v Board of Review, 43 N.J. 535; 206 A.2d 345 (1965); Schoenwiesner v Board of Review, supra; In re North River Logging Co, supra; Henzel v Cameron, supra; Nelson v Texas Employment Comm, supra; A J Sweet of La Crosse, Inc v Industrial Comm, 16 Wis.2d 98; 114 N.W.2d 141, 853 (1962); Baltimore Typographical Union No 12 v Hearst Corp, 246 Md. 308; 228 A.2d 410 (1967) (Maryland enacted a statutory exception for lockouts prior to decision in that case. It is interesting to note that the Court held in that case that application of the exception was prospective only). See, also, Anno: Unemployment compensation: Application of labor dispute disqualification for benefits to locked out employee, 62 ALR3d 437; 76 Am Jur 2d, Unemployment Compensation, § 81, p 990; Haggart, Unemployment Compensation During Labor Disputes, 37 Neb L J 668 (1958).
Moreover, we decline to follow National Gypsum because it would require us to ignore the clear language of the statute and to decide issues of policy reserved to the Legislature. See Buzza v Unemployment Compensation Comm, 330 Mich. 223, 236; 47 N.W.2d 11 (1951); Lawrence Baking Co v Unemployment Compensation Comm, supra, pp 212, 215; Lansing v Lansing Twp, 356 Mich. 641, 648; 97 N.W.2d 804 (1959).
We hold that a lockout is one form of a "labor dispute" as that term is used in § 29(8). Furthermore, we find that § 29(8) exempts lockouts from the labor dispute disqualification only when the labor dispute occurs in functionally integrated establishments operated by the same employing unit.
III
Having determined that § 29(8) recognizes a lockout as a type of labor dispute which comes within the disqualification provision applicable here, we must next decide whether the unemployment involved in the cases before us was due to a labor dispute and, if it was, whether appellees were directly involved in the labor dispute. Our function as a reviewing court is limited to a determination of whether the findings of the MESC are supported by competent, material and substantial evidence on the whole record. MCL 421.38; MSA 17.540. This Court cannot substitute its own judgment for that of the administrative agency if there is substantial evidence which supports the agency. Michigan Employment Relations Comm v Detroit Symphony Orchestra, Inc, 393 Mich. 116; 223 N.W.2d 283 (1974); Regents of the University of Michigan v Employment Relations Comm, 389 Mich. 96; 204 N.W.2d 218 (1973).
A
Before we examine the evidence, it is helpful to review certain legal concepts which are relevant here.
The term "labor dispute" has been defined in Michigan as follows:
"`The term "labor dispute" includes any controversy between employers and employees or their representatives concerning or affecting hours, wages, or working conditions. In the state labor mediation act ([1948 CL 423.2, subd (b); MSA 17.454(2), subd (b)]) it is defined as follows:
"`"The terms `dispute' and `labor dispute' shall include but are not restricted to any controversy between employers and employees or their representatives * * * concerning terms, tenure or conditions of employment, or concerning the association or representation of persons in negotiating, fixing, maintaining or changing terms or conditions of employment.'" Lillard v Employment Security Comm, 364 Mich. 401, 420; 110 N.W.2d 910 (1961).
"It means no more than a controversy between employer and employees regarding hours, wages, conditions of employment or recognition of a bargaining representative." General Motors Corp v Employment Security Comm, 378 Mich. 110, 117; 142 N.W.2d 686 (1966).
A "labor dispute" is generally defined in similar fashion in other states. See Anno: Unemployment Benefits — Labor Disputes, 63 ALR3d 88, 107.
"Controversy" denotes "a difference [of opinion] `marked by the expression of opposing views.'" Salenius v Employment Security Comm, 33 Mich. App. 228, 238; 189 N.W.2d 764 (1971). (Emphasis added.)
A lockout, one of the forms by which a labor dispute is manifested, has been defined as follows:
"A lockout is an employer's withholding of work from his employees in order to gain a concession from them. It is the employer's counterpart of a strike." 4 Restatement Torts, § 787, Comment a, p 128.
In addition to establishing the existence of a labor dispute, it must be shown that the claimant's unemployment was causally connected to the labor dispute. Michigan Tool Co v Employment Security Comm, 346 Mich. 673; 78 N.W.2d 571 (1956); Scott v Budd Co, supra. In Baker v General Motors Corp, 409 Mich. 639, 660; 297 N.W.2d 387 (1980), we explained the requirement of causal connection:
"An individual is disqualified for benefits under the basic provision if a disqualifying labor dispute is shown to be a substantial contributing cause of his or her unemployment. The dispute need not be the sole cause of the unemployment."
Lastly, it is appellants who bear the burden of proving appellees' disqualification. Michigan Tool Co v Employment Security Comm, supra.
B
In both cases, appellees contend that the cause of their unemployment was actually a layoff due to economic reasons rather than a lockout as the appellants claim. The practical distinction, of course, is that appellants would be liable for unemployment benefits for a layoff whereas they would not be liable in a lockout situation. We shall consider the facts of each case separately.
In Smith, the parties had a collective bargaining agreement which expired at 12:01 a.m. on June 23, 1975. Representatives of both parties met on several occasions in May and June of that year in order to negotiate the terms of a new agreement. However, negotiations broke down on the evening of June 22, 1975, and the company informed the union that the employees would be locked out the next day in spite of the fact that the employees were willing to continue working without a new contract. A new contract was ratified on July 27, 1975, and the employees returned to work the next day.
The above facts are not disputed. What follows is the disputed portion of the testimony before the MESC referee upon which the parties draw differing conclusions as to the cause of the unemployment.
Appellees contend that on the evening of June 22, 1975, the union felt that it was close to an agreement but that it wanted to go over some details of the new contract. However, the company asked the union for its strike notice, and when informed there would be no strike, the company told them that it would lock out the employees. The union representative, Mr. Jones, testified that the company informed him that it did not need the employees. He was told that the company had engineers in the plant making changes, that some of the machines were torn down and that the plant was being cleaned up. Mr. Jones admitted that he had no personal knowledge of what was going on inside the plant. Mr. Jones also testified that in the previous year, the company had closed down in the first week of July.
Mr. Biondi, the company's representative, testified that early in the day on June 22, he felt that they were close to coming to an agreement. However, after a four-hour recess, the union came back in an adamant mood and asserted that none of the proposals were acceptable. Mr. Biondi testified that he advised the company to lock out the employees because he felt the negotiations were at a standstill. He felt that it was better to take a short-term loss resulting from a lockout rather than a three-year loss resulting from an unfavorable contract. Biondi further testified that had a new agreement been ratified on June 22, no lockout would have occurred.
During the period of the lockout, the company continued limited production with its supervisory staff. Mr. Biondi testified that the company could not meet the demands of its customers during this period and that other vendors were supplying their customers' demands. General Motors was allowed to remove some tooling they owned from the plant because the company was their sole supplier. Mr. Biondi denied that any revamping of the plant took place during the lockout and stated that only regular maintenance occurred. He testified that there was nothing planned as to a shutdown during July. Further, Mr. Biondi testified that when the employees returned to work, there was a backlog of work and the company had to hire new employees to catch up.
The referee made the following findings of fact, in pertinent part:
"It is found from the record in this matter that the lockout by the employer was used as a weapon against the union and the employees for the purpose of attempting to secure a more favorable contract to the employer. We are not persuaded by any of the statements in the record that the employer used the period of time to re-do its plant, to cover up for what would otherwise be a shutdown or layoff because of depressed economic conditions. The lockout was nothing short of a bargaining tactic."
The referee's finding was upheld by the Michigan Employment Security Appeal Board and the circuit courts. The Court of Appeals did not address the referee's findings of fact, but instead chose to rely on National Gypsum Co v Administrator, Louisiana Dep't of Employment Security, supra, discussed in the previous section of this opinion.
The above review of the evidence in Smith indicates that the referee was called upon to determine an issue of credibility. Appellees produced evidence of a disguised layoff while appellant produced evidence of a lockout. This is exactly the type of situation where this Court must defer to the factfinder.
"Such review must be undertaken with considerable sensitivity in order that the courts accord due deference to administrative expertise and not invade the province of exclusive administrative fact-finding by displacing an agency's choice between two reasonably differing views." Michigan Employment Relations Comm v Detroit Symphony Orchestra, supra, p 124.
In short, we find that the substantial contributing cause of the lockout, which of course was the immediate cause of unemployment, was a labor dispute. There was evidence that negotiations had broken down on the eve of the expiration of the collective bargaining agreement, that the employer locked out its employees to obtain a new contract more favorable to it and that the company had sufficient work to do during the lockout period and was in fact losing business to its competitors. There was also evidence to support appellees' contention of a disguised layoff, but where substantial evidence exists to support both sides and the agency must make a judgment assigning credibility to one side, we may not substitute our judgment for that of the agency.
In Doerr, the parties had been operating under a collective bargaining agreement which was to expire on June 1, 1971. On April 1, 1971, the company gave notice of its intent to terminate the agreement as of May 31, 1971. The representatives of both parties held 23 meetings in the two months prior to the expiration of the old contract trying to negotiate a new agreement. Early in the negotiations, the union offered to continue working under the old contract, but the company informed the union that it could not and would not continue under the terms of the old contract.
On May 26, 1971, the company made its final offer, which included a 9-cent per hour wage increase and certain non-economic proposals. The company indicated in a letter sent to the union that if the offer was not accepted, it would shut down the plant.
"Universal Engineering Division, having reached an impasse with the U.A.W. Local 1131 in its attempt to bargain, and having called in the FMCS for further assistance in negotiations, and after further attempts, still finds itself at an impasse in this labor dispute, having legitimate and substantial business reasons, including continuing substantial economic losses, low employment, low volume of incoming sales, customer resistance to placing orders with the division due to the uncertainty of operations due to labor negotiations, and the unwillingness of the union to grant the necessary efficiency and flexibility requests of Universal Engineering, will close the Frankenmuth plant as of midnight, May 31, 1971, because of this labor dispute.
"These matters were all discussed in considerable detail in this year's negotiation meetings.
"The economic and non-economic terms and conditions for a new contract, a copy of which is attached, is the final offer which would permit a settlement of this dispute.
"In consideration of the withdrawal of any and all union demands at Universal Engineering regarding a Houdaille Council, including the demand for a Houdaille Council step in the grievance procedure, Universal Engineering will continue to operate the Frankenmuth plant through June 4 to facilitate the current negotiations and to permit the union to hold necessary meetings to vote on the company final proposal. Operations of the plant after June 4 is [sic] subject to settlement of the current labor dispute."
On May 28 and 30, the union responded with counter-proposals, including a 35-cent per hour increase, a "30-and-out" pension plan and rejection of the company's non-economic proposals. The union also stated that it did not intend to strike.
"This proposal is made on the basis of the company withdrawing all the demands listed in the first paragraph of the company's proposal made May 26, 1971. Also, settlement of all other non-economic issues as presented by the union. Plus, we are willing to bargain past May 31 until an agreement is reached. We have no intention of striking the plant with the understanding any agreement will be retroactive to June 1, 1971. We want to make it clear we have no intention of striking the plant at this time."
On May 31, 1971, the company locked out its employees. Approximately two weeks later, the company contacted the union and negotiations resumed. On August 23, 1971, the employees returned to work in response to a letter from the company's president inviting them to do so under the terms of the old agreement. In its letter inviting the employees back to work, the company explained that the lockout was being terminated "[i]n accordance with our understanding of the Executive Order of the President of the United States and related documents and public statements covering the ninety (90) day wage-price freeze effective August 15, 1971". A new contract was signed and ratified on January 13, 1972, which was effective retroactive to December 27, 1971.
Appellees contend that the company, as well as the machine tool industry in general, was in a serious economic slump prior to and at the time of the contract negotiations. The proofs submitted to the MESC Appeal Board by appellees included economic data presented by the company to the union in conjunction with the contract negotiations. The evidence demonstrated that the company's profit level from 1967 to 1970 had declined 432% and that the company estimated it was losing $1.38 for every employee hour worked in 1971 through the date of the shutdown. Direct and indirect labor hours at Universal declined 47.7% from 1967 through 1970. Appellees also introduced before the appeal board a July 1, 1971, letter from the company to the MESC in which the company stated that it had laid off a clerical employee because of "the decline in incoming orders".
Appellees point to the fact that they resumed work August 23, 1971, under the terms of the expired labor contract under which they had agreed to continue working prior to the closing of the plant. In addition, appellees rely on the company's May 26, 1971, letter to the union in which it states economic reasons for the plant closing.
Appellant points out that more than 20 negotiating sessions preceded the lockout. From the onset of these negotiation sessions, the company advised the union that unless a new contract was agreed upon before the old contract expired, the company would not continue operations. John Engels, Universal's Industrial Relations Manager, testified at the MESC Referee hearing as follows:
"We had to know what our [inaudible] and operational procedures would be under a new successor agreement and we couldn't continue to operate under the framework of the old agreement without knowing what we were going to be involved in, in a new agreement. We had no way of knowing what the final outcome would be and we knew that we were experiencing very, very many difficulties in regards to the operation under the present agreement and we had to know what our changes would be."
Appellant claims this testimony is buttressed by the company's May 26, 1971, letter to the union which indicates that a work stoppage would not be necessary if the union came to terms.
Appellant points out that it was the company which reinstituted negotiations. The recall of employees on August 23, 1971, under the terms of the old contract, was in keeping with the intent and purpose of the August 15, 1971 Executive Order of the President of the United States. Executive Order No. 11615, 3 C.F.R., 1971-1975 Compilation, p 602.
During the bargaining, Universal argued for the inclusion of two new clauses dealing with the concept of "a fair day's work for a fair day's wages" and an "efficient operations" provision. It was in conjunction with these new clauses that Universal presented to the union the dismal financial data which appellees now rely on. This information was used to persuade the union that it was necessary to increase productivity and job flexibility to match the productivity levels of foreign workers. Appellant contends that it was simply using "the age-old negotiating technique of `pleading poverty'".
Appellant further contends that there was no direct evidence that it lacked work for its production workers in June 1971 or that it ever threatened economic layoffs of production personnel. Appellant explains that the layoff of the clerical worker does not support appellees' position because there is frequently a long delay between the time an order is received and the time in which production of the ordered item has been completed. Finally, appellant points out that it did not close any plant other than the one at which the labor dispute existed.
The referee concluded that the appellees were unemployed due to a labor dispute and, thus, he upheld the commission's disqualification. However, in reaching his conclusion, the referee stated that a labor dispute exists whenever negotiations are ongoing, citing Lillard v Employment Security Comm, supra. This was error. The definition of the term "labor dispute" as set forth in Part 3A requires that there be a controversy. See Salenius v Employment Security Comm, 33 Mich. App. 228; 189 N.W.2d 764 (1971). Although the referee made additional findings of fact to support his finding of the existence of a labor dispute, we cannot be sure that this did not affect his decision.
This error was compounded by the appeal board when it reviewed the decision of the referee. Much of appellees' evidence was presented for the first time before the appeal board. This included the letter of the company to the MESC regarding the laid-off clerical worker which the appeal board found irrelevant, and the company's May 26, 1971, letter to the union, along with the company's economic data, which the appeal board said did not provide "any material new information significantly relating to the question of whether or not the unemployment of the claimants in these matters was due to a labor dispute".
The new evidence was accepted and made a part of the record pursuant to the appeal board's granting of appellees' motion to introduce the exhibits. See MCL 421.35(1); MSA 17.537(1); MCL 421.36(3); MSA 17.538(3).
We disagree that the new evidence did not provide any material new information significantly relating to the labor dispute question. Although we make no finding regarding the weight or credibility to be accorded to this evidence, we find that it was relevant and material to appellees' theory that appellant's economic condition was the substantial contributing cause of their unemployment.
An employer may not use the failure to reach an agreement as a pretext for charging a labor dispute when it would otherwise have curtailed operations because of economic conditions. But where economic conditions would not have otherwise caused the curtailment of operations, but only have played a part in the decision to utilize the lockout tactic, i.e., when the labor dispute is the substantial contributing cause, the employees may properly be disqualified. This determination is necessarily a question of fact.
The circuit court noted in this regard:
"No doubt economic conditions influenced the decision of the employer to lock out its employees to coerce agreement if its final offer was not accepted; and it may have welcomed the opportunity to do so. Likewise, economic conditions undoubtedly influenced the union's decision to offer to work under the old contract and not strike. Probably economic conditions always influence such decisions. It is most unlikely that an employer would lock out employees who are willing to work under a profitable contract in good times for the industry. And an employer need not lock out employees who are unwilling to work. That would be futile."
We concur with the trial judge that probably economic conditions will always be a factor in a lockout or strike decision. As far as the appellant "welcom[ing] the opportunity to do so" in this case, we leave that decision to the board of review on remand.
We think that the appeal board treatment (or lack of treatment) of the evidence indicates that it did not realize that it must not only decide whether a labor dispute existed, but whether the labor dispute was the substantial contributing cause of the appellees' unemployment. If the board did recognize and decide this question, it has failed to make any finding of fact in this regard. Obviously, we cannot review findings of fact if none exist. As we have emphasized numerous times in cases involving workmen's compensation, "conclusory findings are inadequate because we need to know the path [the board] has taken through the conflicting evidence, the testimony it has adopted, the standards followed and the reasoning used to reach its conclusion". Kostamo v Marquette Iron Mining Co, 405 Mich. 105; 274 N.W.2d 411 (1979).
We remand to the board of review for further proceedings consistent with this opinion. We retain jurisdiction.
The board of review is the present successor to the appeal board. See 1977 PA 52; MCL 421.35(3); MSA 17.537(3).
C
Having determined that appellees in Smith were unemployed due to a labor dispute, we must next decide if appellees were directly interested in the labor dispute. Section 29(8)(a) of the ESA sets forth four criteria by which direct involvement is determined. We find that subpart (ii) is the applicable criterion in these cases:
"For the purposes of this subsection an individual shall not be deemed to be directly involved in a labor dispute unless it is established that:
* * *
"(ii) He is participating in or financing or directly interested in the labor dispute which causes his total or partial unemployment. * * *"
Section 29(8)(b) further defines the term "directly interested" as follows, in pertinent part:
"`Directly interested' as used in this subsection shall be construed and applied so as not to disqualify individuals unemployed as a result of a labor dispute the resolution of which may not reasonably be expected to affect their wages, hours, or other conditions of employment, and to disqualify individuals whose wages, hours, or conditions of employment may reasonably be expected to be affected by the resolution of the labor dispute. A `reasonable expectation' of an effect on an individual's wages, hours, or other conditions of employment shall be deemed to exist, in the absence of substantial preponderating evidence to the contrary:
* * *
"(ii) If it is established that 1 of the issues in or purposes of the labor dispute is to obtain a change in the terms and conditions of employment for members of the individual's grade or class of workers in the establishment in which the individual is or was last employed; * * *."
We think that it is clear that one of the purposes of the labor dispute involved here was to obtain a change in the terms and conditions of appellees' employment. We reject, as being contrary to the clear wording of the statute, the argument that each provision of § 29(8)(a) requires a voluntary stoppage of work on the part of the employee. Therefore we find that appellees were directly interested in the labor dispute.
IV
The appellees in Smith contend that if § 29(8) is construed to allow benefits for employees who are unemployed due to a lockout at a functionally integrated establishment, while denying benefits to an employee who is unemployed due to a lockout in the establishment in which he is or was last employed, the disqualification is arbitrary and denies them equal protection of the law. Appellees in Doerr had this issue decided adversely to them in the circuit court and the Court of Appeals and have not raised the issue in this Court.
Appellees' primary contention is that in analyzing the reasonableness of a statutory classification, a court must look to the purpose of the statute. Appellees claim that they were involuntarily unemployed and, thus, they fall within the purpose of the legislation as set forth in MCL 421.2; MSA 17.502, i.e., to provide benefits to workers involuntarily unemployed. Other workers who are involuntarily unemployed as a result of being laid off or as a result of a lockout in a functionally integrated establishment are entitled to receive unemployment benefits.
In Ohio Bureau of Employment Services v Hodory, 431 U.S. 471; 97 S Ct 1898; 52 L Ed 513 (1977), the Court addressed an equal protection challenge to Ohio's unemployment labor disqualification provision. The Ohio statute disqualified plaintiff, who was furloughed as the result of a strike at another plant owned by plaintiff's employer. The basis of plaintiff's complaint was that the state may not deny benefits to those who are unemployed through no fault of their own.
Ohio Rev Code Ann § 4141.29(D)(1)(a).
The Court upheld the constitutionality of the statute stating, in relevant part:
"The statute does not involve any discernible fundamental interest or affect with particularity any protected class. Appellee concedes that the test of constitutionality, therefore, is whether the statute has a rational relation to a legitimate state interest. Brief for Appellee 29. See New Orleans v Dukes, 427 U.S. 297 [ 96 S Ct 2513; 49 L Ed 2d 511] (1976). Our statement last Term in Massachusetts Bd of Retirement v Murgia, 427 U.S. 307 [ 96 S Ct 2562; 49 L Ed 2d 520] (1976), explains the analysis:
"`We turn then to examine this state classification under the rational-based standard. This inquiry employs a relatively relaxed standard reflecting the Court's awareness that the drawing of lines that create distinctions is peculiarly a legislative task and an unavoidable one. Perfection in making the necessary classifications is neither possible nor necessary. Dandridge v Williams, [ 397 U.S. 471,] 485 [ 90 S Ct 1153; 25 L Ed 2d 491 (1970)]. Such action by a legislature is presumed to be valid.' Id., at 314.
* * *
"`If the classification has some "reasonable basis," it does not offend the Constitution simply because the classification "is not made with mathematical nicety or because in practice it results in some inequality." Lindsley v Natural Carbonic Gas Co, 220 U.S. 61, 78 [ 31 S Ct 337; 55 L Ed 369 (1911)].' Dandridge v Williams, 397 US at 485. The rationality of this treatment is, of course, independent of any `innocence' of the workers collecting compensation."
The Court found that Ohio's form of state neutrality which is accomplished through denial of benefits for striking employees is not irrational. Further, the Court held that protection of the fiscal integrity of the fund is a legitimate concern of the state.
In Michigan, the standard of review in scrutinizing legislation which is primarily social and economic against a claimed violation of equal protection is also the rational basis test. Appellees must show that the classification is arbitrary and wholly unrelated in a rational way to the objective of the statute. In re Kasuba Estate, 401 Mich. 560, 568-569; 258 N.W.2d 731 (1977); McAvoy v H B Sherman Co, 401 Mich. 419, 453-454; 258 N.W.2d 414 (1977).
We find that there exists a rational basis for the Legislature's treatment of lockouts in relation to unemployment benefits. The Legislature could have chosen to distinguish between claimants who are laid off and claimants who are unemployed due to a strike or lockout in order to preserve the state's neutrality in labor disputes. The policy of the ESA is not only to provide relief from involuntary unemployment, but also includes the subsidiary policy of maintaining the state's neutrality in labor disputes. Lawrence Baking Co v Unemployment Compensation Comm, supra; Linski v Employment Security Comm, 358 Mich. 239; 99 N.W.2d 582 (1959); Noblit v The Marmon Group, supra. The Legislature may have determined that the payment of benefits to locked-out employees would weaken the effectiveness of the lockout as a bargaining tactic and may have chosen to leave intact the lockout as the employer's counterpart to the strike.
The Legislature also could have rationally distinguished between an employee locked out at his own place of work and an employee who is unemployed due to a lockout at a functionally integrated establishment. It is apparent from the 1963 amendments to § 29(8), which included the addition of the functionally integrated clause, that the Legislature was concerned with eliminating the weapon which employees previously had in being able to strike a key plant, thereby forcing an employer to pay benefits to laid-off employees at functionally integrated plants. It is not unreasonable to conclude that the Legislature intended to eliminate the corresponding weapon of employers in utilizing a lockout to avoid paying unemployment benefits to employees laid off at functionally integrated plants. This goal furthers both aforementioned policies of the ESA.
1963 PA 226. See the authorities cited in fn 3, supra.
Whether or not we agree with the wisdom of the lines the Legislature has drawn, we cannot say that they lack a rational basis. Thus, we conclude that the Legislature's treatment of lockouts in § 29(8) does not violate equal protection.
V
In conclusion, we hold that a lockout may be a manifestation of a "labor dispute in active progress" as that term is utilized in the ESA. If a claimant cannot work because of a lockout "in the establishment in which he is or was last employed", and if the substantial contributing cause of the lockout is a labor dispute, then the claimant falls within the purview of the disqualification of § 29(8). We further hold that if a lockout occurs "in any other establishment within the United States which is functionally integrated with the [claimant's] establishment and is operated by the same employing unit", and if the lockout is the substantial contributing cause of the claimant's unemployment, then the claimant falls without the disqualification of § 29(8) and is eligible for benefits. We conclude that this classification does not violate the Equal Protection Clause.
In Smith, we find that there was substantial, competent and material evidence to support the agency's finding that appellees were unemployed due to a labor dispute in which they were directly involved. Therefore, they were disqualified from receiving unemployment benefits. The decision of the Court of Appeals is reversed and the judgments of the trial courts are reinstated.
In Doerr, we remand to the board of review for further proceedings consistent with this opinion. We retain jurisdiction.
Finally, we grant the motions to strike the unauthenticated and extra-record material contained in the briefs of amicus Borden and amicus Michigan Manufacturers Association. People v Robinson, 390 Mich. 629; 213 N.W.2d 106 (1973); Anderson v Jersey Creamery Co, 278 Mich. 396; 270 N.W. 725 (1936).
No costs, a public question being involved.
COLEMAN, C.J., and KAVANAGH, WILLIAMS, and RYAN, JJ., concurred with FITZGERALD, J.