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May 23, 1977.

NEW YORK TELEPHONE COMPANY, Western Electric Company, American Telephone & Telegraph Company Long Lines Department, and Empire City Subway Company (Limited), Plaintiffs,
NEW YORK STATE DEPARTMENT OF LABOR, Louis L. Levine, Industrial Commissioner of the New York State Department of Labor, New York State Department of Taxation & Finance, and James H. Tully, Jr., State Commissioner of Taxation and Finance, Defendants.

The opinion of the court was delivered by: OWEN

OWEN, District Judge.

In 1971 most employees of the entire nationwide Bell Telephone Company system (Bell System) went on strike. Within days, the strike was settled and there was a return to work at all units except those in New York State, where employees continued on strike for seven months. After the first eight weeks, many of the striking employees began receiving as much as $95.00 per week tax-free as unemployment compensation under New York law, which continued for the duration of the strike. By its conclusion, the strikers had received some $49,000,000 from the Compensation Fund and the New York Telephone Company (Telco) was faced with making up a $40,000,000 depletion in its credit in the said Fund.

 The plaintiffs, New York State units of the Bell System, brought suit for the recovery of funds paid, to restore its lost credit position, and for a declaration that New York Labor Law § 500 et seq., to the extent it mandates payment of unemployment compensation to strikers *fn1" is unconstitutional. By stipulation the liability issues were severed and separately tried.

 The two principal questions raised on the non-jury trial before me are (1) whether the availability, receipt or expected receipt of unemployment insurance benefits for strikers under New York law exerts a significant impact on (a) collective bargaining and the demands and positions of the parties taken in connection therewith, (b) the incidence of strikes, (c) their duration or (d) the timing, nature and costs of collective bargaining settlements; and (2) has federal law preempted this field, requiring the state enactment to give way to federal policy.

 Plaintiffs here, Telco, Western Electric Company(Weco), American Telephone & Telegraph Company Long Lines Department (Long Lines), and Empire City Subway Company (Limited) (Empire), are all part of the overall Bell System. Ninety per cent of the Bell System's non-management employees are members of unions, and seventy per cent are represented by the Communications Workers of America (CWA). For many years, the agreed-upon collective bargaining format between the union and the members of the Bell System was to select two Bell System companies with early contract expiration dates as the patternsetters, one of them being an operating company with a bargaining unit of limited geographic scope, and the other being a bargaining unit with nationwide scope. National issues were the subject of bargaining in these pattern-setting negotiations, while local issues were to be negotiated separately with each unit. Once a patternmaking settlement was reached on a national basis, it became the standard for the settlement of national issues in all the other companies. Bargaining of local issues could then be concluded and complete contracts would be obtained.

 In 1971, the pattern-setters chosen by CWA were Weco, as the nationwide bargaining unit, and the Chesapeake & Potomac Telephone Company, a multi-state bargaining unit of limited geographical scope. On April 30, 1971, the contracts with the two pattern-setters were due to expire. No agreement having been reached, the two contracts were thereafter mutually extended on a day-by-day basis to July 14, 1971, as were other contracts with the Bell System that expired between April 30th and July 14th. On July 14, CWA began a nationwide strike against the Bell System involving some 500,000 employees, some whose contracts had expired, and some whose contracts, such as employees of Telco, Empire and Long Lines, had not yet expired. Four days later, agreements were reached among Bell System companies, including plaintiffs and CWA. These agreements covered both national and local items, the national items conforming to the national pattern. As soon as the agreements were reached, CWA called an end to the strike and directed a return to work on July 21st. With the single exception of the New York State bargaining units, the CWA-represented employees complied with this direction. However, approximately 38,000 members of the Telco unit continued on strike. Weco and Long Lines employees in New York State similarly stayed off the job. A ratification vote was scheduled and counting of the ballots was set for August 14th. CWA strongly endorsed ratification, and this was joined in by one Morton Bahr who, before, during and after the strike, was the top New York State CWA official. The results of the August 14th voting were that every CWA bargaining unit ratified the contract with the exception of the New York State units for Telco and Empire, and the strike was continued in New York. *fn2"

 At the beginning of the strike, Telco made a decision not to settle, despite the prospect of a long strike, because the company had made an offer which had been approved and recommended by the international union, and which was in line with the pattern settlements ratified by the CWA membership throughout the rest of the country. Telco felt that the New York employees' tactics - endeavoring to break the pattern - could only lead to labor turmoil throughout the Bell System. After a number of months had passed, however, Telco saw that the strike would not end without some concession to union demands and, noting that employees were still eligible for six or more months of unemployment compensation, decided to settle along the lines recommended by the federal mediator. In addition to the fact that unemployment insurance payments would continue, there was pressure from the business community to restore normal operations and make backlogged installations of new equipment. Telco's New York unemployment insurance account was approaching a negative balance, having dropped from a pre-strike credit of more than $40,000,000. Finally, some businesses, in addition to complaining about lack of service, would have had to share in the cost of paying strike benefits if Telco's unemployment insurance fund went into negative balance. These factors caused Telco to submit to a break in the national pattern. *fn3"

 During the seven months of the strike, the striking workers, after their wait of eight weeks, had received $49,000,000 in unemployment compensation benefits which were charged against Telco.Telco's unemployment compensation fund had been depleted by $40,000,000, which it was required to replace. *fn4" I note that the strike was thereafter declared illegal by the National Labor Relations Board. *fn5"

 Notwithstanding the State's adamant position to the contrary, I regard it as a fundamental truism that the availability to, or expectation or receipt of a substantial weekly tax-free payment of money *fn6" by, a striker is a substantial factor affecting his willingness to go on strike or, once on strike, to remain on strike, in the pursuit of desired goals. *fn7" This being a truism, one therefore would expect to find confirmation of it everywhere. One does.

 Turning first to the union's contemporaneous view of the effect unemployment insurance had upon its ability to maintain this strike, particularly appropriate is a letter written by Morton Bahr, Vice President of CWA charged with administering all the union's affairs in New York, New Jersey and New England. He wrote to the New York CWA employees shortly after the strike was over:

 "The fact that more than 80% of the membership stood together for 218 days is simply incredible. In my judgment, it is a testimonial to three phenomena:

 1. Dedication and support by the strikers

 2. Unemployment insurance

 3. Effectiveness of CWA's defense fund." *fn8"

 During the course of the strike, the following appeared in the New York Generator, a CWA newspaper:

 "In an attempt to undermine any future strike effort, New York Telephone has filed a suit in Manhattan Federal Court to prevent strikers from collecting unemployment benefits.

 * * *

 "New York Tel. would do well to pay the [unemployment insurance] fund what it owes and commence preparation for our next contract, and incidentally, better wages and benefits, instead of looking for ways to sabotage our strike weapon even before we utilize it."

 In November 1971, during the course of the strike, Bahr wrote a letter to the local president in which he declared:

 "The strike against the New York Telephone Company enters the 18th week today. The stamina and spirit of our members in New York Tel and those respecting picket lines in Western Electric and Long Lines, is simply amazing. More than 89% of the New York Plant employees are still on the bricks.

 "New York State Unemployment Compensation is a tremendous assist to our members. In addition, the CWA Defense Fund is taking care of the necessary payments for shelter and installment payments for cars and appliances where repossession is threatened." [Emphasis supplied.]

 In December 1971, CWA Local 1102 in a recorded telephone message issued a threat to a legislator who proposed repeal of the law granting unemployment insurance to strikers. The message, as monitored, read in part as follows:

 "According to the Staten Island Advance on Friday, December 3rd, our councilman Frank Deondelulo introduced a resolution which asks the State Legislature to repeal the law enabling strikers to obtain unemployment insurance. This ex-dentist who finds he has all the qualifications for public office is certainly alienating labor and will find this out when he tries for reelection."

 At the outset of the strike, CWA expended monies from its own defense fund but shortly thereafter stated:

 "No food assistance is to be given after September 7, 1971 since the members will have other income - which will average $75.00 per week from the New York State Unemployment Compensation."

 Following the strike, in April 1973, in a recorded telephone message to its members, CWA Local 1103 in Westchester urged them to write to a local state legislator, saying:

 "If we did not get [unemployment insurance] aid during the big strike of 1971 and 1972, I don't know where we would be right now."

 Nor is there any question that CWA has always regarded money, regardless of source, as essential to success in a strike. In stating why it had established its defense fund, CWA stated in ...

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