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"Loss of value" for excessive absenteeism: a case study.


The primary subject matter of this case is arbitration in a company with a powerful union. Other issues include absenteeism, FMLA, documentation, arbitrators' decisions, "Loss of value" letters, and Last Chance letters. The case has a difficulty level of being appropriate for senior level or first year graduate classes. The case is prepared for two hours of instruction and discussion. The students should receive the case earlier and be prepared to discuss the ramifications of the case together with the instructor.


This case involves an employee with an extended history of frequent and protracted absences over his employment of 17 years. When the company finally terminated him after going through all the options available to them, the union representing him filed a grievance which progressed thorough the steps of the plant grievance procedure to arbitration. This case is exciting as it is based on first-hand knowledge of the situation. Students will have a sense of immediacy upon reading the case. It gives a perspective seldom available to undergraduate students in the meaning of "Loss of Value" and how such a case must be approached by management. It involves interesting exerts from previous Arbitrators' decisions, along with views of such cases from Authors Elkouri & Elkouri. The case involves interesting testimony during the arbitration hearing by both the grievant and his Union Representative as both give their perspectives on the case to the Arbitrator. This case also has serious implications during the negotiations of a Collective Bargaining Agreement between the parties during the sale of the plant to a new owner. Finally, there is a surprising caveat seldom experienced following an arbitrator's binding opinion and decision to both the Company and the Union.


This paper, written as a case study, investigates whether a manufacturing plant in a small mid-western town was justified in terminating the employment of an employee with seventeen (17) years of service in 2005 following the issuance of a "Loss of Value" letter of notification for what the employer considered excessive absenteeism. The "Loss of Value" letter had been given to the employee in early fall of 2004, prior to the events leading to his ultimate termination.

The employee, represented by a Local Union of the United Steelworkers of America, filed a grievance which went before an Arbitrator, insisting that the employer had violated the spirit and intent of their Collective Bargaining Agreement (CBA), along with previous arbitration decisions at the facility, by unjustly terminating the employee. The Union specifically argued the section of the CBA regarding "Disciplinary Action" and claimed the employee should have been administered a "Last Chance" letter in lieu of discharge.

The Employer attempted to show the grievant's absenteeism had been unacceptable, not only during the past five (5) years of his employment, but throughout his career at the facility. The employee's absences from work for various reasons during the period from 2000 through 2004 had resulted in his being issued the "Loss of Value" letter. This letter communicated that he must correct is attendance problem or be subject to disciplinary action, up to and including discharge. The Employer further argued that the series of events leading to additional absences from work during 2005, coupled with his long history of absenteeism and lack of effort to correct his problems justified the decision for termination.


"Loss of Value" is a common labor relations term utilized through the years by Employers when the evidence indicates that employees are absent from their workplace to the extent that they are no longer of any value to the employer as an employee. The period of time usually used in the process of establishing the burden of proof of "Loss of Value" is the attendance record for the most recent five (5) year period prior to the disciplinary action being taken. In many cases, the final decision maker (Arbitrator, Umpire, or Mediator) will examine the percentages of unexcused absences for each year during this period to see if they meet or exceed a total of 20%. In this case, the employer took the position that "Loss of Value" was when an employee had compiled an absentee record such that the person becomes practically useless as an employee. At this time, it is proper to consider the entire record, including all absences and other aspects of the record including factory injuries, time spent on light duty, and other disciplinary action as it relates to the value of an employee. The Union vehemently opposed this definition due to the fact that it would include absences that are normally covered by the Family Medical Leave Act (FMLA). The Union argued that in previous cases at this facility, FMLA absences were not included in the "Loss of Value" calculation and the Employer had been unsuccessful in any attempt to include such FMLA absences as part of the employee's absentee record. In fact, this Union had prevailed in getting their grievances sustained and the employee returned to work regarding the termination of an employee for any reason for the previous fifteen (15) years.


As previously noted the employee in this case, was hired on July 28, 1988 and had a total of seventeen years of service with this employer at the time of his termination for "Loss of Value" on July 12, 2005. The employee's absentee record during his employment period from July 28, 1988 to July 13, 2005 is summarized as follows:
Employee Absentee Record

Year                    Total Days Absent

1988                            2
1989                            2
1990                            4
1991                           37
1992                           39
1993                           11
1994                           38
1995                           43
1996                           44
1997                           24
1998                           36
1999                            8
2000                           24
2001                           22
2002                           62
2003                           34
2004                           17
2005 (Thru 7/12/05)             3

The above absences are in addition to the following approved Family Medical Leave Act (FMLA) representing days not available for work:
Employee Absentee Record

Year           FMLA Total Days

2002                 61
2003                 18
2004                 69
2005 YTD             37

Further, the employee's claims of both occupational and non-occupational injuries and illnesses had been many and varied throughout his employment. In addition to his above absences from work, he had been provided extensive light duty (276 days) for various reasons throughout his employment.

As a result of the employee's absentee record for the years of 2000 through 2004, and following the required numerous steps in the grievance procedure for excessive absenteeism, a meeting was held on October 26, 2004 regarding his attendance with the appropriate Union and Management officials present. The result of this meeting was a "Loss of Value' letter for absenteeism being placed on the employee's record.

During this meeting the employee's Business Center Manager (BCM) noted the following percentages of work days absent from the year 2000 to 2004 YTD:
Percentages of work days absent from the year 2000 to 2004 YTD

2004 YTD (10/20/04)    15% work days absent (including light duty days)
2003                   22% work days absent (including light duty days)
2002                    38% work days absent
2001                    17% work days absent
2000                    13% work days absent

Following a "Report off sick" on March 3, 2005, the employee experienced additional absentee problems due to health related issues with difficulty breathing. These problems resulted in a "Report off sick" on June 27, 2005 and a "Clock in late" on June 28, 2005. These absences led to a meeting on July 1, 2005 to discuss these last two absences and his overall attendance record. The meeting concluded with the employee being placed on a 48 hour investigative period as required by the Collective Bargaining Agreement (CBA). On July 12, 2005, a follow-up disposition meeting was held regarding the employee's attendance and "Loss of Value" status. This meeting concluded with the employee being notified that his absences were unacceptable in accordance with his "Loss of Value" letter and that his employment was terminated. A grievance was filed that same day which progressed through the steps of the grievance procedure and was heard before the arbitrator on August 31, 2005.


The Company's position at the arbitration hearing was that the employee's absentee record for most of his 17 years of employment history clearly had been unsatisfactory. It had consisted of both long and short term absences spread out over many years. As a result, neither his employer nor his fellow employees could count on him from an attendance standpoint. From the year 2000 through October 26, 2004, the employee had been absent 159 days out of a total of 866 work days for an 18.4 % absentee percentage. Accordingly, after years of attempting to correct his absentee problems, management reached the point where he was determined to be of no value to the Company. Of further significance, when his approved FMLA leave is included in this five (5) year period, he was not available for work 307 days out of the total 866 work days for a 35.5 % unavailable for work percentage.

The Company defined "Loss of Value" at the arbitration hearing as when an employee has compiled an absentee record such that the person becomes practically useless as an employee; at which time it is proper to consider the entire record, including all absences and other aspects of the record including factory injuries, time spent on light duty, and other disciplinary action as it relates to the value of an employee.

The Company argued it was justified in placing this employee on notice with the "Loss of Value" letter dated October 26, 2004 which communicated in part as follows:

"Regular reliable attendance is a responsibility of all employees. Your attendance record was reviewed in its entirety with you, and it was determined to be unsatisfactory. It is your responsibility to correct your attendance problem immediately. Failure on your part to correct you attendance problem may subject you to further disciplinary action, up to and including discharge."

The Company pointed out at the hearing that the employee was asked to "correct your attendance problem immediately." The letter did not ask him to simply improve over his past unsatisfactory attendance. The second step answer by the BCM to the grievance filed by the Union following the issuance of his "Loss of Value" letter also clearly communicated how serious his absenteeism had become by stating in part as follows:

"After reviewing the grievant's record, it is hard to dispute that the grievant places an undue burden on the Company to cover him due to his unavailability to perform his assigned job on a regular basis. Loss of Value recognizes those employees who miss such a large amount of work that they no longer have a value to the Company. Clearly, this employee cannot be relied on for regular attendance and the Loss of Value letter issued was appropriate."

Arbitrator Fred Kindig had previously addressed the principle of a Company issuing letters to employees regarding excessive absenteeism which could eventually lead to discharge for loss of value. His words from Arbitration Decision FEK-222 are well- know and have been quoted by numerous arbitrators as follows:

"Absence is defined as a state of being away or not being present. Therefore, if an employee is not present when expected to be present at work, said employee is absent; whether voluntarily or involuntarily, excused or unexcused, controllable or uncontrollable, avoidable or unavoidable. Arbitrators generally agree that one of an employee's obligations is regular attendance and that no company can tolerate situations where absenteeism is excessive. In fact, a point may be reached where an employee has compiled an absentee record such that the person becomes practically useless as an employee; at which time it is proper to consider the entire record, including all absences and other aspects of the record, and to discharge said employee if lesser discipline fails to correct the unsatisfactory behaviour of the individual.

The principle is also well established that where an employee has been absent from work on many occasions over a period of time for varying injuries and/or illnesses, as to indicate unfitness for industrial employment, a company may finally terminate said employee, not for offenses, for injury and illness are not offenses, but simply because the employee is not only of no value to the company's operations, but is actually a hindrance. Such cases are difficult to handle. The company has the right and the obligation to make an employee aware of a record that is considered unsatisfactory to the company, and should take appropriate action accordingly when it appears to be necessary to convince the employee of the unsatisfactory behaviour. In this connection, one of the problems is the proper timing of the appropriate action; as there is just as much danger in waiting too long as there is in taking action too soon."

The Company argued that it was justified in terminating the employment of the subject employee on July 12, 2005 following the contractually required 48 hour investigative period by concluding that his last absences were unacceptable in accordance with his "Loss of Value" letter. Following his "Report off sick" on March 3, 2005, along with his absence from work on June 27, 2005 and his late clock in on June 28, 2005, it became apparent that this employee would continue to experience additional absentee problems for various health related issues as his previous history had proven.

Arbitrator Anthony Sinicropi had addressed a similar situation in a prior arbitration case at this same mid-western manufacturing facility in 1995 when he upheld the discharge of an employee and stated the following in his decision:

"Arbitrators Wagner and Gunderman have specifically addressed the discharge of 'loss of value' employees at this plant. In Case No. 84.7, for example, Arbitrator Gundermann noted that 'if an employe has an uncontrollable absence due to injury or illness, conditions beyond the employe's control, it is doubtful that either counseling or discipline would have any effect on the employe's attendance, as the underlying cause of the absence is beyond his control. Arbitrator Gundermann also noted in Case No. 84.7 that:

'It is generally recognized that if an employee's uncontrollable absences reach the point where the employee cannot be available for work on a regular basis, and there is no expectation that the cause(s) of the absences can be eliminated, the employer has a right to terminate the employee.

Likewise, in Case No. 77-3, Arbitrator Wagner upheld the discharge of an employee for excessive absenteeism under the following facts:

'In Case 76.1, the Umpire also had before him a termination for excessive absenteeism. In that case the Umpire noted that different approaches were appropriate for absenteeism growing out of employee indifference to his job and that caused by physical disabilities that prevented an employee from fulfilling his job duties. He went on to observe that in the former case the corrective discipline approach was appropriate but in the latter it was not useful but 'instead a systematic and careful medical evaluation must be made' to support a termination. The Union contends that the latter approach should have been followed in the present case if the Company's corrective disciplinary policy was not required. The Umpire believes the facts in the cases are basically different. In 76.1 the grievant had a record of mixed reasons for his absences--indifference and a back disability. The Company terminated him under the corrective discipline policy it customarily applied in its regular absentee control program; however, the Umpire determined that under the circumstances that prevailed, the medical excuses that the grievant advanced for his absences should not have been ignored but should have been 'systematically and carefully evaluated' to determine whether they provided justification for the grievant's absence. In the Umpire's judgment the situation that prevails in the present case is fundamentally different. Here the grievant's absence at the time of termination was not triggered by a particular absence that it considered unjustifiable because it had no medical support but because the grievant had once again been unable to provide the services the Company needed. Although it would have been useful if the Company had insisted upon a detailed and complete medical prognosis of the grievant's prospects before terminating him, the Umpire cannot conclude that in the light of the grievant's repeated and extended absences for a variety of very different illnesses and disabilities that the termination for his physical inability to perform his job was procedurally faulty that it was arbitrary or without cause. On the contrary, the entire record discloses that the Company was burdened heavily by production losses and by medical and sickness benefit costs for which it received no employee services. Therefore, especially in the light of the February 1977 notice, the termination was proper.'

Applying the principles outlined in the above-referenced cases to the facts presented in the instant grievance, the undersigned finds that the Company has met its initial burden of proof to show that the Grievant's absenteeism rate was excessive and warranted disciplinary action. It is undisputed that during the last seven years of his employment with the Company, the Grievant was only able to work his regular job assignment approximately 23% of his scheduled work days. His rate of absenteeism was not only excessive, but was continuing in nature. The Grievant missed work as a result of an appendectomy, assorted strains, and injuries to both shoulders and wrists. Although these injuries may have been caused by reasons outside of the Grievant's control, and were documented as such by his doctor, the fact remains that the Grievant was absent from work and the Company had to repeatedly make arrangements to cover his regular work assignments. These arrangements imposed hardships on the Grievant's coworkers, created financial costs for the Company and, as demonstrated by the record evidence, reached an unacceptable point.

As to the appropriateness of the discharge penalty, the Grievant was given specific notice by the Company's 'loss of value' letter about the consequences of his inability to maintain an acceptable level of attendance. The Grievant failed to meet the conditions of that letter. Because the reasons for the Grievant's absences were largely uncontrollable, strict adherence to the principles of progressive discipline by the Company was not required. The medical evidence introduced by both parties fails to offer any definitive proof that the Grievant's physical inability to perform his regularly assigned job duties will improve or that the Grievant will no longer miss extended periods of work in the future. There is also no evidence in this case to show that the Grievant was unfairly singled out for discharge. In short, there is no evidence of any other employee whose absenteeism rate compared with that of the Grievant and who was not discharged. Under these factual circumstances, the Arbitrator must conclude that the Grievant's discharge was appropriate."

In June, 2005, the subject employee had filed an accident report for heat exhaustion resulting in light duty work and was later absent from work for claims of chest pains. In his letter dated July 11, 2005, the plant physician had noted the following at the conclusion of his evaluation:

"I have come to the conclusion, I find no evidence of this being related to a heat related illness based on the description of his physician, the available laboratory work and the patient's own history."

Even the employee's own personal physician noted in her June 22, 2005 report the following information:

"The patient presents here today with a general achiness all over, throughout his extremities and extreme fatigue as well as some lightheadedness. He does not describe specific chest pain with any radiation. He also complains of extreme fatigue. He states that he has been at work over the past couple of days, and there is no air conditioning, and he has felt drained, particularly yesterday when he got home from work when he began having this all over achiness and continued to feel generalized myalgias and pain over the day. He denies any other symptoms. ASSESSMENT: Myalgias."

Comments provided in a letter dated July 27, 2005 by yet another physician from a nearby mid-western town following the employee's discharge were most interesting and are noted as follows in part:

"Apparently the question had been raised as to whether or not he is suitable for factory work in light of his medical situation. I wanted to clarify that issue. He has suffered from intermittent abdominal pain and pancreatitis in the past. He has also dealt with functional abdominal pain exacerbated by anxiety. He also suffers from mild asthma from which, despite working for years at the plant, he has only suffered one or two mild flares of the asthma despite

all the fumes and hot environment.... He has followed a pattern of intermittent absences from work, which have affected his attendance pattern."

The husband and wife authors Elkouri & Elkouri had also previously addressed "Excessive Absences" in their Fifth Edition of "How Arbitration Works" by noting as follows:

"The right to terminate employees for excessive absences, even where they are due to illness, is generally recognized by arbitrators. However, no simple rule exists for determining whether absences are in fact, 'excessive.' In this regard, Arbitrator Edwin R. Teple explained: 'At some point the employer must be able to terminate the services of an employee who is unable to work more than part time, for whatever reason. Efficiency and the ability to compete can hardly be maintained if employees cannot be depended upon to report for work with reasonable regularity. Other arbitrators have so found, and this Arbitrator has upheld terminations in several appropriate cases involving frequent and extended absences due to illness.'

In another statement, Arbitrator Marlin M. Volz explained that:

'Illness, injury, or other incapacitation by forces beyond the control of the employee are mitigating circumstances, excuse reasonable periods of absence, and are important factors in determining whether absences are excessive. However, if an employee has demonstrated over a long period of time an inability due to chronic bad health or proneness to injury to maintain an acceptable attendance record, an employer is justified in terminating the relationship, particularly where it has sought through counseling and warnings to obtain an improvement in attendance.'

The Company concluded their argument in this case by noting that the history of the subject employee clearly demonstrated over a significant period of time a great number of injuries and illnesses, both occupational and non-occupational, that he had not maintained an acceptable attendance record and this employer was justified in terminating the employment relationship.

The Union's case at the arbitration hearing centered on the Company's use of the employee's FMLA absences in justifying his termination. The Union argued vehemently that the Company had violated this federal statute and that all references to his Company approved FMLA absences should be struck from the record. Previous arbitration decisions were noted by the Union where approved FMLA absences were not allowed to justify discipline and this case was quite similar in nature. With the illegal inclusion of these FMLA absences, the Company had failed to establish the required "just cause" and to consider the mitigating factors which failed to justify discharge.

The Union also argued that the Company was merely out to make an example of this employee and had even refused to agree to a "Last Chance" letter following his "Loss of Value" letter and prior to termination. The Union noted that a "Last Chance" agreement letter had been a standard practice between the parties for the past 15 years rather than administering discharge. Termination of his employment was nothing more than the Company creating "economic capital punishment" for this individual which did not "fit his crime." The Union further contends that the grievant had corrected his attendance record noting that in the year of 2003, just prior to the "Last Chance" letter, he was absence only 34 days, and those absences led to his "Lost of Value" letter. The Union noted at the time of discharge, termination was not justifiable based upon the grievant's attendance record over the past ten (10) months. The Union noted that although the grievant did experience two absences from work after the issuance of his Loss of Value letter in October, 2004, he had clearly demonstrated a strong desire to make himself available to work as evidenced by the fact that he reported for work immediately following hi discharge from the hospital on June 28, 2005. In addition, the Union argued that the Company had failed to conduct systematic and careful evaluations to determine whether or not the grievant's medical conditions were likely to improve prior to deciding to terminate his employment.

As in many discharge cases, the tables began to turn when the Union put the grievant on the witness stand. This employee, regardless of how well coached by the Union, never lacked in his verbal enthusiasm and efforts to describe his medical condition and how he had been mistreated by management and his peers on the job. While testifying on his own behalf, the grievant explained that his primary medical issue had been pancreatitis, a condition he had suffered from for the past five years. He stated that he thought this condition was now under control because he had not had to seek medical treatment for it since June, 2005. This testimony, however, appeared to be contradicted by a medical report from his physician dated February 3, 2005, and submitted by the Union as evidence at the arbitration hearing. This medical report read as follows:

"I am writing at the request of my patient to clarify his family medical leave paperwork. He suffers from abdominal pain syndrome that is a chronic medical condition. It is likely related to a splenic nerve irritation syndrome after pancreatitis and stint placement. He also deals with an element of irritable bowel syndrome, which is worsened with anxiety. He has required intermittent office visits and will likely require these for the foreseeable future. A splenic nerve injection is being contemplated, and we are researching a provider that can pursue that option for him. I wanted to clarify what was meant by the answer to the question concerning incapacity. I simply meant that he was cleared to return to full duty without restrictions at this point in time. That is not to say that his condition has resolved or that we cannot expect periodic visits to the physician being required in the future. I attempted to convey that by stating his condition will likely last 10 years. I feel that he has made a good faith effort to report to work when he is able.

In summary, he does have a chronic condition, which will require periodic physician visits as provided under the Family Medical Leave Act. I hope these comments are useful."

The grievant's comments with respect to his absences of June 27-28, 2005, which triggered his termination, included his explanation of his going to the emergency room for chest pain and being admitted for evaluation. On the next day, June 28, a stress test, along with other tests, were administered, after which he was released to return to work either that day or the next and he chose to go to work that day to prove that he was conscientious about his job. In regards to his March 3, 2005 absence, the grievant claimed the absence was not recorded correctly because he called in for FMLA that day and was told he was granted eight hours of leave. He stated he was never told otherwise until the meeting with management on July 11, 2005, at which time he was told that the March 3 absence was being counted against him as an absence.

Further comments by the grievant while on the stand were many and varied, ranging from conflicts involving hostility and abusive language that he had with his co-workers such as how the Company had failed to stop his fellow employees from harassing him by "staring at him" while he worked at his machine. He also described an incident involving his peers placing grease on his jacket which was transferred to his van seats when he entered his vehicle at the end of his shift. When he reported the incident to the Company and requested reimbursement of $150 for having his van seats cleaned of the grease, his request had fallen on deaf ears. In summary, the employee blamed his discharge on being disliked by many of his fellow employees and management in general.

The Union Vice-President also testified at the hearing on behalf of the grievant. He testified that he had been active in Union affairs for twenty-four years and had been involved in several cases involving employees who had been discharged for "Loss of Value." The Union VP was of the opinion that some of those employees were treated "differently" or more leniently than the grievant but failed to provide any facts or circumstances surrounding the referenced previous cases. His testimony focused on the history of the loss of value procedure applied at this plant and the characteristics that distinguished it from similar procedures at other plants. Based upon the above noted Martin Wagner Case No. 1.76 as noted in part above, the VP concluded that the crux of this dispute is whether the evidence showed that the grievant had corrected his attendance record to the point that discharge was inappropriate and unreasonable.


The grievance was denied by the Arbitrator. In denying this grievance, the Arbitrator noted the following conclusions in his opinion:

First, the grievant had received ample notification that his attendance record was unsatisfactory and that failure to correct his attendance problem immediately would result in termination. Accordingly, ample warning of the consequences had been provided by management. Second, there was no prognosis for improvement in the grievant's record based upon the fact that his absenteeism continued for a wide variety of reasons in 2005, after he received his loss of value letter. It was undisputed that the grievant had been absent for a total of forty days, which represented 41% of the workdays available to him in 2005. Third, keeping an employee on the employment roll who has displayed such cavalier regard to his responsibility for regular attendance does a disservice to the vast majority of employees who do care about their jobs and who do make a conscientious effort to maintain regular attendance. Finally, the Union's claim that the Company has not made a thorough evaluation of the grievant's medical condition in their decision to terminate his employment was completely undermined by the medical evidence in the file which clearly demonstrated this was a matter that was clearly taken into account by the Company.

An Unexpected Turn of Events

Needless to say, this arbitration decision did not set well with a Local Union who had not lost a termination case in the past 10 years. It caught them totally by surprise, and having a future opportunity to redeem themselves was always on their minds. This opportunity came when the plant was sold to a new owner for an even $1 million dollars. Thus, when intense negotiations over a new Collective Bargaining Agreement with the upcoming new owner of the plant occurred during late December, 2005, the reinstatement of the subject grievant was a union proposal in order to complete the deal. When the background of the case and an objection was voiced by the plant Human Resource Manager, the new owner's attorney spoke quite frankly as to the expected outcome when he said, "Listen this new owner (name) wants this plant more than a 16 year old boy wants sex for the first time, trust me the reinstatement of the subject grievant (name) will not stand in the way of this deal". Accordingly, the grievant's reinstatement became a small part of a very big deal for the new plant owners.


After the signing of the new CBA, plant management reluctantly contacted the terminated ex-employee and scheduled a meeting for reinstatement. The individual came to the plant Employment Office as scheduled and as the Employment Manager explained the results of the negotiations and his reinstatement process, the ex-employee suddenly bolted unexpectedly for the door and ran to the gatehouse. The BCM Manager, who had initially terminated his employment and who was present for the reinstatement that day, quickly pursued knowing that he should not fail his new owner and management team. When finally stopped at the plant gatehouse, the ex-employee told his BCM that he had no desire to work at this facility and planned to pursue other interests he had recently initiated. Thus, we all learned something that had been suspected for quite some time: "The Local Union, a new owner, and even the old management team cannot make an individual work that has a lack of desire to do so in the end."

E. Hill Mayfield, Jacksonville State University

Patricia C. Borstorff, Jacksonville State University
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Author:Mayfield, E. Hill; Borstorff, Patricia C.
Publication:Journal of the International Academy for Case Studies
Article Type:Case study
Geographic Code:1USA
Date:Jul 1, 2011
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