Joint Industry Board of Electrical Industry v. United States/Dissent Fortas

Mr. Justice FORTAS, with whom THE CHIEF JUSTICE and Mr. Justice BRENNAN join, dissenting.

I do not agree that United States v. Embassy Restaurant, Inc., 359 U.S. 29, 79 S.Ct. 554, 3 L.Ed.2d 601 (1959), controls this case. I believe the employer's unpaid contributions to the employees' annuity plan are 'wages * *  * due to workmen' within § 64a(2) of the Bankruptcy Act. Those contributions accrued and unpaid within three months before the commencement of the bankruptcy proceedings are entitled to the statutory priority.

In this case, the employees and the employer agreed, in a collective bargaining agreement, that the employer would compensate each employee with stipulated wages and, additionally, $4 per day 'for each day worked or each holiday * *  * .' The latter sum, instead of being paid directly to the employees, was remitted to trustees of an annuity plan. In the accounts of the plan, the sum remitted for each employee, and measured by his days of work, was credited to that employee. The employee was entitled to receive the sum credited to his account upon retirement from the industry at age 60, death, permanent disability, entrance into the Armed Forces, or ceasing to be a participant under the plan by leaving the electrical industry or by accepting employment with some electrical company that is not covered by the collective bargaining agreement.

It is unmistakably clear (1) that the sums in question were to be paid as part of the wage bargain between employer and employee; (2) that the sum due each employee was specifically related to and measured by his work; (3) that the sum which each employee earned was accounted for separately and individually; he was entitled to the amount paid to the trustee on account of his individual labor; and (4) that inevitably, as sure as death, there was to come a point of time when the sum remitted to the trustee on account of each individual's work would be paid to that individual or his heirs.

In my judgment, it is impossible to distinguish, on the basis of the purpose of the priority provisions of the Bankruptcy Act, between these payments to the annuity plan and direct payments to the employee for his labors. The Court, however, holds that payments to the plan do not satisfy the 'manifest purpose of the priority,' as that purpose was explained in Embassy Restaurant. This purpose, the Court says, was to enable employees, upon the bankruptcy of their employer, promptly to secure money directly due them in back wages and thereby to alleviate the hardship that unemployment brings. Embassy Restaurant demonstrates, the Court says, that since the contributions to the annuity plan were not immediately payable to the employees upon bankruptcy, they do not fall within the definition of 'wages' for priority purposes.

But the present case is materially different from Embassy Restaurant. In that case, the employee was never entitled to receive the sums which were paid into the fund on account of his labor. These sums and the sums paid by the employer for all other employees were used to provide life insurance, sick benefits, hospital and surgical payments, and other benefits. An employee was never entitled to demand and receive payment of sums that he had earned. These sums were not credited to him to be paid upon his death or retirement or other contingencies.

In a dissenting opinion in that case, Mr. Justice Black (joined by The Chief Justice and Mr. Justice Douglas) argued that the majority misconceived the nature of the payments into the fund in Embassy Restaurant and the purpose of the priority for wages. But we need not quarrel with the Court's conclusions in Embassy Restaurant, for purposes of the present case. Here, it is entirely clear that the sums paid and payable into the fund were payable to the individual employee. They were his. They were part of his wages. Only the time of receipt was deferred until retirement at age 60, separation from the industry, death, etc.

There is nothing whatever in § 64 to indicate, as the Court would have us believe, that 'wages' lose their priority position if they are not immediately payable upon the event of bankruptcy. There is no basis whatever, except this Court's ipse dixit in this case, to say that the priority is available only to provide 'immediate support for workmen during the period of financial distress.' Embassy Restaurant is not authority for this. Embassy Restaurant is authority for the proposition that when the 'wages' are never payable to the employee, but benefit him only through providing life insurance or various types of services, the priority is not applicable. That is not the present case.

I take it that the purpose of the 'wages' priority-just as in the case of all other priorities-is to give a preferred status to claims deemed particularly meritorious, so that the chances that the claimant will recover the sums due him on such claims will be enhanced. 'Wages * *  * due to workmen' are in this category, as are other claims such as costs of administering the bankruptcy estate and taxes owed to the United States or any State. The lower court cases which the majority claims are 'in agreement' as to the purpose of the 'wages' priority are probably not in agreement with each other at all and certainly not in agreement with the majority's restrictive definition of that purpose. In re Lawsam Electric Co., Inc., 300 F. 736 (D.C.N.Y.), Judge Learned Hand said: 'The statute was intended to favor those who could not be expected to know anything of the credit of their employer, but must accept a job as it comes, to whom the personal factor in employment is not a practicable consideration.' In re Estey, 6 F.Supp. 570 (D.C.N.Y.), it was said that 'the intention of Congress was plainly to give special protection to a class of wage-earners who generally have no substantial savings or other reserves to fall back on in case of adversity and therefore cannot afford to lose.' Certainly neither of these statements, which the majority cites in support of its definition of the purpose of the 'wages' priority, constitutes authority for the proposition that the priority was intended only to alleviate the hardship caused by unemployment following immediately upon the bankruptcy of an employer. As a matter of fact, recognizing the priority does not assure immediate payment. Payment is made upon interim or final distribution of the estate. Priority merely increases the prospects of recovery.

The Court's decision in this case, in my opinion, deprives the workers here concerned of the protection which congress accorded their claims. We should reverse the judgment below.