Source: https://supreme.justia.com/cases/federal/us/327/358/
Timestamp: 2019-04-23 04:39:02+00:00

Document:
1. "Back pay" awarded under the National Labor Relations Act to an employee who was found to have been wrongfully discharged is to be treated under the Social Security Act as "wages" for which the employee is entitled to credit on his Old Age and Survivors Insurance Account. Pp. 327 U. S. 359, 327 U. S. 364.
(a) The treatment of such back pay as wages under the Social Security Act is required by that Act's definitions of wages as "remuneration for employment" and of employment as "any service, of whatever nature, performed . . . by any employee for his employer." P. 327 U. S. 364.
(b) The word "service," as used in the Act's definition of employment, means not only work actually performed, but the entire employer-employee relationship for which compensation is paid to the employee by the employer. Pp. 327 U. S. 365-366.
(c) The construction of the Social Security Act by the Social Security Board whereby "back pay" is excluded from "wages" is unsound, and goes beyond the permissible limits of administrative interpretation . P. 327 U. S. 367.
(d) Administrative determinations must have a basis in law and be within the authority granted the administrative agency. P. 327 U. S. 369.
(e) An administrative agency may not finally determine the scope of its statutory power; that is a judicial function. P. 327 U. S. 369.
2. "Back pay" treated as "wages" under the Social Security Act should be allocated to the periods for which the wages ordinarily would have been paid. P. 327 U. S. 370.
3. The back pay having been awarded for a period prior to the 1939 amendments of the Social Security Act although actually paid thereafter, the decision here is controlled by the Action its earlier form. However, there is no suggestion of any significant difference in the amended Act so far as the question here involved is concerned. P. 327 U. S. 360.
The Social Security Board refused to credit respondent's Old Age and Survivors Insurance Account with the amount of "back pay" awarded him by the National Labor Relations Board. The district court upheld the Social Security Board. The circuit court of appeals reversed. 149 F.2d 273. This Court granted certiorari. 326 U.S. 700. Affirmed, p. 327 U. S. 370.
A problem as to whether "back pay," which is granted to an employee under the National Labor Relations Act, shall be treated as "wages" under the Social Security Act comes before us on this record. If such "back pay" is a wage payment, there is also at issue the proper allocation of such sums to the quarters of coverage for which the "back pay" was allowed.
pay" was paid by the employer on July 18, 1941. Thereafter, Nierotko requested the Social Security Board to credit him in the sum of the "back pay" on his Old Age and Survivor's Insurance account with the Board. [Footnote 2] In conformity with its minute of formal general action of March 27, 1942, the Board refused to credit Nierotko's "back pay" as wages. On review of the Board's decision, [Footnote 3] the District Court upheld the Board. The Circuit Court of Appeals reversed. 149 F.2d 273. On account of the importance of the issues in the administration of the Social Security Act, we granted certiorari. [Footnote 4] 326 U.S. 700; Judicial Code § 240.
"SEC. 210. When used in this title --"
"(a) The term 'wages' means all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash. . . . "
"(b) The term 'employment' means any service, of whatever nature, performed within the United States by an employee for his employer, except --"
The purpose of the Federal Old Age Benefits of the Social Security Act is to provide funds through contributions by employer and employee for the decent support of elderly workmen who have ceased to labor. [Footnote 12] Eligibility for these benefits and their amount depends upon the total wages which the employee has received and the periods in which wages were paid. [Footnote 13] While the legislative history of the Social Security Act and its amendments or the language of the enactments themselves do not specifically deal with whether or not "back pay" under the Labor Act is to be treated as wages under the Social Security Act, we think it plain that an individual who is an employee under the Labor Act and who receives "back pay" for a period of time during which he was wrongfully separated from his job is entitled to have that award of back pay treated as wages under the Social Security Act definitions which define wages as "remuneration for employment" and employment as "any service . . . performed . . . by an employee for his employer."
But it is urged by petitioner that the administrative construction on the question of whether "back pay" is to be treated as wages should lead us to follow the agencies' determination. There is a suggestion that the administrative decision should be treated as conclusive, and reliance for that argument is placed upon Labor Board v. Hearst Publications, 322 U. S. 111, 322 U. S. 130, and Gray v. Powell, 314 U. S. 402, 314 U. S. 411. In the acts which were construed in the cases just cited, as in the Social Security Act, the administrators of those acts were given power to reach preliminary conclusions as to coverage in the application of the respective acts. Each act contains a standardized phrase that Board findings supported by substantial evidence shall be conclusive. [Footnote 21] The validity of regulations is specifically reserved for judicial determination by the Social Security Act Amendments of 1939, § 205(g).
that judicial review has been accorded, however, makes evident that such decisions are only conclusive as to properly supported findings of fact. Both Hearst Publications, p. 322 U. S. 131, and Gray v. Powell, p. 314 U. S. 411, advert to the limitations of administrative interpretations. Administrative determinations must have a basis in law, and must be within the granted authority. Administration, when it interprets a statute so as to make it apply to particular circumstances, acts as a delegate to the legislative power. Congress might have declared that "back pay" awards under the Labor Act should or should not be treated as wages. Congress might have delegated to the Social Security Board to determine what compensation paid by employers to employees should be treated as wages. Except as such interpretive power may be included in the agencies' administrative functions, Congress did neither. An agency may not finally decide the limits of its statutory power. That is a judicial function. [Footnote 23] Congress used a well understood word -- "wages" -- to indicate the receipts which were to govern taxes and benefits under the Social Security Act. There may be borderline payments to employees on which courts would follow administrative determination as to whether such payments were or were not wages under the act.
of the Social Security Act payments which we think were included by Congress. It is beyond the permissible limits of administrative interpretation.
National Labor Relations Act, Sec. 10(c), 49 Stat. 454.
Social Security Act, Sec. 205(c)(3), 53 Stat. 1369.
The briefs of the Government advise us that more than thirty thousand individual employees were allowed "back pay" in "closed" cases by the National Labor Relations Board under Sec. 10(c), 49 Stat. 454, in the period 1939-1945. See Phelps Dodge Corp. v. Labor Board, 313 U. S. 177, 313 U. S. 187. Second. The aggregate in money exceeded $7,700,000 in the fiscal years 1939 to 1944, as shown by the reports of the NLRB for those years.
"(b) The term 'employment' means any service performed after December 31, 1936, and prior to January 1, 1940, which was employment as defined in section 210(b) of the Social Security Act prior to January 1, 1940 (except service performed by an individual after he attained the age of sixty-five if performed prior to January 1, 1939), and any service, of whatever nature, performed after December 31, 1939, by an employee for the person employing him. . . ."
"SEC. 202. (a) Every qualified individual (as defined in section 210) shall be entitled to receive, with respect to the period beginning on the date he attains the age of sixty-five, or on January 1, 1942, whichever is the later, and ending on the date of his death, an old-age benefit (payable as nearly as practicable in equal monthly installments) as follows:"
"(1) If the total wages (as defined in section 210) determined by the Board to have been paid to him, with respect to employment (as defined in section 210) after December 31, 1936, and before he attained the age of sixty-five, were not more than $3,000, the old-age benefit shall be at a monthly rate of one-half of 1 percentum of such total wages;"
"(2) If such total wages were more than $3,000, the old-age benefit shall be at a monthly rate equal to the sum of the following:"
"~ (A) One-half of 1 percentum of $3,000; plus"
"~ (B) One-twelfth of 1 percentum of the amount by which such total wages exceeded $3,000 and did not exceed $45,000; plus"
"~ (C) One-twenty-fourth of 1 percentum of the amount by which such total wages exceeded $45,000."
"(c) The term 'qualified individual' means any individual with respect to whom it appears to the satisfaction of the Board that --"
"(1) He is at least sixty-five years of age; and"
"(2) The total amount of wages paid to him, with respect to employment after December 31, 1936, and before he attained the age of sixty-five, was not less than $2,000; and"
"(3) Wages were paid to him, with respect to employment on some five days after December 31, 1936, and before he attained the age of sixty-five, each day being in a different calendar year."
"(g) The term 'fully insured individual' means any individual with respect to whom it appears to the satisfaction of the Board that --"
"(1) He had not less than one quarter of coverage for each two of the quarters elapsing after 1936, or after the quarter in which he attained the age of twenty-one, whichever quarter is later, and up to but excluding the quarter in which he attained the age of sixty-five, or died, whichever first occurred, and in no case less than six quarters of coverage; or"
"(2) He had at least forty quarters of coverage."
"As used in this subsection, and in subsection (h) of this section, the term 'quarter' and the term 'calendar quarter' mean a period of three calendar months ending on March 31, June 30, September 30, or December 31, and the term 'quarter of coverage' means a calendar quarter in which the individual has been paid not less than $50 in wages. . . ."
"SECTION 801. In addition to other taxes, there shall be levied, collected, and paid upon the income of every individual a tax equal to the following percentages of the wages (as defined in section 811) received by him after December 31, 1936, with respect to employment (as defined in section 811) after such date:"
"(1) With respect to employment during the calendar years 1937, 1938, and 1939, the rate shall be 1 percentum. . . ."
"SEC. 804. In addition to other taxes, every employer shall pay an excise tax, with respect to having individuals in his employ, equal to the following percentages of the wages (as defined in section 811) paid by him after December 31, 1936, with respect to employment (as defined in section 811) after such date:"
§§ 811(a) and (b), and 907(b) and (c).
Provisions similar to those quoted are found in the Social Security Act Amendments of 1939. See §§ 202(a), 202(e), 203(d), 209(a), (b), (e), (g), (h), and 601, 604, and 606 at 53 Stat. 1362 et seq.
"It is hereby declared to be the policy of the United States to eliminate the causes of certain substantial obstructions to the free flow of commerce and to mitigate and eliminate these obstructions when they have occurred by encouraging the practice and procedure of collective bargaining and by protecting the exercise by workers of full freedom of association, self-organization, and designation of representatives of their own choosing, for the purpose of negotiating the terms and conditions of their employment or other mutual aid or protection."
See Helvering v. Davis, 301 U. S. 619, 301 U. S. 641; H.Rep. No.728, 76th Congress, 1st Sess., 3-4; S.Rep. No.734, 76th Cong., 1st Sess. 3-4.
Under the Social Security Act of 1935, see § 202(a) and § 210(c), supra, note 6 Under the 1939 Amendments, see §§ 202 and 209(e), (f) and (g), 53 Stat. 1363, et seq.
Virginia Electric Co. v. Labor Board, 319 U. S. 533, 319 U. S. 543.
Phelps Dodge Corp. v. Labor Board, 313 U. S. 177, 313 U. S. 196-198. See Third Annual Report, National Labor Relations Board, 202, n. 11; Eighth Annual Report 41; Ninth Annual Report 49. Nierotko's order was in this form, 14 N.L.R.B. 346, 410.
H.Rep. No.615, 74th Cong., 1st Sess., pp. 6, 21, 32, and S.Rep. No.628, 74th Cong., 1st Sess., pp. 7, 32.
For example, the Social Security Board's Regulations No. 3, in considering "wages," treats vacation allowances as wages. 26 CFR, 1940 Supp., 402.227(b).
Compare Armour & Co. v. Wantock, 323 U. S. 126, 323 U. S. 133.
Treasury Department Regulations No. 91, relating to the Employees' Tax and the Employer's Tax under Title VIII of the Social Security Act, 1939, Art. 16, classifies dismissal pay, vacation allowances, or sick pay as wages. Regulations 106 under the Federal Insurance Contributions Act, 1940, pp. 48, 51, continues to consider vacation allowances as wages. It differentiates voluntary dismissal pay.
I.R.B., 1940, 1-22-10271, S.S.T. 389, an Office Decision, holds that amounts paid employees during absence on jury service to make their pay equivalent to regular salary are wages.
Though formal action was taken by the Social Security Board on March 27, 1942, our attention has not been called to any regulation of any governmental agency excluding "back pay" from wages. The Treasury Department has authority to issue regulations for Social Security taxes. §§ 808 and 908, 49 Stat. 638, et seq.; Internal Revenue Code, § 1429, 53 Stat. 178. So has the Social Security Board, § 1102, 49 Stat. 647, 53 Stat. 1368. All authority for the promulgation of regulations limits the action to rules and regulations not inconsistent with the provisions of the various sections.
"SEC. 1621. Definitions. As used in this subchapter --"
"(a) Wages. The term 'wages' means all remuneration (other than fees paid to a public official) for services performed by an employee for his employer, including the cash value of all remuneration paid in any medium other than cash, except that such term shall not include remuneration paid --"
See 26 CFR, 1944 Supp., 405.101(d) and (e).
I.R.B., 1939, 14-9776, S.S.T. 359. No regulations covering "back pay" under the Social Security Act have been found. They are authorized by §§ 808 and 908, 49 Stat. 638, 643.
The states have largely followed the Bureau of Internal Revenue in their classification of "back pay." Some have disagreed. Unemployment Insurance Service, All State Treatise, C.C.H., Paragraph 1201. See In re Tonra, 258 App.Div. 835, 15 N.Y.S.2d 755; 283 N.Y. 676, 28 N.E.2d 402.
This is the view of the Eighth Circuit when a "back pay" claim was presented in bankruptcy. Labor Board v. Killoren, 122 F.2d 609, 614.
National Labor Relations Act, 49 Stat. 454, see § 10(e); Bituminous Coal Act of 1937, 50 Stat. 72, 85, § 4-A; Social Security Act Amendments of 1939, §§ 205(c)(3) and (g).
See Sanford Estate v. Commissioner, 308 U. S. 39, 308 U. S. 52; Skidmore v. Swift & Co., 323 U. S. 134, 323 U. S. 139-140.
American School of Magnetic Healing v. McAnnulty, 187 U. S. 94, 187 U. S. 110; International Ry. Co. v. Davidson, 257 U. S. 506, 257 U. S. 514; Iselin v. United States, 270 U. S. 245; Koshland v. Helvering, 298 U. S. 441; Federal Communications Comm'n v. Pottsville Broadcasting Co., 309 U. S. 134, 309 U. S. 144-145; United States v. Carolina Carriers Corp., 315 U. S. 475, 315 U. S. 489; Helvering v. Credit Alliance Co., 316 U. S. 107, 316 U. S. 113; Helvering v. Sabine Trans. Co., 318 U. S. 306, 318 U. S. 311-312; Addison v. Holly Hill Products, 322 U. S. 607, 322 U. S. 611, et seq.; cf. Steuart & Bro. v. Bowles, 322 U. S. 398, 322 U. S. 403.
See Nierotko v. Social Security Board, 149 F.2d 273, 274, r.c.
See note 7 supra. The same problem would arise under the Social Security Act, 49 Stat. 625, § 210(c).
"Certain items of income which are now not considered 'wages' under the definition in the act, should be included as wages, so that the base for benefits would represent the worker's actual remuneration from employment. These include tips, dismissal payments which the employer is not legally required to make but nevertheless does make, and payments made under orders of the National Labor Relations Board or a similar State board."
A pending bill, S. 1050, 79th Cong., 1st Sess., Part F, § 275, makes provision for the inclusion in wages under the Social Security Act of sums paid pursuant to the National Labor Relations Act.
"Back pay" is now treated distributively under the Internal Revenue Code. § 119, Revenue Act of 1943, 53 Stat. 39.
though he be inactive. E.g., Armour & Co. v. Wantock, 323 U. S. 126. This is, practically speaking, the ordinary situation of employment in a "standby" capacity. United States v. Local 807, 315 U. S. 521, 315 U. S. 535. The basis of a back-pay order under the National Labor Relations Act, 49 Stat. 449, 29 U.S.C. § 151, is precisely that. When the employer is liable for back pay, he is so liable because, under the circumstances, though he has illegally discharged the employee, he still absorbs his time. Phelps Dodge Corp. v. Labor Board, 313 U. S. 177. In short, an employer must pay wages although, in violation of law, he has subjected his employee to enforced idleness. Since such compensation is in fact paid as wages, it is a plain disregard of the law for the Social Security Board not to include such payments among the employees' wages. Neither the terms of the Social Security Act, 49 Stat. 620, 53 Stat. 1360, 42 U.S.C. § 301, et seq., nor the implications of policy, comparable to some aspects of the Railway Labor Act, 44 Stat. 577, 48 Stat. 926, 48 Stat. 1185, 49 Stat. 1921, 54 Stat. 785, 45 U.S.C. § 151, et seq., give the Board judicially unreviewable authority to exclude from wages what as a matter of law are wages. And so I concur in the decision of the Court.

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