Source: https://caselaw.findlaw.com/us-supreme-court/327/358.html
Timestamp: 2019-04-20 15:16:44+00:00

Document:
[327 U.S. 358, 359] Mr.Paul A. Sweeney, of Washington, D.C., for petitioner.
Mr. Ernest Goodman, of Detroit, Mich., for responde t.
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.
The respondent, Joseph Nierotko, was found by the National Labor Relations Board to have been wrongfully discharged for union activity by his employer, the Ford Motor Company, and was reinstated by that Board in his employment with directions for 'back pay' for the period February 2, 1937, to September 25, 1939.1 The 'back [327 U.S. 358, 360] 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. 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,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. 4 326 U.S. 700 , 66 S.Ct. 55; Judicial Code 240, 28 U.S.C.A. 347.
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 National Labor Relations Board v. Hearst Publications, 322 U.S. 111, 130 , 64 S.Ct. 851, 860, and Gray v. Powell, 314 U.S. 402, 411 , 62 S.Ct. 326, 332. 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. 21 The validity of regulations is specifically res rved for judicial determination by the Social Security Act Amendments of 1939, sec. 205(g).
The Social Security Board and the Treasury were compelled to decide, administratively, whether or not to treat 'back pay' as wages and their expert judgment is entitled, as we have said, to great weight. 22 The very fact [327 U.S. 358, 369] that judicial review has been accorded, however, makes evident that such decisions are only conclusive as to properly supported findings of fact. Both N.L.R.B. v. Hearst Publications, page 131, of 322 U.S., page 860 of 64 S.Ct., and Gray v. Powell, page 411 of 314 U.S., page 332 of 62 S.Ct., 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. 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.
We conclude, however, that the Board's interpretation of this statute to exclude back pay goes beyond the boundaries of administrative routine and the statutory limits. This is a ruling which excludes from the ambit [327 U.S. 358, 370] of the Social Security Act payments which we think were included by Congress. It is beyond the permissible limits of administrative interpretation.
[327 U.S. 358, 371] though he be inactive. E.g., Armour & Co. v. Wantock, 323 U.S. 126 , 65 S. Ct. 165. This is, practically speaking, the ordinary situation of employment in a 'stand-by' capacity. United States v. Local 807, 315 U.S. 521, 535 , 62 S.Ct. 642, 647. The basis of a back-pay order under the National Labor Relations Act, 49 Stat. 449, 29 U.S.C. 151, 29 U.S.C.A. 151 et seq., 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. National Labor Relations Board, 313 U.S. 177 , 61 S.Ct. 845, 133 A.L.R. 1217. 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., 42 U.S.C.A. 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., 45 U.S.C.A. 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.
[ Footnote 1 ] National Labor Relations Act, Sec. 10(c), 49 Stat. 454, 29 U.S.C.A . 160(c).
[ Footnote 2 ] Social Security Act, Sec. 205(c)(3), 53 Stat. 1369, 42 U.S.C.A. 405(c) (3).
[ Footnote 3 ] Sec. 205(g).
[ Footnote 4 ] 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, 187 , 61 S.Ct. 845, 849, 133 A.L.R. 1217. Second. The aggregate in money exceeded $7,700,000 in the fiscal years 1939 to 1944 as shown by the reports of the N.L.R.B. for those years.
'(2) He had at least forty quarters of coverage.
'(1) With respect to employment during the calendar years 1937, 1938, and 1939, the rate shall be 1 per centum. ...' 42 U.S.C.A. 1001(1).
'(1) With respect to employment during the calendar years 1937, 1938, and 1939, the rate shall be 1 per centum. ...' 42 U.S.C.A. 1004(1).
[ Footnote 9 ] Sections 811(a) and (b), and 907(b) and (c), 42 U.S.C.A. 1011(a, b) and 1107(b, c).
[ Footnote 10 ] Provisions similar to those quoted are found in the Social Security Act Amendments of 1939. See sections 202(a), 202(e), 203(d), 209( a), (b), (e), (g), (h), and 601, 604, and 606 at 53 Stat. 1362 et seq., 42 U.S.C.A. 402(a, e), 403(d), 409(a, b, e, g, h), 26 U.S.C.A. Int.Rev. Code, 1400, 1410, 1426.
[ Footnote 11 ] 49 Stat. 449, 29 U.S.C.A. 151 et seq.
[ Footnote 12 ] See Helvering v. Davis, 301 U.S. 619, 641 , 57 S.Ct. 904, 908, 109 A.L.R. 1319; H.Rep.No.728, 76th Congress, 1st Sess., 3-4; S. Rep.No.734, 76th Cong., 1st Sess. 3-4.
[ Footnote 13 ] Under the Social Security Act of 1935, see sec. 202(a) and sec. 210(c), supra, note 6. Under the 1939 Amendments, see sec. 202 and 209(e), ( f) and (g), 53 Stat. 1363, et seq.
[ Footnote 14 ] Virginia Electric Co. v. Labor Board, 319 U.S. 533, 543 , 63 S.Ct. 1214, 1220.
[ Footnote 15 ] Phelps Dodge Corp. v. Labor Board, 313 U.S. 177, 196 , 198 S., 61 S.Ct. 845, 853, 854, 133 A.L.R. 1217. 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.
[ Footnote 16 ] H.Rep.No.615, 74th Cong., 1st Sess., pp. 6, 21, 32, and S.Rep.No. 628, 74th Cong., 1st Sess., pp. 7, 32.
[ Footnote 17 ] 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, 133 , 65 S.Ct. 165, 168.
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.
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. Secs. 808 and 908, 49 Stat. 638, et seq., 42 U.S.C.A. 1008, 1108; Internal Revenue Code, Sec. 1429, 53 Stat. 178, 26 U.S.C.A. Int.Rev.Code 1426. So has the Social Security Board, sec. 1102, 49 Stat. 647, 42 U.S.C. A. 1302, and sec. 205(a), 53 Stat. 1368, 42 U.S.C.A. 405(a). All authority for the promulgation of regulations limits the action to rules and regulations not inconsistent with the provisions of the various sections.
'(a) Wages. The term 'wages' means all remuneration (other than fees paid to a public official) for services performed by n 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).
[ Footnote 18 ] 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.
[ Footnote 19 ] 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; Id., 283 N.Y. 676, 28 N.E.2d 402.
[ Footnote 20 ] This is the view of the Eighth Circuit when a 'back pay' claim was presented in bankruptcy. National Labor Relations Board v. Killoren, 122 F. 2d 609, 614.
[ Footnote 21 ] National Labor Relations Act, 49 Stat. 454, see 10(e), 29 U.S.C.A . 160(e); Bituminous Coal Act of 1937, 50 Stat. 72, 85, sec. 4-A, 15 U.S. C.A. 834; Social Security Act Amendments of 1939, secs. 205(c)(3) and (g).
[ Footnote 22 ] See Sanford Estate v. Com'r, 308 U.S. 39, 52 , 60 S.Ct. 51, 59; Skidmore v. Swift & Co., 323 U.S. 134, 139 , 140 S., 65 S.Ct. 161, 164.
[ Footnote 23 ] American School of Magnetic Healing v. McAnnulty, 187 U.S. 94, 110 , 23 S.Ct. 33, 39; International Ry. Co. v. Davidson, 257 U.S. 506, 514 , 42 S.Ct. 179, 182; Iselin v. United States, 270 U.S. 245 , 46 S.Ct. 248; Koshland v. Helvering, 298 U.S. 441 , 56 S.Ct. 767, 105 A.L.R. 756; Federal Communications Comm. v. Pottsville Broadcasting Co., 309 U.S. 134, 144 , 145 S., 60 S.Ct. 437, 442; United States v. Carolina Carriers Corp., 315 U.S. 475, 489 , 62 S.Ct. 722, 729; Helvering v. Credit Alliance Co., 316 U.S. 107, 113 , 62 S.Ct. 989, 992; Helvering v. Sabine Trans. Co., 318 U.S. 306, 311 , 312 S., 63 S.Ct. 569, 572; Addison v. Holly Hill Products, 322 U.S. 607 , 611, et seq., 64 S.Ct. 1215, 1218, 153 A.L.R. 1007; cf. Steuart & Bro. v. Bowles, 322 U.S. 398, 403 , 61 S.Ct. 1097, 1099.
[ Footnote 24 ] See Nierotko v. Social Security Board, 6 Cir., 149 F.2d 273, loc. cit. 274.
[ Footnote 25 ] See note 7, supra. The same problem would arise under the Social Security Act, 49 Stat. 625, sec. 210(c).
A pending bill, S. 1050, 79th Cong., 1st Sess., Part F, sec. 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. Sec. 119, Revenue Act of 1943, 53 Stat. 39, 26 U.S.C.A. Int.Rev.Acts.

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