Court Opinion

ID: 9445546
Source: CourtListenerOpinion
Date Created: 2023-08-03 21:32:37.4643+00
Date Added: 2024-06-11T17:30:19.002932
License: Public Domain

RIVES,
Circuit Judge (dissenting).
Agreeing with the views expressed by the learned district judge,11 respectfully dissent. Wages can be “earned” only by virtue of a contract, express or implied, between the employer and employee. Wages may be, and ordinarily are, earned before they become “due,” that is before the employee has a right to demand payment, but they are not earned before they accrue, that is before the obligation to pay under the contract of employment attaches to the employer.
Under the usual contract wages are “earned” when the service is rendered, but whether that be true or not depends upon the terms of the particular contract. For example, under the statute, § 64, sub. a(2) of the Bankruptcy Act, 11 U.S.C.A. § 104, sub. a(2), “wages” include commissions due salesmen employed on a commission basis. Though most, or even all, of his services may have been performed much earlier, no one could reasonably contend that a salesman had earned his commission until he actually effected a sale pursuant to the terms of his contract of employment. Or an employer might agree to pay wages to his employees at piece rates for each article completed according to a certain standard, and the wage for any article might not be earned until it had been so completed. Examples could be multiplied indefinitely to accord with the infinite variety of employment contracts.
With deference, I suggest in lieu of observations of the majority, “ * * * first, that the right to priority of payment results from the Act and cannot be enlarged by contract; and second, that it is wages which are earned and the right to receive them which accrues”, the following ; “ * * * first, that the right to priority of payment depends upon both the Act and the contract of employment; and second, that wages are not earned until the right to receive them accrues.”
This statute was intended to give a limited priority of payment “for the benefit of those who are dependent upon their wages,” 2 who “could not be expected to know anything of the credit of their employer, but must accept a job as *15it comes,”3 “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”.4 With deference, I submit that the purpose of the priority suggested by the majority5 is wholly foreign to the philosophy of the Act. Is it more reasonable for us to conclude that Congress was thinking coldly of things, “assets,” and increase thereof, or warmly of the men and women who earn their living by working for wages? Indeed, the majority answers its own suggestion when in the concluding paragraph of the opinion it recognizes that an employee may be entitled to priority to the extent of one-fourth of his vacation pay, even though in the last quarter of the vacation year he may have performed little or no work.
Under the contract of employment here involved, vacation pay is limited to those “in the employ of the Company on July l,” 6 “the employee’s right to a vacation shall accrue as of July 1.” Those provisions make it clear, I think, that no employee “earns” any part of his vacation pay until July 1.
The Government claims that a contrary construction is called for by Section H of the contract:
“(H) Employees who quit or who are discharged for just cause prior to July 1st shall forfeit any vacation rights accrued during the vacation year ending July 1st.”
That provision must be construed in connection with all of the other parts of the contract including the last sentence of Section G:
“If, after such date (July 1), he should leave the employ of the Company for any reason, and if fully qualified for his vacation payment, he shall be paid his vacation pay as of the time of his leaving the Company’s employ.”
In other words, those employees who leave the employ of the Company for any reason after July .1 receive their vacation pay, while those who quit or are discharged for just cause prior to July 1 do not receive vacation pay. Construing Section H in the light of the contract as a whole, it seems to me not contradictory of the other clearly expressed provisions, but to mean simply that the vacation rights of employees who quit or are discharged for just cause and then rehired should be calculated as if their employment began on the dates on which they were rehired.
The majority, I think, in its decision that one-fourth of the annual vacation pay is entitled to priority, goes beyond the logical effect of its opinion. The vacation year ran from July 1 through June 30. The Bankruptcy proceeding was commenced on July 30. Only about two of the three months before the date of the commencement of the proceeding preceded also the end of the vacation year. The third and last month was the first month of the next vacation year expiring June 30, 1954, as to which no right to vacation pay ever accrued. To be consistent, therefore, it seems to me that the majority should limit the priority nearer to one-sixth than to one-fourth of the annual vacation pay.
The effect of the majority opinion seems to me to be that in cases where there is a definite accrual date for an*16nual vacation pay and where the bankruptcy proceeding is commenced in any part of the year not within three months after such accrual date, vacation pay as wages earned would receive no priority whatever under the statute; no more than one-fourth of such pay could ever under any circumstances be given priority, the proportion being determined by a fraction, the numerator of which would be the part of the year before the commencement of the bankruptcy, not exceeding three months, which also preceded the end of the vacation year and the denominator being the entire year. That result, to my way of thinking, does not conform with either the letter or the spirit of the statute. I, therefore, respectfully dissent.
Rehearing denied. RIVES, Circuit Judge, dissenting.

. “More narrowly, the court is called upon to construe the word ‘earned’ in the above quoted provision of the statute against the backdrop of the controlling contract. Turning to the common definition of the word ‘earned’ connoting ‘to deserve and receive as compensation or wages,’ it becomes apparent that the entire vacation pay as governed by the contract provisions was earned at the conclusion of the specified period rather than from day to day, week to week, or month to month, as an increment to wages. Such was the precise holding of this court in Textile Workers Union of America, CIO, vs. Saratoga Victory Mills, Civil Action No. 700, Middle Division. In that case the undersigned considered and rejected the reasoning in Division of Labor Law Enforcement, State of California v. Sampsell, 9 Cir., 1949, 172 F.2d 400, and Havanas v. Mead, 4 Cir., 1948, 171 F.2d 195. Persuasive authority of such cases is substantially weakened by the following note in 3 Collier on Bankruptcy § 64.203, 1955 Supplement, pages 183, 184:
“<* * * Such wages [vacation pay] may accrue during the period, even though part of the services were performed before that time; priority is not limited solely to wage claims based upon services rendered during the three months specified. * * * Insofar as Havanas v. Mead, supra, and Division of Labor Law Enforcement v. Sampsell, supra, hold to the contrary, they are believed to be incorrect.’ ”

. Blessing v. Blanchard, 9 Cir., 223 F. 35, 37.

. Matter of Lawsam Electric Co., Inc., D.C.N.Y., 300 F. 736, por Judge Learned Hand.

. Matter of Estey, D.C.N.Y., 6 F.Supp. 570.

. “It has been said, however, that the priority was intended to provide that those who created assets immediately prior to the filing of the petition and had not received payment for such creations should be set apart in a privileged class. In re Raiken, D.C.N.J.1940, 33 F.Supp. 88. This purpose would not be served by allowing priority for the full amount of vacation pay.”

. There was no similar provision in Division of Labor Law Enforcement, State of Cal. v. Sampsell, 9 Cir., 172 F.2d 400, but simply a requirement of one year or more of continuous service to qualify for vacation pay.