Social Security Board v. Nierotko

Background

An employee, Joseph Nierotko, was found wrongfully discharged by the National Labor Relations Board and was ordered reinstated with back pay for February 2, 1937, to September 25, 1939. The employer paid the back pay on July 18, 1941. Nierotko asked the Social Security Board to credit those sums on his Old Age and Survivor’s Insurance account. The Social Security Board refused by formal action on March 27, 1942. A district court sustained the Board, the circuit court of appeals reversed, and the Supreme Court granted review because the question affected administration of the Social Security Act.

Reasoning

The central question was whether back pay awarded under the Labor Act counts as “wages” under the Social Security Act. The Court examined the Act’s definitions and concluded that back pay is remuneration for an employer‑employee relationship and is meant to make the employee whole for lost earnings. The Court rejected the Social Security Board’s narrow view and agency rulings that treated back pay as not wages, holding that those administrative interpretations exceeded permissible limits. The Court also held that such back pay should be allocated to the calendar quarters when the wages would have been earned, despite practical accounting difficulties.

Real world impact

The ruling means back pay from labor‑board orders must be included as wages for Social Security credits and benefits and allocated to the quarters those wages would have covered. The Government’s briefs noted more than thirty thousand employees received back pay in closed cases, and aggregated payments exceeded $7.7 million in certain years. The Social Security Board itself had recommended including such payments and a bill to do so was pending, so administrative and legislative practices may adjust to the Court’s decision.

Dissents or concurrances

Justice Frankfurter concurred, stressing that an employer still “absorbs” an employee’s time during enforced idleness and that back‑pay compensation is, as a matter of law, wages that the Board cannot exclude without being subject to review.