Joint Industry Board of Electrical Industry v. United States

Background

The trustees of an employees’ annuity plan, set up by a union and electrical contractors, sought priority payment for $5,114 in unpaid employer contributions after A & S Electric Corp. went bankrupt. The contributions were $4 per day and were credited to individual accounts but payable only on death, retirement at age 60, disability, military service, or leaving the plan. The United States objected as a competing creditor.

Reasoning

The Court addressed whether those deferred payments count as “wages” eligible for the Bankruptcy Act’s limited $600, three-month priority. Relying on an earlier case about welfare funds, the majority concluded the annuity contributions were paid to trustees and were not payable to employees upon bankruptcy. Because the funds were not meant to provide immediate support and employees could not assign or use the credits, the Court denied wage priority and affirmed the lower courts.

Real world impact

The ruling means employees covered by similar collectively bargained deferred-benefit plans cannot claim the special wage priority for unpaid employer contributions; trustees must wait behind priority wage claimants and some creditors. The Court suggested that Congress, not the courts, should change this result if a different rule is desired, so workers or unions seeking higher priority rely on legislative action.

Dissents or concurrances

Justice Fortas (joined by the Chief Justice and Justice Brennan) dissented, arguing the contributions were part of the wage bargain, individually measured by days worked, and ultimately payable to employees or heirs. He said the priority is meant to improve recovery chances for meritorious wage claims and that deferred, credited payments should count as wages entitled to priority.