Straus-Duparquet, Inc. v. Local U. No. 3 Int. Bro. of Elec. Wkrs.
| Decision Date | 19 December 1967 |
| Docket Number | Docket 31154.,No. 115,115 |
| Citation | 386 F.2d 649 |
| Parties | In the Matter of Straus-Duparquet, Inc., Debtor. STRAUS-DUPARQUET, INC., Appellant, v. LOCAL UNION NO. 3 INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, A F OF L, CIO, Appellee. |
| Court | U.S. Court of Appeals — Second Circuit |
James D. Glass and Salvatore A. Adorno, New York City, (Krause, Hirsch & Gross, New York City, on the brief), for appellant.
Norman Rothfeld, New York City, (Harold Stern, New York City, on the brief), for appellee.
Before WATERMAN, MOORE and HAYS, Circuit Judges.
This is an appeal from an order of the district court affirming an order of the referee in bankruptcy allowing certain claims of employees for vacation pay and severance pay as expenses of administration under Section 64a(1) of the Bankruptcy Act, 11 U.S.C. § 104(a) (1). As to the claims for severance pay, we affirm the order of the district court, and we modify that order as to the claims for vacation pay.
The facts are very simple and are not controverted.1 The claimants, who are represented in collective bargaining by the appellee union, were employed by the debtor for some time prior to March 15, 1965, when the debtor filed a petition for an arrangement under Chapter XI of the Bankruptcy Act. On April 16 and 23, 1965, during the Chapter XI proceeding, the debtor-in-possession discharged the claimants. The union filed a claim in their behalf for vacation pay and severance pay under the collective bargaining agreement between the union and the debtor.
The relevant provisions of the collective agreement read as follows:
There is no doubt that the employees have valid claims nor is there any dispute as to the correctness of the amounts for which the claims were filed. The only issue is whether the claims are entitled to priority under Section 64a(1) of the Bankruptcy Act, 11 U.S.C. § 104(a) (1), as expenses of administration of the bankrupt. The referee held that the claims were entitled to such priority and his order was affirmed by the district court.
We hold that the total of the claimed vacation pay is not properly classified as an expense of administration. Vacation pay is generally regarded as earned from day to day over the period of a year intervening between vacations.2 L. O. Koven & Brother, Inc. v. Local Union No. 5767, 381 F.2d 196 (3d Cir. 1967); In the Matter of Ad Service Engraving Co., 338 F.2d 41 (6th Cir. 1964); United States v. Munro-Van Helms Co., 243 F.2d 10 (5th Cir. 1957); Division of Labor Law Enforcement, etc. v. Sampsell, 172 F.2d 400 (9th Cir. 1949); Kavanas v. Mead, 171 F.2d 195, 6 A.L.R.2d 645 (4th Cir. 1948); In re Public Ledger, Inc., 161 F. 2d 762 (3d Cir. 1947). That this rule is not merely a fiction applied exclusively to bankruptcy proceedings is indicated by cases and arbitration awards in which employees whose employment has been terminated before their vacations were due have been held to be entitled to vacation pay "accrued" to the date of termination. See Leon v. Detroit Harvester Co., 363 Mich. 366, 109 N.W.2d 804 (1961); Textile Workers Union, etc v. Brookside Mills, Inc., 203 Tenn. 71, 309 S.W.2d 371 (1957); Livestock Feeds, Inc. v. Local Union No. 1634, 221 Miss. 492, 73 So.2d 128 (1954); Hampton Corporation and Boot and Shoe Workers Union, 39 L.A. 177 (Davis, 1962); Foster Refrigerator Corporation and International Union of Electrical, Radio and Machine Workers, 39 L.A. 241 (Altieri, 1962); Brookford Mills and Textile Workers Union, 28 L.A. 839 (Jaffee, 1957).
Under this theory claimants are entitled to priority for vacation pay as an expense of administration only to the extent of the proportionate part of total vacation pay earned during the period from the beginning of the bankruptcy administration to the date of termination of employment. Of course claimants are entitled to priority under Section 64a(2) for wages...
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