Universal Maritime Service Corp. v. Wright, No. 97-2129

CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)
Writing for the CourtBefore LUTTIG and MICHAEL; MICHAEL
Citation155 F.3d 311
Docket NumberNo. 97-2129
Decision Date19 August 1998
PartiesUNIVERSAL MARITIME SERVICE CORPORATION, Petitioner, v. Bernard N. WRIGHT; Director, Office of Workers' Compensation Programs, United States Department of Labor, Respondents.

Page 311

155 F.3d 311
1999 A.M.C. 37
Bernard N. WRIGHT; Director, Office of Workers'
Compensation Programs, United States Department of
Labor, Respondents.
No. 97-2129.
United States Court of Appeals,
Fourth Circuit.
Argued Jan. 28, 1998.
Decided Aug. 19, 1998.

Page 313

ARGUED: Lawrence Philip Postol, Seyfarth, Shaw, Fairweather & Geraldson, Washington, DC, for Petitioner. Malcolm McLaurin Crosland, Jr., The Steinberg Law Firm, L.L.P., Mount Pleasant, South Carolina, for Respondents.

Before LUTTIG and MICHAEL, Circuit Judges, and GOODWIN, United States District Judge for the Southern District of West Virginia, sitting by designation.

Affirmed in part, vacated in part, and remanded by published opinion. Judge MICHAEL wrote the opinion, in which Judge LUTTIG and Judge GOODWIN joined.

Page 314


MICHAEL, Circuit Judge:

This workers' compensation case involves a dispute over the meaning of "wages" as defined in § 2(13) of the Longshore and Harbor Workers' Compensation Act, 33 U.S.C. §§ 901-950 (LHWCA or Act). Universal Maritime Service Corporation (Universal Maritime) petitions this court to review a decision of the Benefits Review Board in which the Board interpreted "wages" to include vacation, holiday, and container royalty payments received by employees under a collective bargaining agreement. Universal Maritime contends that these payments are "fringe benefits" that the Act specifically excludes from the definition of "wages." Alternatively, the company argues that if these payments are wages, then Bernard Wright's receipt of these payments while he was disabled resulted in a (post-injury) wageearning capacity that reduces his compensation under the Act. Because we conclude that (1) these payments are "wages" if they are earned through actual work and (2) Wright's receipt of this pay did not reflect his wage-earning capacity after his injury, we affirm the Board in part. However, we vacate in part and remand because the record is unclear as to whether vacation, holiday, and container royalty payments should be included in Wright's (pre-injury) "average weekly wages."



On April 17, 1995, Bernard Wright seriously injured a finger in the course of his employment with Universal Maritime at the Port of Charleston, South Carolina. Because his injury rendered him temporarily and totally disabled from April 17, 1995, through December 31, 1995, Universal Maritime paid him temporary, total disability compensation. These payments, however, were based on an average weekly wage that did not include Wright's historical earnings from vacation, holiday, and container royalty payments. 1 Instead, they were calculated from an average weekly wage of $591.34 that compensated Wright only for the loss of his hourly wage rate.

Wright received the vacation, holiday, and container royalty payments pursuant to a collective bargaining agreement between the South Carolina Stevedores Association (SCSA) and his local chapter of the International Longshoremen's Association (ILA). This agreement set the wage rates for covered employees and required that the employers make monetary contributions into employee benefit funds that provide for (1) vacation and holiday payments, (2) container royalties, (3) pension and welfare benefits, and (4) Guaranteed Annual Income payments. To explain these contract provisions in their proper context, we begin with a discussion of pertinent aspects of the shipping industry.


In the shipping industry a stevedore is an entity that loads and unloads cargo from merchant vessels at port. 2 Stevedores usually are independent companies that contract

Page 315

with shipowners to handle the cargo, although shipowners occasionally act as their own stevedores. Longshoremen, in turn, are persons hired by stevedoring concerns to perform the actual loading and unloading of goods. Most longshoremen are not permanent employees of any one stevedore or maritime carrier. Instead, their employment is casual in nature and is usually limited to the task of loading or unloading a specific ship that has arrived at port. Once the ship's cargo has been loaded or unloaded, the employment ends. Consequently, the work schedule of a longshoreman can be "highly variable and unpredictable, from day to day, week to week, and season to season" since "[t]he amount of work available depends on the number of ships in port and their length of stay." Aaron, 334 U.S. at 455, 68 S.Ct. 1186.

Longshoremen typically perform their duties in groups of twelve to twenty workers known as longshoring "gangs." The gang operates as a unit with longshoremen distributed between the ship and the pier to allow for the uninterrupted transfer of cargo. Moreover, membership in gangs often is fixed, which allows "permanent" gangs to become more efficient from teamwork developed over time. 3

Because longshoremen do not have permanent employers, they traditionally have received job assignments though a union-organized "hiring hall" system in which workers are referred to stevedores as work becomes available. Under this system, longshoremen usually do not receive piecemeal paychecks from each individual employer. Instead, their wages are often (if not always) paid through an entity that centralizes payroll accounts, collects wages from employers, and issues a single, aggregate check to each employee.

This fluid employment relationship between longshoremen and their employers also affects the process of labor negotiations. 4 Union contracts in the industry are negotiated between the union and multiemployer bargaining units which represent groups of stevedores, maritime carriers, and marine terminal operators. Historically, contract negotiation has involved a two-step process in which the ILA (representing longshoremen on the Atlantic and Gulf coasts) first negotiates a master contract with a committee of regional stevedore and shipping associations. Although the employers that are parties to the master contract do not represent all stevedoring companies, carriers, and terminals on the Atlantic and Gulf coasts, the agreement nevertheless forms the basis for contract negotiations at each port between the local association of employers and the local chapter of the ILA.

Since the late 1950s the most contentious disputes in these union-employer negotiations on the Atlantic and Gulf coasts have centered on the technological innovation of containerized cargo and its impact on the longshoring industry. 5 Prior to containerization,

[c]argo arriving at the pier by truck was "transferred piece by piece from the truck's tailgate to the ship by longshoremen.... The longshoremen checked the cargo, sorted it, placed it on pallets and moved it by forklift to the side of the ship, and lifted it by means of a sling or hook

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into the ship's hold. The process was reversed for cargo taken off incoming ships."

ILA II, 473 U.S. at 64, 105 S.Ct. 3045. Containerization, however, "profoundly transformed this traditional pattern." Id.

Containers are large metal boxes [ranging from 20 to 40 feet in length that are] designed to fit without adjustment into the holds of special ships and onto the chassis of special trucks and railroad cars. "Because cargo does not have to be handled and repacked as it moves from the warehouse by truck to the dock, into the vessel, then from the vessel to the dock and by truck or rail to its destination, the costs of handling are greatly reduced.... [Moreover], a container ship can be loaded or unloaded in a fraction of the time required for a conventional ship."

Id. at 64 n. 1, 105 S.Ct. 3045. Because containers can be stuffed (packed) and stripped (unpacked) at locations away from the pier, cargo transported in containers can travel without intermediate handling. In addition, containers eliminate the need to load and unload cargo piece by piece. As a result, containerization has "drastically reduced ... [t]he amount of work available for longshoremen." ILA I, 447 U.S. at 495, 100 S.Ct. 2305. It is easy to see why the 1957 arrival in the Port of New York of the first oceangoing container ship set the stage for bitter labor disputes between the ILA and maritime employers.

In 1959, when containerization was still in its infancy, the ILA agreed to a master contract that recognized the right of stevedoring concerns to handle any type of container in exchange for royalty payments that employers would make for all containers stuffed or stripped by non-ILA labor away from the pier. This was but the first container royalty negotiated by the union. The second royalty was negotiated in the 1971 master contract following a strike along the entire Atlantic and Gulf coasts that was triggered by issues relating to containerization. The royalties, which apply only to containers that pass intact over the piers, were a part of the larger collective bargaining agreement that included the Rules on Containers. The Rules, which were upheld in ILA II as a lawful work preservation agreement, essentially provide that only ILA longshoremen (and the employees of the cargo's beneficial owner) can stuff or strip containers within 50 miles of the port. Together, the Rules and the container royalties have the effect of partially preserving the traditional role that longshoremen have played in the loading and unloading of oceangoing merchant vessels. In 1977 the ILA's master contract added a third container royalty and reaffirmed the Rules on Containers.


The local collective bargaining agreement between the ILA and SCSA in this case is a product of this history. It specifies that a stevedore must give preference in employment to those permanent gangs that regularly work for it and that a union-run hiring hall must provide a system for employers to call in orders for gangs. Of course, the contract also sets hourly wage rates for the various types of longshoring work.

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