Bankruptcy – Priorities – Status of Employer Contributions to Union Welfare Fund

Under a collective bargaining agreement an employer was required to contribute eight dollars monthly to a union welfare fund for each of its employees who were union members. A trust agreement authorized the trustees of this fund to file claims of priority in any proceeding involving the employer’s insolvency. In a bankruptcy proceeding the trustees of the fund sought priority as wage claimants for the employer’s unpaid contributions to the fund which had accrued during the three months prior to bankruptcy. In the same proceeding the United States sought priority for unpaid taxes. The referee ruled that the unpaid employer contributions were not “wages” within section 64a(2) of the Bankruptcy Act, and relegated the trustee’s claim to the status of payments due unsecured creditors. The district court vacated the referee’s order and granted wage priority to the employer contributions. On appeal, held, affirmed. Since employer contributions to union welfare funds are in a realistic sense part of the agreed compensation for services rendered, and are also bargained for as an integral part of the wage package, they must be considered as “wages” under section 64a(2) of the Bankruptcy Act. Matter of Embassy Restaurant, (3d Cir. 1958) 254 F. (2d) 475, cert. granted 79 S. Ct. 42 (1958).