Metropolitan Life Insurance v. Durkin

Desmond, J. Subdivision 7 of section 213 of the Insurance Law prohibits the payment to life insurance agents of “ any compensation greater than that which has been determined by agreement made in advance of the payment of the premium ”. [379] Subdivision 5 of section 213-a of the same law prohibits the payment to agents selling industrial life insurance of “ any compensation greater than that which has been determined by agreement made in advance of the rendering of such service.” Plaintiff, a domestic mutual life insurance company, brought this action against two labor unions and certain individual defendants, praying for a judgment which would declare that those two statutes bar the payment, by plaintiff to about 8,000 of its insurance agents, of additional compensation at the rate of $2.85 per week, for a period during which proceedings for a wage increase were pending before the National War Labor Board. In other words, plaintiff employer asserts, and seeks an adjudication, that the statutes which forbid added remuneration for past services operate to make unlawful so much of a wage arbitration award as orders that a determined wage increase be paid as of the date of the submission to arbitration. Many other interesting questions have been briefed but plaintiff frankly tells us that, if it be wrong in its interpretation of those statutes, then the award was wholly valid and the judgment below, in favor of defendants, is correct. We agree with the trial court and with the Appellate Division (and with the National War Labor Board, and with the United States District Judge who passed on the same question in Paris v. Metropolitan Life Ins. Co., 68 F. Supp. 64, revd. without passing on this issue, 167 F. 2d 834) that the above-cited statutes have no bearing at all on, and were never intended to make unlawful, the ordinary and traditional consequence of collective bargaining, that is, the ordering of a wage increase dating back to the beginning of the proceedings. The material facts are these: April, 1938 — defendant, Industrial Life Insurance Company Agents Union, Local 30, was certified by the New York State Labor Relations Board as collective bargaining agent for plaintiff’s employees in New York City and nearby communities. June, 1942 — a dispute arose between plaintiff and its New York City employees involving, among other things, the compensation of sellers of industrial insurance; negotiations for settlement were fruitless. October, 1942 — the United States Secretary of Labor, at the request of defendant Industrial Life Insurance Company Agents [380] Union, Local 30, certified the dispute to the National War Labor Board. May, 1943 — after the board had decided, over plaintiff’s objection, that the board had jurisdiction, and after hearings before the board, the parties made a voluntary agreement as to all disputed matters except compensation, which branch of the dispute, the voluntary agreement recited, was “ being submitted to the War Labor Board (Similar voluntary agreements each containing the same recital, were, later on, made by plaintiff with the other union here as a defendant [UOPWA] which latter union represented plaintiff’s agents in six States other than New York; the wage question, as to the members of UOPWA, was, by stipulation, consolidated with the original proceeding before the board.) September, 1943 — the Regional War Labor Board made its order that the agents involved in the original (New York City) dispute should have their compensation increased by $2.85 per week, retroactive to October 24, 1942, the date on which, as we have noted above, that dispute had been certified to the board. July, 1944 — after plaintiff had appealed from the Regional Board’s order to the National War Labor Board and hearings had been had there, plaintiff and the unions made a stipulation in which plaintiff agreed that it would 1 ‘ not question the power of the Board to make the order, nor that it is a final order of the Board, nor will it question the determination of the amount of the compensation involved, but it will question only its ability to make retroactive payment, in view of the provisions of Sections 213 and 213-a of the New York State Insurance Law.” In other words, plaintiff abandoned all its previously stated objections, except that plaintiff continued to insist, as it had all along insisted, that the New York statutes forbade any retroactivity of award. This stipulation put completely out of the picture any question as to the jurisdiction of the board to fix a fair wage, and so nothing more will be said herein on that jurisdictional question. September, 1944 — the National War Labor Board made its order affirming the Regional Board’s determination including retroactivity, as to each group of employees, to the date of certification of the dispute to the board. Pursuant to an agree [381] ment previously made between the company and the unions, the part of the award contested as unlawfully retroactive (about $800,000) was deposited in escrow to await court action as to the effect thereon of the New York statutes. We find nothing in either the language or the history of the two Insurance Law sections, to support plaintiff’s attempt to apply those laws here. Nothing could be plainer than the reasons for, and purposes of, those enactments, and those reasons and purposes have no relation whatever to the facts of this case. Section 213 (formerly § 97) was put on the books in 1909 (L. 1909, ch. 33; renum. in 1939) as one of the fruits of the Armstrong Committee’s extensive inquiry into the evils and abuses of the insurance business. The necessity for a law against bonuses or gratuities for past service was explained by the committee itself (see Report of the Legislative Insurance Investigating Committee, 1905 [published by J. B. Lyon Co.], Vol. VII, pp. 305-306). Its plain purpose was to put an end to excessive and ex post facto rewards, and it had no objective in any way relevant to the situation here. Section 213-a was enacted, in similar language, in 1940 (L. 1940, ch. 574), to express the same prohibition as to sellers of industrial life insurance. Such statutes, directed against known and stated evils, are not to be stretched to cover situations having no real or reasonable relation to those evils (see McKinney’s Cons. Laws of N. Y., Book 1, Statutes [1942 ed.], §§ 95, 141, 146, and cases cited; also Kauffman & Sons Saddlery Co. v. Miller, 298 N. Y. 38, 44, 45, and Matter of Breen v. New York Fire Dept. Pension Fund, 299 N. Y. 8, 19). This record exhibits no evil or abuse at all — rather, a normal, orderly application, to an existing wage dispute of collective bargaining and arbitration, in accord with modern custom and the settled public policy of this State. If those bargaining or arbitratory processes had begun and ended on a single day, no “ retroactivity ” of increase would have been needed, but the company would have paid just the same number of dollars it is now called on to pay. For this pay raise was retroactive in the sense only that it was ordered as of the day the machinery for fixing it began to function. To say that these statutes, which long ago did their job of outlawing bonuses and gratuities, can now be used to annul [382] so innocent and conventional a wage-fixing method, is to write new statutory law that the Legislature never heard of. Equally untenable is plaintiff’s contention that this retroactive pay raise comes within the language of the statutory ban. Plaintiff argues that there were in effect binding agreements fixing the agents’ compensation during the period of the War Labor Board hearings. The record is to the contrary. The individual agency agreements existing before the disputes arose, and to which plaintiff points, were, by express covenants therein, terminable by the company on two weeks’ notice, or by any agent on one week’s notice. Notices, by the unions to the company, that present wages were unsatisfactory, and later negotiations, agreements and arbitrations, put an end to those agreements, under their own terms (for another reason for the same conclusion, see Martin v. Campanaro, 156 F. 2d 127, 129). Only brief mention need be made of the argument that this result frustrates the intent of another statute, section 216 of the Insurance Law, likewise recommended by the Armstrong Committee, which section requires companies like plaintiff, annually to distribute their surplus earnings to their policyholders. That provision was complete in itself, and, as the committee report shows (Vol. VII, pp. 319-327) had nothing to do with the prohibitions against gratuities to agents. The award here was for proper wages actually earned, and no Legislature would, in any form or for any purpose, forbid their payment. Our attention is called to a number of rulings, by the successive Superintendents of Insurance, applying section 213 to various situations. Only one is pertinent: the ex parte ruling by the present Superintendent that the statutes make unlawful the payments here contested. Of course, one such ruling could hardly constitute “ long-standing administrative practice ”. It was simply an opinion by a competent, qualified State officer, entitled to respect but not binding on the courts. The judgment should be affirmed, with costs. Footnotes [1] Stipulation Between United Office and Professional Workers of America, C.I.O. and Metropolitan Life Insurance Company With Respect to Disputes Pending Before National War Labor Boafd. 1. The parties agree to enter into written collective bargaining agreements with respect to compensation covering all of the agents involved in the various disputes, — the agreements to be as of the date of the Board’s order, and to provide for compensation in accordance with the provisions of the order. 2. If the directive order of the Board awards increased compensation, and if it awards such increased compensation retroactively, that is, prior to the effective date of the agreement provided for in paragraph 1, then Metropolitan agrees to deposit under the terms of the attached Escrow Agreement with Leon W. Berney of the United Office and Professional Workers of America, Cecil J. North of the Metropolitan Life Insurance Company and E. J. Nicholas of the Manufacturers Trust Company, as Eserowees, the amount of such retroactive increased compensation for all of the agents involved in the disputes for the respective periods for which they were involved, that is, from the respective dates as of which retroactive increased compensation was awarded in the several disputes, to the effective date of the agreement provided for in paragraph 1, to be held by the Eserowees pending the final determination of an action to be instituted in a court of competent jurisdiction of the question whether the provisions of Sections 213 and 213-a of the New York State Insurance Law constitute a bar to the payment by the Metropolitan to its agents of retroactive increased compensation. 3. Metropolitan will not question the power of the Board to make the order, nor that it is a final order of the Board, nor will it question the determination of the amount of the compensation involved, but it will question only its ability to make retroactive payment, in view of the provisions of sections 213 and 213-a of the New York State Insurance Law. 4. The Union agrees in consideration of Metropolitan’s agreements contained in paragraphs 2 and 3, and the attached Escrow Agreement, not to apply to any governmental authority for the enforcement of the Board’s order. 5. The Union shall have the initiative to choose the form of action or proceeding and the forum to test the legal question involved; but if the Union shall fail to bring such action or cause such action to be brought within ninety days after the date of the Board’s order, the Metropolitan may institute such suit or proceeding. 6. Both parties will abide the final determination by the Courts with respect to the issue submitted to the Court.