Johnson v. Fuller & Johnson Manufacturing Co.

Doerfler, J. As correctly stated in the brief of defendant’s counsel, “The precise question presented by this appeal is whether the defendant is entitled to. credit for money paid as bonuses and premiums to its employees in making final settlement for back pay covering a period when the arbitration proceedings were pending.” — 76 — What might be deemed a reasonable rate for an employee depends upon numerous conditions. An hourly rate of forty cents may constitute in reality higher pay under certain conditions than an hourly rate of eighty cents under different conditions. The real value of such rate must be measured by the purchasing power of a dollar, and in order to determine the value of the dollar many economic conditions must be taken into consideration, and among such are the cost of necessaries such as household provisions, clothing, the cost of merchandise in general, housing Conditions, rentals for homes, cost of entertainment, etc. These items apparently received careful attention by the War Labor Board in its investigation, and it becomes readily apparent that the principal object of such investigation consisted in determining an' average minimum for every employee to enable him to lead a comfortable and tolerable existence. Many of the employees of the defendant were receiving less than forty cents per hour as a wage. Investigation had been made by the War Labor Board in nufnerous communities throughout the United States for the purpose of ascertaining and fixing a minimum wage. Such minimum wage depends largely upon the existing conditions of the community investigated,-and, inasmuch as such conditions necessarily are not uniform, some differences resulted on the subject, as was reflected by the varying awards in different localities. After what appears to have been a rather exhaustive investigation, the Labor Board in its award saw fit to establish in the defendant plant a minimum wage of forty cents* per hour, on the basis of an eight-hour day, which resulted in granting to all employees during the period involved, receiving less than forty cents per hour, an increase to such minimum, with an extra allowance for overtime and for Sundays and certain holidays. While the establishment of a minimum wage constituted the principal object and purpose of the Labor. Board, nevertheless the board also considered with respect to all em — 77 — ployees, whether receiving wages below or above the minimum, the establishment of an eight-hour day with extra pay for overtime and work performed on Sundays and certain holidays. That the Labor Board had in mind a recognition of the wages paid by the employer on the 1st of August, 1918, and during the arbitration period, is clearly made manifest in that portion of its award where it provides: “Time in excess of eight hours shall be paid for at one and one-half the hourly rate, based on what the employee was receiving on August first, nineteen eighteen, taking into account the minima herein prescribed and including any increases granted since that date.” So that it can confidently be said that, unless changed by agreement, there was an express recognition of contract relations existing during the period, which contract relations, however, were subject to change from time to time. It was not necessarily contemplated by the board that the wages should during the arbitration period continue at the same rate as existed on August 1, 1918. Prices of commodities during such period had a strong upward tendency, and were increased from time to time; rentals were soaring, and, in fact, the living, cost was highly on the increase. Evidently with this in view, the board had in mind that differences from time to time might arise, and therefore prescribed a method for adjustment of such differences. Union labor expressly received recognition, together with the right of collective bargaining, and it was therefore provided that grievances, which included wage grievances, were the proper subject of adjustment'between committees of the employees and the employer. A possible inability of the parties to agree with respect to alleged grievances also had the consideration of the board, so the award provided that such differences might be settled by an appeal to the Labor Board- Unfortunately, before the serious disputes between the employer and employees could be finally and definitely arbitrated subsequent to the award, the War Labor Board went out' of existence. However, it was — 78 — held by the court that while these various means of settlement and adjustment were prescribed by the award, nevertheless the award- itself clearly recognized existing wage agreements, and that while the right to strike or the right of the individual employee to quit his employment at all times existed, nevertheless, unless a modification of the wage agreement resulted, such agreement constituted and formed the basis for all adjustments under the provisions of the award. Such was the decision of the court, and the same meets our approval. When the award finally, on April 1, 1919, became effective, a dispute arose between the employer and the employees as to a correct interpretation of the same. The stand taken by the parties is tersely and accurately set forth in the lettergram sent by Huybrecht in behalf of the employees to the secretary of the board: “The employees contend that the basis of the computation should include not only the hourly rate paid in these factories on August 1, but, in addition thereto, any premium or bonus then paid; employers contend that under the award this basis consists of the fiat hourly rate paid August 1, exclusive of bonus or premiums.” In the interpretory telegram of the chief administrator of the board he replies: “Bonuses and premiums shall not be taken into account in determining basis of computation of back pay for overtime. Correct basis is hourly rate which employee received on August first, nineteen eighteen, if above minimum fixed by award, taking into account any increases granted since that time. If hourly rate-on August first, nineteen eighteen, is below minimum fixed by award, then such minimum is basis taking into account increases granted since that date when such increases raise hourly rate above the minimum.” The payment of a bonus by an employer in recent years has become quite common, and the meaning of the term “bonus” is quite generally understood and has been judi79 dally determined. Where an employer pays a bonus he has in view a benefit accruing to him, consisting of an inducement to continuous service and of loyalty on the part of the employee. The employee does not receive the bonus as a gift, as the literal meaning of the term would indicate, but, on the contrary, as a part of his wage. Such has been the holding of this court in Zwolanek v. Baker Mfg. Co. 150 Wis. 517, 137 N. W. 769; and the term has been similarly defined in other jurisdictions. Ciarla v. Solvay Process Co. 184 App. Div. 629, 172 N. Y. Supp. 426; Kerbaugh v. Gray, 212 Fed. 716; Scott v. J. F. Duthie & Co. 125 Wash. 470, 216 Pac. 853; Payne v. U. S. 269 Fed. 871. The trial court held that the bonus in the instant case was not paid for services rendered at the time and in the manner that the hourly wage is paid; that it constituted a reward for continuous service. The view thus expressed by the learned trial judge is not in accord with the popular view or with that laid down by the numerous authorities where the question was up for consideration. We are clearly of the opinion that the trial court erred in its view, and hold that the bonus payment was one made for services rendered' during the period of employment. The award having definitely fixed the basis upon which the back pay is to be determined, and having limited the computation to the flat hourly wage received by the employee, and the Labor Board in its interpretory telegram having expressly excluded the bonus from consideration, in determining the amount of back pay, we are forced to the inevitable conclusion that the defendant is entitled to credit upon the amount of back pay ascertained, to the extent of ■the actual amount paid by way of a bonus. This conclusion 'becomes all the more certain iii view of the recitals of the 'War Labor Board where it is said, “No piece work or bonus payments are made although the former bonus system was ■formerly operative." It appears that at the time of the making of the award the War Labor Board had lost sight — 80 — of the fact that the payment of bonuses prevailed during the entire period under consideration, and was of the impression' that some time previous to the award the bonus system had been abolished. What the board had in view was the recognition of a standard hourly rate of pay, and it clearly in its award- constituted as the basis of the back pay such hourly rate. The bonuses, therefore, having been paid in consideration of services actually rendered by the employee, the amount paid as such becomes a proper item of credit on the part of the employer. When we come to the premium system, however, we find that an entirely different situation exists. By the establishment of the premium system an employer held out to the employee an inducement for extraordinary effort. No obligation rested upon any employee under his contract to earn a premium. If he performed the duties of the ordinary skilful and diligent employee the premium did not accrue. On the other hand, if he exerted himself and performed extraordinary services which resulted in his finishing a certain job during a period which was less than the time consumed in the activities of the ordinary employee, he created something of value for the employer. In such extra effort he reduced the overhead expense of the employer. A fair and reasonable consideration of such extra effort demanded a full allotment to the employee and not a division of such effort between the employee and the employer. Whatever may be said, however, of the justice of the allowance, .the ■same was fixed by agreement between the parties, and they have now no legal reason to complain thereof. To permit the employer to offset as against back pay under the award the amount of premiums actually earned and.paid would in effect operate as a fraud upon the employee. The efforts- of the employee were expressly stimulated by the inducement under this system held out by the employer, and the employer cannot be permitted to claim that the amount paid is a proper — 81 — offset. The trial court held that the amount accruing under the award for back pay to the employee cannot be offset by the amount the employer paid under the premium system, and we fully agree with his conclusions in that respect. While under the agreement for, arbitration and the award the latter became retroactive as of date of August 1, 1918, it nevertheless appears quite clear that the parties did not contemplate.that the abolition of the premium system should be made retroactive. The very nature of the system and the "results achieved under such system would indicate to a certainty amounting to a demonstration that not only the parties but the board had in view the abolition of the premium system after. April 1, 1919. The object desired by the parties in the arbitration proceedings was to effect substantial justice, and not to' create a palpable injustice, and with this in view we have arrived at the conclusion that the logic of the situation impels the holding that the abolition of the premium system by the award was not retroactive but was made applicable to the future. The matter in controversy before the trial court did not involve a consideration of the justice or fairness of the award; neither are we concerned with such consideration on this appeal. The parties, under the existing circumstances, wisely resorted to an appeal to this governmental agency for an adjustment of their differences. The Labor Board apparently performed its duty to the best of its ability, and rendered its award after a rather extensive and elaborate investigation. The only question before us comprises the interpretation of the award. From all the facts and circumstances appearing in the record, and from a thorough and painstaking study not only of the award but of the telegram of Huybrecht and of the interpretory 'telegram of the chief administrator of the board, we have come to the conclusions herein set forth. By the Coiurt. — The judgment of the lower court is re — 82 — versed, and the cause is remanded with, directions to ascertain the amount due to the plaintiff as assignee of the claims of the three assignors in accordance with this opinion, and when the amount shall be so ascertained judgment shall be entered in the lower court accordingly.