Carlo Affetto v. Trw, Inc., an Ohio Corporation, and John Hancock Mutual Life Insurance Company, a Massachusetts Corporation

Citations: 691 F.2d 357; 25 Wage & Hour Cas. (BNA) 1004; 1982 U.S. App. LEXIS 24652Docket: 79-1377

Court: Court of Appeals for the Seventh Circuit; October 21, 1982; Federal Appellate Court

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The case involves Carlo Affetto and other former employees of TRW, Inc. and John Hancock Mutual Life Insurance Company, who are appealing a decision regarding the interpretation of an Illinois statute that allows for attorney's fees in successful wage suits. The plaintiffs, terminated when TRW closed its Chicago plant in 1975, had met specific length of service requirements for retirement benefits but were under 62 years old when employment ended. TRW contended that employees must be actively employed at retirement age to receive full annuities and insurance benefits, while the plaintiffs argued otherwise.

The district court ruled in favor of the plaintiffs, granting them full annuities upon turning 62, and found an implied contract for insurance benefits. However, it denied their request for attorney's fees, stating that annuities were not considered "wages" under the Illinois statute, and deferred the insurance benefits fee claim due to ongoing appeals.

The appellate court agreed to consider the attorney's fees for both annuities and insurance benefits, despite the lower court's limitations, noting there is no existing Illinois case law defining whether retirement annuities or insurance benefits qualify as "wages" under the relevant statute. The statute specifies that employees who successfully sue for earned wages are entitled to reasonable attorney fees, provided they meet certain pre-suit demand requirements.

Plaintiffs assert that the intent of legislation related to "wages" was to assist employees in obtaining owed compensation and to prevent employers from exploiting their economic advantage. They argue that "wages" should encompass all forms of compensation for services rendered, suggesting that the definition should evolve with the changing landscape of employee benefits, despite retirement benefits being uncommon at the time of the law's enactment in 1889. Conversely, TRW advocates for a restrictive interpretation, defining "wages" as immediate payments for services rendered, distinct from other forms of compensation such as retirement benefits, which they consider a separate category. They reference various legal definitions of "wages," including a broad interpretation that includes bonuses and benefits, as seen in Webster's Dictionary and Black's Law Dictionary. Previous cases, like Inland Steel Co. v. National Labor Relations Board, have included pension and insurance benefits under "wages," while TRW cites cases where "wages" were interpreted narrowly to exclude such benefits, emphasizing that definitions depend on the specific statute and its intent. The varying interpretations highlight the importance of the statute's purpose in guiding legal understanding.

In O'Dell v. International Paper Company, the court ruled that disputes regarding wage supplements related to workmen's compensation should be arbitrated, interpreting "wages" to refer only to a "wage scale." In Caviness v. Andes, the court determined that withheld savings fund amounts, once deducted from wages, constituted a debt rather than unpaid wages, emphasizing the need for strict interpretation of penal statutes regarding unpaid wages. In U.S. v. Embassy Restaurant, obligations to a welfare fund under a collective bargaining agreement were not classified as "wages" entitled to priority under the Bankruptcy Act. Conversely, in Genix Supply Co. v. Board of Trustees, the court favored trustee claims for unpaid contributions over suppliers' claims against a contractor's bond. General American Life Insurance Co. v. Isabell clarified that unearned benefits assigned prior to an employee's death were not considered wages under relevant statutes. Estate of Schroeder and Bell v. Midland National Life Insurance Company established that pension benefits could be recovered within statutory limitations since they were not classified as wages. In Illinois, the court in Reiss v. El Bauer Chevrolet Co. ruled that annual bonuses were considered wages, rejecting the employer's narrow interpretation of the term. Additionally, while some Illinois cases have strictly interpreted statutes regarding the classification of "wages," none have mandated a narrow definition of the term itself.

TRW references the case Gasbarra v. Park-Ohio, Inc., where a plaintiff's contract as President was deemed improperly terminated, entitling him to contract payments until a valid termination occurred. However, the court denied attorney's fees, reasoning that the plaintiff was being compensated for inactivity and that the payments were not classified as "wages." TRW further cites Illinois statutes excluding retirement annuities and benefits from the definition of "wages." Specifically, the Illinois Unemployment Compensation Act excludes payments related to retirement, disability, and medical expenses from wage definitions. The Illinois Wage Payment and Collection Act, enacted in 1974, defines wages as compensation for services rendered and includes provisions for final compensation and wage supplements, while imposing penalties for employers who refuse to pay due wages. Although retirement benefits may not be covered under this Act, the court maintains that suits to establish entitlement to such benefits can still be viewed as "suits for wages." Additionally, Oregon law allows for attorney's fees in actions to collect wages, with case law establishing that sales commissions and vacation pay qualify as wages under this statute.

The statute aims to facilitate prompt compensation collection for employees while discouraging employers from leveraging their economic power to delay payments. This policy parallels that of ORS 20.080, which permits the recovery of attorney's fees in specific small tort claims. The term "wages" in this context has both narrow and broad meanings, with a broader interpretation aligning more closely with the statute's objectives. The district court overlooked the request for attorney's fees related to retirement insurance benefits from TRW, asserting that the Illinois Wage and Payment Collection Act equates an employer's pension contributions with wage payments, but does not obligate the payment of pension benefits themselves. The court's analysis suggested a mischaracterization of the employer's obligation, treating it as if it were a trust fund scenario rather than a direct employer liability. The historical context of the statute, enacted in 1889 when pension plans were rare, does not preclude the inclusion of such benefits under its coverage. Courts must consider the evolving nature of statutory application and the potential relevance of new developments. The judgment concludes that the suit regarding retirement annuities and insurance benefits qualifies as a wage claim, entitling the plaintiff to attorney's fees from TRW. The prior judgment is reversed, and the case is remanded for the determination of a reasonable attorney's fee. Jurisdiction is based on diversity, governed by Illinois law.