Alabama Power Company v. Davis – Oral Argument – April 25, 1977

Media for Alabama Power Company v. Davis

Audio Transcription for Opinion Announcement – June 06, 1977 in Alabama Power Company v. Davis
Audio Transcription for Oral Argument – April 26, 1977 in Alabama Power Company v. Davis

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Warren E. Burger:

We will hear arguments next in 76-451, Alabama Power against Davis.

If it will assist you in making your plans, gentlemen, we will hear the petitioner’s argument this afternoon and the respondent’s in the morning.

H. Hampton Boles:

Mr. Chief Justice, I have asked for a period of rebuttal, so I will represent the first portion of my argument.

Mr. Chief Justice, and may it please the Court.

I represent Alabama Power Company in this cause, who is the appellant.

Alabama Power Company is an electric public utility engaged in the service of electricity to consumers in portions of the State of Alabama.

Except for a two-and-one-half year period of time in the military and a period off for a union strike, Mr. Davis was employed by Alabama Power Company from 1936 until his retirement in 1971.

According to the provisions of the pension plan of Alabama Power Company, Mr. Davis’ time in the military was not considered as a credit in computing the amount of Mr. Davis’ retirement income.

Mr. Davis is, to the litigation through the U.S. Attorney’s office, alleging that Alabama Power Company, notwithstanding the contrary provisions of its pension plan, was required to count the two-and-one-half year period as accredited service with the company in computing the amount of retirement income under the pension plan.

The District Court in Alabama ruled in favor of Mr. Davis, reasoning that since the Alabama Power Company’s plan did not have a precise matching of units of work to units of benefit under the plan that the benefit was like seniority and, therefore, his military time must be counted as accredited service under the plan.

Court of Appeals for the Fifth Circuit affirmed Per Curium with one dissenting opinion, and this Court accepted cert.

Now, although the monthly monetary amount involved in Mr. Davis’ claim is not very great, this case presents to this Court for the first time the precise issue of the proper treatment of military-service time under the reemployment provisions of the Military Selective Service Act.

The facts below were not disputed and are set forth as agreed statement of facts beginning at about Page 15 in the appendix.

Now, we believe that this case is in a posture to be decided upon three fundamental propositions which we believe to exist with respect to the reemployment provisions of Military Selective Service Act.

Now, first of all, we do not contest nor dispute that the Military Selective Service Act, that is, the reemployment provisions of that Act, were enacted to benefit the veteran.

Primarily they were enacted and dictate that a qualifying veteran, upon his return to private employment, must be employed without loss of seniority and must be entitled to participate in insurance and other benefits that exist in accordance with established rules of the employer as they relate to employees on leave or furlough of absence.

Now, the second proposition which we have no contest about and we do not question is, if there is an employee benefit or any type of an employee advancement which accrues automatically by virtue of continued association with an employer alone by virtue of that time period, then the veteran must have his military service time count toward accruing that benefit.

The third proposition, which we say is well-founded in law and applies to this case, is that if the employer agreement has in it a work requirement that is a condition to that benefit, then that work requirement must be satisfied by the employee, regardless of whether he is a returning veteran or just a returning employee from leave of absence before the employee becomes entitled to that benefit.

Now, it’s Alabama Power Company’s position in this case that accredited service under its pension plan can only be earned when one of its employees works for the company.

It is our position that that work requirement is real; it requires the employee to be present on the job earning regular pay.

Potter Stewart:

Mr. Boles, is the plan clear in its application to employees who are on furlough or leave of absence?

I should think if it were, then this would be open and shut, isn’t it — wouldn’t it?

H. Hampton Boles:

Mr. Justice Stewart, I agree that it should be open and shut, and it is our position that the case should be very simple.

It is clear that an employee on leave of absence without regular pay receives no benefit under the pension plan.

He gets no credit for accredited service under the minimum pay provisions of computing income; he gets absolutely not one day of earnings.

As I want to go into, there are two provisions in the plan, both computing pension pay, and they are set forth in Section 5 of the pension plan beginning at about Page 60.

Warren E. Burger:

Is that set aside every month , every quarter or annually?

H. Hampton Boles:

Mr. Chief Justice, it would be set aside on an actuarial basis.

And I do not proclaim to understand when it is done; but it is set aside on an actuarial basis, and there is no segregation of the fund per employee, if I answered your question.

Warren E. Burger:

Well, it must be at fairly frequent intervals to take into account people who either leave or take long-term sick leave, must it not?

Audio Transcription for Oral Argument – April 26, 1977 in Alabama Power Company v. Davis

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H. Hampton Boles:

Yes, sir.

Now, I would like to point out and you may have — yes, sir.

I cannot answer that question within any degree of certainty; but I do know that it has done as frequent as is necessary through accounting procedures to maintain the plan on a sound actuarial basis, and they do take this into account, yes, sir.

Warren E. Burger:

There would be tax problems involved there, too, would there not?

H. Hampton Boles:

If you are speaking about Section 404 of the Internal Revenue Code, which states that payments into the pension fund are deductible in the year in which they are made, it is my understanding under the theory that they are a type of compensation to the employee and then the employee gets them as deferred compensation and they become taxable to him in the year of receipt and taxable to the employer in the year that it has given, yes, sir.

Warren E. Burger:

Now, when he is on military leave, then does this record show whether the company made any contributions for this particular man?

H. Hampton Boles:

I believe in the agreed statement of facts, it does, Your Honor.

It states that the fund was not funded to account for periods of absence on military leave, yes, sir.

Warren E. Burger:

Now, one reason for that, I suppose among many others, is that there is no certainty that the particular employee is going to come back.

H. Hampton Boles:

Absolutely not, there is no certainty.

When an employee leaves to go into military, he does not have any type of contract which binds him to return to the employer.

That is his free election.

If he returns within the time period that is specified in the statute, I believe 90 days, the employer has to accept him.

There is further no requirement that once he returns that he stay any length of time; I mean, he can return, stay a day and leave.

Well, that is true of someone on leave of absence, too.

Lumley against Wagner forbids the specific performance of contracts for personal service as no employee is ever bound by contract to come back to his employer in a sense of an enforceable obligation.

H. Hampton Boles:

That is correct.

That is true if a person goes on leave of absence, say to take his own time without pay to go two years of college, we do not fund the plan there, either, for him.

Now, do you give him seniority for the two-year time that he has gone to college?

H. Hampton Boles:

Your Honor, that is under the collective bargaining agreement.

As great seniority for time, I cannot state exactly whether the union allows him to accumulate seniority.

I can state that with respect to the pension plan, he does not earn not a red cent.

Well, but clearly an employee who left to go in the military was entitled to have seniority in the sense of job-bidding preference, and if your leave-of-absence man got seniority, but nothing else, I would think you have man returning from the military would … or, rather, if your leave-of-absence man got your … well, now I have lost my chain of thought, go ahead.

H. Hampton Boles:

I can state that the record refers to the collective bargaining agreements.

It is absolutely clear in those agreements that military service time does count toward seniority for those types of things such as layoff and job preference.

What about a sick leave?

Let us say an employee has tuberculosis and has a one-year leave of absence, and he is not being paid.

Is there any contribution paid into the fund for his account?

H. Hampton Boles:

It is my understanding, Mr. Chief Burger, that it is not funded to account for prolonged leaves of absence.

Now, you do not get credit on leaves of absence for sickness under the pension plan in excess of 30 days except for the one occasion that is mentioned in the stipulated facts where if an individual has over 20 years’ service and he faces that situation that the company can in its discretion grant extended sick leave.

Audio Transcription for Oral Argument – April 26, 1977 in Alabama Power Company v. Davis

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H. Hampton Boles:

In that case, if he has granted sick leave with pay, it is funded.

Warren E. Burger:

That is a matter of contract, though, is it?

H. Hampton Boles:

There is no contract to —

This is a noncontributory plan, isn’t it?

H. Hampton Boles:

It is noncontributory plan, but we —

Do I correctly understand that this really gets down to the computation of, “accredited service”, upon the basis in which you compute the amount of the pension.

Isn’t that right under the plan?

H. Hampton Boles:

In Mr. Davis’ case, we did have —

Now, under the plan, is it the basic thing?

H. Hampton Boles:

No, sir.

it is not?

H. Hampton Boles:

I do not think so, sir.

Under Section 5, the basic normal retirement income computation is a percent of earnings, totally a percent of earnings.

There is nothing else in there but a percentage.

It is an extremely long and complicated formula I guess we do in pension plans, but they take one percent of his earnings up to a certain step and then a greater percent of earnings.

Yes, but in that formula don’t you apply a multiplier of the total use of accredited service?

H. Hampton Boles:

You do not unless — that is a minimum pay formula.

Let me try to explain that, because that is important to my case.

Well, I have the impression that the plan does not include military service in accredited service.

H. Hampton Boles:

It also does not — there are two —

No, is that right?

H. Hampton Boles:

That is correct.

And that is why we got the case, isn’t it?

H. Hampton Boles:

That is one reason.

You could get it even under … we do not count it for earnings.

The basic provision under the plan in Section 5 for computing the amount of retirement income is that you take a percent of earnings and add them up, that is all.

Then we have a minimum pay, minimum retirement pay section, which is also in Section 5, that was introduced by amendment in 1966 that does take into account accredited service.

Basically, that section says you take a percent of his earnings on retirement and multiply it times his accredited service.

And you do not include in that last element military.

H. Hampton Boles:

That is absolutely correct, we do not.

Audio Transcription for Oral Argument – April 26, 1977 in Alabama Power Company v. Davis

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And it may not include other things; but in any event, you do not include military service.

H. Hampton Boles:

We do not.

And that is why we have the case, isn’t it?

H. Hampton Boles:

That is why you have this specific case.

Well, and the case depends upon the statute, and the statute appears on Page 3 of the brief of the respondent; and C-1(b) — no, just C-1 — equates this thing to what happens to employees who are on furlough or leave of absence, and that is the critical issue in this case.

And what does happen to employees under your plan who are on furlough or leave of absence?

That is dispositive of this statutory question.

H. Hampton Boles:

I agree, and those persons do not get credit under the pension plan, not by way of accredited service nor by way of earnings under the first section.

Do they get credit for lost seniority?

H. Hampton Boles:

Are you speaking of the returning veteran?

Two years to go to college.

H. Hampton Boles:

If it is nonunion-related, it is my understanding that they do not; but the veteran does, I mean, the specific veteran does.

He gets it by statute.

H. Hampton Boles:

Yes, sir.

It gets it by the same statutory provisions.

H. Hampton Boles:

Exactly.

So that is why you cannot necessarily say that because you treat other leaves of absence the way you treat military leave the same you are following the statute, because the statute requires different treatment in some situations.

H. Hampton Boles:

Exactly, with regard to seniority it can require a preference for the veteran.

If a certain benefits is a function of seniority, you have to give it to them.

Certainly.

H. Hampton Boles:

I do not deny that if a benefit is a function of seniority that you have to give it to the returning veteran.

Even though you do not to people who are on leave.

H. Hampton Boles:

We are in complete agreement.

Warren E. Burger:

But your position, if I take it, is the function of seniority is not to be equated with contributions by the employer into a fund during a period when the person is not present in the establishment.

H. Hampton Boles:

And earning regular pay, and that is present as a full-time regular employee; that’s one that works 40 hours a week for an indefinite period of time.

The statute entitles the returning veteran to three separate guarantees: He shall be restored without loss of seniority, he shall be entitled to participate in insurance or other benefits offered by the employer pursuant to established rules and practices relating to employees on furlough or leave of absence, and he shall not be discharged from such position without cause within one year after such restoration.

Those are three separate guarantees.

I take it we are now considering the second one that I read.

H. Hampton Boles:

That is the one that —

And the test there is what the plan provides for employees on furlough or leave of absence.

Audio Transcription for Oral Argument – April 26, 1977 in Alabama Power Company v. Davis

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So it seems to me relatively simple.

H. Hampton Boles:

The plan provides that they will not receive accredited service when they are on furlough or leave of absence.

Mr. Boles, isn’t there another qualification in that language; it is in accordance with rules in effect at the time he went into service, and wasn’t this plan adopted after this man went into the service?

H. Hampton Boles:

This plan was adopted after he went into the service.

You said you “bestowed” them on him.

H. Hampton Boles:

He absolutely does.

Well, if the pension plan was adopted after he went in the service, then the language Mr. Justice Stewart read really does not apply, does it?

H. Hampton Boles:

According to the reading of the statute, it does not apply.

Well, are we really —

H. Hampton Boles:

Excuse me, sir.

In dollar amounts, is there a $17 difference as suggested between what he has been getting and what he would get if he were credited with the two-and-a-half years of military service?

H. Hampton Boles:

That is right, sir.

$17.11 a month.

H. Hampton Boles:

That is right.

Mr. Boles, would you give me one other factual bit of information I am confused on?

H. Hampton Boles:

One year, and the veteran —

Anything over a year.

H. Hampton Boles:

Yes, sir; and I will point out now here the distinction is that with that one-year qualifying period under the plan, we do not have a work requirement; you just have to maintain a status of an employee/employer for one year.

Does what you are saying add up to the fact that the dispute over the right of the veteran never affects eligibility; it may sometimes affect the dollars he receives and that is all?

H. Hampton Boles:

It would affect the dollars received and would not affect his eligibility.

Why, it is assumed he did the service, but it is not assumed that he earned any wages, is that it?

H. Hampton Boles:

That is correct, sir.

May I ask you one question?

H. Hampton Boles:

Yes, sir.

Did you characterize the payments under the plan as deferred compensation?

H. Hampton Boles:

I do, sir, yes, sir.

Well, then how do you count for taking into the plan services rendered prior to July of 1944?

H. Hampton Boles:

I think that you can look at it … you are talking about past service under the plan, and in that particular section it also has an accredited service part of the formula.

Well, it is not clear that it does, is it?

H. Hampton Boles:

Not — he had no legal claim before the plan, and his only claim is by virtue of the plan, that is right.

Audio Transcription for Oral Argument – April 26, 1977 in Alabama Power Company v. Davis

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Of course, he had no claim to any pension plan, did he?

H. Hampton Boles:

And that is one of the points here that I have got is that I think you have got to look at the plan in order to determine what benefit at all that Mr. Davis may have been entitled to, and it is our contention that he got anything that he earned and we properly exclude —

Warren E. Burger:

Very well.

Allan A. Ryan, Jr.:

Mr. Chief Justice, and may it please the Court.

Warren E. Burger:

This is more than rights to reemployment.

Allan A. Ryan, Jr.:

It is, Mr. Chief Justice.

Warren E. Burger:

What would you say with respect to a plan, a pension plan, that as to this man had been established in 1960, long after the war, long after he had returned?

Allan A. Ryan, Jr.:

I would say you have to look at the plan.

Well, how do you interpret the last part of the Section C1 on Page 3 of your brief when you talk about “participate in insurance or other benefits offered by the employer pursuant to established rules and practices relating to employees on furlough or leave of absence in effect with the employer at the time such person was inducted into such forces”.

Allan A. Ryan, Jr.:

That language means that while the employee is in uniform, while he is serving in the military, the employer is obligated during that time to provide him with the same benefits as the employer provides to employees who are on nonmilitary leave of absence, and the Court in Accardi supports that reasoning.

Well, it is dicta in Accardi, and how do you reconcile it with the actual language itself?

Allan A. Ryan, Jr.:

It is a very difficult job to reconcile it with the language of the statute itself.

It’s impossible.

Allan A. Ryan, Jr.:

The statute speaks of persons who are restored, and the argument, I would think, is that while an employee is in uniform, he has not yet been restored.

Was persuaded to render that dicta.

Allan A. Ryan, Jr.:

Yes, sir.

It is your position, then, that this case is to be judged under that provision?

Allan A. Ryan, Jr.:

That is absolutely our position, Mr. Justice.

Now, I would have thought that the second stage, being very explicit with respect to — what would you call it?

Allan A. Ryan, Jr.:

Well, I think we agree that it is not applicable in this case; but I —

It does not seem to be applicable, because there was no plan at the time he was inducted into the Armed Forces.

Well then if you are right, the guy gets a much better break if his employer adopts a plan in 1960 than if he adopted one in 1940.

Allan A. Ryan, Jr.:

He gets no better break than his counterpart who never went into the Army, and that is what Congress intended.

But he gets a better … the man who went into the Army in 1940 and his employer had a pension plan then is limited to the terms of the pension plan that was in effect in 1940, whereas the man who went in in 1940 and the pension plan is not adopted until 1960 gets better treatment, even though he — presumably, there were no elements of reliance there.

Allan A. Ryan, Jr.:

Well, the veteran whose employer adopts a plan in 1960 is to be treated in exactly the same way as any other employee who has been with the company for an equal length of time who did not go into the Army.

But your reason for the inapplicability of that provision we have been talking about is a different reason.

Allan A. Ryan, Jr.:

It is a different reason from the one Mr. Justice Stewart suggests, yes, sir, it is.

Would you accept that reason, in addition?

Allan A. Ryan, Jr.:

I will not quarrel with that reason, Mr. Justice; but I think in this case, it is not necessary to reach that point.

And he must be, what, at least 60 years old?

Audio Transcription for Oral Argument – April 26, 1977 in Alabama Power Company v. Davis

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Allan A. Ryan, Jr.:

He must work 20 years, or 15 years having reach to the age of 50.

And then it is compulsory retirement at 65?

Allan A. Ryan, Jr.:

At 65 unless it is waived.

And this petitioner voluntarily retired at 61, is that it?

Allan A. Ryan, Jr.:

He took an early retirement at 61, that is correct.