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Palmarozzo v. Coca-Cola Bottling Co.

decided: December 18, 1973.


Appeal from summary judgment in favor of the plaintiff in the Southern District of New York, Inzer Wyatt, Judge, for the company's failure to credit time spent in military service towards severance pay in violation of 50 U.S.C. §§ 459(b)(B) and (c). Judgment affirmed.

Friendly, Anderson and Mulligan, Circuit Judges. Friendly, Circuit Judge (dissenting).

Author: Anderson

ANDERSON, Circuit Judge:

Carmine Palmarozzo worked as a permanent employee of the Coca-Cola Bottling Company of New York from June 4, 1962 until September 21, 1962. He then served six months in the Armed Forces and returned to work for Coca-Cola from March 23, 1963 until June 22, 1967, at which time he voluntarily left the company. Coca-Cola employees qualified for severance pay after accumulating five years of service credits, but Palmarozzo was denied severance pay because the company refused to include in its calculation of his service credits the time which he spent in the military. Palmarozzo brought this suit in the Southern District of New York to collect $200 severance pay and to force Coca-Cola to contribute toward his severance pay for the period he spent in the service. He charged that the company, by refusing so to contribute, violated his right as a veteran to be restored in employment with no loss of seniority under the Universal Military Training and Service Act, 50 U.S.C. App. §§ 459(b)(B) and (c). (June 24, 1948, c. 625 Title I, 62 Stat. 614, as amended).*fn1

Pursuant to a contract with the International Teamsters, Coca-Cola added twenty cents to the Soft Drink Workers Local 812 Retirement Fund for each hour worked up to 40 hours a week. The Rules and Regulations of the Retirement Fund determined the availability of severance benefits, and Article III of those rules stated that if an employee severed employment after accumulating five or more service credits, he was entitled to severance pay.

An employee received 1/4 of a service credit for every 400 hours actually worked during a year, but he could never acquire more than one credit per year, representing a total of 1600 hours. The hours actually worked, for purposes of calculating service credits, were determined by Coca-Cola's fund payments, which never exceeded compensation for 40 hours per week. Therefore, an employee received no service credit for overtime during the week or for work in excess of 1600 hours per year.

Employees who worked regularly could easily achieve one service credit each year, and their severance benefits increased with every five service credits -- or approximately with every five years of continuous service.

Palmarozzo accumulated 4 1/2 credits during his employment. The District Court found the Act required Coca-Cola to presume for purposes of calculating severance pay that Palmarozzo had been continuously employed while he was in the service, and the court ordered the employer to contribute to the fund for such time.*fn2 The District Court held the case was governed by Accardi v. Penn. Ry. Co., 383 U.S. 225, 86 S. Ct. 768, 15 L. Ed. 2d 717 (1966), and both parties on appeal agree.

In Accardi, the Supreme Court analyzed a "compensated service" plan, similar to the "service credit" plan in this case, and held that denial of credit for time served in the armed forces violated the veteran's right not to lose seniority. The Court ordered the Pennsylvania Railroad to base firemen's severance benefits on length of actual service including time spent in fulfilling military obligations. The Court stated:

"The requirements of the 1940 Act are not satisfied by giving returning veterans seniority in some general abstract sense and then denying them the perquisites and benefits that flow from it. We think it clear that the amount of these allowances is just as much a perquisite of seniority as the more traditional benefits such as work preference and order of lay-off and recall. We hold that the failure to credit petitioners' 'compensated service' time with the period spent in the armed forces does not accord petitioners the right to be reinstated 'without loss of seniority' guaranteed by § 8(b)(B) and (c)." 383 U.S. at 230-31.

Appellant Coca-Cola seeks to limit Accardi to severance plans which are based primarily on terms of years with a company rather than work time. Appellant states the "compensated service" plan in Accardi was a sham, because credit could be given for any year in which a fireman had worked only one day per month for seven months. Coca-Cola contends the Supreme Court held the plan violated the Act because of the "bizarre result" that a man who only worked seven days a year was preferred over the veteran who worked six full months but could not complete the year due to his military service.

But Accardi is not so limited. The "bizarre results" in that case illustrated that the compensated service benefits, despite pretentions to being equated to working time, were actually proportionate to length of service. Similarly, Coca-Cola's plan gave one credit for each year of continuous service, based benefits on five-year plateaus of accumulated credits, and allowed no credit for overtime or work in excess of 1600 hours per year. In both Accardi and the present case, length of continuous service, rather than the nature of that service, produced the benefits.

Coca-Cola contends that its service credit plan was sufficiently related to the amount of time actually worked that the benefits were in the nature of compensation, as opposed to a seniority benefit. The Act only requires that the veteran not lose seniority; and the employer is under no obligation to compensate him for time spent in the armed forces. This argument was presented in Accardi, and the Supreme Court disposed of it as follows:

". . . the real nature of these payments was compensation for loss of jobs. And the cost to an employee of losing his job is not measured by how much work he did in the past -- no matter how calculated -- but by the rights and benefits he forfeits by giving up his job. Among employees who worked at the same jobs in the same craft and class the number and value of the rights and benefits increase in proportion to the amount of seniority, and it is only natural that those with the most seniority should receive the ...

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