The NLRB entered a back pay order against the employer. Four months later, and before the order was enforced, the employer was adjudicated a bankrupt. Thereafter, the court enforced the back pay order and the NLRB filed proof of claim in the bankruptcy proceeding. The referee disallowed the claim, but on petition for review the district court set aside the referee's order and gave the claim priority over general creditors. The Court of Appeals for the First Circuit affirmed, holding (1) that the back pay award was a provable claim, under section 63a(1) of the Bankruptcy Act as a fixed liability evidenced by a judgment, and (2) that it was entitled to fifth priority under section 64a(5) as a debt owed to the United States. This precise question had previously been presented to the Court of Appeals for the Eighth Circuit in NLRB v. Killoren where the back pay award was held to be (1) a provable claim under section 63a(4) as a debt on an implied contract, and (2) entitled to second priority as wages earned under section 64a(2). To resolve this conflict, the United States Supreme Court granted certiorari. Held, reversed and remanded. A back pay order is a provable claim under section 63a( 4) and is entitled to second priority under section 64a(2); however the bankruptcy court should remit the award to the NLRB and allow a reasonable time for its liquidation by that agency. Nathason v. NLRB, 344 U.S. 25, 73 S.Ct. 80 (1952).
Peter Van Domelen S.Ed,
BANKRUPTCY-PROVABILITY AND PRIORITY OF A BACK PAY AWARD,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol51/iss6/6