Supreme Court of Rhode Island
488 A.2d 1225 (R.I. 1985)
Robert Law was the president of Law Trucking Company (Law Trucking) (defendant). Pursuant to a collective-bargaining agreement, Law Trucking’s drivers were entitled to wages of $12.71 per hour for straight time and $19.06 per hour for overtime. Due to financial difficulties, Law approached several of Law Trucking’s drivers to request that they accept $10 per hour for straight time and $15 per hour for overtime. Law promised that if Law Trucking made a profit at the end of the year, the company would reimburse the drivers for the wage concession. The drivers agreed, and a written agreement was drawn up. The agreement referred to the wage concession as a loan. Law Trucking’s bookkeeper also categorized the wage concession as a loan, as opposed to wages. Ultimately, Law Trucking declared bankruptcy under the United States Bankruptcy Code (Bankruptcy Code), 11 U.S.C. § 101, et seq. The drivers submitted a claim for unpaid wages, arguing that the wage concession constituted back wages entitled to priority status under section 507(a)(3)-(4) of the Bankruptcy Code. Law Trucking’s receiver (plaintiff) brought a petition to determine whether the drivers’ claim should be paid. The trial court found that the wage concessions were loans and not wages and that the drivers were therefore not entitled to priority status. The receiver and the drivers appealed.
Rule of Law
Holding and Reasoning (Bevilacqua, C.J.)
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