HonorableOrvilleS. Carpenter             OpinionNo. O-2248
Chairmanand ExecutiveDirector            Re: Whether or not money paid by
Texas UnemploymentCompensationCommission an employerunder the "Annuities,
Austin,Texas                             Insuranceand SavingsProgram"and
                                         the "Accidentand Sick BenefitPlan"
                                         and "DismissalWages“ constitute
                                         "wages"under the Texas Unemployment
                                         CompensationAct and the regulations
                                         of the UnemploymentCompensation Com-
Dear Sir:                                mission in pursuancethereof.

         We receivedyour letter datedApril 17, 1940, which.isself explanatory
and reads as follows:

          "The definitionof 'wages'.foundin the Texas UnemploymentCom-
    pensationAct (Article%21b-l7poi) is the same definitionwhich was
    found prior to the Act's amendmenton April 1, 1939. Under this
    definitionof wages the Comnilssion on July 2, 1937,-adoptedits Regu-
    I.&ion 36, 'ItemsIncludedas Wages'. .Regulation36 was superseded
    by the presentRegulation38, 'Wages,'which beca& effectiveby
    adoptionon September5, 1939* It,is under the statutoryprovision
    cited,as well as under the regulationsapplicableto the periodsof
    time indicated,that your opinionis requestedwith respectto the
    fact situationswhich are to be presented. Does money paid by the
    corporations which are the employers,under the 'Annuities,Insur-
    ance,.andSavingsProgram'andthe 'Accidentand Sick BenefitPlan'
    and a6 'Dismissal Wages' constituteIwages'under‘theTexas Unem-
    ploymentCompensationAct and regulationsin pursuancethereof?
    This questioncontemplates  money paid into the Fundb or Plans as
    well as money paid to individuals.

         "Annuities,Insuraucejand SavingProgram

         "On January1, 1938,the Ethyl GasolineCorporationadoptedan
    'Annuities,.Insurance,and SavingsProgram'for the benefitof all
    employeesof the Companywho were in active serviceon January1,
    1938. Participationin the plan was, and is, voluntary. For the
    purposesof this programthe companyestablisheda trust fund, such
    trust fund being administeredby a corporatetrustee.

         "Underthe planall participatingemployeescontributes    by salary
    deductionauthorizations  a sum of money not 1es.sthan three per.cent
    nor more than ten per cent of currentsalary. To this amount the
    corporationcontributesan equal sum. From these funds each
HonorableOrvilleS. Carpenter,Page 2 (0-2248)



    participantallots a sum not less than two-thirdsof the total
    thereoffor annuities. The balance,if any, called 'savings,'
    remainsas a creditin the employee'saccount In the trust fund.

         "A group annuitycontractwas enteredinto by the Company
    with a Life AssuranceSociety,under which annuitiesere pur-
    chasedby the Company-withthe amountsallottedfor such pur-
    poses by the employee. Group annuitiespurchaeedfor a parti-
    cipantbelong solelyto him. The amount of annuity income
    payableat retirementdepends,or will depend,upon the age at
    which such allotmentsare paid to the AssuranceSociety,the
    age at retirement,the form of annuityselected,and other perti-
    nent factors.

         "Uponterminationof employment,an'employeereceives,or
    will receive,such paid-updeferredannuitya8 was, or shall have
    been, purchasedwith his own contribution,  or he may elect to re-
    ceive in lieu thereof cash equal to the sum of his own contribu-
    tions plus interest. With respectto t&e employingcompany's
    coqtribution, the participantreceives,or &all receive,a paid-
    up deferredannuitywhich annuityhas no cash surrendervalue.

         '90 the extentthat a participant'screditbalance in his
    savingsaccountpermits,it may all be used by him to purchase
    insuranceor it may be withdrawnin cash; provided,however,that
    the cash withdrawaloptionmay be exercisedonly after the com-
    pletionof one year's continuousparticipationin the plan, and
    thereafterat intervalsof not less than twelve months.

         "Accidentana Sick BenefitPlan

         "Underthis voluntarilyestablishedplan, the companypro-
    vides for the paymentto eligibleemployees,absent on account
    of illnessor accident,of benefite.equa1t.o their normal salary
    or wages for periods ofweeks rangingfrom one to thirteen,de-
    pendingupon the employees'number of years of service. In ad-
    ditionto the benefitspaid in accordancewith the provisionsof
    the plan, the company,a6 a matter of generalpolicy,extends
    furtherbenefitsin certainmeritoriouscases. The company
    chargesbenefitspaid under the plan to 'Accidentand Sick Bene-
    fits - eupplemental.'

         "Thus,two types of benefitisare'avallableto.the employees:
    (1) benefitspaid in accordancewith the plan, and (2) the sup-
    plementalbenefitspaid in accordancewith the.CompanY'spolicy.
    This plan 'ispresentedl,ndetail in the'attached,four-pagemimeo-
    graphedinstrument.

                                "DismiesalWages
           .   .>




HonorableOrvilleS. Carpenter,Page 3 (o-2248)



          "'Dismissalwages' are amountsof money paid to employees
     of the companyupon the terminationof their employment. The
     companypays a dischargedindividual,upon his discharge,a
     sum of money over and above his regularwages, which varies in
     amount directlywith the lengthof his servicerecordwith the
     company. There is no legal obligationon the part of the com-
     pany, contractualor otherwise,to pay these dismissalwages."

          Section(0) of Article5221b-17of the Texas UnemploymentCompensa-
tion Act, same being Acts 1936, 44th Legislature,3rd C.S., Page 1993, Ch. 482,
definesthe word "wages"as follows:

          fl'Wages'
                  means all remunerationpayablefor perso&l serv-
     ices, includingcommissions and bonusesand cash value of all
     remunerationpayablein any medium other then cash. Gratuities
     customarilyreceivedby an individualin the course of his em-
     ploymentfrom personsother than his employingunit shallbe
     treatedas wages payableby his employingunit. The reasonable
     cash'value.ofremunerationpayablein any medium other than cash,
     and the reasonableamountof gratuities,shall be estimat'ed and
     determinedin accorrlqn.ce
                             with rules prescribedby the~Commiesion."

         Under the above definitionof gg@s the'Commi$sion,on July 2, 1937,
adoptedRe&.ation No. .36 which reads, in-part,as.follows:

          "(2) DiemissalWages. Paymentto an employeeof so-called
     dismissalwages, vacationallowance,or sick pay, constitutes
     Wages.



          “(4)  Premiumson Life Insurance. Geneiallyppemiumapaid
     by en employeron a policy of life.ins!xanFecoveringthe life
     of en employeeconstitute,wages  If the emplpyeris not a bene-
     ficiaryunder the policy. However,premiumapaid by an employer
     on policiesof group life l.qumnce   covering the lives of his
     .employeesare not wages, if the employeehas no tiption to take
     the amount of the premiumainsteadof acceptingth6 insurance
     end has no'equityin the pol$cy {su& aB the right of assign-
     ment or the right to the surrendervalue on termi+ationof his
     employment."

          RegulationNo. 36 was supersededby RegulationNo:38 on September
5, 1939.  RegulationNo.,38, contraryto Regulation.36,is silentupon.thesub-
ject of whether or not.accidentand sick benefits,diemissa!$
                                                          wages, or premiums
paid on insurancepoliciesare wages.

          Under the Annuities,Instiance~andSavingsProgramwe fitidthat upon
terminationof employment,en empioyeereceivesa paid-up deferredannuitywhich
was paid for with the.employee'sown contribution,or the employee.mayelect to

                                                            .
HonorableOrvilleS..Carpenter,Page 4 (0-2248)



receive in lieu thereof cash equal to the sum of the employee'sown contribu-
tion: With respectto the employer'scontribution,    the employeereceivesa
paid-up deferredannuitywhich has no cash surrendervalue and which is not
assignable.

         To the extentthat an employee'screditbalance in his savingsac-
count permits,it may all be used by him-topurchaseinsuranceor it may be
withdrawnin cash; provided,however,that the cash withdrawaldoes not exceed
one-half(l/2) of the amount in his savingsaccount.

         As is seen from the above quoted statute,wages includesall remunera-
tion payablefor personalservices. Even though the employerimposescertain
additionalconditionsto enablethe employeeto receivethe benefitsfrom the
employer'scontributionto the trust fund, nevertheless,in view of the broad
definitionof wages as definedby statute,we are of the opinionthat the em-
ployer'scontributions to the trust fund are wages within the meaningof the
above quoted statuteand such contributions are subjectto thexnemployment
compensation+x+x.

          It seems that the employer,In additionto matchingthe employee's
contribution, may from time to time make additionalcc+trlbutionsto the trust
fund. We are unable to determinedefinitelywhetherthis contributionwould
be wages since we do not know the particularspertainingto such contributions;
If the employeereceivesadditionalannuities,insurance,    or savingsfrom this
additionalcontributionmade by the employer,said contribution  would probably
be wages. If the contributionis for the purpose of supplyingthe money to
meet the expensesof the actualadministration  of the trust fund, said contri-
butionwould not be wages.

          Under the plan in questio!i,
                                     we are of the opinionthat the earnings
of the trust fund, such a8 interestand profitson investmentsand dividends
receivedfrom the insurancecompar;iea, are not wages within the meaningof
the Act and are not taxableas such.
          We find nothing in the Regulationspromulgatedby the Commission
which are contraryto our conclusionabove stated,

         The Accidentand Sick BenefitPlan works as follows:

         Employeesabsent from work because of illnessor accidentwill be
allowedtheir full normal salary or wages for the number of weeks'specified
below:

    Upon completionof                           Full salarywill be
        serviceof                                   allowedfor
          1 year                                      1 week
          2 years                                     2 weeks
          3 years                                     3 weeks
          4 years                                     4 tieeks
          5 years                                     5.weeks
    HonorableOrvilleS. Carpenter,Page 5 (o-2248)



        Upon completionof                           Pull salarywill be
            serviceof                                   allowedfor'
              6 year?                                     6 weeks
              7 years                                     7 weeks
              8 years                                     ~9weeks
              9 years                                    11 weeks
             10 or more years                            13 weeks

              It appearsto us that the paymentsunder consideration are made as
    a result of the personalservicesrenderedto the employerby the individual
    receivingthem. The above benefitsare determinedend made in accordancewith
    a.fixed policy of the employer. An employerwould not pay these benefitsto
    one who had not renderedsome serviceto him. We concludethat accidentand
    sick benefits,as describedabove, are wages withinthe meaning of Section
    (0) of Article 5221b-17end contributionsare due thereon.

              We find,nothingin the Regulationsof the Commissionwhich are con-
    triry to the above holding.

              Your letter statesthat the employer'extends furtheraccidentend
    sick benefitsto the employeesIn certainmeritoriouscases. As to these
    particularbenefits,they may or may not be wages.according  to the particular
    facts of each case. Should the employerpay anemployee an additionalsum
    of money due to the need of the employeeand said sum haa no relationto the
    durationof employmentor to the salaryof the employee,It would.seemthat
    such benefitswould not be wages'forthe performanceof personalservicesbut
    would be.an outrightgift f&m the employerto thenemployee
.             As to these specialbenefits,if they are not'wageswithinthe meen-
    ing of Section (0) of Art. 5221b-17,'then             36 of the Commission
                                            Regulation.No.,
    would be inapplicableas to these nartirularbenefits..

              Under the facts set out in your letter it seems that it IS the CUS-
    tom for'theemployerto pay every employeecertaindi-amissal    wages.upontermi-
    natlon of.emp+yment. It appearsthat the amount of di@issal wages paid to
    a particularemployeedepends~uponhis length of employmentand the salary
    or wages that he had received. The employee,.nodoubt, contemplatesreceiving
    these benefitsai remunerationfor the personalservicethat he has rendered
    his employer. Certainly,no employerwould pay such'moneyto one who had not
    rendered.someeervice'tohim.

              We might say,thatthe Texas Law contain&no exemptionof payments
    of dismissalwages exemptingthen from the inclusivedefinitionof wages.
    We conclude,therefore,that the dlsmisealwages are ,wageswithin the mesning
    of the Texas UnemploymentCompensation Act and contributions
                                                              are due thereon,
:
             It might be said thatSection 3 of Regulation38, supra, is in con-
    flict wit&what we have heretoforesaid in'this opinion..Sai.dsectionreads
    ~88.followb:
HonorableOrvilleS. Carpenter,Page 6 (o-2248)



         "Ordinarily,facilitiesor privilege6furniehedby an em-
    ployer to individualsin his employ are not deemedto be wages
    if such facilitiesor privilegesare offeredor furnishedby
    the employermerely as a convenienceto the employeror as a
    meana of promotingthe health,good will, contentmentor effi-
    ciencyof those individualsin his employ."

          We do not believethat the above Sectionhas any referenceto the
particularbenefitsor wages referredto in this opinion. We quote from a
ruling of the Utah UnemploymentCompensationCommissionas follows:

         "Paymentsnot ordinarilyconsideredwages include* * *
    (3) facilitiesor privileges,such as entertainment,
                                                     cafeterias,
    restaurants,medical services,or so called 'courtesydiscounts'
    on purchases,furnishedor offeredby an employermerelyas a
    convenienceto his workersor as a means of promotingtheir
    health,good will or efficiency;* * *"

          Other stateshave adopteda similarregulationas to facilitiesor
privilegesfurnishedby the employerand none seem to have includedaccident
and sick benefitsor dismissalwages within the meaningof such regulation.
It is not our purposehere to determinewhat particular"facilitiesor privi-
leges"are includedwithinRegulationNo. 38. We merely hold that said Regu-
lation has no applicationto the "Accidentend Sick BenefitPlan" or to "Dis-
missal Wages."

         We trust that this Is the informationdesired.

                                                    Yours very truly

APPROVEDJUL 11, 1940                           A!M!ORREYGENERALOFTEXAS

ISI GroverSellers
                                               By   /s/ Glenn R. Lewis
FIRST ASSISTART                                         Glenn R. Lewis
ATTORNFXGENERAL                                             Assistant


                                               By /s/ Lee Shoptaw
                                                      Lee Shoptaw

L5i:eaw:l.m

                                        THIS OPINION
                                       CONSIDEREDAND
                                        APPROVED IN
                                          LIMITED
                                         CONFERENCE
