Pro rata

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Pro rata is an adverb or adjective, meaning in proportion.[1] The term is used in many legal and economic contexts, and sometimes spelled pro-rata.

Contents

[edit] Meanings of Pro rata

More specifically, Pro rata means:

  1. In proportion to some factor that can be exactly calculated. [2] [3] [4]
  2. To count based on amount of time that has passed out of the total time.
  3. Proportional Ratio [5]

Pro-rata has a latin etymology, from pro, according to, for, or by, and rata, feminine ablative of calculated (rate or change). [6]

[edit] Examples

Examples in law and economics include the following noted below.

[edit] Torts

When liability for a toxic tort or Products liability concerns many manufacturers, the liability under tort law is allocated proportionally. [7]

[edit] Partnership liability

Each of several partners "is liable for his own share or proportion only, they are said to be bound pro rata. An example ... may be found in the liability of partners; each is liable ... only pro rata in relation to between themselves." [8]

[edit] Bankruptcy law

When a debtor files for bankruptcy, and "the debtor is insolvent, creditors generally agree to accept a pro rata share of what is owed to them. If the debtor has any remaining funds, the money is divided proportionately among the creditors, according to the amount of the individual debts." [9] "A creditor of an insolvent estate is to be paid pro rata with creditors of the same class." [10]

In the U.S. Bankruptcy Court practice, the creditors often agree to settle for a pro-rata share at the so-called 341 meeting of creditors, named for the section of the Bankruptcy Code, without a formal hearing before a judge, and sometimes without even a trustee present.[citation needed]

[edit] Worker's pay and benefits

A worker's part-time work, overtime pay, and vacation time are typically calculated on pro rata basis. [11] [12] [13]

Under US Federal regulations, a government worker has the right, that, "When an employee's service is interrupted by a non-leave earning period, leave is earned on a pro rata basis for each fractional pay period that occurs within the continuity of employment." [14]

The American Federation of Teachers (AFT), a US labor union, argues that all part-time or adjunct instructors should get pro-rata pay for teaching college courses. [15] This is an important issue, as of 2007, for part-time faculty. [16]

Irish secondary school teachers are entitled to pro-rata pay for part-time work. [17]

Under British employment law, "Regulations state that, where appropriate, the pro rata principle should be applied to any comparison ... to be given ... holiday." [18]

Likewise, in Tasmania, Australia, the law clearly grants workers the privilege of part-time benefits for leave of absence. [19] [20] This is granted under the Long Service Leave Act 1976. [21]

[edit] Investment laws

Under the Blue Sky Laws, the Uniform Commercial Code's usage of trade, and industry practice governing a wide variety of investments, interest and dividends are divided pro-rata.[citation needed]

In corporate securities practice, "a pro-rata dividend means that every shareholder gets an equal proportion for each share he or she owns." [5]

In banking, "Pro-rating also refers to the practice of applying interest rates to different time frames. If the interest rate was 12% per annum, you could pro-rate this number to be 1% a month (12%/12 months)." [5]

[edit] Insurance

In insurance, pro rata is used to determine risk based on the time the insurance policy is in effect. [22] It may also be used to describe proportional liability when more than one person is responsible for a loss or accident. [23]

[edit] College tuition

When a college student withdraws, colleges almost always refund tuition payments on a pro-rata basis. [24]

[edit] References

  1. ^ Farlex's The Free Dictionary
  2. ^ Answers.com. Accessed May 29, 2008.
  3. ^ Investor Words web site
  4. ^ Ehrich, Eugene, Amo, Amas, Amat and More, p. 233 (New York, Harper Row 1985). ISBN 0-06-27217-1.
  5. ^ a b c Investopedia web site. Accessed May 29, 2008.
  6. ^ The Free Dictionary. Accessed May 29, 2008.
  7. ^ [1] State of Maine government web site pdf file listing of Pro Rata Share Responsibility.
  8. ^ ClickDocs UK Legal web site (quote marks changed to italics for clarity).
  9. ^ Jrank.org legal web site
  10. ^ WWLIA legal web site
  11. ^ John Steven Niznik, Pro Rata, at Job Search Tech web site.
  12. ^ TheSite.org web page about pro-rata payment for part-time work
  13. ^ Uk Answers.com blog
  14. ^ US Department of Commerce Office of Human Resources Management official web site, citing 5 CFR 630.204.
  15. ^ AFT web site
  16. ^ California Part-time Faculty Association official web site page regarding pro-rata pay
  17. ^ Association of Secondary Teachers Ireland official web site page regarding pro-rata pay
  18. ^ NASUWT web site Holiday is used here in the British sense of the American vacation.
  19. ^ Tasmanian Government official web site
  20. ^ [2] Tasmanian Government official web site pdf file.
  21. ^ Tasmanian Legislation online official web site
  22. ^ InsuranceZA web site
  23. ^ Jrank.org legal web site
  24. ^ See, e.g., [3]

[edit] See also

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