Rojas v. Fitch

Decision Date02 June 1997
Docket NumberNos. 96-2328,97-1089,s. 96-2328
Citation127 F.3d 184
PartiesUnempl.Ins.Rep. (CCH) P 22,198 Guadalupe ROJAS, Plaintiff-Appellant, v. Lawrence FITCH, et al., Defendants-Appellees. Guadalupe ROJAS, Plaintiff-Appellee, v. Dr. Lee H. ARNOLD, et al., Defendants-Appellants. . Heard
CourtU.S. Court of Appeals — First Circuit

John W. Dineen, with whom Yesser, Glasson & Dineen, Providence, RI, was on brief for appellant Guadalupe Rojas.

Scott Glabman, Attorney, Washington, DC, with whom J. Davitt McAteer, Acting Solicitor of Labor, Mount Hope, WV, Charles D. Raymond, Associate Solicitor for Employment and Training, Legal Services, and Harry L. Sheinfeld, Counsel for Litigation, U.S. Department of Labor, Office of the Solicitor, Washington, DC, were on brief for appellee Cynthia A. Metzler, Acting Secretary of Labor.

Rebecca Tedford Partington, Assistant Attorney General, Providence, RI, for appellee Dr. Lee Arnold, Director, Rhode Island Department of Labor and Training.

Michael G. Dolan, with whom Cadwalader, Wickersham & Taft, and Gerard P. Cobleigh, Warwick, RI, were on brief for appellee Salvation Army.

Before TORRUELLA, Chief Judge, CAMPBELL, Senior Circuit Judge, and BOUDIN, Circuit Judge.

TORRUELLA, Chief Judge.

Plaintiff-Appellant Guadalupe Rojas, a former employee of the Salvation Army, sought a declaratory judgment that exemptions for religious employers under the Rhode Island unemployment tax statute and under the Federal Unemployment Tax Act ("FUTA"), 26 U.S.C. §§ 3301-3311, violate the Establishment Clause and the Equal Protection Clause of the federal Constitution, as well as Article I, § 3 of the Rhode Island Constitution, which protects the Freedom of Religion. She named as defendants the director of the Rhode Island Department of Employment and Training ("DET") and the Secretary of the federal Department of Labor. The Salvation Army intervened as a defendant. The district court rejected all of Rojas's substantive arguments for declaratory relief, see Rojas v. Fitch, 928 F.Supp. 155, 162-67 (D.R.I.1996), and now, on appeal, she reasserts her federal Establishment Clause and Equal Protection claims. We affirm.

BACKGROUND

The following facts are not disputed. Rojas was a paid employee of the Salvation Army, serving as a social case worker from 1988 to 1994, except for a short interruption in 1990 and 1991 when she worked for Catholic Social Services. Rojas was not, and was not required to be, a soldier or member of the Salvation Army when employed as a case worker. The Salvation Army terminated her employment on March 18, 1994, citing financial constraints.

Approximately one month after her termination, Rojas applied for unemployment insurance benefits from the DET. The DET found that Rojas was ineligible because her former employer, the Salvation Army, was exempt from contributing to Rhode Island's unemployment insurance scheme under sections 28-42-8(4) and 28-44-11 of the Rhode Island General Laws. 1 Pursuant to the exemption for religious employers under section 28-42-8(4), no taxes were withheld from Rojas's wages by the Salvation Army, and her income was not reported to the DET. The DET's denial of benefits was upheld by a DET referee after a hearing, and later the referee's determination was upheld by the DET Board of Review.

On September 9, 1994, Rojas initiated an action in federal district court against the Director of the DET, seeking declaratory invalidation of the exemption under either FUTA establishes a federal-state unemployment benefit scheme requiring employers to pay a federal excise tax, see 26 U.S.C. § 3301 (computing the tax as a percentage of wages of covered employees), but encouraging the development of state unemployment insurance programs in the following ways: first, employers paying into a qualifying state unemployment fund are entitled to a credit on the federal tax, see 26 U.S.C. § 3302, and second, a qualifying state is entitled to receive federal grants toward the cost of administering the state's unemployment compensation program, see 42 U.S.C. § 503. Rhode Island's unemployment fund qualified for participation in the FUTA system.

                the Establishment Clause, 2 the Equal Protection Clause, 3 or Article I, § 3 of the Rhode Island Constitution. 4  In an amended complaint, Rojas added the Secretary of the Department of Labor as a defendant, on the theory that FUTA's allowance of state exemptions for religious employers in the federal-state unemployment insurance system was an underlying cause of the Rhode Island exemption she challenged.  See 26 U.S.C. 3309(b) (FUTA provision listing permissible employer exemptions, including exemption for religious employers).  The Salvation Army was allowed to intervene, without objection, as a defendant
                

FUTA exempts certain classes of employees from mandatory state coverage by a qualifying state plan. See 26 U.S.C. § 3309(b). The current scope of exemptions reflects amendments made to FUTA by Congress in 1976. The 1976 Amendments narrowed the set of employees who were exempt from mandatory state coverage, by requiring, for example, that previously exempted school employees be covered. In 1970 as well, the scope of FUTA exemptions was narrowed significantly by Congress when it repealed a broad exemption previously available to all nonprofit organizations. See generally California v. Grace Brethren Church, 457 U.S. 393, 397, 102 S.Ct. 2498, 2502, 73 L.Ed.2d 93 (1982) (describing the 1970 and 1976 FUTA Amendments).

Currently, the segments of the labor force that the states are not required to cover under FUTA section 3309(b) include persons "in the employ of (A) a church or convention or association of churches, or (B) an organization which is operated primarily for religious purposes and which is operated, supervised, controlled, or principally supported by a church or convention or association of churches." 26 U.S.C. § 3309(b)(1). Also exempt are employees of small nonprofit organizations (having fewer than four regular employees), see § 3309(c), elected state employees, see § 3309(b)(3), employees at certain rehabilitation facilities, see § 3309(4)(A), and inmates of custodial or penal institutions, see § 3309(b)(6).

The Rhode Island Employment Security Act ("RIESA"), R.I.G.L. §§ 28-42-1 et seq., exempts a variety of kinds of employment from coverage. See R.I. Gen. Laws § 28-42-8 (1995). Apparently tracking the language of FUTA, Section 28-42-8(4)(i) exempts service performed "in the employ of: (A) A church or convention or association of churches, or (B) an organization which is operated, supervised, controlled, or principally supported by a church or convention or association of churches." Other exempted employees under RIESA include certain insurance brokers, golf caddies, certain rehabilitation center employees, and certain real The defendants raised a number of procedural claims below, all of which were rejected by the district court. Upon reaching the merits of Rojas's suit, the district court rejected all of her claims. On appeal, Rojas argues that the Rhode Island and FUTA exemptions for religions violate the Establishment Clause and the Equal Protection Clause of the federal Constitution, while the appellees reassert their claims that jurisdiction is lacking because of the Tax Injunction Act, 28 U.S.C. § 1341 and that the appellant lacks standing.

estate brokers. R.I. Gen. Laws §§ 28-42-8(11), (9), (4)(B)(iii), (10).

DISCUSSION

Because we find that the appellant's claims fail on the merits, we need not reach either the claim put forward by the federal defendant-appellee that Rojas lacks standing to challenge FUTA or the claim put forward by the state defendant-appellee that the Tax Injunction Act bars federal jurisdiction over the suit. See Norton v. Mathews, 427 U.S. 524, 530-31, 96 S.Ct. 2771, 2774-75, 49 L.Ed.2d 672 (1976); Hachikian v. FDIC, 96 F.3d 502, 506 n. 4 (1st Cir.1996) (" 'It is a familiar tenet that when an appeal presents a jurisdictional quandary, yet the merits of the underlying issue, if reached, will in any event be resolved in favor of the party challenging the court's jurisdiction, then the court may forsake the jurisdictional riddle and simply dispose of the appeal on the merits.' ") (quoting United States v. Stoller, 78 F.3d 710, 715 (1st Cir.1996)).

I. The Establishment Clause Claim

At the core of the Establishment Clause is the idea that government cannot "favor religion over nonreligion, nor sponsor a particular sect, nor try to encourage participation in or abnegation of religion." Walz v. Tax Comm'n, 397 U.S. 664, 694, 90 S.Ct. 1409, 1424, 25 L.Ed.2d 697 (1970) (Harlan, J., concurring) (noting that while disagreements over applications of Establishment Clause are common, its core ideal is well established). In order to vindicate this constitutional guarantee, two tests have long guided judicial review of any challenged legislation: first, the law must have a purpose other than to advance or inhibit religion; second, the primary effect of the law must not be to advance or inhibit religion. See, e.g., Abington School District v. Schempp, 374 U.S. 203, 222, 83 S.Ct. 1560, 1571-72, 10 L.Ed.2d 844 (1963) ("The test may be stated as follows: what are the purpose and primary effect of the enactment? If either is the advancement or inhibition of religion then the enactment exceeds the scope of legislative power as circumscribed by the Constitution."). A third practical concern under the Establishment Clause is that the net effect of governmental programs avoid "excessive governmental entanglement with religion." Walz, 397 U.S. at 674, 90 S.Ct. at 1414.

These threads were united in the well-known three-part test in Lemon v. Kurtzman, 403 U.S. 602, 91 S.Ct. 2105, 29 L.Ed.2d 745 (1971), which provides: "First, the statute must have a secular legislative purpose; second, its principal or primary effect must be one that neither advances or inhibits religion; finally, ...

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