Bleich v. Maimonides School

• Decision Date: 16 June 2006
• Citation: 447 Mass. 38,849 N.E.2d 185
• Parties: Leon BLEICH v. MAIMONIDES SCHOOL & another.<SMALL><SUP>1</SUP></SMALL>
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

849 N.E.2d 185

447 Mass. 38

Leon BLEICH v. MAIMONIDES SCHOOL & another.¹

Supreme Judicial Court of Massachusetts, Norfolk.

Argued February 9, 2006.

Decided June 16, 2006.

Michael Magerer, Needham, for the plaintiff.

Michael R. Coppock, Boston, for Maimonides School.

James J. Arguin, Assistant Attorney General, for Division of Unemployment Assistance.

Present: MARSHALL, C.J., GREANEY, SPINA, COWIN, SOSMAN, & CORDY, JJ.

MARSHALL, C.J.

The division of unemployment assistance (division)² determined that Maimonides School (Maimonides),³ whose corporate purposes include maintaining a place of worship according to Orthodox Jewish rites and instructing Jewish students in the teachings of Orthodox Judaism, is exempt from the State unemployment tax as a "church or convention or association of churches, or 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." G.L. c. 151A, § 6(r). That determination is challenged in this appeal by a former employee of Maimonides who applied for and was denied unemployment benefits. Because we conclude that Maimonides is both "operated primarily for religious purposes" and "principally supported" by Jewish synagogues and other Jewish organizations, we now affirm.

1. Background. From March 1, 1988, until his discharge on October 18, 2002, the plaintiff, Leon Bleich, was employed by Maimonides as a tuition and scholarship administrator. Following his discharge, the plaintiff filed a claim for unemployment benefits, which the division denied. The plaintiff appealed to the division's hearings department. After a hearing, a review examiner determined that the plaintiff was ineligible for unemployment benefits because the wages he earned from Maimonides were exempt from taxation pursuant to G.L. c. 151A, § 6 (r).⁴ He appealed from that determination to the division's board of review (board), which denied his application for further review, making the decision of the review examiner the final decision of the board. See G.L. c. 151A, § 41(c) (if application for review is denied, decision is "deemed" decision of board for purpose of judicial review). See also Starks v. Director of the Div. of Employment Sec., 391 Mass. 640, 640, 462 N.E.2d 1360 n. 26 (1984) (where board denies application for review, review examiner's findings treated as findings of board).

The plaintiff sought judicial review of the board's determination pursuant to G.L. c. 151A, § 42.⁵ A judge in the Brookline Division of the District Court Department affirmed the board. Relying on Ursuline Academy, Inc. v. Director of the Div. of Employment Sec., 383 Mass. 882, 420 N.E.2d 326 (1981), the judge concluded that to deny Maimonides the statutory exemption for unemployment compensation contributions would violate the establishment and free exercise clauses of the First Amendment to the United States Constitution and "various" provisions of the Massachusetts Constitution, because a contrary ruling would prefer a hierarchical religion, such as the Roman Catholic Church, over the Jewish religion. The plaintiff appealed, and we transferred the case here on our own motion. For reasons different from those of the judge, we affirm.

2. Facts. We first describe Maimonides, supplementing as necessary the findings of the review examiner with the unchallenged evidence before him. The review examiner found, and the record supports, the following:

"[Maimonides] was incorporated in 1938 for the purpose of maintaining a place of worship according to the Orthodox Hebrew rite, the instruction of Jewish youth in the [tenets] of the Jewish religion and, among other things, to maintain and operate a school for the dissemination and teaching of Hebrew religious and literary works based upon Orthodox traditional Judaism together with English secular education in coordination with and under the supervision of the public school authorities and covering all subjects taught in the elementary and high school grades of our public schools."

Maimonides is governed by a board of directors who are appointed by members of the Maimonides corporation, described by the executive vice-president of Maimonides, Leora Joseph, as a small "self-perpetuating group" that acts as the school's "overseers." The board of directors, in turn, appoints a "school committee," which oversees the school's curriculum. According to Joseph, teaching the tenets of Orthodox Judaism is an integral part of the school's curriculum.⁶ The senior administrators of the school are required to be Orthodox Jews, approximately fifty per cent of the faculty is Jewish, and all teachers of Jewish instruction are Orthodox Jews. All students are required to participate in daily worship services led in a synagogue on the school's premises by Orthodox rabbis. The school also offers extracurricular programs related to the Jewish faith. Maimonides has close relationships with Orthodox synagogues in the Boston area, from which it recruits many of its students. The synagogues, which are separate entities, are not involved in the internal policies or daily governance of Maimonides, but collaborate with each other and with the school. Joseph described the school's relationships with the synagogues as "supported relationships of recruitment, of exchanging personnel, of getting speakers, of community building, and community relations." Tuition is the main source of the school's funding, although Maimonides engages in its own fundraising and, as found by the review examiner, receives "substantial funding" from Combined Jewish Philanthropies.

Maimonides employs approximately 120 people full time and twenty part time. It does not make contributions to the Federal or State unemployment systems, in accordance with Federal and State determinations to that effect.⁷

3. Discussion. In 1935, responding to widespread unemployment, Congress established a cooperative Federal-State program to provide benefits to unemployed workers. See St. Martin Evangelical Lutheran Church v. South Dakota, 451 U.S. 772, 775, 101 S.Ct. 2142, 68 L.Ed.2d 612 (1981). The program, which now appears as the Federal Unemployment Tax Act (FUTA), 26 U.S.C. §§ 3301-3311 (2000),⁸ imposes a Federal excise tax on all employers, except those specifically exempted by Congress. See California v. Grace Brethren Church, 457 U.S. 393, 396-397, 102 S.Ct. 2498, 73 L.Ed.2d 93 (1982). Congress further provided that employers could avoid a significant portion of the federal tax by payment into federally approved State unemployment programs where those were available.⁹ See id. at 397, 102 S.Ct. 2498. Massachusetts quickly took advantage of the Federal incentive by formulating its own unemployment benefits program, G.L. c. 151A, inserted by St.1935, c. 479, § 5, which governs unemployment benefits in the Commonwealth. All other States have similarly enacted unemployment compensation laws providing at least the minimum coverage mandated by FUTA. See St. Martin Evangelical Lutheran Church v. South Dakota, supra at 775, 101 S.Ct. 2142 n. 3.

Under G.L. c. 151A, employers¹⁰ cover the costs of unemployment benefits by making payroll tax contributions to the Commonwealth for credit to the unemployment compensation fund, G.L. c. 151A, § 13, unless the service performed by their employees is excluded from the definition of "employment" by the provisions of G.L. c. 151A, §§ 6 or 6A. See G.L. c. 151A, § 14 (establishing method for calculation of payroll taxes); G.L. c. 151A, § 14A (alternative payment option for nonprofit organizations and governmental employers to make contributions); §§ 6, 6A (excluding certain services from definition of "employment"). Cf. 26 U.S.C. § 3309 (exempting from mandatory State coverage services performed for certain employers or by certain individuals). To be eligible for unemployment benefits, an individual must satisfy the requirements of G.L. c. 151A, § 24, which provides in part that the individual must have been paid "wages" by his former employer that constituted "employment" for purposes of G.L. c. 151A. See G.L. c. 151A, § 1(k), (s) (A).

The issue in this case is whether the division properly determined that the services provided by the plaintiff to Maimonides fall within the employment exclusion of G.L. c. 151A, § 6(r),¹¹ thereby excluding the plaintiff from unemployment benefits.¹² We review the board's decision "to determine whether the review examiner applied the correct legal principles in denying unemployment compensation benefits to the plaintiff [and] whether [his] findings are supported by substantial evidence." Quintal v. Commissioner of the Dep't of Employment & Training, 418 Mass. 855, 858-859, 641 N.E.2d 1338 (1994). See Guarino v. Director of the Div. of Employment Sec., 393 Mass. 89, 92, 469 N.E.2d 802 (1984). See also G.L. c. 30A, § 14(7).

The plaintiff maintains that Maimonides does not qualify for exemption under the statute because the school is not a "church" as contemplated by the first prong of G.L. c. 151A, § 6(r). See note 11, supra. As to the second prong of G.L. c. 151A, § 6(r), the plaintiff concedes that Maimonides is "operated primarily for religious purposes," but argues that Maimonides is not "operated, supervised, controlled, or principally supported by a church or convention or association of churches," and therefore not exempt. In this regard the plaintiff notes that Maimonides is entirely internally governed; is not bound by the rulings or authority of any other religious body; sets its own funding, staffing, and curriculum determinations; and is financially supported in the main by tuition, its own fundraising, and an endowment. The plaintiff further argues that, to the extent that it cooperates with any external body, it coordinates with and is under the supervision of the public school authorities with respect to teaching in its elementary and...