Bohling v. Corsi

• Decision Date: 12 August 1953
• Citation: 204 Misc. 778
• Parties: Leo H. Bohling, Plaintiff,<BR>v.<BR>Edward Corsi, as Industrial Commissioner, et al., Defendants.
• Court: New York Supreme Court

204 Misc. 778

Leo H. Bohling, Plaintiff,

v.Edward Corsi, as Industrial Commissioner, et al., Defendants.

August 12, 1953.

Merwin K. Hart, Jr., for plaintiff.

Nathaniel L. Goldstein, Attorney-General (Wendell P. Brown and Francis R. Curran of counsel), for defendants.

RINGROSE, J.

The plaintiff in this action seeks a judgment declaring unconstitutional the provisions of the Unemployment Insurance Law (Labor Law, § 562) relating to the termination of the liability of an employer for the 2.7% pay roll tax. The legal conclusions alleged in the complaint are denied in the answer, and judgment declaring the challenged provisions constitutional, is sought by the defendants. Both parties move for judgment on the pleadings.

The undisputed facts are: The plaintiff, a building contractor in the city of Utica, New York, employed four persons from April, 1947, to January, 1951. Sometime in the first quarter of the calendar year 1951, the number of the plaintiff's employees was reduced to less than four and he has employed less than four persons at all times since.

As the employer of four or more persons, the plaintiff was liable under the Unemployment Insurance Law (Labor Law, art. 18) for the 2.7% pay roll tax and remains liable even though the number of his employees is less than four, until such time as he is released from liability by the Commissioner of Labor. The plaintiff has and is being assessed a pay roll tax at the specified rate, which will continue for a year or more after the date he ceased to employ four or more persons, and he is prohibited by the statute from denying his liability under said Labor Law, or terminating said tax liability, until he has paid a pay roll tax at the aforesaid rate for a period of at least one year after he ceased to employ four persons.

It appears from the complaint to be the contention of the plaintiff that the statute is discriminatory and therefore unconstitutional, in that it prescribes an arbitrary and unreasonable formula for determining the tax liability or nonliability as between employers employing three and those employing more than three persons, following a change in the status of an employer by the reduction of the number of his employees to less than four. Thus the issue is limited to the legality of the continuing liability for the tax following a change in status by a reduction in the number of employees. It is assumed in the absence of an allegation to the contrary that plaintiff never filed a written application with the commissioner to be released from liability pursuant to section 562 of the Labor Law.

The pertinent provisions of the Unemployment Insurance Law (Labor Law, §§ 560, 562) on this issue, are as follows: "§ 560. Terms of coverage 1. Liability. Any employer shall become liable for contributions under this article if he employs in all of his several places of employment in the state four or more persons in employment on fifteen or more days in any calendar year, except that persons employed in personal or domestic service in private homes shall be considered separately and that an employer shall become liable for contributions with respect to them only if he employs in such service four or more persons within the period and under the conditions above provided. Such liability for contributions shall commence on the first of such fifteen days of employment. An employer who, by operation of law, becomes successor to an employer liable for contributions shall become liable for contributions on the day of his succession. This provision shall not affect such successor's liability as otherwise prescribed by law for unpaid contributions due from his predecessor." "§ 562. Termination of coverage 1. Required coverage. Any employer who has once become liable for contributions under this article shall cease to be liable under the following conditions: a. If he files a written application with the commissioner during the fourth calendar quarter, he may be released from coverage as of the first day of the next calendar quarter provided the commissioner finds that the employer has not employed four or more persons in employment within each of fifteen or more days in the completed calendar year in which the application is filed. b. If he files a written application with the commissioner in any other calendar quarter of the year he may be released from coverage as of the first day of the calendar quarter following the filing of the application provided the commissioner finds the employer has, before such day, in neither the calendar year in which the application is filed nor in the preceding calendar year, employed four or more persons in employment within each of fifteen or more days."

Section 562 as originally enacted was contained in subdivision 3 of section 502 of the Labor Law, and read as follows: "`Employer' means any person, partnership, firm, association, public or private, domestic or foreign corporation, the legal representatives of a deceased person, or the receiver, trustee or successor of a person, partnership, firm, association, public or private, domestic or foreign corporation (excluding the state of New York, municipal corporations and other governmental subdivisions), who or whose agent or predecessor in interest has employed at least four persons in any employment subject to this article within each of thirteen or more calendar weeks in the year nineteen hundred thirty-five or any subsequent calendar year; * * * shall make a newly-subject employer subject for all purposes as of January first of the calendar year in which such employment occurs." It was also therein provided: "Any employer subject to this article shall cease to be subject hereto only upon a written application by him and after a finding by the commissioner that he has not within any calendar week within the last completed calendar year employed four or more persons in employment subject thereto. Any employer (of any person within the state) not otherwise subject to this article shall become fully subject hereto, upon filing by such employer with the commissioner of his election to become fully subject hereto for not less than two calendar years, subject to written approval of such election by the commissioner."

It is the contention of the defendant that subdivision 1 of section 562 of the Labor Law was designed to avoid inequitable treatment of employees entitled to benefits, which resulted from the procedure by which an employer's liability for the tax was terminated, and also to facilitate the administration of the law.

Under the present law (Labor Law, § 527, L. 1951, ch. 645, eff. June 4, 1951) an applicant for unemployment insurance must have had at least twenty weeks of employment in the fifty-two week period preceding the filing of his claim, and must have earned an average wage of at least $15 per week in at least twenty weeks of employment in such fifty-two week period. Prior to that time a claimant was required to have earned a certain amount of wages in covered employment during his "base year", which was the calendar year immediately preceding the beginning of a benefit year (L. 1944, ch. 705). "Benefit year" was defined as the period from the first Monday falling in the month of June in each calendar year to and including Sunday which follows the last Monday falling in the month of May in the next calendar year (Labor Law, §§ 520, 521, 590, L. 1944, ch. 705).

The reason for the enactment of present subdivision 1 of section 562, and its predecessor, is thus self-evident. It avoids the situation of an employee being in covered employment for a portion of a "base year" and not for the entire year, which might reasonably occur where an employer subject to the tax reduces the number of his employees to less than four during the year and could terminate his liability at the end of that year instead of at the close of the next calendar year as provided under the present section. As suggested in the brief of the Attorney-General, without the provisions of subdivision 1 of section 562, "an employer who became subject to the law on July 1, 1952, by reason of having employed four or more persons within each of fifteen or more days commencing on that date, would be subject to the tax for the remainder of the year 1952, but if he did not employ four or more persons commencing on January 1, 1953, his employees might not be covered under the statute for several months during that year, until such time as the employer again employed four or more persons for the required period of time."

The foregoing illustration appears more visionary than real in view of the present minimum wage requirement necessary to qualify for unemployment insurance benefits (Labor Law, § 527, L. 1951, ch. 645), although the amount thereof might be less except for the amendment.

The question posed is whether the law provides a reasonable and rational basis of classification of employers subject to the tax...