New Capitol Bar & Grill Corp. v. Division of Employment Sec., Dept. of Labor and Industry

• Decision Date: 21 October 1957
• Docket Number: No. A--17,A--17
• Citation: New Capitol Bar & Grill Corp. v. Division of Employment Sec., Dept. of Labor and Industry, 135 A.2d 465, 25 N.J. 155 (N.J. 1957)
• Court: New Jersey Supreme Court
• Parties: NEW CAPITOL BAR & GRILL CORP., Petitioner-Appellant, v. DIVISION OF EMPLOYMENT SECURITY, DEPARTMENT OF LABOR AND INDUSTRY, State of New Jersey, Defendant-Respondent.

Page 155

25 N.J. 155

135 A.2d 465

NEW CAPITOL BAR & GRILL CORP., Petitioner-Appellant, v. DIVISION OF EMPLOYMENT SECURITY, DEPARTMENT OF LABOR AND INDUSTRY, State of New Jersey, Defendant-Respondent.

No. A--17.

Supreme Court of New Jersey.

Argued Sept. 23, 1957.

Decided Oct. 21, 1957.

Richard T. McDonough, Newark, argued the cause for petitioner-appellant.

Herman D. Ringle, Trenton, argued the cause for defendant-respondent.

The opinion of the court was delivered by

WEINTRAUB, C.J.

On June 29, 1950 Joseph McDonough contracted to buy the tavern business of Club 850, Inc. He formed a corporation, New Capitol Bar & Grill Corp., and assigned the contract to it. The sale was consummated on July 11, 1950, at which time New Capitol took over, hiring one employee of the seller a few hours thereafter on the same day and continuing the business without interruption.

It is conceded that at the time of sale, Club 850, Inc. was an employer subject to the Unemployment Compensation Law, R.S. 43:21--1 et seq., N.J.S.A. Upon the basis of its own operations, New Capitol would not be a subject employer during the period here involved. The question is whether it nonetheless became one because its vendor was. On July 6, 1951 the Division determined that New Capitol had thus become a subject employer. In 1955 New Capitol paid $1,380.73 in contributions, penalties and interest for the years 1950 through 1953. On January 20, 1956 it applied for a refund under N.J.S.A. 43:21--14(f), which the Commissioner refused. New Capitol appealed to the Appellate Division, and we certified the appeal on our own motion before consideration of it by the Appellate Division.

N.J.S.A. 43:21--19(h)(2) provides that 'Employer' means 'Any employing unit which acquired the organization, trade or business, or substantially all the assets thereof, of another which at the time of such acquisition was an employer subject to this chapter.' New Capitol agrees that it would come within this definition if it had been an 'employing unit' at the moment of acquisition, but urges it was not because it first engaged an employee a few hours thereafter and hence was not an employing unit 'at the time of such acquisition'. It stresses the definition of 'employing unit' in the section cited above:

'(g) 'Employing unit' means any * * * corporation * * * which has or subsequent to January 1, 1936, had in its employ 1 or more individuals performing services for it within this State. * * *'

In support, New Capitol cites Hattersley v. Division of Employment Security, 19 N.J. 487, 117 A.2d 607 (1955). The facts in Hattersley (19 N.J. at page 490, 117 A.2d at page 608,) are readily distinguishable. There the prior business was 'idle for lack of orders' and the 'lease * * * had expired.' The shop, according to Hattersley, 'was virtually shut down.' He negotiated a new lease, and although he took over the physical assets and received the seller's covenant not to compete, he did not acquire any books or records, customer lists or accounts receivable, nor did he assume the accounts payable. Hattersley worked alone and hired his first employee about six weeks after title was closed. We need not now consider which of the facts just recited are significant in cases of this kind; it is enough to say that unlike the present case there was no continuity in the operation of the business or of any employment therein.

Hattersley gave crucial effect to the following interpretation of 'employing unit' (19 N.J. at page 492, 117 A.2d at page 609,)

'* * * The language employed by the Legislature is, we believe, susceptible of but one meaning: the status of the purchaser as an 'employer' is fixed on the date of the purchase and not by events subsequent thereto. * * *'

Accordingly it was said that, assuming Hattersley 'was truly a successor to the business carried on' by his vendors, he nonetheless was not a subject employer because he did not in fact have an employee 'on the date of the purchase.' New Capitol construes Hattersley to mean that the purchaser must have an employee at the moment of purchase, while the Division urges that Hattersley would be satisfied if there were an employment at any time on the day of purchase, and alternatively, that if Hattersley is so sweeping as to deny coverage where business operations and employment are continuous as a practical matter, it should be reconsidered.

The Division forcefully depicts the anomalous consequences of an interpretation which would make continued coverage depend upon whether the purchaser did or did not have an employee at the moment of acquisition of a going concern. In the not uncommon situation in which the purchase of a going concern is made by an individual or a newly formed corporation not having an employee at that moment, it would follow that the rights of the seller's employees (who might well number in the thousands), would be grossly disturbed if a short period intervened between the sale and their technical re-employment by the purchaser, notwithstanding that realistically their employment was continuous and uninterrupted. For example, if the employees were short of 17 base weeks, they could not reach that minimum during the first 20 weeks of operation of the new employer, and if the purchase was effected in the last 19 weeks of a calendar year, no credit could be acquired until the 20th week of the following year. It...