Sheppard v. State, Dept. of Employment

• Decision Date: 26 August 1982
• Docket Number: No. 13737,13737
• Parties: Bradley R. SHEPPARD, dba B. R. Sheppard Co., Claimant-Appellant, v. STATE of Idaho, DEPARTMENT OF EMPLOYMENT, Defendant-Respondent.
• Court: Idaho Supreme Court

Page 643

650 P.2d 643

103 Idaho 501

Bradley R. SHEPPARD, dba B. R. Sheppard Co., Claimant-Appellant, v. STATE of Idaho, DEPARTMENT OF EMPLOYMENT, Defendant-Respondent.

No. 13737.

Supreme Court of Idaho.

Aug. 26, 1982.

Paul S. Street and Gerald T. Husch, Moffatt, Thomas, Barrett & Blanton, Boise, for claimant-appellant.

David H. Leroy, Atty. Gen., Carol L. Brassey, Deputy Atty. Gen., Dept. of Employment, Boise, for defendant-respondent.

SHEPARD, Justice.

This is an appeal from an order of the Industrial Commission holding that the claimant-appellant, Bradley R. Sheppard as a covered employer is required to pay unemployment compensation taxes. We affirm.

The facts are uncontroverted. In the spring of 1979, Sheppard formed a business to install lawn sprinkler systems. The business is seasonal, operating only from April to October of each year. His installations water lawns and shrubbery at residences, golf courses, and commercial establishments. He has done no work in the agricultural or horticultural fields and does not contend that his business falls within the agricultural exemption to unemployment compensation taxation. In May, 1979, Sheppard had three employees, one of which was fired after a week's work, and the remaining two quit in late August to return to college. Total wages during that period were approximately $5800. Respondent State does not dispute Sheppard's contention that his employees were "always" students.

This controversy began when the Department of Employment issued a determination that Sheppard was subject to unemployment insurance reporting. Sheppard appealed to a hearing examiner and, receiving an adverse decision, appealed to the Industrial Commission, which affirmed Sheppard's liability. This appeal follows. From the outset Sheppard has asserted that although his business does not fall within the agricultural exemption to unemployment compensation taxes, nevertheless his business is similar to agriculture and therefore should be exempt.

I.C. Title 72, Chap. 13 (the Employment Security Law), is a comprehensive legislative plan establishing eligibility for unemployment compensation and collecting taxes to defray the costs. Overly simplified, it defines "covered employers", I.C. § 72-1315, who are required to make "contributions", I.C. § 72-1314, to the employment security fund, I.C. §§ 72-1345 to -1353. Claimants who meet eligibility requirements are then paid from the funds. I.C. §§ 72-1365 to -1370. The act provides numerous exemptions from "covered employers", and employees of exempt employers are not eligible for benefits. I.C. § 72-1367.

At the outset Sheppard asserts that requiring him as a "covered employer" to pay unemployment compensation taxes violates the constitutional equal protection rights of his employees. He argues that absent those taxes, his employees would receive a higher wage, that because of the employees' status, they can never receive benefits, and hence there is a resultant discrimination. Respondent State asserts Sheppard has no standing to maintain such an argument. We agree.

There is no indication in the record that Sheppard's employees do or would seek to have the business exempted from unemployment compensation taxes. Employees are not parties to this action and we have been cited to no case in which an employee sought to have his employer exempted from the payment of unemployment compensation taxes. Prior cases generally involve employees arguing against unemployment compensation tax exemptions granted to their employer. See Florek v. Sparks Flying Service, Inc., 83 Idaho 160, 359 P.2d 511 (1961) (agricultural exemption); Romero v. Hodgson, 319 F.Supp. 1201 (N.D.Cal.1970), aff'd, 403 U.S. 901, 91 S.Ct. 2215, 29 L.Ed.2d 678 (1971) (agricultural exemption); Doe v. Hodgson, 478 F.2d 537 (2d Cir.), cert. denied 414 U.S. 1096, 94 S.Ct. 732, 38 L.Ed.2d 555 (1973) (agricultural exemption); Fisher v. Secretary of United States Dep't of Health, Education and Welfare, 522 F.2d 493 (7th Cir. 1975) (domestic workers' exemption); Von Stauffenberg v. Dist. Unemployment Compensation Bd., 459 F.2d 1128 (D.C.Cir.1972) (religious and charitable exemption). But cf. Department of Employment v. Champion Bake-N-Serve, 100 Idaho 53, 592 P.2d 1370 (1979).

Sheppard argues that the cases of Craig v. Boren, 429 U.S. 190, 97 S.Ct. 451, 50 L.Ed.2d 397 (1976), Singleton v. Wulff, 428 U.S. 106, 96 S.Ct. 2868, 49 L.Ed.2d 826 (1976), and similar cases, support his argument that he has standing to assert the constitutional rights of his employees. We disagree. In Craig, a beer vendor was held to have standing to assert the constitutional rights of 18-to-21 year old males who wanted to but were denied the right to buy beer. In Singleton, doctors were held to have standing to assert the constitutional rights of their patients who were denied medicaid funds for abortions. The Court held in those cases that the interests of the parties to the lawsuit and third parties whose constitutional rights were being raised, were virtually identical. In the instant case, the interests of Sheppard and his employees do not necessarily so coincide, since if Sheppard were to prevail, his employees might be denied unemployment benefits for which they might be eligible if otherwise qualified.

As stated by the Court in Craig:

"[O]ur decisions have settled that limitations on a litigant's assertion of jus tertii are not constitutionally mandated, but rather stem from a salutary 'rule of self-restraint' designed to minimize unwarranted intervention into controversies where the applicable constitutional questions are ill-defined and speculative." 429 U.S. at 193, 97 S.Ct. at 455.

We deem Sheppard's assertion of the constitutional rights of his employees too speculative to be raised here. Our holding today is limited to whether the exemptions violate the constitutional rights of a "covered employer" and we do not touch or pass upon the rights of the employees to bring their own suit challenging inclusion or exclusion from unemployment compensation benefits. Cf. State v. Goodrick, 102 Idaho 811, 641 P.2d 998 (1982). As to actions by employees challenging the agricultural exemption in the context of unemployment compensation, see Florek v. Sparks Flying Service, supra; Romero v. Hodgson, supra; Doe v. Hodgson, supra. As to cases involving the agricultural exemption in the context of workmen's compensation, compare Gutierrez v. Glaser Crandell Co., 388 Mich. 654, 202 N.W.2d 786, 787 (1972); and Benson v. North Dakota Workmen's Comp. Bureau, 283 N.W.2d 96 (N.D.1979) with State ex rel. Hammond v. Hager, 160 Mont. 391, 503 P.2d 52 (1972), appeal dismissed, 411 U.S. 912, 93 S.Ct. 1548, 36 L.Ed.2d 303 (1973); Otto v. Hahn, 209 Neb. 114, 306 N.W.2d 587 (1981); and Cueto v. Stahmann Farms, Inc., 94 N.M. 223, 608 P.2d 535 (1980).

We now turn to Sheppard's assertion that he individually is denied equal protection under the provisions of both the Fourteenth Amendment to the United States Constitution, and the Idaho Constitution, Art. 1, § 2. There is no contention that this case involves either a fundamental right or a suspect classification so as to trigger the strict scrutiny test. Twin Falls Clinic v. Hamill, 103 Idaho 19, 644 P.2d 341 (1982); Idaho Quarterhorse Breeders Ass'n, Inc. v. Ada County Fair Board, 101 Idaho 339, 612 P.2d 1186 (1980). Sheppard asserts that while his equal protection argument under the Fourteenth Amendment to the United States Constitution is to be measured by the traditional rational basis test, nevertheless, Idaho's equal protection guarantee, Idaho Const., Art. 1, § 2, establishes a middle tier level of scrutiny falling between the rational basis and the strict scrutiny tests. To a limited extent, we agree.

The means-focus test as enunciated by this Court in Jones v. State Board of Medicine, 97 Idaho 859, 555 P.2d 399 (1976), cert. denied, 431 U.S. 914, 97 S.Ct. 2173, 53 L.Ed.2d 223 (1977), establishes a standard of review under Idaho's equal protection guarantee separate, distinct, and to be applied independently of the standards applied under the Fourteenth Amendment to the United States Constitution. We note other courts which have imposed a stricter standard of review under a state constitution as contrasted with the two tier analysis of the United States Supreme Court of the Fourteenth Amendment to the United States Constitution. See e.g., Commercial Fisheries Entry Comm'n v. Apokedak, 606 P.2d 1255 (Alaska 1980); DeRonde v. Regents of University of California, 28 Cal.3d 875, 172 Cal.Rptr. 677, 625 P.2d 220 (1981), cert. denied, 454 U.S. 832, 102 S.Ct. 130, 70 L.Ed.2d 110 (1981); Taxpayers Ass'n of Weymouth Township, Inc. v. Weymouth Township, 80 N.J. 6, 364 A.2d 1016 (1976), appeal dismissed, 430 U.S. 977, 97 S.Ct. 1672, 52 L.Ed.2d 373 (1977); Benson v. North Dakota Workmen's Comp. Bureau, 283 N.W.2d 96 (N.D.1979). See also City of Mesquite v. Aladdin's Castle, Inc., 455 U.S. 283, 102 S.Ct. 1070, 71 L.Ed.2d 152 (1982) (questioning the continuing validity of the standard of review enunciated in Reed v. Reed, 404 U.S. 71, 92 S.Ct. 251, 30 L.Ed.2d 225 (1971), and Royster Guano Co. v. Virginia, 253 U.S. 412, 40 S.Ct. 560, 64 L.Ed. 989 (1920), but suggesting that Texas could require the imposition of such a standard). See generally H. Linde, First Things First: Rediscovering the States' Bills of Rights, 9 U.Balt.L.Rev. 379 (1980). However, for the reasons outlined below, we hold that the means-focus test is inappropriate under the facts of this case.

This Court has long deferred to legislative decisions regarding classifications for taxes and their exemptions. Justus v. Board of Equalization of Kootenai County, 101 Idaho 743, 620 P.2d 777 (1980); School Dist. No. 25 v. State Tax Comm'n, 101 Idaho 283, 612 P.2d 126 (1980); Evans v. Idaho State Tax Comm'n, 95 Idaho 54, 501 P.2d 1054 (1972); Leonardson v. Moon, 92 Idaho 796, 451 P.2d 542 (1969); Williams v. Baldridge, 48...