Sugar Plum Tree Nursery School v. Iowa Dept. of Job Service, 62784

• Decision Date: 14 November 1979
• Docket Number: No. 62784,62784
• Citation: 285 N.W.2d 23
• Parties: SUGAR PLUM TREE NURSERY SCHOOL, Appellee, v. IOWA DEPARTMENT OF JOB SERVICE, Appellant.
• Court: Iowa Supreme Court

Page 23

285 N.W.2d 23

SUGAR PLUM TREE NURSERY SCHOOL, Appellee, v. IOWA DEPARTMENT OF JOB SERVICE, Appellant.

No. 62784.

Supreme Court of Iowa.

Nov. 14, 1979.

Joseph L. Bervid and Harold D. Keenan, Des Moines, for appellant.

W. Kent Thomson and Alanson K. Elgar, Mount Pleasant, for appellee.

Considered by REYNOLDSON, C. J., and REES, HARRIS, McCORMICK, and McGIVERIN, JJ.

McCORMICK, Justice.

The question here is whether the day care workers of petitioner Sugar Plum Tree Nursery School are employed by a church within section 96.19(7)(a)(6)(a), The Code 1977, which exempts service performed in the employ of a church from the Iowa Employment Security Law. Respondent Iowa Department of Job Service held services for petitioner were covered. Upon petition for judicial review, the district court held the exemption applied and reversed. We affirm the district court.

The Iowa Employment Security Law is Iowa's response to the Federal Unemployment Tax Act, I.R.C. §§ 3301-11. The federal statute imposes on covered employers an excise tax on wages paid but allows a credit against the tax for contributions made by the employer to a state unemployment compensation fund which meets minimum federal standards. Sections 3309(a) and 3304(a)(6) together impose a requirement that the state system must cover service for organizations exempt from federal income tax under I.R.C. § 501(c)(3), but section 3309(b)(1) exempts from this requirement service performed

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 . . . .

In conformity with this standard the Iowa statute covers service performed for organizations exempt from income tax under I.R.C. § 501(c)(3), but excepts service performed

(i)n the employ of 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.

§ 96.19(7)(a)(6)(a), The Code 1977.

The federal exception was enacted in 1970, and the state exception was enacted in 1971 to bring the Iowa statute into conformity with the federal amendment. See 1971 Sess., 64th G.A., H.F. 704, at 39 (explanation of bill by sponsors); 1971 Sess., 64th G.A., S.F. 546, at 39 (explanation of bill by sponsors). The legislature plainly intended the state exception to have the same meaning as the identical federal exception. See Stromberg Hatchery v. Iowa Employment Security Commission, 239 Iowa 1047, 1050, 33 N.W.2d 498, 500-01 (1948) ("(W)e have no guide post except the inevitable assumption that the legislature intended just what Congress intended by the language employed.").

Congressional intent is manifested in the House and Senate reports on the federal bill containing the exception:

(T)he services of the janitor of a church would be excluded, but services of a janitor for a separately incorporated college, although it may be church related, would be covered. A college devoted primarily to preparing students for the ministry would be exempt, as would a novitiate or a house of study training candidates to become members of religious orders. On the other hand, a church related (separately incorporated) charitable organization (such as, for example, an orphanage or home for the aged) would not be considered under this paragraph to be operated primarily for religious purposes.

S.Rep.No.752, 91st Cong., 2d Sess. 48-49 (1970); H.R.Rep.No.612, 91st Cong., 1st Sess. 44 (1969).

In implementing the state exception, the Department adopted regulations which endorse and amplify the statement of Congressional intent:

The word "church" is used in its limited sense and is synonymous with an individual house of worship maintained by a particular congregation. Convention and association refer to formal and informal groups of churches, clergy or laymen, whether of a continuing nature or meeting periodically, whose purpose is primarily concerned with religious and denominational matters of the group or groups represented. Any service by an individual for a church, convention or association of churches is excluded from coverage. However, the exclusion does not apply to service performed for an organization which may be religious in orientation unless it is operated primarily for religious purposes and is operated, supervised, controlled or principally supported by a church (or a convention or association of churches). Thus, the service of the janitor of a church is excluded, but the service of a janitor for a separately incorporated college, although it may be church related, is covered.

Service for a college devoted primarily to the preparation of students for the ministry is exempt, as is service for a novitiate or a house of study, training candidates to become members of religious orders. On the other hand, a church related (separately incorporated) charitable organization (such as an orphanage or a home for the aged) is not considered, under this Act, to be operated primarily for religious purposes.

a. Therefore, if a church operates directly a day care center, and the day care center workers are employees of the church, this law will exempt those workers from coverage.

b. If, however, the day care center is operated by an organization other than a church, convention of churches, or association, and the workers furnishing such day care services are employees of such an organization rather than employees of a church, the day care center will be a covered employer even though the organization is itself operated, supervised, controlled or principally supported by a church. An organization which operates a day care center is not an organization operated for religious purposes.

370 Iowa Admin.Code § 3.27(1)-(2).

The regulations thus expressly recognize that when a church directly operates a day care center and the workers are church employees, the law exempts the workers from coverage. Under the regulations, the exception does not apply if the day care center is operated by an organization other than a church and the employees are employees of that organization.

By its terms, the statutory exception purports to apply in either of two situations. The first is when service is performed in the employ of a church or convention or an association of...