Wash. Nat. Ins. Co. v. Bd. Of Review Of N.J. Unemployment Comp. Comm'n

Decision Date07 March 1949
Docket NumberNo. A-112.,A-112.
Citation64 A.2d 443
PartiesWASHINGTON NAT. INS. CO. v. BOARD OF REVIEW OF NEW JERSEY UNEMPLOYMENT COMPENSATION COMMISSION et al.
CourtNew Jersey Supreme Court

OPINION TEXT STARTS HERE

COPYRIGHT MATERIAL OMITTED.

Appeal from Superior Court.

Certiorari proceeding by the Washington National Insurance Company against Board of Review of New Jersey Unemployment Compensation Commission, the New Jersey Unemployment Compensation Commission, and Robert W. Cavanaugh to review a decision of the board that Robert W. Cavanaugh was entitled to the benefits of the Unemployment Compensation Act. From a judgment of the Appellate Division of the Superior Court, whose judgment was based on an opinion of the former Supreme Court, 137 N.J.L. 596, 61 A.2d 178, the plaintiff appeals.

Judgment affirmed.

Murray Fredericks and Frank S. Farley, both of Atlantic City, for appellant.

Clarence F. McGovern and Charles A. Malloy, both of Trenton, for appellees.

HEHER, Justice.

The essential question here is the constitutional sufficiency of R.S. 43:21-19, as amended by ch. 385 of the Laws of 1941, Pamph.L. p. 992, N.J.S.A. 43:21-19, to contain this provision:

(i) (7) The term ‘employment’ shall not include: * * *

(J) Service performed by agents of insurance companies, exclusive of industrial life insurance agents, or by agents of investment companies, who are compensated wholly on a commission basis.’

Industrial life insurance agents in the service of the appellant company were held to be within the coverage of the Act.

It is said that the amendment contravenes the Fourteenth Amendment of the Federal Constitution and also Article IV section VII, paragraphs 8 and 9 of the new State Constitution of 1947, N.J.S.A., barring the grant to any corporation, association or individual, by private, special or local laws, of ‘any exclusive privilege, immunity or franchise whatever.’ As to the latter, we must look to the corresponding provisions of the Constitution of 1844, for the constitutional validity of legislation in this regard is to be measured by the organic law in force when the legislation was adopted, except to the extent that the later constitution is made retroactive. Limitations on special or local laws, without more, do not operate to repeal or render inoperative preexisting laws of that class conforming to the old constitution. Kirkpatrick v. New Brunswick, Ch. 1885, 40 N.J.Eq. 46; Stockton v. Central Railroad of New Jersey, Ch.1892, 50 N.J.Eq. 52, 24 A. 964, 17 L.R.A. 97; Gaslight Co. of City of New Brunswick v. Borough of South River, Ch.1910, 77 N.J.Eq. 487, 77 A. 473; Saunders v. Morris, Sup.1886, 48 N.J.L. 99, 2 A. 666; Ingersoll v. Nassau Electric R. Co., 1899, 157 N.Y. 453, 52 N.E. 545, 43 L.R.A. 236; Barber Asphalt Paving Co. v. Jurgens, 1915, 170 Cal. 273, 149 P. 560, 9 A.L.R. 597; Leser v. Lowenstein, 1916, 129 Md. 244, 98 A. 712. A constitution is to be given a prospective operation only, unless an intention to make it retrospective is clearly revealed in the legislative expression. City of San Antonio v. San Antonio Public Service Co., 1921, 255 U.S. 547, 41 S.Ct. 428, 65 L.Ed. 777; Cooley's Constitutional Limitations, 8th Ed., 136. Article XI, section I, paragraph 3 of the new Constitution directs that all law, statutory and otherwise, in force at the time the Constitution or any article thereof became effective ‘shall remain in full force until they expire or are superseded, altered or repealed by this constitution or otherwise.’ But there is no difference of substance in this behalf between these particular mandates and Article IV, section VII, paragraphs 9 and 11 of the Constitution of 1844; and thus the inquiry is whether the statutory provision now under review is within the interdicted class.

The argument is that the inclusion of ‘industrial life insurance agents' alone within the beneficiary class, as provided in the amendment of 1941, serves to deny to the appellant insurance company due process of law and the equal protection of the laws and constitutes ‘special legislation which grants to a certain class an exclusive privilege or immunity, arbitrarily and capriciously, without a logical and reasonable basis in fact.’

This enactment came after the adoption by the Congress, in 1939, of the act relating to Employment Taxes, which defined the term ‘employment’ to exclude ‘Service performed by an individual for a person as an insurance agent or as an insurance solicitor, if all such service performed by such individual for such person is performed for remuneration solely by way of commission’. 26 U.S.C.A. s 1607(c)(14). In the Federal Social Security Act of 1935, 42 U.S.C.A. ss 301-1305, there was not an explicit exclusion of the ‘services' of insurance agents from the statutory employment category; and until the passage of the cited Federal Act of 1939, there was a contrariety of view both on the Federal and State levels as to the status of insurance agents. There were holdings that industrial insurance agents were independent contractors, and therefore not within the statutory class. In this State, the old Supreme Court ruled that certain insurance agents, whose services would seem to be of the industrial class, were not independent contractors but employees within the coverage of the Act. Superior Life, Health & Accident Insurance Co. v. Board of Review of the Unemployment Compensation Commission, Sup.1942, 127 N.J.L. 537, 23 A.2d 806. Following the adoption of the Federal Act of 1939, 33 states and the District of Columbia, we are told without challenge, enacted a like provision barring from such coverage the services of insurance agents whose remuneration is solely by way of commissions. But New Jersey deviated from the substance of the provision by including ‘industrial life insurance agents' within the beneficiary class and excluding all other insurance agents; and thus the question arises as to whether the classification is arbitrary and discriminatory, and therefore vicious in the constitutional sense. We think it is.

The classification is plainly illusory. The class included comprises not industrial insurance agents generally, but industrial life insurance agents only; and we perceive no valid ground for this distinction. There is no rational basis for the exclusion of industrial health and accident insurance agents from the excepted class and thus from the coverage of the Act thereby extended to industrial life insurance agents. The character of the service and the conditions of work and the mode and manner of performance and compensation are essentially the same for both groups. The one form of application is used for both classes of insurance; and the proofs show that the industrial insurance agents employed by the appellant company serve in both fields. We have no means of knowing why the Legislature made this distinction. There is no apparent reason for it. There is no conceivable difference between those included and those excluded sufficient to warrant this differentiation of treatment in respect of the benefits and burdens of the Unemployment Compensation Law.

Though the state has a broad discretion in the selection of the class, it is requisite that the classification have a reasonable and just relation either to the general object of the legislation or to some substantial consideration of public policy or convenience or the service of the general welfare. Otherwise, there would be arbitrary discrimination. The Legislature may, without running afoul of the Fourteenth Amendment or the due process and equality clauses of the State Constitution, N.J.S.A.Const. art. 1, pars. 1, 5, make distinctions of degree having a rational basis; and they will be presumed to rest on that basis if there be any conceivable state of facts which would afford reasonable ground for its action. Carmichael v. Southern Coal & Coke Co., 1937, 301 U.S. 495, 57 S.Ct. 868, 81 L.Ed. 1245, 109 A.L.R. 1327; Charles C. Steward Machine Co. v. Davis, 1937, 301 U.S. 548, 57 S.Ct. 883, 81 L.Ed. 1279, 109 A.L.R. 1293. These constitutional limitations safeguard the fundamental rights of persons and of property against arbitrary and oppressive state action.

Singer Sewing Machine Co. v. New Jersey Unemployment Compensation Commission, Sup.1942, 128 N.J.L. 611, 27 A.2d 889, affirmed Err. & App.1943, 130 N.J.L. 173, 31 A.2d 818.

Here, industrial life insurance agents have been singled out for special favor. By a subdivision of the general class of industrial insurance agents compensated by commissions, the life insurance agents would be arbitrarily favored over other agents in like circumstances; and thus there would be a denial of the equal protection of the laws. Those in precisely the same class are not dealt with alike. The legislation is unequal, partial and discriminatory; it treats members of the same class differently, capriciously denying to some the benefits granted to others. ‘Arbitrary selection can never be justified by calling it classification. The equal protection demanded by the fourteenth amendment forbids this.’ Gulf, C. & S.F. Ry. Co. v. Ellis, 1897, 165 U.S. 150, 17 S.Ct. 255, 258, 41 L.Ed. 666.

The equal protection clause means that the right of all persons must rest upon the same rule under similar circumstances, and that it applies to the exercise of all the powers of the state which can affect the individual or his property, including the power of taxation. Louisville Gas & Electric Co. v. Coleman, 1928, 277 U.S. 32, 48 S.Ct. 423, 72 L.Ed. 770. While the due process and equal protection guaranties are not coterminous in their spheres of protection, equality of right is fundamental in both. Each forbids class legislation arbitrarily discriminatory against some and favoring others in like circumstances. It is essential that the classification itself be reasonable and not arbitrary, and be based upon material and substantial distinctions and differences reasonably related to the subject matter of the...

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