Committee on Economic Security (CES)
Volume VI. Social Insurance
A. Constitutional Issue
LEGAL BASIS OF COMPULSORY UNEMPLOYMENT INSURANCE
PROVIDED
IN BILL, APPENDIX B.
by
James Harrington Boyd
Your commentator undertakes to show that the fund provided for in the
Compulsory Unemployment Bill Appendix B, created by the levying of contributions
upon the employer and the employee, which contributions are imposed for
the regulation of the relative rights, privileges and duties as ordinary
individuals to wit: for the conservation of order in our political society,
and the encouragement of industry, and the discouragement of the evil
of unemployment.
Such regulative legislation has for its primary object the readjustment of the relations between certain classes of society employers and employees to the development of the public welfare by raising a fund by levying a tax both upon the employer and the employee to be distributed to employees who are forced into unemployment through no fault of their own. The levying of said tax is justified through the exercise of the police power of the State within the constitutional limitations of the Fifth Amendment.
It is shown first of all in Part I, that the need of the protection of society and workmen from the evils of unemployment is clearly established.
It is then shown that the remedy provided in the bill of Appendix B is justified by the exercise of the police power of the State for the purpose of regulation of employments and the protection of the general welfare of the people of the State and that said remedy does not infringe upon any of the constitutional limitations of the Federal Constitution, or of the Constitution of the State of Ohio, or any other State of the United States.
To establish a System of Compulsory Unemployment Insurance Without Liability
on the Part of the State of Ohio or Any Other State Adopting the Same
and to Create an Unemployment Insurance Commission to Administer the Fund
to Provide Unemployment Insurance.
A brief to sustain the constitutionality of the proposed model compulsory
state unemployment insurance act exemplified the Bill set out in Appendix
B.
The possible constitutional questions, both state and federal raised by
the enactment of said proposed bill, set forth in Appendix B are as follows:
It may be claimed that said proposed model compulsory unemployment insurance bill, set forth in Appendix B, is unconstitutional in that it violates the Constitution of the United States and of the State of Ohio in the following particulars:
1. Section 3, paragraph b and e of said proposed bill violates the Constitution of the United States, Section 1, Article 14 of the Amendments of the Constitution, Ordinance of 1787, Article 2, State of Ohio Constitution, Article 1, Section 2 and 16 in that they take property without due process of law.
2. Section 6, paragraph b of said model unemployment insurance act violates the State Constitution of Ohio, Article 1, Section 2 in that said act is not uniform in operation upon individuals of the state (and violates similar provisions in the constitutions of other states)
3. Section 5, paragraphs a, b, c, d, and e of said model act providing for unemployment insurance as set forth in Appendix B violates the State Constitution of Ohio, Article 4, Section 1 (similar provisions in constitution of other states) in that is vests judicial power in a Tribunal from which no appeals or error lies in the Supreme Court.
4. Section 5, paragraphs b, in particular (1), (3), (5), (6), (9), of said Act violates the Constitution of the State of Ohio, Article 2, Section 32 (or the corresponding provisions in the statutes of any other State of the United States) in that the Legislature seeks to delegate legislative power.
5. Section 3, paragraphs in particular a, b, e, of said Act violates the Ordinance of 1787, Article 2, Constitution of the State of Ohio, Article 2, Section 28 ( or the corresponding provisions of any other State of the United States) in that it impairs the obligation of contracts between employers and employees in existence at the time an employer is required to come under said Act.
6. The entire Act is an unreasonable exercise of the police power of the State of Ohio (or the police power of any other State of the United States.)
FOUNDATION OF INDUSTRIAL INSURANCE AND UNEMPLOYMENT INSURANCE
Industrial insurance and unemployment insurance, hereinafter discussed,
are founded upon the political, social and legal concepts evolved through
the growth of the American nation under the Constitution of the United
States, to wit:
1. "We, the people of the United States, . . . and promote the general welfare . . . ." (Preamble to the Constitution of the United States.)
2. "We, the people of the State of Ohio, . . . and promote our common welfare . . . ." (Preamble to the Constitution to the State of Ohio.) "Laws may be passed . . . providing for the comfort . . . and general welfare of all employees . . . ." (Constitution of the State of Ohio, Article II, Section 34. And corresponding provisions in the Constitutions of the other State of the United States.
3. "The State is a social compact by which the whole people covenants with each citizen and each citizen with the whole people, and all shall be governed by the same laws for the common good." (Constitution of Massachusetts.)
4. It has been established by a series of cases, that am ulterior public advantage may justify a comparatively insignificant taking of private property for what, in its immediate purpose, is a private use." (Clark vs. Nash, 198 U.S. 361 & Noble State Bank vs. Haskill 219 U.S. 104.)
5. "Besides the cases of every day taxation there are the cases: ‘in which the share of each party in the benefit of a scheme of mutual protection is sufficient compensation for the correlative burden that it is compelled to bear.'" (Ohio Oil Co. vs. Indiana, 177 U.S. 190, Noble State Bank vs. Haskill 219 U.S. 104.)
6. "The Police Power of the State and Nation extends to all of the great public needs". (Camefield vs. U.S. 167 U.S. 518.)
7. ‘The Police Power of the State and nation may be put forth in aid of what is sanctioned by usage or hold by the prevailing morality or strong or preponderant opinion to be greatly and immediately necessary to the public welfare." (Noble State Bank vs. Haskill 219 U.S. 104.)
The Problem of Industrial Insurance and Industrial Efficiency.
The writer's studies of Industrial Insurance covering a period of twenty-five years, leads him to the observation that the most intelligent, profound and modern statement of the economic and social value of Industrial Insurance in its relation to ‘Industrial Efficiency" is that made by Charles P. Steinmetz.
Dr. Steinmetz was a profound mathematician and electrical engineer who was a permanent paralytic from childhood, incapacitated to perform ordinary common labor. He was a practical engineer who was employed by and maintained the unlimited confidence of his employer, one of the greatest electrical manufacturing companies of the United State for many years until he died.
In discussing "Industrial Efficiency and Political Waste" he says:
"There will be competition, whether gas-engine or electrical motor
is to be used, whether a local steam-turbine plant is to be installed
or power brought from along-distance transmission system. But the decision
will be made on the basis of the relative economy.
"Financial manipulation for the mere acquisition of more money, without
regard to constructive economical organization, necessarily must be impossible.
There must be an active co-operation between all producers, from the unskilled
laborer to the mastermind which directs a huge industrial organization.
Such active co-operation presupposes that everybody feels personally interested
in the industrial economy. This presupposes that the fear of unemployment,
of sickness, and old age has relegated to the relics of barbarism, and
everybody is assured an appropriate living, is assured employment when
able to work; and protected against want, maintained in his or her standard
of living when not evident duty of society toward the individual.
"This can be done, as it has been in other countries by effective
social legislation. . . .
"As a structural foundation, on which to build such structure by
evolution in correspondence with our democratic national temperament,
we have our political governments – federal, state, and municipal – our
large national societies, and our industrial corporations. Of these, the
political government is the only one, which is all-embracing, is controlled
by and responsible to all citizens, at least nominally. Therefore, while
its constructive power may be practically nil, due to its form of organization,
it has a vast inhibitory power (in our country) far greater than any other
power in our country. We have seen this and continuously see it in the
action toward corporations in the national conservatism movement, even
in the power exerted by subordinate governmental bureaus.
"Thus nor organization which does not include the political government
as an essential part of the structure can hope to succeed. The natural
suggestion, then, would be to have the federal government, with its subordinate
state and municipal governments, organize, control, and administrate the
country's economic-industrial system."
1) Industrial Efficiency and Political Waste (November 1916), p. 725-27, The American Journal of Sociology, May 17, 1917, Socialization of the Law, p. 834-835.
ANALYSIS OF THE RELATIONSHIP CREATED BETWEEN THE EMPLOYER AND EMPLOYEE
AS A RESULT OF THE ENACTMENT OF A COMPULSORY UNEMPLOYMENT INSURANCE ACT
FOR WORKMEN (APPENDIX B.)
On November 17, 1881, Emperor William I came to Bismarck's support and
gave his famous speech to the Reichstag. This message is called "The
monument of the new Social Era." The Emperor William I said:
"We consider it our Imperial Duty to impress upon the Reichstag
the necessity of furthering the welfare of the working people. We should
review with increased satisfaction the manifold successes, with which
the Lord has blesses our Reign, could We carry with Us to the grave the
consciousness of having given our country an additional and last insurance
of internal peace, and the conviction that We have rendered the needy;
that assistance to which they are justly entitled."
"Our efforts in this direction are certain of the approval of all
the federate Governments, and we confidently rely on the support of the
Reichstag, without distinction of parties. In order to realize these views
a bill for the Insurance of Workmen against Industrial accident will first
of all be laid before you, after which a supplementary measure will be
submitted providing for a general organization of industrial sick relief
insurance.
"But likewise those who are disable tin consequence of OLD AGE AND
INVALIDITY possess a well founded claim to a more ample relief on the
part of the State than they have hitherto enjoyed. To devise the fittest
ways and means for making such provisions, however difficult, is one of
the highest obligations of every community based on the moral foundations
of Christianity. A more intimate connection with the actual capability
of the people, and a mode of turning these to account INCORPORATE ACTIONS
OR ASSOCIATIONS, under the patronage and with the aid of the state, will
we trust, develop a scheme to solve which the State alone would unequal."
"Accordingly when the workingman, unfitted for work by sickness,
accident, invalidity or old age, is to have a legal right to due and just
provisions, in order not to be compelled to rely upon public charity.
The end could only be attained by a system of general and compulsory insurance,
based on mutuality and self-administration.
"After 50 sittings the bill for sick insurance passed on May 31,
1883, with a majority of 117 votes, it did not include at first employees
engaged in agriculture but contemplated, ultimately to include practically
all employees."
Accordingly, during the years 1884, 1886, and 1887, insurance laws were
passed insuring employed in Industry, Transport Trades, Telegraph, the
army and Navy, Agriculture and Forestry, building Trades and navigation.
As has already been shown, Germany established a Universal Unemployment
Insurance Law in 1925.
The Prussian law of more than a century ago (140 years) acknowledged the famous right to work and to a living. The state, in its very nature, is the guarantee of the weaker classes. In the common law of that time it is states:
"It is the duty of the state to provide sustenance and support of
those of its citizens who cannot provide sustenance themselves. Work adapted
to their strength and capacities shall be supplies to those who lack means
and opportunities of earning a livelihood for themselves and those dependent
upon them.
The obligation of industrial insurance and workmen's unemployment compensation
accrue from contingencies not dependent upon or within the control of
the parties, and thus have no relationship whatever to the conduct of
the parties. It follows then that they must pertain to the subject of
government regulations, and are in the nature of economic provisions taking
the form of indirect taxation levied to regulate occupations, for on what
other basis would the government be justified in writing into the labor
contract against the will of the parties, an insurance policy? Were this
not so, industrial insurance or workmen's compensation would be free from
the standpoint of both the employee and the employer, without basis of
justice or equity. If it be justifiable it must be on the sociological
theory of the right of the state to levy a tax for the purpose of protecting
from an economic standpoint, the community as a whole.
It therefore follows that in our analysis of constitutional limitations we can not look for any analogy in the decisions, which have to do with the regulation of the private relations between the employer and his employees. However, for this purpose, there have been brought into the earlier stages of the discussions on this subject cases, which hold a statute of Pennsylvania constitutional which abolished the doctrine of respondent superior in the cases of persons on or near railroads and not in the employ of the railroad company; cases which held statutes constitutional that make railroads liable for fire set by engines though without fault; cases holding a statute constitutional making a railroad company liable for injury though without fault, or the common illustrations as the liability of a master for the acts of his servant, or the ancient law of deodands, or the liability of the husband for the tort of his wife. All of the common law or statutory duties defined in these decisions relate to the preservation of private rights.
It appears from the history of unemployment insurance in the United States established by companies, by trade-unions, and joint agreement plans beginning as early as 1916, set out in Part I above, that by natural development funds providing compensation for unemployed workmen, which prevented them from depending upon public charity.
The economic and social need of the enactment of unemployment insurance acts, for the protection of regional welfare of the public, is shown by the establishment of unemployment insurance systems by seventeen European countries. These national acts cover the entire working population. Great Britain passed her law in 1911. In addition to these national acts many cities, Belgium as early as 1897 made appropriations for unemployment relief. Besides municipal and National acts there have been for a long time hundreds of trade-union and other private plans providing such insurance. (See Part I above.)
Our problem is, therefore, the following: has the State of Ohio (or the other states of the United States) the power to regulate its industries foe the purpose of protecting the health, safety and genera; welfare of the community, by levying a tax in the form of an insurance obligation upon such industries and upon the wages of the operatives employed in the same, for the benefit of those operatives who are forced out of employment and unable to procure work although they are able and willing to work under the terms and conditions set forth in the proposed bill in Appendix B.
Hence we next consider the Scope and Limitations of the Taxing Power of the State.
Then it will be shown:
First, that "it is established by a series of cases that an ulterior public advantage may justify a comparatively insignificant taking of private property for what, in its immediate purpose, is a private use." Justice Holmes in Noble State Bank vs. Haskill, 219 U.S. 104; Clark vs. Nash, 198 U.S. 361; Stickley vs. Highland Boy Gold Mining Co., 203 U.S. 372; Pacon v. Walker, 204 U.S. 311, 315. And in the second place "it would seem that there may be other cases besides the every day one of taxation in which the share of each party in the benefit of the scheme of mutual protection is sufficient compensation for the correlative burden that it is compelled to assume." See 209 U.S. 104; Ohio Oil Co. vs. Ind., 177 U.S. 190.
And third, that we have a case within the reasonable exercise of the police power as the facts herein fully show, no more need be said.
THE ATTRIBUTES, LIMITATIONS AND SCOPE OF THE TAXING POWER, JUDGE COOLEY,
IN HIS WORK ON TAXATION, DESCRIBES THE GREAT EXTEND OF THIS POWER AS FOLLOWS:
"The power of taxation is an incident of sovereignty, and is possessed
by the government without being expressly conferred by the people. It
is a legislative power; and when the people, by their constitution, create
a department of government upon which they confer the power to make laws,
the power of taxation is conferred as art of the more general powers.
"Everything to which legislative power extends may be the subject of taxation, whether it be person or property, or possession, franchise or privilege, or occupation or right. Nothing but express constitutional limitation upon legislative authority can exclude anything to which the authority extends from the grasp of the taxing power, if the legislative in its discussion shall at any time select it from revenue purposes; and not only is the power unlimited in its reach as to subjects, but in its very nature it acknowledge no limits, and may be carried even to the extent of exhaustion and destruction, thus becoming in its exercise a power to destroy. If the power be threatened with abuse, security must be found in the responsibility of the legislative that imposes the tax to the constituency which must pay it. The judiciary can afford no redress against oppressive taxation, so long as the legislature, in imposing it, shall keep within the limits of legislative authority and violate no express provision of the constitution. The necessity for imposing it addresses itself to the legislative discretion, and it is or may be an urgent necessity which will admit of no property or other conflicting right in the citizen while it remains unsatisfied."
But in regard to its limitation (page 83):
"Great is the power of any sovereignty to levy and collect taxes
from the citizens that power in a constitutional country has very distinct
and positive limitations"
Again he says, page 84:
"It is the first requisite of lawful taxation, that the purpose for which it is laid shall be a public purpose. The decision to lay a tax for a given purpose involves a legislative conclusion that the purpose is one for which a tax may be laid; in other words, is a public purpose. But the determination of the legislature on this question is not, like its decision of ordinary questions of public policy, conclusive either on the other departments of the government, or on the people. The question, what is and what is not a public purpose, is one of the law; and though unquestionably the legislature shall have clearly exceeded its authority in this regard and levied a tax for a purpose not public, it is competent for any one who on person or property is affected by the tax, to appeal to the courts for protection."
SCOPE OF TAXING POWER.
In regard to the domain of the subject matter in which the taxing power may obtain, Cooley says (Cooley on Taxation, p. 25) quoting from the case of State tax on Foreign Held Bonds, 12 Wallace, 315:
"The power of taxation, however vast in its character, and searching in it's extent, is necessarily limited to subjects within the jurisdiction of the State. These subjects are persons, property and business. Whatever form taxation may assume, whether as duties, imposts, excises or licenses, it must relate to one of these subjects. It is not possible to conceive of any other, though as applied to them the taxation may be exercised in a great variety of ways. It may touch property in every share in its natural condition, in its manufactured form, and in its various transmutations. And the amount of the taxation may be determined by the value of the property, or its use, or its capacity, or its productiveness. It may touch business in the almost infinite forms in which it is conducted, in professions, in commerce, in manufactures and in transportation."
Justice Marshall in Providence Bank vs. Billings, 4 Peters 514 at 561, says:
"The power of legislation, and consequently of taxation, operates on all persons and property belonging to the body politic. This is an original principle. Which has its foundation in society itself. It is granted by all for the benefit of all. It resides in the government as part of itself, and need not be reserved where property of any description, or the right to use it in any manner, is granted to individuals, or corporate bodies. However absolute the right of an individual may be, it is still in the nature of that right that it must bear a portion of the public burdens, and that portion must be determined by the legislature. This total power may be abused; but the interest, wisdom and justice of the representative body, and its relations with its constituents, furnish the only security where there is no express contract against unjust and excessive taxation, as well as against unwise legislation generally."
THE LIMITATIONS OF THE RIGHTS OF THE COURTS TO
INTERFERE WITH THE TAXING POWER.
"Justice Marshall in McCulloch vs. Md. 4 Wheat, 316, at 430, says:
"It is unfit for the judicial department to inquire what degree of taxation is the legitimate use, and what degree may amount to the abuse of the power."
"Notwithstanding the vast power which resides in the states to tax, all taxation proceeds upon the theory that a corresponding benefit returns to the individual taxed for the property which belonged to him and which was appropriated. For example, in the use of a general tax collected for the general revenues of the state, it is assumed that the state is suffered to make full and adequate return in the protection which the state gives to the value of his possessions by the uses to which the state applies the money contributed, (Cooley on Taxation p. 3). In the case of a tax which is levied for a special purpose, this theory of return becomes emphasized so that for the purpose of determining the validity of the tax, it becomes necessary to find an immediate specific benefit passing to the individual taxed."
SIMILARITY OF THE ATTRIBUTES OF SPECIAL TAXATION AND EMINENT DOMAIN
See Cooley's Constitutional Limitations, 7th Ed. P. 715, where he says:
"Taxation and eminent domain indeed rest substantially on the same foundation, as such implies the taking of private property for the public use on compensation made; but the compensation is different in the two cases. When taxation takes money for the public use, the taxpayer received, or is supposed to receive, his just compensation in the protection which government affords to life, liberty and property, in the increase in the value of possessions which comes from the use to which government applies the money raised by the tax; and these benefits amply support the individual burden."
And in his work on Taxation, p. 1183, he says:
"The theory of the law is that fill compensation is then received
in every instance. It is not, it is true, a compensation made in money,
but, as in every other case of taxation, the person taxed is to receive
a benefit from the expenditure of the moneys collected."
Therefore, the underlying principle of special taxation, general taxation
and eminent domain, is one and the same, namely, that for the tax collected
a return shall be given back to the individual whose property is appropriated.
THE PUBLIC PURPOSE FOR WHICH A TAX MAY BE LEVIED
The regulation of private rights for a public purpose under the police power is as much an appropriation of property as the direct taking of property under the taxing power. Thus one of the powers of exercising the police power is to levy a tax for regulative purposes instead of for revenue. See Cooley on Taxation, page 1125, where he says:
"There are some cases in which levies are made and collected under the general designation of taxes, or under some form employed in revenue laws to indicate a particular class of taxes, where the imposition of the burden may fairly be referred to some other authority than to that branch of the sovereign power of the state under which the public revenues are apportioned and collected. The reason is, that the imposition has not for its object the raising of revenue, but looks rather to the regulation of relative rights, privileges and duties as between individuals, to the conservation of order in the political society, to the encouragement of industry, and the discouragement of pernicious employments. Legislation for these purposes it would seem proper to look upon as being made in the exercise of that authority, which is inherent in every sovereignty, to make all such rules and regulations as are needful to secure and preserve the public orders, and to protect each individual in the enjoyment of his own rights and privileges by requiring the observance of rules of order, fairness and good neighborhood, by all around him. This manifestation of the sovereign authority is usually spoken of as the police power."
Industrial insurance would seem in part to come within the scope of regulative legislation above referred to, since the fund necessary to be raised to protect the employed class must necessarily be created through the exercise of some form of the taxing power, and moreover, the primary object of such regulative legislation is to re-adjust relations between certain classes of society to the development of the public welfare. Therefore in determining whether such legislation be constitutional or not, one is confronted with the limitations placed by the Fifth Amendment upon the exercise of the policy power by the state in the form of the taxing power.
What then is a public purpose, from the standpoint of such regulative legislation?
Cooley's Constitutional Limitations, Ed. P. 1026, gives many cases falling within the category of taxes levied for what the courts have held to be for public purposes:
"In the first place, taxation having for its only legitimate object the raising of money for public purposes and the proper needs of government, the exaction of moneys from the citizens for other purposes is not a proper exercise of this power, and must therefore be unauthorized. In this place, however, we do not use the word ‘public' in any narrow and restricted sense, nor do we mean to be understood that whenever the legislature shall overstep the legitimate bounds of their authority the case will be such that the courts can interfere to arrest their action. There are many cases of unconstitutional action by the representatives of the people which can be reached only through the ballot-box; and there are other cases where the line of distinction between that which is allowable and that which is not is so faint and shadowy that the decision of the legislature must be accepted as final, even though judicial opinion might be different. But there are still other cases where it is entirely possible for the legislature so clearly to exceed the bounds of the due authority that we cannot doubt the right of the courts to interfere and check what can only be looked upon as ruthless extortion, provided the nature of the case is such that judicial process can afford relief. An unlimited power to make any and everything lawful which the legislature might see fit to call taxation, would be, when plainly stated, an unlimited power to plunder the citizen.
"It must always be conceded that the proper authority to determine what should and what should not constitute a public burden is the legislative department of the state. This is not only true for the state at large, but is true also in respect to each municipality or political division of the state; these inferior corporate existences having only such authority in this regard as the legislature shall confer upon. And in determining this question, the legislature cannot be held in any narrow or technical rule. Not only are certain expenditures absolutely essential to the continued existence of the government and the performance of its ordinary functions, but as a matter of policy it may sometimes be proper and wise to assume other burdens which rest entirely on considerations of honor, gratitude or charity. The officers of government must be paid, the laws printed, roads constructed and public buildings erected; but with a view to the general well being of society, it may also be important that the children of the state should be educated, the poor kept from starvation, losses in the public service indemnified, and incentives held out to the faithful and fearless discharge of duty in the future, by the payment of pensions to these who have been faithful public servants in the past. There will therefore be necessary expenditures which rest upon considerations of policy only, and in regard ti the one as much as to the other, the decision of that department to which alone questions of the state policy are addresses must be accepted as conclusive.
"Very strong language has been used by the courts in some of the cases on the subject. In a case where was questioned the validity of the state law confirming township action which granted gratuities to persons enlisting in the military service of the United States, the Supreme Court of Connecticut assigned the following reasons in support:
"In the first place, if it be conceded that it is not competent for the legislative power to make a gift of the common property, as of a cum if money to be raised by taxation, where no possible public benefit, direct or indirect, can be derived therefrom, such exercise of the legislative power must be of an extraordinary character to justify the interference of the judiciary; and this is not that case.
Second. If there be the least possibility that making the gift will be promotive in any degree of the public welfare, it becomes a question of policy, and not of natural justice, and the determination of the legislature is conclusive. Such is this case. Such gifts to unfortunate classes of society, as the indigent blind, the deaf and dumb, or insane, or grants to particular colleges or school, or grants of pensions, swords, or other mementoes for past service, involving the general good indirectly and in slight degree, are frequently made and never questioned."
IN THE APPLICATION OF THE REMEDIES AS MADE AND PROVIDED IN THE MODEL
COMPULSORY UNEMPLOYMENT COMPENSATION ACT GIVEN IN APPENDIX B, ARE THE
FOLLOWING CONSTITUTIONAL LIMITS INFRINGED?:
1. The taking of property without due process of law;
2. All laws shall be uniform in their operations upon individuals of the
state;
3. Does the law curtail unlawfully the administration if judicial authority?;
4. The taxing of private property for private use;
5 The taxing of private property for public use;
6. Does the Legislature seek by this law to delegate legislative powers?
7. No law impairing the obligation of contract shall ever be passed.
8. Is the act a reasonable exercise of the police power of the state?
SUCH LEGISLATION IS ALREADY WELL GROUNDED ON FOUR DISTINCT LINES OF CASES IN AMERICAN JURISPRUDENCE
a. The bank depositors guarantee act cases;
b. The sheep-dog cases;
c. The cases which justifies the enactment of a law which authorized the
creation of fund to be disbursed by a state commission in the erection
and operation of a state asylum for inebriates;
d. The cases which uphold statutes impossible a liability upon fire insurance
agents, of the nature of a tax, based upon the amount of insurance effected
by them, for the benefit of a fund to care for and cure sick and injured
firemen.
(a)
The cases which sustain Bank Depositors Guarantee Acts.
That the foregoing constitutional limitations are safely awarded by the
rule laid down in our jurisprudence by the Supreme Court of the United
States and likewise in the state courts was on the 3rd of January, 1911,
voiced by the Supreme Court of the United States in Noble State Bank vs.
Haskell, 219 U.S. 104, 55 L. ed.---, 31 Sup. Ct. rep. 299; Shallenburger,
Governor of Nebraska, et al. vs. Barton, et. al.; Assaria State bank of
Assaria et al. vs. Dolley, et. Al., 219 U.S. 121.
Mr. Justice Holmes, delivering the opinion of the court in the case first cited, said:
"This a proceeding against the governor of the state of Oklahoma and other officials, who constitute the State banking Board, to prevent them from levying and collecting an assessment from the plaintiff under an act approved December 17, 1907. This act creates the board and directs it to levy on every bank existing under the laws of the state an assessment of 1 per cent of the bank's average daily deposits, with certain deductions, for the purpose of creating a depositors' guaranty fund. There are provisions for keeping up the fund, and by and act passed march 11, 1909, since the suit was begun, the assessment is to be 5 per cent. The purpose of the fund is shown by its name. It is to secure the full repayment of deposits. When a bank becomes insolvent and goes into the hands of the bank commissioner, if its cash immediately available is not enough to pay depositors in full, the banking board is to draw from the depositors' guaranty fund (and from additional assessment if required), the amount needed to make up the deficiency. …In answering that question we must be cautious about pressing the broad words of the 14th Amendment to a drily logical extreme. Many laws which it would be vain to ask the court to overthrow could be shown, easily enough to transgress a scholastic interpretation of one or another of the great guarantees in the Bill of Rights. They more or less limit the liberty of the individual, or they diminish property to a certain extent. We have few scientifically certain criteria of legislation, and as it is often difficult to mark the line where what is called the police power of the state is limited by the Constitution of the United States, judges should be slow to read into the latter nolumus mustare as against the law-making power.
"The substance of the plaintiff's argument is that the assessment takes private property for private use without compensation. And while we should assume that the plaintiff would retain a revisionary interest in it contribution to the fund so as to be entitled to a return of what remained of it if the purpose were given up (see Danby Bank vs. State Treasurer, 39 Vt. 92, 98) still there is no denying that by this law a portion of its property might be taken without return to pay debts of a failing rival in business. Nevertheless, notwithstanding the logical form of the objection, there are more powerful considerations on the other side. In the first place, it is established by a series of cases that an ulterior public advantage may justify a comparatively insignificant taking of private property for what, in its immediate purpose, is a private use. Clark vs. Nash. 198 U.S. 361, 49 L. ed. 1085, 25 Sup. Ct. rep. 676, 4A. E. Ann. Cas. 1171; Strickley vs. Highland Boy Gold Min. Co. 200 U.S. 527. 531, 50 L. ed. 581, 583, 26 Sup. Ct. Rep. 301; 4 A. & E. Ann. Cas. 1174; Olfield vs. New York, N.H. & H.R. Col. 203 U.S. 372, 51 L. ed. 231, 27 Sup. Rept. 72; Bacon vs. Walker, 204 U.S. 311, 315, 51 L. ed. 499, 501, 27 Sup. Ct. rep. 289. And in the next, it would seem that there may be other cases besides the every day one of taxation, in which the share of each party in the benefit of a scheme of mutual protection is sufficient compensation for the correlative burden that it is compelled to assume. See Ohio Oil Co. vs. Indiana, 177 U.S. 190, 44 L. ed. 729, 20 Sup. Ct. Rep. 576, 20 Mor. Minn. Rep. 466. At least if we have a case within the reasonable exercise of the police power, as above explained, no more need be said.
"It may be said in a general way that the police power in a general way extends to all the great public needs. Camefield vs. United States, 167 U.S. 518, 42 L. ed. 260, 17 Sup. Ct. Rep. 864. It may be put forth in aid of what is sanctioned by usage, or held by the prevailing morality or strong or preponderant opinion to be greatly and immediately necessary to the public welfare. Among matters of that sort, probably few would doubt that both usage and preponderant opinion give their sanction to enforcing the primary conditions of successful commerce. One of those conditions at the present time is the possibility of payment by checks drawn against bank deposits, to such an extent do checks replace currency in daily business. If, the, the legislature of the state thinks that the public welfare requires the measure under consideration, analogy and principle are in favor of the power to enact it. Even the primary object of the required assessment is not a private benefit as it was in the cases cited above of a ditch for irrigation or a railway to a mine, but it is to make the currency of checks secure, and by the same stroke to make safe the almost compulsory resort of depositors to bank as the only available means of keeping money on hand. The priority of claim given to depositors is incidental to the same object and is justified in the same way. The power to restrict liberty by fixing a minimum of capital required of those who would engage in banking is not defined. The power to restrict investments to securities regarded as relatively safe seems equally plain. It has been held, we do not doubt rightfully, that inspections may be required and the cost thrown on the bank. See Charlotte, C. & A. R. Co. vs. Gibbes, 142 U.S. 386, 35 L. ed. 1051, 12 Sup. Ct. Rep. 255. The power to compel beforehand, co-operation, and thus, it is believed, to make a failure unlikely and a general panic almost impossible, must be recognized, if government is to do its proper work, unless we can say that the means have no reasonable relation to the end. Gundling vs. Chicago, 177 U.S. 183, 188, 44 L. ed. 723, 728, 20 Sup. Ct. Rep. 633. So far is that from being the case that the device is a familiar one. It was adopted by some states the better part of a century ago, and seems never to have been questioned until now. Danby Bank vs. State Treasurer, 39 Vt. 92; People vs. Walker, 17 N.Y. 502. Recent cases going not less far are Lemieux vs. Young, 211 U.S. 489, 496, 53 L. ed. 295, 300, 29 sup. Ct. Rep. 174; Kidd, D. & P. Co. vs. Mussleman Grocer Co. 217 U.S. 461, 54 L. ed. 839, 30 Sup. Ct. Rep. 606."
(b)
Sheep Dog Fund Law Cases.
Many states, notably Ohio, Illinois, Indiana, Kentucky, Michigan, Wisconsin, New Hampshire, Massachusetts, Connecticut and Texas, exercising the police power for the promotion of the sheep industry and public welfare, have enacted statutes imposing a tax or license upon dogs in a stated sum, collecting the same from the owner, placing the collections in a public fund, and distributing the same through state officers in paying damages to owners of sheep killed by dogs. These statutes have been universally upheld by the Courts.
The Ohio Act was attacked as being an unconstitutional exercise of the taxing power of the state and an unreasonable exercise of the Police Power.
In Holtz vs. Roe 39 O.S. 340-344.
The court said in sustaining the Ohio Law:
"While the dog as a species, posses many valuable traits which by some are denominated virtues, it is nevertheless known of all men, that he possesses vicious traits which are especially inimical to the important industry of raising sheep and wool. If the government were powerless to protect this industry from the ravage of dogs, it would indeed be impotent to protect its citizens in the enjoyment of property, than which none other is more essential to the public welfare. But such power is unquestionably vested in the general assembly as a police power, and, in the judgment of the general assembly a per capita tax on dogs has been deemed a means of securing the necessary protection to sheep owners; and , as the choice of means was within the power and
(page 115 missing)
Chalker 31 Conn. 121 Ex parte Cooper 3 Texas C. App. 489" – Also:
Freemont Canning Co. vs. Waters 209 Mich. R. 178 (Feb. 1920)
"Syl. 3 – DUE PROCESS OF LAW – TOWNSHIPS. Nor is said Act in conflict with sec. 16, Article 2 of the Constitution providing that no person shall be deprived of his property without due process of law, because, under the Act in question, the duty to pass on a claim, because, under the Act in question, the duty to pass on a claim for sheep killed by dogs devolved upon a justice of the peace rather than the township board, the fund from which said claim was paid not being a township fund."
"4 – POLICE POWER – REGULATION. Said Act held, not tax legislation, but the exercise of the police power of the State in relation to the licensing of dogs, the killing of sheep, and the compensation of owners therefor."
"5 – VESTED RIGHTS – TOWNSHIPS. The township has no vested right in a fund crated by said Act by the licensing of dogs for the sole benefit of sheep owners."
(2) Cole vs. hall, 103 111. 39. (May 12, 1882)
"Syl. 1 - TAXATION – LICENSE ON DOGS – NOT A TAX. The license fee imposed on the owners of dogs under the Act of 1879, entitled ‘An Act to indemnify the owners of sheep in cases of damage committed by dogs' is no sense a tax, and is therefore, not within the constitutional provision that all needful revenue shall be raised by levying a tax by valuation. Such a fee is imposed under the police power, and not under the taxing power of the State."
"2 – POLICE POWER OF THE STATE – IMPOSING LICENSE FEE UPON DOGS.
Everything hurtful to the public interest is subject to the police power
of the state and may be brought within restraining and prohibiting influence.
Therefore, the Act authorizing a license fee to be imposed upon and collected
of the owners or keepers of dogs is not subject to any constitutional
objection."
(3) Mitchell vs. Williams 27 Ind. 86. (Nov. 1866.)
"TAX. – DEFINITION OF. – The word tax means a burden, charge or imposition, put upon persons or property for public uses."
"DOG TAX. – As a measure of internal police, the legislature has
the power to encourage the rearing of sheep, and with that object in view
to discourage the keeping of dogs, by assessing a penalty upon the owner
or keeper of the latter."
"SAME. – The Act of March 2, 1865, (Acts of 1865, p. 56) ‘To discourage
the keeping of useless and sheep-killing dogs', etc., is constitutional.
The penalty imposed by the law upon the owners of dogs is not a special
tax."
The Court citing with approval: Thorpe vs. Rutland and Burlington Railway Co., 27 Vt. 140, where the Court held: "This police power of the State extends to the protection of the lives, limbs, health, comfort and quiet of all persons, and the protection of all property within the State."
(4) McGlone vs. Womack 129 Ky. 274 (June 17, 1908.) 111 S.W. 688
"1 – STATUTES – SUBJECTS AND TITLES – ACT TO PROMOTE SHEEP INDUSTRY.
Act March 1, 1906 (Acts 1906, p. 25, c. 10), entitled ‘An Act to promote
the sheep industry and to provide a tax on dogs,' is not repugnant to
Const. Dec. 51, providing that no law enacted by the General Assembly
shall relate to more than one object, which shall be expressed in the
title, where it is apparent that the subject-matter of the Act is the
promotion of the sheep industry, and that this is accomplished by the
imposition of a tax on dogs for the purpose of creating a fund to remunerate
the owners of sheep killed by dogs."
"2 – LICENSES – CONSTITUTIONAL RESTRICTIONS – PUBLIC PURPOSES.
Act March 1, 1906 (Acts 1906, p. 25, c. 10), providing for the imposition
of a tax on dogs to create a fund for the remuneration of the owners of
sheep for losses suffered by the killing of their sheep by dogs, is not
a revenue statute, but is a police regulation of the keeping and ownership
of dogs, and therefore such statute is not repugnant to Const. Sec 171,
providing that taxes shall be levied for other than public purposes."
"4 – SAME – REGULATION OF DOGS – KILLING SHEEP – REMUNERATION OF OWNERS OF SHEEP.
Act March 1, 1906, (Acts 1906, p. 25, c. 10), providing for the imposition of a tax on dogs for the creation of a fund to remunerate owners of sheep for losses arising from the killing of sheep by dogs, is a valid exercise of the police power of the Legislature to regulate the keeping and ownership of dogs."
(5) Blair vs. Forehand 100 Mass. 136.
"It is within the police power vested in the legislature by the Constitution
of the Commonwealth to regulate the keeping of dogs."
(6) Tenney etc. Vs. Lenz 16 Wisc. 298. Tenney vs. Lenz 566 (Jan. 1863.)
"Chap. 175, Laws of 1860, regulating an licensing the keeping of dogs, is an exercise of the police power of the State and not of its taxing power, and is constitutional."
"The Legislative may, in regulating any matter that is a proper subject of the police power of the State, impose such sums for license as will operate as a partial restriction upon the business, or upon the keeping of the particular kinds of property regulated."
"Chap. 48, R.A., and Chap. 175, Laws of 1860, furnish the owner of sheep killed by dogs two different remedies, and he may elect which he will pursue, but after recovering upon one he cannot pursue the other."
"If the owner of sheep killed by dogs, elects to prove his damages to the supervisors of the town, and accepts an order on the town treasurer for the amount, his claim becomes by operation of law transferred to the town, and it may recover against the owner of the dog, but the owner of the sheep cannot thereafter recover against him."
(c)
Cases which sustain an act to tax saloonists to create a fund for the benefit if inebriates.
In State vs. Cassidy, 22 Minn. 312, the court sustained an act to establish a fund for the foundation and maintenance of an asylum for inebriates, requiring all sellers of liquors to pay ten dollars a year to the state treasurer, through the county treasurers, in addition to the usual license, the fund to be disbursed by the state commission in the erection and operation of a state asylum for inebriates. Th court in its opinion points out that the act is and exercise of the police power upon a subject clearly within that power saying:
"This act regards the traffic as one tending to produce intemperance and as likely, by reasoning thereof, to entail upon the state the expense and burthen of providing for class of persons rendered incapable of self-support, the evil influence of whose presence and example upon society is necessarily injurious to the public welfare and prosperity, and therefore, calls for such legislative interposition as will operate as a restraint upon the business, and protect the community from the mischiefs, evils and pecuniary burdens flowing from its prosecution. . . .That these provisions unmistakenly partake of the nature of police regulations, and are strictly of that character, there can be no doubt, nor can it be denied that their expediency or necessity is solely a legislative, and not a judicial, question. . . . Regarding the law as a precautionary measure, intended to operate as a wholesome restraint upon the traffic, and as a protection to society against its consequent evils, the exacted fee is not unreasonable in amount, and the purpose to which it is devoted is strictly pertinent and appropriate. It could not be questioned but that a reasonable sum imposed in the way of an indemnity to the state against the expense of maintaining a police force to supervise the conduct of those engaged in the business and to guard against the disorders, and infractions of law occasioned by its prosecution, would be a legitimate exercise of the police power, and not open to the objection that it was a tax for the purpose of revenue, and, therefore, unconstitutional. Reclaiming the inebriate, restoring him to society, prepared again to discharge the duties of citizenship, equally promotes the public welfare, and tends to the accomplishment of like beneficial results, and it is difficult to see wherein the imposition of a reasonable license fee would be any the less a proper exercise of this power in the one case than in the other. The purpose to which the license fund created by the act is designated is more consonant to the idea of regulating the traffic and preventing its evil than is the case under the general license law, which devotes the fees received to common school purposes, and we are not aware that any objection has ever been urged against that law on that account."
This case is cited with approval by Professor Fruend in his work on the Police power, Sec. 623.
(d)
Cases which sustain acts, which create a fund for the benefit of sick and injured firemen.
Statutes imposing a liability upon fire insurance agents, based upon the amount of the insurance effected by them, for the benefit of a fund to care for and cure such sick and injured firemen, have been upheld in the States of New York and Illinois. Fire Department vs. Noble, 3 E.D. Smith (N.Y.), 440; Fire Department vs. Wright, 3 E.D. Smith (N.Y.), 453; Except Fireman's Fund vs. Roome, 29 Hun. 391, 394; Firemen's Benevolent Ass'n. vs. Lounsbury, 21 111. 511, 74 Am. Dec. 115. A similar statute relating to agents for foreign insurance companies was upheld in Wisconsin. Fire Department vs. Helfenstein, 15 Wis. 136.
Each class of these four lines of cases is an example of the police power of the States to create a fund by taxation for the protection of the health, safety and general welfare of classes of citizens and the general public. The rule is that an ulterior public advantage may justify a comparatively insignificant taking of private property for what, in its immediate purpose, is a private use.
THE AUTHORITY OF THE LEGISLATURE OF OHIO (OR ANY OTHER STATE OF THE UNITED STATES) TO ENACT THE UNEMPLOYMENT INSURANCE ACT EXEMPLIFIED BY APPENDIX "B", IF IT EXISTS AT ALL, RESIDES IN THE POLICE POWERS. WHAT IS THE NATURE AND WHAT ARE THE LIMITATIONS OF THE POLICE POWER?
The Police Power
The Supreme Court of the United States has perhaps most clearly defined the conditions under which the conduct of business or employments warrants the exercise of legislative power of any state to pass proper police measures to regulate the same for the purpose of protecting society as a whole, in speaking through its Chief Justice (Waite), in Munn vs. Illinois, 94 U.S. 113-154, 24 L. ed. 77-94.
In this case the constitutionality of a law passed by the legislature of Illinois to regulate the rates which grain elevators might charge was raised. This act fixed a maximum rate which grain elevators might charge the public for storing grain. These principles are clearly stated as follows: "The state is a social compact by which the whole people convenants with each citizen, and each citizens with the whole people, that all shall be governed by certain laws for the common good."
"From this source come the police powers, which, as said by Chief Justice Taney in the License Cases, 5 How. 583, 12 L. ed. 291, "are nothing more or less than the powers of government inherent in every sovereignty, . . . that is to say, . . . the power to govern men and things'. Under these powers the government regulates the conduct of its citizens one towards another, and the manner in which each shall use his own property, when such regulation becomes necessary for the public record. In their exercise it has been customary in England from time immemorial, and in this country from its first colonization, to regulate ferries, common carrier, hackmen, bakers, millers, wharfingers, innkeepers, etc., and in so doing to fix a maximum of charge to be made for services rendered, accommodations furnished, and articles sold. To this day statutes are to be found in many of the states upon some or all of these subjects, and we think that it has never yet been successfully contended that such legislation came within any of the constitutional prohibitions against interference with private property. With the 5th Amendment in force, Congress in 1820, conferred power upon the city of Washington ‘to regulate...the rates of wharfage at private wharves...the sweeping of chimneys, and to fix the rates of fees therefor, ...and the weight and quality of bread,' 3 Stat. at L. 587, Chap. 104, Sec. 7; and in 1848, ‘to make all necessary regulations respecting hackney carriages, and the rates of fare of the same, and the rates of hauling by cartmen, wagoners, carmen, and draymen, and the rates of commission of auctioneers.' 9 Stat. At L. 224, Chap. 42, Sec. 2.
From this it is apparent that, down to the time of the adoption of the 14th Amendment, it was not supposed that statutes regulating the use, or even the price of use, of private property necessarily deprived an owner of his property without the due-process of law. Under come circumstances they may, but not under all. The amendment does not change the law in this particular; it simply prevents the states from doing that which will operate as such a deprivation...
Property does become clothed with a public interest when used in a manner to make it of public consequences, and affect the community at large. When, therefore, one devotes his property to a use in which the public has an interest, he in effect grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created. He may withdraw his grant by discontinuing the use, but, so long as he maintains the use, he must submit to the control. . .
Neither is it a matter of any moment that no precedent can be found for a statute precedent can be found for a statute precisely like this. It is conceded that the business is one of the recent origin, that its growth has been rapid, and that it is already of great importance. And it must also be conceded that it is a business in which the whole public has a direct and positive interest. It presents, therefore, a case for the application of a long known and well-established principle in social science, and this statute simply extends the law so as to meet this new development of commercial progress. There is no attempt to compel these owners to grant the public an interest in their property, but to declare their obligations, if they use it in this particular manner.
First. It follows from the definition foregoing, that the existing conditions relative to the economic and social effects of the unemployment of workmen, hereinbefore set forth in Part I, upon their families and society as a whole, come within the domain of applicability of the police power of the state.
Second. That the remedy provided in the bill in Appendix S, namely Compulsory Unemployment Insurance, is not in conflict with the constitutional limitation of the several state of Federal Constitutions.
POLICE POWER DISTINGUISHED FROM TAXING POWER
Taxation may be for the purpose of raising revenue, or for the purpose of regulation, when for the purpose of regulation it is an exercise of the police power of the state:
Carthage vs. Rhodes, 101 Md. 175; Davis vs. Petrionovich, 112 Ala. 654; Mulcahy vs. Newark, 57 N.J. L. 513 and cases cited.
Maxim of Police Power
Prof. Ernest Freund - Police Power 1904 - Sec. 8. p. 6:
"The maxim of this power (police power) is that any individual must
submit to such restrictions in the exercise of his liberty or his rights
of property as may be required to remove or reduce the danger of the abuse
of these rights on the part of those who are unskillful, careless, or
unscrupulous." Prothero Statutes and Constitutional Documents, p.
341.
Syl. "2 - Chapter 112 of the State Laws of 1896 of N.Y. known as
Liquor Tax Laws, is not a "tax law" in the proper sense, as
it does not have for its primary purpose the raising of revenue for the
support of the government, but it is a law enacted under the police power,
the exaction of which, although denominated taxes are imposed for the
primary purpose of regulating and controlling the liquor traffic (1896)":
People vs. Murray et. al., 149 N.Y. 367.
Syl. "4 - Sections 8970-8974, Oregon Law requiring land owners to
provide a fire patrol, and authorizing the State forester to maintain
such patrol at the landowner's expense in case of his failure to do so,
in a reasonable and proper police regulation to protect the forests of
the State from destruction by fire, and its enactment was not an exercise
of the taxing power of the State": First State Bank of Sutherlin
vs. Kendall Lumber Co. et. al. 107 Wash. (November 1, 1923).
"The term ‘police power' as understood in American Constitutional Law mean simply the power to impose such restraints upon private rights as are practically necessary for the general welfare of all."
"The police power is a general term used to express the particular right of a government which is inherent in every sovereignty:" L.S. & N.S.R. Co. vs. Smith, 173 U.S. 684.
"The police power extends to the protection of lives, health, and property of the citizens and to the preservation of good order and public morals:" Davock vs. Moore 105 Mich. 120. Licenses for the regulation of occupations and not for revenue can be justified only upon the ground that a necessity exists for the exercise by the state either directly, or through the delegation to municipal corporation, the police power;" Bessetts vs. People 193 111. 334. In order that an ordinance to license a particular occupation, such as the business of plumbing, may be justified as an exercise of the police power, it must appear that the requirement of a license tends to promote the public health, morals, safety and comfort, or welfare or to support disease:" Wilkie vs. Chicago, 188 111. 444.
The Right of any State of the United States to Regulate Employment for the Conduct of any Business through the Exercise of the Police Power to Conserve a Public Purpose.
Munn vs. Illinois, 94 U.S. 113 (October 1876.)
Syllabus:
1. "Under the powers inherent in very sovereignty, a Government may regulate the conduct of its citizens toward each other, and, when necessary for the public record, the manner in which each shall use his own property."
3. "Down to the time of the adoption of the Fourteenth Amendment of the Constitution of the United States, it was not supposed that statutes regulating the use, or even the price of the use, of private property, necessarily deprived an owner of his property without due process of law. Under some circumstances they may, but not under all. The amendment does not change the law in this particular: it simply prevents the States from doing that which will operate as such deprivation."
4. "When the owner of property devotes it to a use in which the public has an interest, he in effect grants to the public an such use, and must to the extent of that interest, submit to be controlled by the public, for the common good, as long as he maintains the use, He may withdraw his grant by discontinuing the use."
5. "The rights of property and to reasonable compensation for its use, created by common law, cannot be taken away without due process; but the law itself, as a rule of conduct, may, unless constitutional limitations forbid, be changed at the will of the Legislature. The great office of statutes is to remedy defects of the common law as they are developed, and to adapt it to the changes of time and circumstances."
The court speaking through Chief Justice Wait at page 124 says:
"When one becomes a member of society, he necessarily parts with some rights or privileges which as an individual not effected by his relations to others, he might retain. A body politic as aptly defined in the preamble of the Constitution of Massachusetts, ‘is a social compact by which the whole people convenants with each citizen, and each citizen with the whole people, that all shall be governed by certain laws for the common good.
The Principle upon which the Power of Regulation rests.
"Looking, then, to the common law, from whence came the right which the Constitution protects, we find that when private property is effected with a public interest, it ceases to be juris privati only.' This was said by Lord Chief Justice Hale more than 200 years ago, in his treatise De Portibus Maris, 1 Hard. Law Tracts, 78, and has been accepted without objection as an essential element in the law of property ever since. Property does become clothed with the public interest when used in a manner to make it of public consequence, and effect a community at large. When, therefore, one devoted his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good to the extent of the interest as thus created."
The case Munn vs. Illinois, 94 U.S. 113, arose out of the violation of a statute enacted by the Legislature of the State of Illinois limiting the price which a grain elevator might charge for storing grain. The plaintiff Munn was convicted of violating the statute for charging more for storage than the maximum price fixed by the statute. The plaintiff Munn claimed that the statute violated the V and XIV amendments to the Constitution of the United States. The Supreme Court of the United States sustained the statute.
Limitations in the Use of Property
Fixed by State Statutes.
In the case: Nebbia vs. New York, 291 U.S. 502, and particularly 523,
etc., the New York Court of Appeals affirmed the conviction of a storekeeper
for selling milk at a price below that allowed by an order promulgated
by a State Board pursuant to statutory authority. An appeal was taken
from the judgment of the County Court rendered on a remitter. At pages
523, 524, 525, and 526, the Supreme Court of the United States, speaking
through Justice Roberts, spoke as follows:
"Under our form of government the use of property and the making of contracts are normally matters of private and not of public concern. The general rule is that both shall be free of governmental interference. But neither property rights nor contract rights are absolute; for the government cannot exist if the citizen may at will use his property to the detriment of his fellows, or exercise his freedom of contract to work them harm. Equally fundamental with the private right is that of the public to regulate it in the common interest. As Chief Justice Marshall said, speaking specifically of inspection laws, such laws form ‘a portion of that immense mass of legislation, which embraces every thing within the territory of a State...all which can be most advantageously exercised by the States themselves. Inspection laws, quarantine laws, health laws of every description, as well as laws for regulating the internal commerce of a State, ...are component parts of this mass.' 10
"Justice Barbour said for this in court: ‘...it is not only the right, but the bounden and solemn duty of a state, to advance the safety, happiness and prosperity of its people, and to provide for its general welfare, by any and every act of legislation, which it may deem to be conductive to these ends; where the power over the particular subject, or the manner of its exercise, is not surrendered or restrained, in the manner just stated. That all those powers which relate to merely municipal legislation, or what may, perhaps, more properly be called internal police, are not thus surrendered or restrained; and that, consequently, in relation to these, the authority of a state is complete, unqualified, and exclusive.'
"And Chief Justice Taney said upon the same subject: ‘But what are the police powers of a State? They are nothing more or less than the powers of government inherent in every sovereignty to the extent of its dominions. And whether a State passes a quarantine law, or a law to punish offences, or to establish courts of justice, or requiring certain instruments to be recorded, or to regulate commerce within its own limits, in every case it exercises the same powers; that is to say, the power of sovereignty, the power to govern men and things within the limits of the dominion. It is by virtue of this power that it legislates; and its authority to make regulations of commerce is as absolute as its power to pass health laws, except in so far as it has been restricted by the constitution of the United States.'
"Thus has this court from the early days affirmed that the power tp promote the general welfare is inherent in government. Touching the matters committed to it by the Constitution, the United States possesses the power, as do the states in their sovereign capacity touching all subjects jurisdiction of which is not surrendered to the federal government, as shown by the quotations above given. These correlative rights, that of the citizens to exercise exclusive dominion over property and freely to contract about his affairs, and that of the state to regulate the use of property and the conduct of the business, are always in collision. No exercise of the private right can be imagined which will not in some respect, however slight, effect the public; no exercise of the legislative prerogative to regulate the conduct of the citizen which will not to some extent abridge his liberty or affect his property. But subject only to constitutional restraint the private right must yield to the public need.
"The Fifth Amendment, in the field of federal activity, and the Fourteenth, as respects state action, do not prohibit governmental regulation for the public welfare. They merely condition the exertion of the admitted power, by securing that the end shall be accomplished by methods consistent with the due process. And the guaranty of due process, as has often been held, demands only that the law shall not be unreasonable, arbitrary or capricious, and that the means selected shall have a real and substantial relation to the object sought to be attained. It results that a regulation valid for one sort if business, or in given circumstances, may be invalid for another sort, or for the same business under other circumstances, because the reasonableness of each regulation depends upon the relevant facts.
"The reports of our decisions abound with cases in which the citizen, individual or corporate, has vainly invoked the Fourteenth Amendment in resistance to necessary and appropriate exertion of the police power."
"The court has repeatedly sustained curtailment of enjoyment of private property, in the public interest. The owners' right may be subordinated to the needs of other private owners whose pursuits are vital to the paramount interests of the community. The state may control the use of the property, in various ways; may prohibit advertising bill boards except of a prescribed size and location, or their use for certain kinds of advertising; may in certain circumstances authorize encroachments by party walls in cities; may fix the height if buildings, the character of materials, and methods of construction, the adjoining area which must be left open, and may exclude from residential sections offensive trades, industries and structures likely injuriously to affect the public health or safety; or may establish zones within which certain types of buildings or businesses are permitted and others excluded. And although the Fourteenth Amendment extends protection to aliens as well as citizens, a state may for adequate reasons of policy exclude aliens altogether from the use and occupancy of land.
"Laws passed for the suppression of immorality, in the interest of health, to secure fair trade practices, and to safeguard the interests of depositors in banks, have been found consistent with due process. These measures not only affected the use of property, but also interfered with the right of private contract. Other instances are numerous where valid regulation has restricted the right of contract, while less directly affecting property rights.
"The Constitution does not guarantee the unrestricted privilege to engage in a business or to conduct it as one pleases. Certain kinds of business may be prohibited; and the right to conduct a business, or to pursue a calling, may be conditioned. Regulation of a business to prevent waste of the state's resources may be justified. And statutes prescribing the terms upon which those conducting certain businesses may contract, or imposing terms if they do enter in agreement, are within the state's competency."
Equal Protection and Classification
In the case of Continental Baking Company vs. Woodring, 55 F. (2d) 347, and in particular at page 353, District Court, District of Kansas, 2nd Division, decided December 15, 1931, the plaintiffs, the Continental Baking Company, sough to enjoin the enforcement of a statue regulating transportation by motor vehicles on the ground that a statute is arbitrary and discriminatory and that it compels private carriers to assume the burdens of common carriers.
The Court, page 353, citing with approval Munn vs. Illinois, 94 U.S. 113-132, held:
"That a legislative classification should stand, ‘if any state of
facts reasonably can be
conceived that would sustain it'; that the burden is on the assailant
to show that the classification is ‘essentially arbitrary'; that the Legislature
has a ‘wide scope of discretion' in classification; that ‘mathematical
nicety' is not required; and that ‘some inequality in practice' is not
fatal — see Lindsley vs. Natural Carbonic Co., 220 U.S. 61, 78, 31 S.
Ct. 337, 340, 55 L. Ed. 369, Ann. Cas. 1912C, 160; State Board of Tax
Commissioners vs. Jackson, 283 U.S. 527, 537, 51 S. Ct. 540, 75 L. Ed.
1248, 73 A.L.R. 1464; Brown-Forman Co. vs. Kentucky, 217 U.S. 563, 573,
30 S. Ct. 578, 54 L. Ed. 883; Munn vs. Illinois, 94 U.S. 113, 132, 24
L. Ed. 77. It is abundantly settled that the Legislature may consider
the difficulties of administration in the enactment of statutes. In Purity
Extract & Tonic Co. vs. Lynch, 226 U.S. 192, 33 S. Ct. 44, 57 L. Ed.
184, it was held that the difficulties besetting the administration of
a law were sufficient to authorize the placing of an innocent article
within a prescribed class. See, also, Ruppert vs. Caffey, 251 U.S. 264,
283, 40 S. Ct. 141, 64 L. Ed. 260."
Is the proposed compulsory employment insurance act (appendix B) of
welfare operation xxxxx individuals?
Section 8. DEFINITIONS. As used in this act:
a. "Commission" means the unemployment insurance commission of Ohio.
b. "Employer", except where the context clearly shows otherwise means any person, partnership, firm, association or corporation who (which) has six or more persons employed in any employment subject to this act. It shall not include the state of Ohio as an employer, nor any municipal or public corporation, nor any political subdivision; nor any farmer; or any person, partnership, firm, association or corporation to which this act may not apply by reason of any provision of the constitution of the United States or any act of Congress.
c. "Employee", except where the context clearly shows otherwise, means any person, including aliens and minors, employed for hire by an employer in an employment subject to this act, except a person whose employment is not in the usual course of the trade, business, profession or occupation of the employer, and except further any person employed as other than manual labor at a rate of remuneration of two thousand dollars a year or more.
d. "An employment", except where the context clearly shows otherwise, means any employment in which all or the greater part of the employee's work is performed within the state of Ohio, under any contract of hire, express or limited, oral or written, including all contracts entered into by helpers and assistants of employees, whether paid by employer or employee, if employed with the knowledge actual or constructive of the employer; and shall include any trade, occupation, profession or process of manufacture, or any method of carrying on said trade, occupation, profession or method of manufacture in which any person may engage; except that for the purpose of this act it shall not include:
(1) Employment as an agricultural laborers.
(2) Employment in the personal or domestic services of an employer at his home.
(3) Employment in the service of a common carrier engaged in interstate commerce, subject to the laws of Congress and supervision of interstate commerce commission.
(4) Employment by any governmental unit, or municipal or public corporation, or any political subdivision; or in any employment in a private or parochial school or college where the contract of hire is on annual salary basis.
(5) Employment as a short-time or casual laborer for a period of less than four weeks, provided that where such short-time or casual labor is employed during four successive weeks or more, it shall be deemed an employment within the scope of this act.
(6) Employment of a physically handicapped person by an institution financed largely by charitable donations and organized not for profit but primarily for the relief and rehabilitation of such handicapped person.
(7) Employment as physician, surgeon, intern, or nurse in a hospital, sanatarium, or other similar private endowed institution not operated for profit.
(8) Employment of the father, mother, spouse, or minor child by the employer.
e. "Benefits" means money allowances payable to an employee as insurance or compensation for losses of wages due to unemployment as provided by this act.
f. "Wages" means what is customarily meant by the term, the money rate at which the employee is recompensed under the contract of hire, except that it shall include commissions and bonuses and the reasonable value of board, rent, housing, lodging or similar advantages received from the employer.
g. "Average Weekly Wages" means the weekly earnings that an employee subject to this act would average if he were employed full time, i.e. the full member of schedule or customary working hours per week in the employment or employments in which he is or has engaged prior to applying for benefits under this act. The commission shall make suitable rules for the purpose of calculating the average wages on the basis of which benefits under the act are to paid, and for this purpose may average full time earnings over a period of three months or more in order to include reasonable proportions of busy and slack weeks, and may adopt such method or methods of calculating the said average weekly wages as may be suitable and reasonable under this act.
h. "Payroll" means and shall include all wages, salaries, and remuneration paid to employees subject to this act.
i. "Total Unemployment", except where the context clearly shows otherwise, means the condition caused by the inability of an employee, who is capable of an available for employment, to obtain work in his usual employment or in suitable employment as defined by this act; which condition causes total loss of wages.
j. "Partial Unemployment" means part-time employment resulting in less of wages amounting to forty per cent or more of an employee's average weekly wages.
Section 3. PREMIUMS.
a. On and after the first day of July, 1936, premiums for insurance in the fund shall accrue and become payable by every employer and employee subject to this act and in accordance with its provisions. All premiums payable to the fund shall be paid to the commission, at such times and in such manner as the commission shall prescribe, and shall promptly be paid over by the commission to the treasurer of state who shall credit same to the fund.
b. Employer's Premium. Every employer subject to this act shall in the month of July, 1936, and thereafter at such intervals as the commission may determine and require, pay into the fund the amount of premiums fixed by this act, and by the commission as authorized by this act, for the employment or occupation of the employer. Until July 1, 1939, the contributions or premiums regularly payable by every employer into the fund shall be an amount equal to two per cent per annum of his payroll. Thereafter the premium to be paid by each employer shall be determined by the classifications, rules and rates made and published by the commission; and every employer shall thereafter pay at regular intervals fixed by the commission such premiums into the fund as may be ascertained to be due from him by applying the rules of the commission; provided that the premium for an employer shall in no case amount to less than one per cent per annum or more than three ad one-half per cent per annum of such employer's payroll.
c. Employees' Premium. Every employee whose employment is subject to the provisions of this act shall pay into the fund a sum equal to one per cent of all wages received by him in such employment, and the employer shall deduct such amount and shall pay the same into the fund under such regulations and at such intervals as the commission may determine and require. No agreement by an employee to pay any portion of the premium, or other payment required to be made by his employer for the purpose of providing benefits, shall be valid; and no employer shall make a deduction for such purpose from the wages or salary of any employee. But nothing in that act shall affect the validity of voluntary arrangements by which employees individually or collectively agree to make contributions for the purpose of securing benefits in addition to those provided by this act."
CLASSIFICATION OF EMPLOYMENTS
Your commentator contents that the proposed State Bill, Appendix B. is constitutional, even though the bill limits the Act to cover employments in which six (6) or more persons are regularly employed; and also further limits the classes of employees covered by the Act by excluding certain classes of employment. See especially paragraphs b, c, d, Section 8 of the bill; that these limitations are not in violation of Article I, Section 2 of the Constitution of the State of Ohio, which provides that "Government is instituted for the equal protection and benefit . . . " and the corresponding provisions in the constitution of the other States of the United States.
That such a limitation is a reasonable exercise of the Police Power has been decided by abundance of authorities. The United States Supreme Court, in St. Louis Consolidated Coal Co. vs. Illinois, said: "Another question is whether the act, as amended in 1897, insofar as it discriminates as to penalties imposed upon some persons engaged in the mining business, and not upon others, is a proper exercise of the police power. It is true that the act of 1897 amended the former law of 1895, by limiting its application to coal mines ‘where more than five men are employed at any one time.' This is a species of classification which the legislature is at liberty to adopt, provided it be not wholly arbitrary or unreasonable, as it was in Cotting vs. Kansas City Stock Yards Company, 183 U.S. 79, in which an act defining what should constitute public stock yards and regulation all charges connected therewith was held to be unconstitutional, because it applied only to one particular company, and not to other companies or corporations engaged in a like business in Kansas, and thereby denied to that company the equal protection of the laws. In the case under consideration there is no attempt arbitrarily to select one mine for inspection, but only to assume that mines, which are worked upon so small a scale as to require only five operatives, would not be likely to need the careful inspection provided for the larger mines, where the workings were carried on upon a larger scale or at a greater depth from the surface, and where a much large force would be necessary for their successful operation. It is quite evident that a mine which is operated by only five men could scarcely have passed the experimental stage, or that precautions necessary in the operation of coal mines of ordinary magnitude would be required in such cases. There are clearly reasonable foundation for a discrimination here."
To the same effect is the decision of the Supreme Court of the United States in McLean vs. Arkansas, where the court held that it was not an unreasonable classification to divide coal mines into those where less than ten miners are employed and those where more than that number are employed, and that a State police regulation was not unconstitutional under the equal protection clause of the Fourteenth Amendment because only applicable to mines where more than ten miners are employed.
A similar classification was sustained by the same court in Williams vs. Arkansas, and in Engel vs. O'Malley. In Borgnis vs. Falk Co., the Wisconsin Supreme Court unanimously sustained a like provision in the Wisconsin Compensation Act and in State of Ohio, in State ex rel. of Wallace D. Yaple vs. David S. Creamer, Treasurer of State, the Supreme Court of Ohio sustained a like provision in the Ohio Workmen's Compensation Act.
EXTENT OF THE POLICE POWER
THAT MAY BE EXERCISED BY THE STATE
We cite Holden v. Hardy 169 U.S. 326, showing to what extend the Legislature may go in the exercise of its police power in regulating the relation of employer and employee, without violating the provisions of the Fourteenth Amendment of its Constitution of the United States by abridging the privileges or immunities of the citizens, or by depriving them of their property, or by depriving to them the equal protection of the Laws, the court says:
"The provisions in the act of March 30, 1896, c 72, of Utah, providing that: "The period of the employment of workingmen in all underground mines or workings shall be eight hours per day, except in cases of emergency where life or property are in imminent danger;" that "the period of the employment of workingmen in smelters and all other institutions for the reduction of refining of ores or metals shall be eight hours per day, exempt in cases of emergency where life or property are in imminent danger;" and that "any person, body corporate, agent, manager or employer who shall violate any of the provisions of sections one and two of this act shall be deemed guilty of a misdemeanor," are a valid exercise of the police power of that State, and do not violate any of the provisions of the Fourteenth Amendment to the Constitution of the United States by abridging the privileges or immunities of its citizens, or by depriving them of their property, or by denying to them the equal protection of the laws.
The cases arising under the Fourteenth Amendment are examined in detail,
and are held to demonstrate that, in passing upon the validity of state
legislation under it, this court has not failed to recognize the fact
that the law is, to a certain extend, a progressive science; that in some
States methods of procedure which, at the time the Constitution was adopted,
were deemed essential to the protection and safety of the people, or to
the liberty of the citizen, have been found to be no longer necessary;
that restrictions which had formerly been laid upon the conduct of individuals
or classes had proved detrimental to their interests; and other classes
of persons, particularly those engaged in dangerous or unhealthy employment's,
have been found to be in need of additional protection; but this power
of change is limited by the fundamental principals laid down in the Constitution,
to which each member of the Union is bound to accede as a condition of
its admission as a State."
We cite additional cases in support of our contention that the Legislature of this or any other State of the United States is vested with the authority to exercise its police power to regulate employment and make the classification of employment's set forth in the proposed Compulsory Unemployment Insurance Bill set up in Appendix B, in promotion of the general welfare of the State.
1. Some employers of laborers engaged in hazardous employment's may be required to compensate such laborers for injuries received while so engaged without regard to fault upon the part of the employer (Cooley's Constitutional Limitations, 8th Edition, p. 1337.)
2. The legislature, within the exercise of its police powers, in enacting a compulsory compensation act, may abrogate common-law defenses, and impose liability without fault, substituting new rules of legal procedure in place of the old, so long as its action in that regard is not arbitrary, unjust, or unreasonable. State ex rel. Amerland v. Hagan, 44 N.D. 175 N.W. 372.
3. In a test of he constitutionality of a State compulsory workmen's compensation act under the Fourteenth Amendment to the Federal Constitution, "the questions whether there is inherent hazard in an occupation or a group of occupations is not to be settled conclusively by a legislature . . . is justified in extending the benefits of the compensation law as far as it reasonably may determine occupational hazards to extend, -- to the ‘vanishing point', as it were, -- and any lines of group definition it may adopt, if easily understood and applied, cannot reasonably be called an empty form of words merely because they do not carry on their faces the reasons for adopting them." Ward & Gow v. Krinsky, 259 U.S. 503. See also State ex. Rel. Davis-Smith Co. v. Clausen, 65 Wash. 156.
4. It is within the province of the legislature, in the proper exercise of its police power as a matter of public policy, to declare that there is an element of hazard or of danger in employment in the modern business world, and a court, upon construction of tis definition in that regard, will not presume that the term "hazardous" must necessarily refer to employment's that have heretofore been termed hazardous, by reason of extra features of hazard inherent to the nature of occupation. State ex rel. Amerland v. Hagan, 44 N. D. 306.
5. The exclusion from the operation of a workmen's compensation law of certain classes of employees is not a denial of the equal protection of the laws. Among the classes of laborers whose exclusion has been held not to constitute such denial, are the following: Domestic servants, farm and other agricultural laborers, employees engaged in dairy labor, or in stock or poultry raising, laborers in cotton gins, coal mine operators, railroad employees, casual employees, employees receiving more than a stated salary, and employees or employers employing not more than a certain number or workmen. New York C. R. Co. v. White, 243 U.S. 188; Middleton v. Texas Power & Light Co., 249 U.S. 152; Lower Vein Coal. Co. v. Industrial Bd., 255 U.S. 144; Western Indemnity Co. V. Pillsbury, 170 Cal. 686; Hunter v. Colfax, 175 Iowa 245; In re Opinion of Justices, 209 Mass 607.
6. A workmen's compensation law is not violative of the due process clause or the equal protection of the laws clause of the Fourteenth Amendment of the Federal Constitution because it operates compulsorily upon coal mining companies, while as to other employers it is permissive, or does not apply at all. Labor Vein Coal Co. v. Industrial Board, 255 U.S. 144.
We cite in particular in "7" & "8", decisions of the Supreme Court of the United States, in which that Court unanimously affirmed the judgments respectively of the Supreme Court of Ohio and the State of Washington, which courts sustained the constitutionality of the Ohio Workmen's Compensation Act and the State of Washington's Workmen's Compensation Act. Both of these Acts are based upon a very broad and extensive use of the exercise of the police power of the State in its right to tax and regulate employment's to promote the general welfare of the working classes and the people of the State.
The needs of the states of the United States to regulate employment's and unemployment for the protection of the general welfare of the people of the states of the United States is set forth in Part I of this memorandum pp. 1 to 83.
7. Re: Constitutionality of the Ohio Workmen's Compensation Act.
1. - The Jeffrey Manufacturing Co. v. Blogg (Jan. 5, 1915) 235 U.S. 571.
The Supreme Court of the United States held:
" In general Workmen's Compensation Act, establishing a state plan that all employers having five (5) or more employees may enter on equal terms, a provision, abolishing the defenses of contributory negligence as to such employers who do not come into the plan, is not unconstitutional as denying equal protection of the laws as to them because the defense is not abolished as to those having less than five (5) employees and so held as to such provisions in the Workmen's Compensation Law of Ohio."
The Supreme Court of the United States unanimously affirmed the judgment of the Supreme Court of Ohio which had held in the case The State ex, rel. Yaple v. Cramer, Treasurer of the State. (Feb. 6, 1912) 85 O. St., 349, that:
"The Act entitled ‘An Act to create a state insurance fund for the
benefit of injured, and the dependents of killed employees' etc., 102
O.L. 524, is a valid exercise of legislative power not repugnant to the
Federal or State Constitutions, or to any limitation contained in either",
citings:
Lindsley v. Natural Carbonic Gas Co., 220, U.S. 61; St. Louis Consolidated
Coal. Co., v. Illinois, 185 U.S. 203; McLean v. Arkansas, 211 U.S. 539.
8. 2. The Supreme Court of the United States in the case: Mountain Timber Co. v. The State of Washington, 243 U.S. 219 (March 6, 1917) unanimously affirmed the decision of the Supreme Court of the State of Washington in the case: The State of Washington, Respondent vs. Mountain Timber Company Appellant, 75 Wash. 581 which held:
"CONSTITIONAL LAW - POLICE POWER - SCOPE. The police power is as broad as the public welfare and as strong as the arm of the state, and its scope is to be measured by the legislative will of the people in acts passed in affirmance of established usage or of such standards of morality and expediency as have, by gradual process and accepted reason, become so fixed as to fairly indicate the better will of the people in their social, industrial and political development.
"JURY - RIGHT TO JURY TRIAL - CONSTITUTIONAL PROVISIONS. The right to trial by jury guaranteed by the Federal constitution does not apply to state courts or to prosecutions for the violation of state laws.
CONSTITUTIONAL LAW - REPUBLICAN FORM OF GOVERNMENT. The compulsory industrial insurance law does not violate the Federal constitutional guarantee of a republican form of government."
9. We cite below the cases which Honnold in Vol. 3, of his work on "Supreme Court Law" has cited in support of the constitutionality of workmen's compensation acts of the states of the United States. Honnold has grouped these decisions under two types of compensation acts:
Type "1" - where in general, where "provisions for compulsory compensation are made to apply only to those employed in hazardous employment's" and
Type "2" - where there is something more in a compensation law than the element of hazard, - something that gives room for the power of classification which a legislature may exercise in its judgment of what is necessary for the public welfare through the exercise of the police power in the regulation of employment's.
We cite the following authorities in support of the constitutionality of compulsory workmen's compensation acts in the several states of the United States.
See "Supreme Court Law" by Honnold, volume 3, pages 2645-2647: to wit:
Workmen's Compensation
1. In general, provisions for compulsory compensation are made to apply only to those employed in hazardous occupations, where it may be contemplated by both parties in advance that sooner or later some of those employed probably will sustain accidental injury in the course of employment, but where nobody can know in advance which particular employees, or how many, will be the victims, or how serious will be the injuries.
Ward & Gow v. Krinsky, 259 U.S. 503, 42 S. Ct. 529, 66 L. Ed. 1033; New York C.R. Co. v. White, 243 U.S. 188, 202, et seq., 37 S. Ct. 247, 61 L. Ed. 667, 674, LR. A. 1917D, 1, Ann. Cas. 1917D, 629, 13 N. C. C. A. 943; Mountain Timber Co. v. Washington, 243 U.S. 219, 239, 243, 244, 37 S. Ct. 260, 61 L. Ed. 685, 697-699, Ann. Cas. 1917D, 642, 13 N.C.C.A. 927; Arizona Employers' Liability Cases (Arizona Copper Co. v. Hammer), 250 U.S. 400, 420, 422-426, 39 S. Ct. 553, 63 L. Ed. 1058, 1066, 1067, 1069, 6 A.L. R. 1537.
The remedy which the Compensation Statute attempts to give is of character
wholly unknown to the common law, incapable of enforcement by ordinary
processes of any court, and is not saved to suitors from the grant of
exclusive jurisdiction. Southern P. Co. v. Jensen, 244 U.S. 205, 37D.
Ct. 524, 61 L. Ed. 1086; The Hine v. Trevor, 4 Wall. 571, 572, 18 L. Ed.
456; The Belfast, 7 Wall. 624, 644, 19 L. Ed. 266, 272; American S. B.
Co. v. Chase, 16 Wall. 522, 531, 533, 21 L. Ed. 369, 371, 372; The Glide,
167 U.S. 606, 623, 17 S. Ct. 930, 42 L. Ed. 296, 302.
It is argued that there is a deprivation of liberty and property without
due process of law in requiring employees, willingly or unwillingly, to
accept the new system where their employer has adopted it. But, as has
been held so often, the liberty of the citizen does not include among
its incidents any vested fight to have the rules of law remain unchanged
for his benefit. The law of master and servant, as a body of rules of
conduct, is subject to change by legislation in the public interest. The
definition of negligence, contributory negligence, and assumption of risk,
the effect to be given to them, the rules of respondeat superior, the
imposition of liability without fault, and the exemption from liability
in spite of fault, --all these, as rules of conduct, are subject to legislative
modification. And a plan imposing upon the employer responsibility for
making compensation for disabling or fatal injuries irrespective of the
question of fault, and requiring the employee to assume all risk of damages
over and above the statutory schedule, when established as a reasonable
substitute for the legal measure of duty and responsibility previously
existing, may be made compulsory upon employees as well as employers.
Middleton v. Texas Power & Light Co., 249 U.S. 152, 39 S. Ct. 227,
63 L. Ed. 527; New York C.R. Co. v. White, supra; Mountain Timber Co.
v. Washington, supra.
2. There is something more in a compensation law than the element of hazard,
-- something that gives room for the power of classification which a legislature
may exercise in its judgment of what is necessary for the public welfare,
and which cannot be pronounced arbitrary because it may be disputed and
opposed by argument and opinion of serious strength.
Lower Vein Coal Co. v. Industrial Board of Ind., 255 U.S. 144, 41 S. Ct. 252, 65 L. Ed. 555; German Alliance Ins. Co. v. Lewis, 233 U.S. 389, 34 S. Ct. 612, 58 L. Ed. 1011, L.R.A. 1915C, 1189; International Harvester Co. v. Missouri, 234 U.S. 199, 34 S. Ct. 859, 58 L. Ed. 1276, 52 L.R.A. (N.S.) 525.
Liability without fault is not unknown to the maritime law, and, apart from this fact, considerations are applicable to the substantive provisions of legislation, with respect to the relation of master and servant, similar to those which the Court has found sufficient to sustain workmen's compensation laws of the states against objections under the due process clause of the Fourteenth Amendment. Crowell v. Benson, 285 U.S. 22, 52 S. Ct. 285, 289, 76 L. Ed. 598; New York Central R. Co. v. White, 243 U.S. 188, 37 S. Ct. 247, 61 L. Ed. 667, L.R.A. 1917D, 1, Ann. Cas. 1917D, 629; Mountain Timber Co. v. Washington, 243 U.S. 219, 37 S. Ct. 260, 61 L. Ed. 685, Ann. Cas. 1917D, 642; Ward & Gow v. Krinsky, 259 U.S. 503, 42 S. Ct. 529, 66 L. Ed. 1033, 28 A.L. R. 1207; Lower Vein Coal Co. v. Industrial Board, 255 U.S. 144, 41 S. Ct. 252, 65 L. Ed 555; Madera Sugar Pine Co. v. Industrial Accident Commission, 262 U.S. 499, 501, 502, 43 S. Ct. 604, 67 L. Ed. 1091; Sheehan Co. v. Shuler, 265 U.S. 371, 44 S. Ct. 548, 68 L. Ed. 1061, 35 A.L.R. 1056; Dahlstrom Metallic Door Co. v. Industrial Board, 284 U.S. 594, 52 S. Ct. 202, 76 L. Ed. 54; Nogueira v. N.Y., N.H. & H.R. Co., 281 U.S. 136, 137, 50 S. Ct. 303, 74 L. Ed. 754. Workmen's compensation acts are treated, almost universally, as creating a statutory relation between the parties--not like employer's liability acts, as substituting a statutory tort for a common-law tort. Bradford Electric Light Co. v. Clapper, 286 U.S. 145, 52 S. Ct. 571, 76 L. Ed. 1026.
See Cudahy Packing Co. v. Parramore, 263 U.S. 418, 44 S. Ct. 153, 68 L. Ed. 366, 30 A.L.R. 532; Mulhall v. Nashua Manufacturing Co., 80 N.H. 194, 115 A. 449; Cameron v. Ellis Construction Co., 252 N.Y. 394, 169 N.E. 622; Chandler v. Industrial Commission, 55 Utah, 213, 184 P. 1020, 8 A.L.R. 930; Anderson v. Miller Scrap Iron Co., 169 Wis. 106, 170 N.W. 275 171 N.W. 935.
THE AUTHORITY OF THE UNEMPLOYMENT INSURANCE COMMISSION
(PROVIDED FOR IN SECTION 5, PARAGRAPH a, AND PARAGRAPH b, AND PARAGRAPH
C,) TO ADMINISTER THE UNEMPLOYMENT INSURANCE FUND (PROVIDED FOR IN SECTION
2 AND SECTION 3) TO CLASSIFY EMPLOYMENT AND FIX PREMIUM (SECTION 3) AND
TO DETERMINE THE AMOUNTS OF AWARDS OF BENEFITS MADE TO UNEMPLOYED WORKMEN
COVERED BY THE ACT.
It is believed that the provisions of the Compulsory Unemployment Insurance Act, set out in Appendix B, are effective and practical and that the executive and judicial functions of the State are not confounded and that unconstitutional difficulties have been avoided; that the provisions of the Act take the form of administrative measures, the principles of which have been approved largely in the administrative provisions of the various Workmen's Compensation Acts of the different States, which have long been practical operation.
The Seventh Amendment of the Constitution of the United States reads
as follows:
"In Suites at common law where the value in controversy shall exceed
$20, the right of trial by jury shall be preserved and no fact tried by
a jury shall be otherwise reexamined in any court of the United States,
than according to the rules of the common law."
It follows, therefore, from the Seventh Amendment that in case a controversy
arising out of the proposed Unemployment Insurance Act can be classified
as an executive function of the State or one that the State has authority
vested in it to delegate it to an administrative commission, then the
Seventh Amendment has no application, for the reasons that it is limited
in its application by its express provisions to two judicial proceedings.
Our inquiry, therefore, resolves itself into two propositions:
Proposition I. Does the exercise of the legislative act creating the proposed bill Appendix B, for the purpose of appropriating the property of the employer and employee, for the purpose of compulsory unemployment insurance and determining the rights of the employee to such fund, come within the exercise of the executive function or within the judicial function of the State?
Proposition II. If it comes within the judicial function, does it fall within the class of actions which receive a trial by jury?
Does the Unemployment Insurance Commission created by the Model Unemployment Insurance Bill set forth in Appendix B exercise a judicial function?
In considering this proposition it is necessary to investigate the nature of the limitations created by the 5th Amendment to the Constitution of the United States, with respect to the provisions "due process of law," which is deemed to apply not only to the power of the legislative, but also to the judicial, branches of the State government.
The 5th Amendment reads: "No person shall be deprived of life, liberty, or property, without due process of law, nor shall private property be taken for public use, without just compensation."
The phrase "due process of law" has application in our problem, not only to the rights created by the act, but also rather to the remedy provided by the act to make the putting into operation of the same effective.
The executive arm of every State government disposes of many problems
which, considered by themselves, are purely judicial in character. This
principle, as the authorities show, is illustrated in the following examples,
viz: (1) In the levying of special assessments; (2) in the exercise of
the power of eminent domain; (3) in the collection of various taxes; (4)
in the adjudication of those controversies (of purely judicial nature)
which deal with questions of account between tax collectors and the State,
in which the State many finally determine all issues through its administrative
agencies. In the case of Murray v. Hoboken Land & Emprov. Co., 9 Justice
Curtis, after referring to the summary methods used in England in the
collection of taxes and in adjusting accounts of receivers of revenue,
says: " For, though due process of law
generally implies and includes actor, reus, judex, regularly allegations,
opportunity to answer, and a trial according to some settled course of
judicial proceedings, ….yet this is not universally true. There may be,
and we have seen that there are, cases under the law of England after
Magna Charta, and as it was brought to this country and acted on here,
in which process, in its nature final, issues against body, lands, and
goods of certain public debtors without any such trial; and this brings
us to the question whether those provisions of the Constitution which
relate to the judicial power are incomparable with these proceedings?
"That the auditing of the accounts of a receiver of public moneys may be, in an enlarged sense, a judicial act, must be admitted. So are all those administrative duties the performance of which involves an inquiry into the existence of facts and the application to them of rules of law. . . But it is not sufficient to bring such matters under the judicial power, that they involve the exercise of judgment upon law and act."
Cooley, 0speaking of trial by jury in eminent domain cases cites the
case of People v. Smith1, 1and quotes from the decision as follows: "The
constitutional provision securing a trial by jury in certain cases, and
that which declares that no citizen shall be deprived of his property
without due process of law, have no application to the case. The jury
trial can only be claimed as a constitutional right where the subject
is judicial in its character. The exercise of the right of eminent domain
stands on the same ground with the power of taxation. Both are emanations
of the law making power. They are the attributes of political sovereignty,
for the exercise of which
the legislature is under no necessity to address itself to the courts.
In imposing a tax, or in appropriating the property of a citizen, or a
class of citizens, for a public purpose, with a proper provision for compensation,
the legislative act itself due process of law; though it would not be
if it should undertake to appropriate the property of one citizen for
the use of another, or to confiscate the property of one person or a class
of persons, or a particular description of property, upon some view of
public policy, where it could not be said to be taken for a public use.
. . It follows from these views that it is not necessary for a legislature,
in the exercise of the right of domain, directly or indirectly through
public officers or agents, to invest the proceedings with the forms of
substance of judicial process. It may allow the owner to intervene and
participate in the discussion before the officer or board to whom the
power is given of determining whether the appropriation shall be made
in a particular case, or it may provide and duty without the aid of a
forensic contest. The appropriation of the property is an act of public
administration, and the form and manner of its performance is such as
the legislature shall in its discretion prescribe."
In respect to the levying and collection of taxes in a summary manner, the court says in Kelly v. Pittsburgh 2: "Taxes have not, as a general rule, in this county since its independence, nor in England before that time, been collected by regular judicial proceedings. The necessities of government, the nature of the duty to be performed, and the customary usage's of the people, have established a different procedure, which, in regard to the mattery, is and always has been due process of law."
In Palmer v. Memahon,3 the court said: "That amendment (the 14th)
provides that no State shall make or enforce any law which shall abridge
the privileges or immunities of citizens of the United States; nor shall
any State deprive any person of life, liberty or property without due
process of law, nor deny to any person within its jurisdiction the equal
protection of the laws."
It is insisted that Palmer had not notice and no opportunity to be heard
or to confront or cross-examine the witnesses for the taxing authorities
or to sub-poena witnesses in his own behalf; and had not otherwise the
protection afforded in a judicial trial upon the merits. The phrase ‘due
process of law' does not necessarily mean a judicial proceeding. "The
nation from whom we inherit the phrase due process of law," said
this court, speaking by Mr. Justice Miller, has never relied upon the
courts of justice for the collection of her taxes, though she passed through
a successful revolution in resistance to unlawful taxation.' McMillen
v. Anderson 95 U.S. 37, 41, 24 L. ed. 335, 336.
"The power to tax belongs exclusively to the legislative branch of the government, and when the law provides for a mode of confirming or contesting the charge imposed, with such notice to the person as its appropriate to the nature of the case, the assessment cannot be said to deprive the owner of his property without due process of law. . . . The imposition of taxes is in its nature administrative, and not judicial, but assessors exercise quasi-judicial powers in arriving at the value, and opportunity to be heard should be and is given under all just systems of taxation according to value.
"It is enough, however, if the law provides for a board of revision authorized to hear complaints respecting the justice of the assessment, and prescribes the time during which and the place where such complaints may be made."
These decisions show that the controversies arising under the subject of taxation and eminent domain have no relation to judicial proceeding, and in consequence due process of law does not require in such instances, proceedings in a court of law, unless the government consent.
CONCERNING PROPOSITION II.
If we were to assume that the adjudication of a controversy between an employee and the Unemployment Insurance Commission, within whose jurisdiction will fall the power to distribute the unemployment insurance fund or the tax on both the employer and the employee, is judicial in character and should thereby be delegated to the courts to pass upon, we are still of the opinion that this is not essential in creating a remedy to adjudicate a right of an employee so arising to prescribe a trial by jury.
In civil cases, the Constitution of Ohio Article I, Section 5, provides: "The right of trial by jury shall be inviolate, except that, in civil cases, laws may be passed to authorize the rendering of a verdict by the concurrence of not less than three-fourths of the jury. (Adopted September 3, 1912.)"
All the State Constitutions preserve the right of trial by jury for civil as well as for criminal cases, with such exceptions as are specified and which for the most part consist in such cases as are of small consequence and are triable in inferior courts. The constitutional provisions do not extend the right; they only secure it in cases in which it was a matter of right before.
CONSTITUTIONAL RIGHT OF TRIAL BY JURY; EXTENT OF RIGHT;
IN WHAT CASES THE RIGHT EXISTS.
"The provisions of the Federal Constitution that, in suits at common law, where the value in controversy shall exceed $20, the right of trial by jury shall be preserved, applies only to proceedings in the courts of the United States, and is not a restriction or limitation upon the several states, nor a regulation of the trial of actions in their courts. Twitchel v. Com. 74 U.S. 7 Wall. 321 (19:223); Com. V. Whitney, 108 Mass. 5; Lee v. Tillotson, 24 Wend. 337, 35 Am. Dec. 622; Whallon v. Bancroft, 4 Minn. 109."
"The 7th Amendment does not apply to the preliminary examination under the fugitive slave law, such a proceeding not being according to the course of the common law, but statutory. Miller v. McQuerry, 5 McLean, 469."
"Trial by jury means a trial according to the course of the common law, and the same in substance as that which was in use when the Constitution was adopted. East Kingston v. Towle, 48 N.H. 64; Mead v. Walker, 17 Wis. 189."
"The right to trial by jury is secured by the Constitution only in cases where a jury trial was customarily used, and could legally be claimed, at the time of the adoption of the Constitution. People v. Phillips, 1 Edm. Sel. Cas. 386; Mead v. Walker, 17 Wis. 189."
"In proceedings for the condemnation of property under the power of eminent domain, the property owner has no constitutional right to a trial by jury, unless, as is the case in some states, the Constitution expressly gives it. Backus v. Lebanon, 11 H.N. 19, 35 Am. Dec. 466; Lamb v. Lane, 4 Ohio St. 167."
"In the assessment and collection of taxes the constitutional provisions relating to jury trial do not apply. Grave v. Newton Ed. of Health, 135 Mass. 490."
"In the trial of claims against the government, the claimant has no constitutional right to a trial by jury; he can only establish his claim in the mode pointed out by the statute. McElrath v. United States, 102 U.S. 426 (26:189)."
Workmen's Compensation Acts
Deprivation of Right to Trial by Jury under such Acts.
The question whether statutes creating workmen's compensation acts (now existing in forty-four states) operate as a denial of the right to trial by jury within the constitutional sense, is squarely met by the Supreme Court of Montana in passing upon the compensation law of that State. After showing that the Constitution does not prevent a change in the system of actions for negligence, the court says:
"The right of trial by jury which is secured and protected by the constitution, refers to the trial of cases, actions, or suits at law (see Koppokus v. Capitol Commissioners, 16 Cal. 249), and has no reference to claims against an indemnity fund, such as are provided for by this act, or demands by the State auditor for occupation taxes. There is not anything in the constitution guaranteeing a right of trial by jury in case of demand for a license or occupation tax. The adjustment of claims under the act is an administrative function and not a judicial proceeding, and it is only in certain cases falling under the latter designation that trial by jury is guaranteed by the constitution. ‘Due process of law' does not necessarily require a jury trial." (Montana Co. v. St. Louis Min. Co., 152 U.S. 160.)
In case: Cunningham etc. v. Northwestern Improvement Co., 119 Pac. R. 554 (Nov. 21, 1911), the Supreme Court of the State of Montana holds the following:
Syllabus, par. "10 - Trial by Jury - Limitation: State Constitution, Art. 3, Sec. 23, (Montana) providing that the right of trial by jury shall remain inviolate, and referring to civil cases, did not confer the right of trial by jury, in a special proceeding to obtain the benefits of La ws 1909, C. 67, providing a scheme for industrial insurance for persons engaged in coal mining within the state, and their dependents, in case of injury or death in the course of their occupation; and hence such act was not unconstitutional as depriving those subject to its terms of their right to trial by jury."
"The principles are well summarized by Robert J. Carey. In his view the decisions do not require trial by jury for the purpose of adjudicating a claim made by an employee against a government agency, for the payment of out of tax fund of a stipulated sum alleged to be due such employee as insurance. ‘Such right so vested in the employee is not a new private right against his employer. Thus it bears no resemblance to new substantive private rights akin to common-law rights, though created by statue. It is rather a right to share in a tax fund, and thus is necessarily a claim against the government, though the details of the law might be such that the claim is to be made against a government agency, as, for instance, a bureau commission, or association. The fun against which such claim is made is collected admittedly in a summary proceeding; the right to an interest in such fund arises not for the purpose of recoupment in damages on account of a private wrong done the employee, but solely because the employee, being a victim of a prevalent evil, is to be protected by the state as a member of a class of society, the right, indeed, is in one respect akin to the right of a landowner in an eminent domain suit to compensation due him in lieu of his property appropriated. In the present instance the employee's chose in action against his employer for a person wrong suffered is taken from him, and in lieu of which he is paid a benefit for the appropriation of such right. Under such circumstances, even though a controversy arising over the payment of a fund take judicial form, we think it within the power of the government to determine the character of the remedy."
The investigations of the Committee on Economic Security of the United States and of the Ohio Commission on Unemployment Insurance, and the experience of company plans, joint agreement plans, and trade-union plans in providing unemployment insurance, and the experience of eighteen European countries in developing plans for providing unemployment insurance is sufficiently shown in Part I of this memorandum and brief, that unemployment insurance is not only desirable and practical, but also that the State of Ohio and every other State of the United States cannot safely face unemployment insecurity of the future without preparing for it a compulsory system of insurance.
The evidence is conclusive in face of recurring periods of severe unemployment which industry and commerce in the states of the United States are unable to prevent, the lack of State systems of unemployment insurance in the United States is a dangerous menace to the safety of the states, to the solvency of public treasuries, to the integrity of family life for thousands of our citizens, to physical and moral welfare of the children of unemployed workers, and to the spirit of independence, initiative, self-reliance, self-support and thrift that the people of this country have rightly guarded as the spirit of Americanism.
Because economic depression and unemployment have forced business men, corporations, insurance companies and railroads and banks to appeal for public relief and to receive it through the Reconstruction Finance Corporation and other governmental agencies, to the extent of many hundreds of millions of dollars during the last two years, it cannot, with reason, be contended that wage earners could have provided against distress by their individual efforts and savings. It is evident that most working people are not responsible for their unemployment and that most employers are unable to avoid unemployment, and that they are unable to provide for themselves for long periods when industry and commerce cannot furnish employment. Private and public charities and the Federal Government have been the chief means relied upon to provide for the needs and prevent the suffering of the individuals and families in distress caused by unemployment.
There is, therefore, clearly established a public need as shown by the economic set-up in Part I to justify the State in the exercise of its police power to tax employers and employes and thus regulate employment to provide a fund for the relief of unemployment.
The grounds, therefore, for providing a legal basis to the exercise of the police power for creating an unemployment state insurance fund and Commission to administer same, are fully as strong and persuasive as they were for creating workmen's compensation acts in the forty-four states of the United States.
Whether the Unemployment Insurance Act May be Optional.
"It is well settled by the decisions of the Supreme Court of the United States that if an act mandatory in form can be constitutional, it will likewise by constitutional if it is voluntary in form.
"This conclusion was reached in the bank deposit guarantee fund cases which came to the court from the states of Oklahoma, Nebraska and Kansas. The law of the latter state was voluntary in form in certain of its vital features. The laws of the former were obligatory in form. Speaking of these differences Mr. Justice Holmes said:
"The most important of these is that contribution to the fund is not absolutely required. On this ground it is said, and was thought by the Circuit Judge, that the law could not be justified under the police power. We cannot agree to such a limitation. If, as we have decided, the law might compel the contribution on the grounds that we have stated, it may try to bring about the same result by the creation of motives less compulsory than command and of disadvantages in holding aloof less peremptory than an immediate stop. We shall not go through the details of minute criticism urged by the appellants, in most if not all of which they are in no way concerned.
"'Perhaps the most striking of these subordinate matters is the preference or ordinary depositors over other creditors, -- a preference that seems to be overstated by the appellants.
"'This obviously, is in aid of what assumed to be the one of the chief objects and justifications of such laws, securing the currency of checks. The ordinary deposits are those that are drawn against in that way.'"
Further, there are workmen's compensation acts, new in operation in 44 State of the United States, in all excepting the State of Arkansas, Florida, South Carolina and Utah.
An examination of these 44 plans for compensating injured workmen, their dependents and the dependents of killed workmen, shows that there are only the State of Alabama, Maryland, Ohio, Oregon, Vermont, Washington, West Virginia, Wisconsin and Wyoming, in which said acts provide for a trial by jury in the adjudication of any controversy between an employe and the board or commission within those jurisdiction falls the power to distribute the tax or fund to workmen entitled to an award under the acts.
As has been shown above, the adjustment of claims under said acts is an administrative function and not a judicial proceeding and that in any case arising under the administration of said acts ‘due process of law' does not necessarily require a jury trial. Therefore, the legislatures in those States which provide for the determination of disputed claims in certain instances in a trial by jury, have the right under the exercise of the police power to dispense with a trial by jury of the issues in any controversy arising under said acts.
It is noted that all of the 44 compensation acts provide for an appeal or a review in the State courts of all claimed errors in law.
It further follows from the above, that all of the said 44 compensation acts are grounded upon the authority vested in the legislature to regulate employment through exercise of the police power for the protection of the public welfare of the States.
THEREFORE, THE FOREGOING CONCLUSIONS OF LAW SUSTAIN THE PROPOSITION THAT THE PROVISIONS OF THE PROPOSED COMPULSORY UNEMPLOYMENT INSURANCE ACT, APPENDIX B, MAY DISPENSE WITH PROVIDING FOR A TRIAL BY JURY IN DISPOSING OF DISPUTES OR CONTROVERSIES ARISING OUT OF ANY ORDER OF THE UNEMPLOYMENT INSURANCE COMMISSION.
APPENDIX A
S. 2616
IN THE SENATE OF THE UNITED STATES
February 5, 1934
Mr. Wagner introduced the following bill; which was read twice and referred
to the Committee on Finance.
A BILL
To raise revenue by levying an excise tax upon employers, and for other
purposes.
Be it enacted by the State and House of Representatives of the United
States of America in Congress assembled,
DEFINITIONS
SECTION 1. When used in this Act, the term ---
"Employer" shall mean any person, partnership, association, corporation, or the legal representative, trustee in bankruptcy, receiver, or trustee thereof, or the legal representative of a deceased person, who or whose agent or predecessor in interest has, within each of twenty or more calendar weeks in the taxable year, employed at least six person in this act, except that the term "employer" shall not include the Federal Government, the government of the several States, municipal corporations, or other governmental instrumentality's. In determining whether an employer employs enough persons to be an "employer" subject hereto, and in determining for what tax he is liable hereunder, he shall, whenever he contracts with any subcontractor for any work which is part of his usual trade, occupation, profession, or business, be deemed to employ all persons employed by such subcontractor on such work, and he alone shall be liable for the tax measured by wages paid to such persons for such work; except as any such subcontractor who would, in the absence of the foregoing provision, be liable to pay said tax accepts exclusive liability for said tax under an agreement with such employer made pursuant to regulations promulgated by the Commissioner of Internal Revenue with the approval of the Secretary of the Treasury.
"Employment" shall mean any employment in which all or the
greater part of the person's work is or was performed within the continental
United Sates under any contract of hire, oral or written, express or implied,
whether such person was hired and paid directly by the employer or through
any other person employed by the employer, provided the employer had actual
or constructive knowledge of such contract; except that for the purpose
of this Act it shall not include--
(1) employment as an agriculture laborer;
(2) employment in the domestic service of any family or person at his
home;
(3) employment as a teacher in any school, college, or university for
the regular annual term for which such school, college, or university
is in session;
(4) employment as a physician, surgeon, interne, or nurse in a hospital,
sanatorium, or other similar private endowed institution no operated for
profit;
(5) employment of a physically handicapped person by an institution financed
largely by charitable donations and organized not for profit but primarily
for the relief and rehabilitation of such handicapped persons;
(6) employment of the father, mother, spouse, or minor child of the employer;
(7) employment in the service of a common carrier subject to the provisions
of the Emergency Railroad Transportation Act of 1933 (48 Stat. 211);
(8) any employment for which unemployment compensation shall have been
provided directly by Act of Congress.
"Pay roll" shall mean the total amount of all wages paid by the employer during the taxable year to persons employed by him in employment subject to this Act; except that pay roll shall not include the wages paid to a person employed by the employer within such year on a minimum fixed salary basis of $250 or more for each month in which the person was thus employed.
"Wages" shall mean every form of remuneration for employment received by a person from his employer, whether paid directly or indirectly by the employer, including salaries, commissions, bonuses, and the reasonable money value of board, rent, housing, lodging, payments in kind and similar advantages.
"State law" shall mean a statute enacted by any one of the
several States, providing for systematic compensation and the creation
of an unemployment fund or funds.
"Contributions" shall mean the amount which the employer has
paid for the taxable year to any unemployment fund to which he is required
to contribute by or pursuant to a State law, but shall not include any
amounts deducted from wages or contributed by employees.
"Unemployment fund" shall mean any unemployment compensation fund or reserve, or unemployment insurance fund or reserve, or guaranteed employment fund or reserve, to which the employer contributes pursuant to a State law, whether or not under such law other employers contribute to the same fund or reserve or to different or separate funds or reserves, and whether or not under such law the State and/or employees contribute to or supplement such fund or reserve: Provided, That such fund or reserve is available solely for the payment of compensation and of any State administrative costs chargeable thereto under the State law.
"Compensation" shall mean the cash benefits payable under a compulsory State law to employees for their unemployment; and shall also be deemed to include, as to any guaranteed employment plan complying with a State law, the wages guaranteed and payable to employees for certain workless hours under such plan.
"Employee", as used in this Act, shall mean any employed person who is covered by a State law and/or may become eligible for compensation thereunder.
"State agency" shall mean the State labor department or other governmental agency designated or created under a State law administer such law.
"Tax" shall mean the gross tax imposed on the employer for the taxable year under subsection (a) of section 2 of this Act.
IMPOSITION OF TAX; ALLOWABLE CREDITS
SEC. 2. (a) There shall be levied, assessed, and collected annually from every employer subject to this Act, for example the taxable year commencing July 1, 1936, and for each taxable year thereafter, an excise tax measured by an amount equal to 3 per centum of the employer's pay roll as defined in section 1 of this Act: Provided, That said tax shall be paid after the close of each taxable year and may be paid in quarterly installments, under suitable regulations promulgated by the Commissioner of Internal Revenue with the approval of the Secretary of the Treasury.
(b) Any employer who has paid the contributions required of him under a State law duly certified under section 3 of this Act may credit against the tax thus due to the total of the two following amounts:
(1) The amount of contributions which he has actually paid during the taxable year under such State law, and
(2) The amount by which these paid contributions were less than his largest required contributions under such law in any previous taxable year: Provided, That--
(a) The amount thus determined shall, before being credited against tax, be reduced by the same percentage by which the employer's pay roll is less than his pay roll in such previous taxable year; and
(b) The employer's required contribution rate for the taxable year is less than the comparable rate for such previous taxable year, and that such reduction was permitted pursuant to provisions of such State law not inconsistent with subsection (f) of section 3 of this Act; and
(c) The additional credit permitted under this subsection shall not be allowed an employer except where the unemployment fund to which such employer contributes under such State law has paid in full through the taxable year the compensation required under such law to be paid by such fund, without any reduction of compensation payments within the taxable year due to the inadequacy of such fund.
CONDITIONS FOR CREDIT ALLOWANCE
SEC. 3. No. Credit specified in section 2 of this Act shall be allowed for contributions under a State law, unless the Secretary of Labor has made a finding of fact within the taxable year that such State law conforms to the standards and conditions enumerated in subsections (a) to (j), inclusive, of this section and has certified such State law to the Secretary of the Treasury. Annually before the end of the taxable year the Secretary of Labor shall state and determine whether or not each State law conforms to said standards and conditions, and shall certify to the Secretary of the Treasury each State law which--
(a) Provides for the systematic payment, to all unemployed persons eligible under such law, of cash compensation which shall be payable to them as a matter of right: Provided, That compensation rights and payments shall commence not more than twelve months after contributions begin under such law;
(b) Specifies the eligibility conditions which shall apply to the payment of compensation, including any uncompensated waiting period to be applied thereto, but does not require of any employee a probationary service period prior to benefit eligibility aggregating more than ten calendar weeks of employment by any new employer; and provides for total unemployment benefits at a minimum rate which shall equal or exceed either $7 per week, or else the employee's average wage earnings for twenty hours of work; and provides for partial benefits at least equaling the amount by which the eligible employee's total benefits exceed his reduced wage earnings and provides that the legal liability of such unemployment fund to pay compensation shall be limited at all times to the resources of such fund, including any contributions due or unpaid;
(c) Either permits all eligible employees to receive ten or more full weeks of compensation within a year or less; or else adjusts the duration of compensation to employees in a direct and substantially uniform ratio to their employment within not more than five years proceeding their compensable unemployment, making at least some employees eligible to receive fifteen or more full weeks of compensation within a year or less;
(d) Provides that compensation cannot be assigned or garnished, and that no agreement by an employee to waive or reduce his right to compensation or any other right under such law shall be valid;
(e) Provides specifically that no otherwise eligible employee shall be barred from or denied compensation for refusing to accept new work under any of the following conditions: (1) If the position offered is vacant due directly to a strike, lockout, or other labor dispute; (2) if the wages, hours, and other conditions of the work offered are substantially less favorable to the employee than those prevailing for similar work in the locality; (3) if acceptance of such employment would either require the employee to join a company union or would interfere with his joining or retaining membership in any bona fide labor organization;
(f) Requires from all employers subject thereto regular contributions, at a uniform rate applicable to all such employers for at least twelve months after commencement of contributions under such law, and also thereafter unless such law permits the rate of contributions subsequently to be reduced in respect to some but not all employers subject thereto, such reduction being in accordance with classification standards or other provisions designed to adjust the contributions of employers in accordance with the compensation experience of such employers and/or of the unemployment fund or funds to which they contribute: Provided, That no employer's contribution rate shall be reduced unless the unemployment fund to which he contributes under such State law has paid in full throughout the preceding year the compensation required to be paid by such fund, and no reduction of compensation required to be paid by such fund, and no reduction of compensation payments has been made within such preceding year due to the inadequacy of such fund;
(g) In case it permits an employer to guarantee work or wages to his employees, requires such employer to contribute at the rate otherwise applicable to him under such law, to an unemployment fund from which he shall pay in whole or in part the compensation promised for guaranteed but workless hours and in addition, to any employee whose guaranty is not renewed, at least half the benefits otherwise payable to the employee under such law: Provided, That such employer's contribution rate may under such law be reduced consistency with the provisions of subsection (f) of this section;
(h) Prohibits every employer subject thereto from directly or indirectly insuring his liability to pay compensation in any private insurance company organized or operated for profit;
(i) Provides that every unemployment fund required thereunder shall either be held by an officer or agency of the State acting as custodian, or shall be held strictly in trust under such conditions approved by the State agency as will in its judgment assure the safety and liquid availability of such unemployment fund or funds: Provided, That where any law permits an employer of demonstrated financial strength to contribute to an unemployment fund in the form of an accounting reserve, such law shall require such employer to maintain with the State a collateral deposit of securities approved by the State agency as shall at all times have a market value at least equal to the current total of such permitted unemployment fund or reserve;
(j) Provides for administration or supervision by a State agency, and provides adequate funds to finance administration and suitable penalties to secure enforcement of the law's provisions; and secures to each party in interest a right to the hearing and determination of any disputed compensation claim by an impartial administrative agency authorized by such law to decide such claims and to determine finally all questions of fact involved therein; and assures to employers and employees, through representation on advisory committees, an effective voice in the law's administration.
ADMINISTRATION, REFUNDS, AND PENALTIES
SEC. 4. (a) The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury shall prescribe and publish all needful rules and regulations for the enforcement of the provisions of this Act.
(b) Every employer liable for tax under this Act shall make a return under oath within one month after the close of the year with respect to which such tax is imposed to the collector of internal revenue for the district in which is located his principal place of business or, if he has no principal place of business in the United States, then to the collector of internal revenue at Baltimore, Maryland. Such return shall contain such information and be made in such manner as the Commissioner of Internal Revenue wit the approval of the Secretary of the Treasury may by regulations prescribe. The tax shall, without assessment by the Commissioner or notice from the collector, be due and payable to the collector within one month after the close of the year with respect to which the tax is imposed. If the tax is not paid when due, there shall be added as part of the tax interest at a rate of 1 per centum a month from the time when the tax became due until paid. All provisions of law (including penalties) applicable in respect of the taxes imposed by section 600 of the Revenue Act of 1926 shall, insofar as not inconsistent with this Act, be applicable in respect of the tax imposed by this Act. The Commissioner may extend the time for filing the return of the tax imposed by this Act, under such rules and regulations as he may prescribe with the approval of the Secretary of the Treasury, but no such extension shall be for more than sixty days.
(c) Returns required to be filed for the purpose of the tax imposed by this Act shall be open to inspection in the same manner, to the same extent, and subject to the same provisions of law, as returns made under title II of the Revenue Act of 1926.
(d) The taxpayer may elect to pay the tax in four equal installments, in which case the first installment shall be paid on the date prescribed for the filing of returns, the second installment shall be paid on or before the last day of the third month, the third installment on or before the last day of the sixth month, and the fourth installment on or before the last day of the ninth month, after such date. If any installment is not paid on or before the date fixed for its payment, the whole amount of the tax unpaid shall be paid upon notice and demand from the collector.
(e) At the request of the taxpayer the time for payment of any initial installment of the amount determined as the tax by the taxpayer may be extended under regulations prescribed by the Commissioner, with the approval of the Secretary, for a period not to exceed six months from the date prescribed for the payment of such installment. In such case the amount in respect of which the extension is granted shall be paid (with interest at the rate of one-half per centum per month) on or before the date of the expiration of the period of the extension.
SEPARABILITY
SEC. 5. If any provisions of this Act, or the application thereof to
any person or circumstances, is held invalid, the remainder of the Act,
and the application of such provisions to other persons or circumstances,
shall not be affected thereby. S2616
A BILL
To raise revenue by levying an excise tax upon employers, and for other
purposes.
By Mr. Wagner
February 5, 1934
Read twice and referred to the Committee on Finance Appendix A1 is the
same as Appendix A with some slight changes.
Appendix A1
A BILL
To raise revenue by levying an excise tax upon employers and for other purposes.
Be it enacted by the Senate and the House of Representatives of the United States of America in Congress assembled:
IMPOSITION OF TAX
Section 1. There shall be levied, assessed, and collected annually from every employer subject to this Act, for the taxable year commencing January 1, 1936, and for each taxable year thereafter an excise tax, measured by an amount equal to 3 per centum of such employer's payroll; provided, that if the Federal Reserve Board's adjusted index of total industrial production averages for the year ending September 30, 1935, not more than 85 per centum of its average for the years 1923-25 inclusive, the Governor of the Federal Reserve Board shall certify that fact to the Secretary of the Treasury and to Congress, and the tax imposed by this section shall, for the taxable year commencing January 1, 1936, be measured by an amount equal to 1 per centum of such employer's payroll; and, provided further, that if such index averages, for such year, more than 85 per centum but less than 95 per centum of such earlier average, such fact shall be so certified, and the tax imposed by this Section shall for the taxable year commencing January 1, 1936, be measured by an amount equal to 2 per centum of each employer's payroll.
ALLOWABLE CREDIT
Section 2. Any employer may credit against the tax thus due, up to 90 per centum of the tax, the amount of his contributions for the taxable year to any unemployment fund under any State law; provided, that the Secretary of Labor has, in the month of December in the taxable year, made a finding of fact and certified to the Secretary of that Treasury that
(a) The State by whose law such contributions were required has accepted the provisions of the Act of June 6, 1933, 48 Stat. 113, U.S.C. Ti. 29, Sec. 49(c), and that the appointment and tenure of all clerical, investigatory and custodial employees in the public employment offices maintained by such State are on a merit basis, in accordance with rules, regulations and examinations to be prescribed by the United States Employment Service;
(b) Payment of all compensation is, or is to be made solely through the public employment offices in such State, and commences under such State law two years after contributions are first made under such law;
(c) The State agency of such State to safeguard the money paid as contributions, and to assist in maintaining the stability of industry upon its being paid as contributions, in the Unemployment Trust fund, or in a bank or banks designated as agents of such Trust Fund to be held as part of such Trust Fund, in accordance with Section 4 of this Act.
(d) None of the money requisitioned by such State agency, in accordance with Section 4 of this Act, has been used for any purpose except the payment of compensation.
(e) Compensation is not denied to otherwise eligible employee for refusing to accept new work under any of the following conditions; (1) if the position offered is vacant due directly to a strike, lockout, or other labor disputes; (2) if the wages, hours, and other conditions of the work offered are substantially less favorable to the employee than those prevailing for similar work in the locality; (3) if acceptance of such employment would either require the employee to join a company union or would interfere with his joining or retaining membership in any bona fide labor organization.
FINDINGS OF FACT
Section 3. In December, 1935, the Secretary of Labor shall notify the Secretary of the Treasury and the treasurers of the several States of the names of those States having State laws which, if faithfully executed, may entitle employers to credit for contributions made under such laws in the taxable year commencing January 1, 1936. Annually thereafter in December, the Secretary of Labor shall make findings of fact and certifications to the Secretary of the Treasury, as provided in Section 2 of this Act, as to compliance by the States with the conditions of subsections (a) to (d) inclusive, of Section 2, and shall notify the treasurers of the several States of the names of these States which he finds to comply with such subsections.
UNEMPLOYMENT TRUST FUND*
Section 4(a) There is hereby established in the Treasury a trust fund to be known as the "Unemployment Trust Fund," The Secretary of the Treasury is authorized and directed to receive and hold in this fund any and all moneys delivered to him or deposited in a bank under subsection (c) of Section 2 of this Act by any State agency, and the income derived therefrom. The fund or any part thereof may be invested and reinvested in any direct obligations of the United States or in any obligations guaranteed as to both principal and interest by the United States, and for such purposes the Secretary of the Treasury may acquire such obligations in the market, or by direct purchase of obligations outstanding or on original issue. The Secretary of the Treasury shall so far as practicable keep the fund, including any accumulated income thereon, invested in interest-bearing securities; and to this end the purposes for which obligations of the United States may be issued under the Second Liberty Bond Act, as amended, are hereby extended to authorize the issuance thereof to the fund for the sole purpose of providing it with suitable investments, notwithstanding the availability of similar obligations in the market.
* This Section is being altered in some respects by the Treasury, but
in its relationship to the rest of the bill there will be no change.
(b) The Secretary of the Treasury is further authorized to deposit the
fund or any part thereof in any one or more Federal Reserve banks provided
that at the time such deposits are made such Federal Reserve Banks are
authorized to agree, and to enter into an agreement with the Secretary
of the Treasury, that such deposits will be used solely for the purpose
of investment in obligations of the character in which the Secretary of
the Treasury may invest the fund, that the deposits shall be secured by
such investments, and that the banks will maintain such deposits so invested
to the extent that it is practicable, an that the interest on such investments,
as received by the Federal Reserve Banks, shall be credited to the fund
as income of the fund.
(c) The interests in the fund of each State agency shall be undivided, but the Secretary of the Treasury shall maintain a separate book account of each such agency, and shall credit quarterly to each such account a proportionate part of the earnings of the fund for the preceding quarter, on the basis of the average daily balance of such account.
(d) The Secretary of the Treasury is authorized and directed to pay out of the fund to any State Agency such part of the money held in trust for it, as may be duly requisitioned by it in accordance with the terms of this Act. Whenever in order to make any such payment it is necessary to dispose of any obligations held in the fund, the Secretary of the Treasury is authorized to sell such obligations on the market, or to acquire such obligations for the account of the United States at not less than the market price thereof.
(e) The Secretary of the Treasury is authorized and directed to appoint, as the agent of the Unemployment Trust Fund, at least one bank in each of the several States, under agreements with such banks consistent with the provisions of this Section.
ADMINISTRATION, REFUNDS, AND PENALTIES
Section 5 (a) The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe and publish necessary rules and regulations for the enforcement of the provisions of this Act.
(b) Every employer liable for tax under this Act shall make a return under oath within one month after the close of the year with respect to which such tax is imposed to the collector of Internal Revenue for the district in which is located his principal place of business. Such return shall contain such information and be made in such manner as the Commissioner of Internal Revenue with the approval of the Secretary of the Treasury may by regulations prescribe. The tax shall, without assessment by the Commissioner or notice from the collector, be due and payable to the collector within one month after the close of the year with respect to which the tax is imposed. If the tax is not paid when due, there shall be added as part of the tax interest at the rate of 1 per centum a month from the time when the tax became due until paid. All provisions of law (including penalties) applicable in respect of the taxes imposed by Section 600 of the Revenue Act of 1926 shall, insofar as not inconsistent with this Act, be applicable in respect of the tax imposed by this Act. The Commissioner may extend the time for filing the return of the tax imposed by this Act, under such rules and regulations as he may prescribe with the approval of the Secretary of the Treasury, but no such extension shall be for more than sixty days.
(c) Returns required to be filed for the purpose of the tax imposed by this Act shall be open to inspection in the same manner, to the same extent, and subject to the same provisions of law as returns made under Title II of the Revenue Act of 1926.
(d) The taxpayer may elect to pay the tax in four equal installments, in which the case the first installment shall be paid on the date prescribed for the filing of returns, the second installment shall be paid on or before the last day of the third month, the third installment on or before the last day of the ninth month, after such date. If any installment is not paid on or before the date fixed for its payment, the whole amount of the tax unpaid shall be paid upon notice and demand from the collector.
(e) At the request of the taxpayer the time for payment of any initial installment of the amount determined as the tax by the taxpayer may be extended under regulations prescribed by the Commissioner with the approval of the Secretary of the Treasury, for a period not to exceed six months from the date prescribed for the payment of such installment. In such case the amount in respect of which the extension is granted shall be paid (with interest at the rate of one half of one per centum per month) on or before the date of expiration of the period of the extension.
DEFINITIONS
Section 6. When used in this Act the term--
"Employer" shall mean any person, partnership, association, corporation, whether domestic or foreign, or the legal representative, trustee in bankruptcy, receiver, or trustee thereof, or the legal representative of a deceased person, who or whose agent or predecessor in interest has, within each of 13 or more calendar weeks in the taxable year, employed at least 4 persons in employment subject to this Act, except that the term "employer" shall not include the Federal Government, the governments of the several States, municipal corporations, or other governmental instrumentality's. In determining whether an employer employs enough persons to be an "employer" subject hereto, and in determining for what tax he is liable hereunder, he shall whever he contracts with any subcontractor for any work which is part of his usual trade, occupation, profession or business, be deemed to employ all persons employed by such subcontractor on such work, and he alone shall be liable for the tax measured by wages paid to such persons for such work; except as any such subcontractor who would in the absence of the foregoing provisions, be liable to pay said tax, accepts exclusive liability for said tax under an agreement with such employer made pursuant to regulations promulgated by the Commissioner of Internal Revenue with the approval of the Secretary of the Treasury.
"Employment" shall mean any employment in which substantially all of the person's work is, or was, performed within the continental United States under any contract of hire, oral or written, express or implied, whether such person was hired and paid directly by the employer or through any other person employed by the employer, provided the employer had actual or constructive knowledge of such contract; except that for the purposes of this Act it shall not include any employment wherein the employees are provided with systematic unemployment benefits under an Act of Congress.
"Wages" shall mean every form of remuneration for employment received by a person from his employer, whether paid directly or indirectly by the employer, including salaries, commissions, bonuses, and the reasonable money value of board, rent, housing, lodging, payments in kind and similar advantages.
"Payroll" shall mean the total amount of all wages paid by
the employer during the taxable year to persons employed by him in employment
subject to this Act.
"State" shall include the District of Columbia.
"State law" shall mean a statute enacted by any one of the several States which provides for systematic compensation and the creation of an unemployment fund under the direction of a State Agency, requires contributions from employers, whether or not they are National Banks, and whether or not they are engaged in interstate commerce, except insofar as systematic unemployment benefits for persons in their employ are provided by Act of Congress, and which may require that employees also contribute.
"Contributions" shall mean the amount which the employer has paid, as required by a State law, for the taxable year, into an unemployment fund.
"Unemployment fund" shall mean a special fund, established under a State law, and administered by a State agency in trust for the payment of compensation, and shall include so much of such fund as is administered as a pooled fund, and so much, if any, for which the State agency maintains separate book reserve accounts for individual employers or group of employers who are required to make contributions.
"State agency" shall mean any State officer, board, or other authority designated, under a State law, to direct the administration of an unemployment fund in such State.
"Pooled fund" shall mean that part of an unemployment fund in which all contributions are mingled and undivided, and from which is payable compensation at least to those eligible employees who are not employed by employers for whom individual or group book reserve accounts are maintained by the State agency.
"Book reserve account" shall mean a separate account, maintained by a State agency, of contributions paid by an employer or group of employers, from which is payable compensation to the employees of such employer or group.
"Guaranteed employment account" shall mean a separate account, maintained by a State agency, of contributions paid by an employer or group of employers who guarantee full wates, for not less that 40 weeks in each taxable year to some or all of their employees, and give adequate guarantees for the payment thereof as prescribed by the State law, from which account may be payable compensation to each such employe if his guarantee is not renewed and he is otherwise eligible for benefits under such law.
"Compensation" shall mean the cash benefits payable under a compulsory State law to employees for their unemployment.
"Employee" as used in this Act, shall mean any employed person who is covered by a State law and/or may become eligible for compensation thereunder.
"Tax" shall mean the gross tax imposed on the employer for the taxable year under Section 1 of this Act, except that when it is used in Section 5 "tax" shall mean the said gross tax minus any amounts credited in accordance with sections 2 and 7 of this Act.
"Taxable year" shall mean the year from January 1 to December 31, inclusive, or any portion of such year.
ALLOWANCE OF ADDITIONAL CREDITS
Section 7. Any employer qualifying under Section 8 of this Act, who had made contributions and has reduced them under a State law which allows certain employers to reduce their contributions may, for the taxable year beginning not less than two years after he first paid contributions under such law, and for any taxable year thereafter, credit against the tax an amount in addition to the credit allowed under Section 2 of this Act, except that in no instance shall an employer's total credits under this Act exceed 90 per centum of his tax. The additional credit under this section shall be the amount by which such employer's contributions have been reduced in accordance with the State law, and in computing it;
(a) The total of his contributions in the taxable year shall be subtracted from the largest amount of contributions ever required of him in a previous taxable year.
(b) To insure that no credit shall be allowed for any reductions caused by the diminution of such employer's payroll, the difference determined under (a) shall be reduced by the same percentage as such employer's payroll has shrunk since such previous taxable year.
CONDITIONS OF ADDITIONAL CREDIT ALLOWANCE
Section 8. No additional credit shall be allowed under Section 7 of this Act except to an employer who
(a) Has made contributions throughout the taxable year, and is required to continue to contribute, to a pooled fund in the State whose law allows the reductions for which such credit is claimed, at a rate of at least 1 per centum * of that part of payroll by which contributions are measured under such law; and
(b) If the State agency maintains a separate book reserve account for him individually or as one of a group of employers, is allowed to contribute at a reduced rate only when the amount credited in such book reserve account amounts to not less than $180 for each employee of such employer or group; and
(c) If the State agency maintains a separate guarantee employment account for him individually or as one of a group of employers, is allowed to contribute at a reduced rate as to contributions measured by the guaranteed wages, only if he or such group has fulfilled his or its guaranty, and only when the amount credited in such guaranteed employment account amounts to not less than $90 for each employee whose wages guaranteed by such employer or group.
SEPARABILITY
Section 9. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the remainder of the Act, and the application of such provisions to other persons or circumstances shall not be affected thereby.
*Should this be ½ of 1 per centum, designed to care for employees
who leave plants with
plant funds and are partly unprovided for?
APPENDIX -B
THE UNEMPLOYMENT INSURANCE BILL
To establish a system of Compulsory Unemployment Insurance without liability
on the part of the State and to create an Unemployment Insurance Commission.
Section 1. DECLARATION OF PUBLIC POLICY. As a guide to the interpretation
and application of this act the public policy of the state is declared
as follows:
a. Distress from unemployment has become a serious menace to the health,
safety, morals and welfare of the people of the state of Ohio. Because
insurance or reserve have not been provided in times of plentiful employment
for the support of unemployed employees and their families during periods
of unemployment and depression, poverty, distress and suffering have spread
throughout the state; and the taxpayers have been unfairly burdened with
the cost of supporting able bodied workers laid off by their employers
until such time as they would again be needed. Farmers and rural communities,
particularly, are unjustly burdened with increased taxation for the support
of industrial workers at the very times when agricultural incomes are
reduced by lack of purchasing power in the urban markets. In years of
prosperity, as well as depression, expenditures of private and public
charity organizations for the relief of the unemployed and their families
fluctuate according to the fluctuations in unemployment; and in every
period of serve unemployment, private charity funds for the care of unemployed
are inadequate. Demands are, therefore, made and pressure exerted for
the appropriation of funds from the treasuries of local and state governments.
Increasing sums are appropriated and paid out in the form of the "dole"
in order that suffering and starvation may be avoided, thereby unduly
increasing the expenditure of said governments, making taxes unduly burdensome,
and
undermining and threatening to destroy the initiative, responsibility,
self-reliance and self respect of the individual unemployed and of their
families.
b. As these grave dangers to the citizenship and to the state became increasingly evident, the general assembly (Session of 1931) authorized the governor to appoint a commission "to investigate the practicability and advisability of setting up unemployment reserves or insurance funds to provide against the risk of unemployment, and to recommend what form of legislation if any may be wise or suitable to Ohio…and which may seem to offer the best preventive remedy to avoid future distress and suffering such as is being undergone by our citizens who are unable to find work through no fault of their own." This commission after extended investigations found and reported;
(1) That charities, both private and public, although helpful, are inadequate, inappropriate, unscientific methods of dealing with the distress of capable workers who are unemployed through no fault of their own;
(2) That public charitable support for such able-bodied unemployed and their families is unwise and unsound as a public policy because it means the payment of doles from public treasuries, makes such relief and doles a political issue, resulting in burdensome increased in governmental expenditures and weakening of the moral fibre of the population.
(3) That lack of voluntary provision by businesses, corporations and individuals for the eventuality of unemployment, and the exhaustion of such savings as are provided, bring about an unfair and unjust distribution of the investable costs of unemployment; that industry and commerce are relieved of the expense of maintaining their labor reserves, and this expense is met partly by diverting charity funds from the sick, the mained, the mentally and physically defective, the widowed women and the orphaned children for whom such charity funds are properly intended, but mainly by shifting the burden to the taxpayers, and to landlords, grocers, butchers and other tradesmen who are under the necessity of carrying the unemployed; that in addition, great number of city industrial workers are forced out into the rural districts to live on their farm relatives or to produce agricultural commodities in competition with farmers who are already suffering from low prices caused by over-supplied markets;
(4) That, in spite of all such provisions for dealing with distress from unemployment as have been made, man families have been broken up and children taken from their parents to be placed in institutions and foster homes because of lack of employment of the breadwinners; other thousands are left without adequate food, clothing and shelter, and are forced to beg for some in soup kitchens, bread lines, public relief depots and public lodging houses; that in many communities these conditions have lead to protest demonstrations accompanied in some cases by rioting and violence;
(5) That these dangers to the peace, safety and health of the communities of the state are aggravated by the fear of those who have employment that they too will soon be without work and without resources, who therefore contract their purchases, which action in turn is reflected in additional unemployment and further reductions in consumption;
(6) That these dangers and fears cannot be avoided unless foresighted provision for the unemployed and their families is made in times of plentiful employment on a comprehensive scale by industry and commerce, as well as by individuals, in the form of compulsory insurance that will be state-wide in scope; that such insurance is the only method by which the number and the need of the unemployed can be accurately known and the available opportunities for reemployment reliably ascertained, and that such insurance, to which employees as well as employment contribute, is the most satisfactory method of avoiding distress from unemployment and preventing the weakening of individual character, self-reliance and self respect.
c. In view of these findings of fact, the considered judgment of the general assembly is that the compelling power of the state must be used to secure the thrift and foresight that are necessary on the part of the whole working population, to induce industry and commerce to bear their fair share of the cost of idle labor as they do of idle property, and to establish, maintain and operate the system of unemployment insurance hereinafter provide for.
Section 2. UNEMPLOYMENT INSURANCE FUND.
a. There is hereby created an unemployment insurance fund (hereinafter called the fund) to be administered by the state of Ohio without liability on the part of the state beyond the amounts paid into and earned by the fund. This fund shall consist of all premiums and money paid into and received by the fund as provided by this act; of property and securities acquired by and through the use of moneys belonging to the fund; and of interest earned by the fund. The fund shall be used to pay benefits as provided by this act, the entire cost of administration including salaries, the cost of public employment bureaus and all other expenditures necessary for the proper execution of the provisions of this act, however the total cost of administration of this act, as hereinbefore described, for any one year, shall not exceed ten per cent (10%) of the total premiums paid into said fund for that year.
b. CUSTODIAN. The treasurer of the state shall be the custodian of the fund and all disbursements therefrom shall be paid by him upon vouchers authorized by the unemployment insurance commission hereinafter provided for, and signed by any two members thereof; or such vouchers may bear the facsimile signatures of the members of the commission printed thereon, and the signature of the deputy for other employee of the commission charged with the duty of keeping the account of the fund and with the preparation of vouchers for the payment of benefits to the persons entitled thereto. The treasurer of state shall give a separate and additional bond, in such amount as may be fixed by the governor, and with sureties to his approval, conditioned for the faithful performance of his duties as custodian of the fund. Such bond shall be deposited within the secretary of state and kept in his office.
c. DEPOSITS. The treasurer of state is hereby authorized to deposit any portion of the fund not needed for immediate use, in the same manner and subject to all provisions of law with respect to the deposit of state funds by the treasurer; and all interest earned by such portion of the fund as may be deposited by the state treasurer in pursuance of authority herein given, shall be collected by him and placed to the credit of the fund.
d. INVESTMENTS. The commission shall have the power to invest any of the surplus or reserve belonging to the fund in securities as follows:
(1) Bonds or other obligations of the United States or of the state of
Ohio;
(2) Bonds or other interest bearing obligations of any county, city, village,
school district or other legally constituted political taxing subdivision
within the state of Ohio, provided such county, city, village, school
district or other subdivision has never defaulted in the payment of the
principal or interest of any of its bonds or other interest bearing obligations;
(3) Any bonds issued by any bank, organized under the provisions of the
Act of Congress, known as the Federal Farm Loan Act, approved July 17,
1916, and amendments thereto; and all securities so purchased shall forthwith
be placed in the possession of the treasurer of state. The treasurer of
state shall honor and pay all vouchers drawn on the fund by the commission
for the payment of such securities upon delivery of said securities to
him, provided there is attached to such vouchers a certified copy of a
resolution of the commission authorizing the purchase of such securities.
The commission may sell any of said securities and the treasurer of state
shall make delivery thereof upon like resolution, and the proceeds of
any such sale shall be paid by the purchaser to the treasurer of state
upon delivery of said securities.
Section 3. PREMIUMS.
a. On and after the first day of July, 936, premiums for insurance in the fund shall accrue and become payable by every employer and employee subject to this act and in accordance with its provisions. All premiums payable to the fund shall be paid to the commission, at such times and in such manner as the commission shall prescribe, and shall promptly be paid over by the commission to the treasurer of state who shall credit same to the fund.
b. EMPLOYERS' PREMIUMS. Every employer subject to this act shall in the month of July, 1936, and thereafter at such intervals as the commission may determine and require, pay into the fund the amount of premiums fixed by this act, and by the commission as authorized by this act, for the employment or occupation of the employer. Until July, 1939, the contributions or premiums regularly payable by every employer into the fund shall be an amount equal to two per cent per annum of his payroll. Thereafter the premium to be paid by each employer shall be determined by the classification, rules and rates made and published by the commission; and every employer shall thereafter pay at regular intervals fixed by the commission such premiums into the fund as may be ascertained to be due from him by applying the rules of the commission; provided that the premium for an employer shall in no case amount to less than one per cent per annum or more than three and one-half per cent per annum of such employer's payroll.
c. CLASSIFICATION OF EMPLOYMENTS. For the purpose of establishing the premiums to be paid by employers on and after July 1, 1939, the commission shall investigate, group and classify employment's, industries and occupations with respect to the degree of the hazard of unemployment in each, shall determined the risk of unemployment on the basis of the employment record and the fluctuations in the payroll of each employer, and shall fix the rate of premium to be paid by each employer on an actuarial rating at the lowest possible figures consistent with the maintenance of a solvent insurance fund with reasonable reserves and surplus, but within the limitations of maximum and minimum rate of contribution by employers stipulated in Section 3b. The commission shall have the power to apply that form of rating system which, in its judgment, is best calculated to merit or individually rate the risk most equitable for each employer, predicated upon the record of employment and the fluctuations in payrolls of such employer, and to encourage the prevention of unemployment; and shall develop fixed and equitable rules controlling same.
d. SELF-INSURING EMPLOYERS. When the necessary investigations to establish risks of unemployment and classifications of employment as provided in the proceeding paragraph have been made, and when premiums based on a merit rating system as therein prescribed have been fixed and published, the commission shall prepare a special report to the legislature on the question whether, in its judgment, it is desirable or not to permit individual employers to carry their own insurance against unemployment and to pay the benefits prescribed by this act directly to their unemployed employees without insuring such payments in the unemployment insurance fund. The statistical and other evidence on which the commission bases its judgment in the said special report shall be submitted with the report, together with recommendations of measures necessary to safeguard the contributions of employees, as well as to guarantee the benefits to be paid by employers in the event hat self-insurance is permitted.
e. EMPLOYEES' PREMIUMS. Every employee whose employment is subject to the provisions of this act shall pay into the fund a sum equal to one per cent of all wages received by him in such employment, and the employer shall deduct such amount and shall pay the same into the fund under such regulations and at such intervals as the commission may determine and require. No agreement by an employee to pay any portions of the premium, or other payment required to be made by his employer for the purpose of providing benefits, shall be valid; and no employer shall make a deduction for such purpose from the wages or salary of any employee. But nothing in this act shall affect the validity of voluntary arrangements by which employees individually or collectively agree to make contributions for the purpose of securing benefits in addition to those provided; by this act.
Section 4. BENEFITS. Every employee who has contributed to the fund the premiums provided for in this act shall be eligible to receive benefits as compensation for loss of wages due to total or partial unemployment, and benefits shall be paid by the commission in the amounts and subject to the conditions stipulated in this act.
a. QUALIFICATIONS: No employee shall be entitled to any benefits unless he or she
(1) has been employed by employers subject to this act and has paid the
premiums provided herein for a period of not less than twenty-six weeks
within the twelve months preceding the date of the application for benefits,
or unless he has been so employed and paid said premiums for a period
of forty weeks during the two years preceding date of application;
(2) is capable of an available for employment, and unable to obtain work
in his usual employment or any other employment for which he is reasonably
fitted including employment's not subject to this act, or is suffering
loss of wages by reason of partial unemployment amounting to more than
forty pre cent of his average weekly wages;
(3) has registered at an employment office or other registration place
maintained or designated by the commission, or has otherwise notified
the commission of his unemployment in accordance with its rules respecting
notification.
b. DISQUALIFICATIONS. No benefits shall be payable to any unemployed employee
who has lost his employment or has left his employment by reason of strike
or lockout in the establishment in which he was employed, as long as such
strike or lout continues; or whose unemployment has been directly caused
by an act of God; or who becomes unemployed by reason of commitment to
any penal institution; or who fails or refused to report to the commission
or its designated agencies from time to time as required by its rules;
or who refused to accept an offer of employment for which he is reasonably
fitted. Provided, however, that no unemployed employee otherwise qualified
to receive benefits shall lose the right to benefits by reason of a refusal
to accept employment if
(1) acceptance of such employment would deny to such employee his right
to refrain from joining a labor organization or his right to retain membership
in and observe the lawful rules of a labor organization; or
(2) there is a strike or lockout in the establishment in which the employment
is offered; or
(3) the employment is at an unreasonable distance from his residence,
having regard to the character of the work he has been accustomed to do,
and travel to the place of employment involves expense substantially greater
than that required for his former employment, unless the expense be provided
for; or
(4) the wages, hours and conditions offered ar substantially less favorable
to the employee than those prevailing or similar work in the locality,
or are such as tend to depress wages or working conditions.
c. WAITING PERIOD.
(1) An employee suffering total unemployment shall be eligible for benefits for unemployment occurring subsequent to a waiting period of three weeks and not benefits shall be or become payable during this required waiting period; but no more than three such weeks of waiting period shall be required of any employee in any twelve months in order to establish his eligibility for total unemployment benefits under this act; except that employees who have been discharged for just cause and those who have voluntarily quit their employment without just cause, and thereafter are unable to secure other employment, shall have a waiting period of six weeks during which no benefits shall be payable.
(2) An employee suffering a partial unemployment shall be eligible for benefits for each week of such partial unemployment after waiting period such that the loss of wages in such partial unemployment is equal to three weeks of total unemployment. No benefits shall be or become payable for this required waiting period, but no more than a total of three weeks in any twelve months shall be required as a waiting period for any such employee.
(3) The waiting period both for total and for partial unemployment shall commence on the day the employee registers as unemployed at an employment office or other place of registration maintained or designated by the commission or on the day that he has otherwise given notice of his unemployment in accordance with the rules of the commission.
d. AMOUNT OF BENEFITS. Benefits shall be payable on account of each weeks of total unemployment after the specified waiting period at the rate of fifty per cent of th employee's average weekly wages shown by premium paid by him, but not to exceed a maximum of fifteen dollars per week. In cases of partial unemployment where by reasons of part-time employment there is loss of wages amounting to more than forty per cent of weekly wages, benefits shall be paid as in cases of total unemployment, except that the amount of such benefits shall be as follows:
where part time employment results in loss of weekly wages in excess
of
40% but less than 55% benefits shall be 10% of average weekly wages
55% but less than 70% benefits shall be 20% of average weekly wages
70% but less than 85% benefits shall be 30% of average weekly wages
85% or more, benefits shall be 40% of average weekly wages
In cases where average weekly wages amount to more than $30 per week,
these percentages shall be calculated on the basis of $30.
e. LIMITATIONS AND ADJUSTMENTS OF BENEFITS. The total benefits to which
an employee shall be entitled in any consecutive twelve months whether
for partial unemployment or total unemployment, or partial and total unemployment,
shall not exceed sixteen times his benefit for one week of total unemployment.
In the event of general and extended unemployment such that the reserve
of the fund is reduced below a proper actuarial basis, the commission
shall have authority to declare an emergency, and thereupon to borrow
funds from whatever source obtainable on the security of the resources
of the fund, and/or to adjust the benefits; either in their weekly amount
or in the length of time for which they should be paid, until such time
as the fund is restored to a sound and actuarial basis.
f. BENEFITS SUSPENDED. When an employee eligible to benefits under this
act becomes employed in an employment or by an employer not subject to
this act, his right to benefits shall be suspended. If such employee becomes
totally unemployed within six months of his employment by his last, previous
employer subject to this act, his right to benefits shall recommence upon
a registration and expiration of the waiting period. If an employee undertakes
such uninsured employment during the three weeks waiting period it shall
not affect the running
of such period if such employment continues for two weeks or less.
g. INVALID WAIVER AND ASSIGNMENT. No agreement by an employee to waive his right to benefits under this act shall be valid; nor shall benefits under this act be assigned, released or commuted, and such benefits shall be exempt from all claims or creditors and from levy, execution and attachment or other remedy for recovery or collection of a debt, which exemption may not be waived.
h. BENEFITS IN SEASONAL EMPLOYMENT. Whenever in any employment it is customary to operate only during a regularly recurring period or periods of less than one year in length, than the rights to benefits shall apply only to the longest seasonal period or periods which the best practice of such industry or class of employment will reasonably permit. The commission shall ascertain and determine, or redetermine after investigation and due notice, such seasonal period or periods for each such seasonal employment. Until such determination by the commission, no employment shall be deemed seasonal. When the commission has determined such seasonal period or periods, it shall also fix the proportionate number of weeks of employment and payment of premiums required to qualify for benefits in place of the 26 weeks stipulated in Section 4 a-1, and the proportionate number of weeks for which benefits may be paid.
i. CASUAL OR SHORT-TIME EMPLOYMENT. Any employer desirous of employing additional employees for short-time work only, and without liability for premiums and benefits for such employees, may secure permission from the commission for such employment, which shall thereupon be deemed casual employment and exempted from the provisions of this act. The commission shall make and publish rules governing the exemption of such casual employment. But no such employment shall be exempted from the provisions of this act by virtue of this section, unless express permission shall have been granted by the commission nor in any case if the employment shall continue for a period of more than four weeks.
Section 5. ADMINISTRATION. This act shall be administered by the unemployment insurance commission of Ohio.
a. UNEMPLOYMENT INSURANCE COMMISSION. (1) There is hereby created an unemployment insurance commission of Ohio, to be composed of three members appointed by the governor with the advise and consent of the senate. Not more than one of the appointees to such commission shall be a person, who, on account of his previous vocation, employment or affiliations, can be classed as a representative of employers, and not more than one of such appointees shall be a person who, on account of his previous vocation, employment or affiliations, can be classed as a representative of employment or affiliations, can be classed as a representative of employees; and not more than two of the members of said commission shall belong to the same political party. No commissioner shall hold any position of trust or profit, or engage in any occupation or business interfering or inconsistent with his duties as a member of said commission; and no commissioner shall serve on any committee of any political party.
(2) The members of the commission shall be appointed by the governor within thirty days after the date this act becomes effective; one of which members shall be appointed for the term of two years; one member for four years; and one member for six years; and thereafter as their terms expire the governor shall appoint one member for the term of six years. Vacancies shall be filled by appointment by the governor for the unexpired term. The governor at any time may remove any member of the commission for inefficiency, neglect of duty, malfeasance, misfeasance or nonfeasance in office.
(3) Each of the members of the commission shall receive an annual salary of six thousand dollars, payable in the same manner as the salaries of other state officers are paid. Before entering upon the duties of his office, each member shall take the constitutional oath of office and shall swear or affirm that he holds no position upon any committee of a political party, which oath or affirmation shall be filed in the office of the governor. Each member of the commission shall give a bond in the sum of ten thousand dollars, which bond shall be approved by the governor and filed with the treasurer of state. All employees or deputies of the commission receiving or disbursing funds shall give bond to the state in amounts and with surety to be approved by the commission.
(4) The commission shall choose one of its member as chairman. A majority of the commission shall constitute a quorum to transact business. No vacancy shall impair the rights of the remaining commissioners to exercise all of the powers of the commission, so long as a majority remain. Any investigation, inquiry or hearing which the commission is authorized to hold or undertake may be held or undertaken by or before any one member of the commission, or by or before one of its deputies, and every order made by a member thereof, or by one of its duly authorized deputies, when approved and confirmed by a majority of the commissioners, and so shown on its record of proceedings, shall be deemed to be the order of the commission.
(5) The commission shall keep and maintain its principal office in the city of Columbus, and such branch offices in other cities of the state as it may find necessary, and shall provide suitable rooms, equipment, supplies, books, periodicals and maps for the same. It shall provide itself with a seal for the authentication of its rules, orders, awards and proceedings, upon which shall be inscribed the words "UNEMPLOYMENT INSURANCE COMMISSION -- STATE OF OHIO -- OFFICIAL SEAL." The commission may hold sessions in any place within the state of Ohio.
b. DUTIES AND POWERS OF THE COMMISSION. In addition to all other duties imposed on the commission and powers granted by the provisions of this act, the commission shall have full power:
(1) To adopt and enforce reasonable rules and regulations relative to the exercise of its powers and authority, and proper rules to govern its proceedings and to regulate the mode and manner of all investigations and hearings; to prescribe the time, place and manner of making claims for benefits under this act, the kind and character of notices required thereunder, the procedure for investigating, hearing and deciding claims, the nature and extent of the proofs and evidence and the method of taking and furnishing same to establish the right to benefits, and the method and time within which adjudication's and awards shall be made; to adopt rules and regulations with respect to the collection, maintenance and disbursements of the unemployment insurance funds; and to amend and modify any of its rules and regulations from time to time in such respects as it may find necessary or desirable;
(2) To employ secretaries, deputies, accountants, superintendents of employment districts and offices, clerks, stenographers and other assistants as may be required for the administration of the provisions of this act, and to determine their salaries and duties;
(3) To create such employment districts and to establish, maintain and operate such free employment offices and branch offices as may be necessary to provide for the registration of unemployed person, for placing them in available employment's, and for the proper administration of this act;
(4) To appoint advisors or advisory employment committees, by local districts, or by industries or for the whole state, who shall without compensation but with reimbursement of necessary expenses assist the commission in the execution of its duties;
(5) To require all employers, including employers not otherwise subject to the provisions of this act, to furnish to it from time to time information concerning the amount of wages paid, the number of employees employed, the regularity of their employment, the number of employees hired, laid off and discharged from time to time and the reasons therefor, and the numbers that quit voluntarily; and to require such employers to give other and further information respecting any other facts required for the proper administration of this act;
(6) To classify generally industries, businesses, occupations and employment's, and employers individually, as to the hazard of unemployment in each business, industry, occupation or employment, and as to the particular hazard of each employer, having special reference to the conditions of regularity and irregularity of the employment provided by such employer and the fluctuations in payrolls of such employer;
(7) To determine, within the limits provided by this act, the premiums rates upon employers subject to this act; and to provide for the levy and collection from all employees and employers subject to this act, of the premiums required for the maintenance of the unemployment insurance fund;
(8) To receive, hear, and decide claims for unemployment benefits, and to provide for the payment of such claims as are allowed;
(9) To promote the regularization of employment and the prevention of unemployment; to encourage and assist in the adoption of practical methods of vocational training, retraining and vocation guidance; to investigate and recommend and advise and assist in the establishment and operation, by municipalities, counties, school districts and the state, of prosperity reserves of public works to be prosecuted in times of business depression and unemployment; to promote the re-employment of unemployed workers throughout the state in any other way that may be feasible, and to take all appropriate steps within its means to reduce and prevent unemployment; and to these ends to carry on and publish the results of any investigations and research which it deems relevant.
All duties and powers of the department of industrial relations and of the industrial commission relating to the establishment, maintenance and operation of free public employment offices, and particularly those powers granted to the industrial commission for such purposes under the provisions of Section 871-22 (9) of the general code, are hereby transferred to and vested in the unemployment insurance commission of Ohio.
c. PUBLICATION OF RULES AND CLASSIFICATIONS. The commission shall cause to be printed in proper form for distribution to the public its classifications, rates, rules, regulations and rules of procedure and shall furnish the same to any person upon application therefor; and the fact that such classifications, rates, rules, regulations and rules of procedure are printed ready for distribution to all who apply for the same, shall be a sufficient publication of the same as required by this act.
d. DUTIES OF EMPLOYERS. (1) Every employer shall furnish the commission upon request all information required by it to carry out the purposes and provisions of this act. Every employer receiving from the commission any blank, with direction to fill out the same, shall cause the same to be properly filled out so as to answer fully and correctly all questions therein propounded, and to furnish all the information therein sought, or if unable to do so, he shall give the commission in writing good and sufficient reason for such failure.
(2) The commission may require that the information herein required to be furnished shall be verified under oath and returned to the commission within the period fixed by it for that purpose, shall have the right to examine under oath any employer, or the officer, agent or employee thereof, for the purpose of ascertaining any information which such employer is required by this act to furnish to the commission. Any employer who shall fail or refuse to furnish such information as may be required by the commission under authority of this section, shall be liable to a penalty of five hundred dollars, to be collected in a civil action brought against said employer in the name of the state. All such penalties, when collected, shall be paid into the fund and become a part thereof.
(3) The information furnished to the commission by employers in pursuance of the provisions of this section, shall be for the exclusive used and information of the commission in discharge of its duties, and shall not be open to the public nor be used in any court in any action or proceeding pending therein unless the commission is a party to such action or proceeding; but said information may be tabulated and published in statistical form, for the use and information of the state department and the public. Any person in the employ of the commission who shall divulge any information secured by him while in the employ of the commission in respect to the transactions, property, business or mechanical, chemical or other industrial processes of any person, firm, corporation, association or co-partnership, to any person other than the members of the commission, shall be fined not less than one hundred dollars, nor more than one thousand dollars,, and shall thereafter be disqualified from holding any appointment or employment by the commission.
(4) Every employer shall keep a true and accurate employment record of all his employees, whether qualified and eligible to benefits or not, and of the hours worked by each such employee and of the wages paid to each, and shall furnish to the commission upon demand a sworn statement of the same. Such recorded shall be open to inspection by the commission or its authorized representatives at any time.
(5) It shall be the duty of each member of a firm, and of the president, secretary, general manager and managing agent of every corporation subject to this act, to cause such firm or corporation to comply with the provisions of this act, and any person or any member of such firm or any officer of such corporation referred to in this section who shall neglect or fail to comply with the provisions of this act relating to the making of reports and the payment of premiums to the fund shall be guilty of a misdemeanor and upon conviction thereof shall be fined not more than five hundred dollars and the costs of prosecution. Such fine when collected shall be paid to the commission and placed in the fund. Each day's refusal on the part of such person, members of such firm or officers of such, to comply with the provisions of this act, after notice to said person, firm or corporation from the commission to comply with same, shall be deemed a separate offense and be punished as herein provided. All courts exercising jurisdiction in cases of misdemeanor, including justices of the peace, shall have final jurisdiction of offenses under this section.
e. DUTIES OF EMPLOYEES. Every employee whether totally or partially unemployed, in order to quality for benefits under this act, must give notice of his unemployment by registering at a public employment office maintained by the commission, or in such other manner and within such time as the rules and regulations of the commission may prescribe. Thereafter he shall give notice of the continuance of his unemployment as frequently and in such manner as the commission may prescribe.
Section 6. ADJUDICATION OF CLAIMS FOR BENEFITS.
a. Claims for benefits shall be filed with the superintendent of the pubic employment office for the district in which the claimant is or was last employed, or with a deputy of the commission designated for the purpose. Such claims shall be in such form and shall be filed within such time and in such manner as the rules of the commission shall prescribe; and said rules shall also prescribe the form and manner of allowing or disallowing claims for benefits in the first instance, and the method and manner of serving notice of disputed or contested claims, of hearing and deciding the same, and of appealing and deciding appeals on all claims that are disputed or contested. The commission may provide for the hearing of disputed or contested claims by local boards consisting of one employer or representative of employers, one employee or representative of employees, and one person who is neither an employer not an employee not a representative of either. The members of such boards shall be appointed by the commission, and the commission shall make rules for the proceedings before such boards and for review or rehearing by the commission or by any commissioner or deputy authorized to hear or review claims under rules adopted by the commission as provided in this act.
b. Each member of the commission, its secretary and all deputies, or any duly authorized representative of the commission shall for the purpose contemplated by this act, have power to administer oaths, certify to official acts, take depositions, issue subpoenas compel the attendance of witnesses and production of books, accounts, papers, records, documents and testimony.
Section 7. VIOLATIONS AND PENALTIES.
If any employer, employee or other person shall violate any of the provisions of this act or shall do any act prohibited by this act or shall fail or refuse to perform any duty lawfully enjoined, within the time prescribed by the commission, for which no penalty has been specifically provided, or fail, neglect or refuse to obey any lawful order given or made by the commission, or any judgment or decree made by any court in connection with provisions of this act, for each such violation, failure or refusal such employer, employee, or other person shall be fined not less than fifty dollars, not more than one thousand dollars for the first offense, and not less than one hundred nor more than five thousand dollars for each subsequent offense. Every day during which any person, persons or corporation, or any officer, agent or employee thereof shall fail to observe and comply with any order of the commission or to perform any duty enjoined by this act shall constitute a separate and distinct violation of such order or section of this act, as the case may be.
a. PROCEDURE IN CASES OF VIOLATION.
(1) If the commission finds that any person, firm, corporation or association is, or has been at any time after July 1, 1936, and employer subject to the provisions of this act and has failed to comply with the provisions of this act, it shall determine the period during which he or it was such an employer, which finding and determination shall for all purposes of this act be prima facie evidence thereof. The commission shall forthwith give notice of said action to the employer who shall immediately thereafter furnish the commission with a payroll covering the period included in said finding, and shall forthwith pay onto the fund the amount of contribution determined and fixed by the commission.
(2) If said employer fails, neglects or refuses to furnish such payroll and pay the contribution for such period within ten days after receiving such notice, the commission shall then determine the amount of contribution due from said employer for the period the commission found him or it to be subject to this act, and shall notify said employer of the amount thereof and shall order the same paid into said fund. If said amount is not paid within ten days after receiving notice, the commission shall certify the same to the attorney general, who shall forthwith institute a civil action against such employer in the name of the state for the collection of such premium. In such action it shall be sufficient for the plaintiff to set forth a copy of the finding of the commission relative to such employer as certified by the commission to the attorney general and to state that there is due to plaintiff on account of such finding of the commission a specified sum which plaintiff claims with interest. A certified copy of such finding relative to such employer shall be attached to the petition and shall constitute prima facie evidence of the truth of the facts therein contained. The answer of demurrer to such petition shall be filed within ten days, the reply or demurrer to the answer within twenty days, and the demurrer to the reply within thirty days after the return day of the summons or service by publication. All motions and demurrers shall be submitted to the court within ten days after the same are filed. As soon as the issues are made up in any such case, it shall be placed at the head of the trial docket and shall be first in order of trial.
(3) Unless said employer shall, within the ten days last aforesaid, execute a bond to the state, in double the account so found and ordered paid by the commission, with sureties to the approval of the commission, conditioned that he or it shall pay any judgment and cost rendered against him or it for said contribution the court at the time of filing of the petition, and without notice, shall appoint a receiver for the property and business of such employer, in this state, with all the powers of receivers in other cases, who shall take charge of all said property and assets of the defendant and administer the same under the orders of the court.
(4) If upon final hearing of said cause it is found and determined that the defendant is subject to the provisions of this act, the court shall render judgment against said defendant for the amount of contribution, provided to be paid by such employer for such period under the provisions of this act, with interest at twelve per cent (12%), from the date of the determination of said amount by the commission, together with costs, which judgment shall be given the same preference as is now or may hereafter be allowed by law on judgments rendered for claims for taxes.
(5) If any employer who has complied with this act shall default in any payment required to be made by him or it to the said fund, for a period of ten days after notice that such payment is due, the same proceedings may be has as in the case of any employer against whom the commission has made a finding as herein before provided.
(6) If the defendant is a non-resident of this state or a foreign corporation doing business in this state, service or summons may be made upon any agent, representative or foreman of said defendant, wherever found in the state, or service may be made in any other manner designated by statute.
(7) The commission, for good cause shown, may waive a default in the payment of contribution where said default is less than sixty days duration, and upon payment by the employer of such contribution for such period, he and his employees shall be entitled to all the benefits provided in this act.
b. JURISDICTION OF COMMISSION. The commission shall have full power and authority to near and determine all questions within its jurisdiction, and its decisions thereon in each claim shall be final. Provided, however, that any employer or employee aggrieved by an order or decision of the commission may, within fifteen days therefrom, appeal such order or decision to the court of common pleas of the county wherein said appellant is resident or was last employed; and said appeal shall be heard upon a transcript of the proceedings before the commission and said order shall not be modified or reversed unless said court shall find, upon consideration of the record, that it was unlawful and unreasonable. Either party shall have the right to prosecute error from the court of common pleas as in other civil cases.
Section 8. DEFINITIONS. As used in this act;
a. "Commission" means the unemployment insurance commission of Ohio.
b. "Employer," except where the context clearly shows otherwise, means any person, partnership, firm, association or corporation who (which) has six or more person employed in any employment subject to this act. It shall not include the state of Ohio as an employer, nor any municipal or public corporation, nor any political subdivision; nor any farmer; nor any person, partnership, firm association or corporation to which this act may not apply by reason of any provision of the constitution of the United States or act of Congress.
c. "Employee," except where the context clearly shows otherwise, means any person, including aliens and minor, employed for hire by an employer in an employment subject to this act, except a person whose employment is not in the usual course of the trade, business, profession or occupation of the employer, and except further any person employed at other than manual labor at a rate of remuneration of two thousand dollars a year or more.
d. "An Employment," except where the context clearly show otherwise, means any employment in which all or greater part of the employee's work is performed within the state of Ohio, under any contract of hire, express or implied, oral or written, including all contracts entered into by helpers and assistants of employee, whether paid by employer or employee, if employed with the knowledge actual or constructive of the employer; and shall include any trade, occupation, profession or process of manufacture, or any method of carrying on said trade, occupation, profession or method of manufacture in which any person may engage; except that for the purpose of this act it shall not include:
(1) Employment as an agricultural laborer.
(2) Employment in the personal or domestic service of an employer at his home.
(3) Employment in the service of a common carrier engaged in interstate commerce, subject to the laws of Congress and supervision of interstate commerce commission.
(4) Employment by any governmental unit, or municipal or public corporation, or any political subdivision; or in any employment in a private or parochial school or college where the contract of hire is on an annual salary basis.
(5) Employment as a short-term or casual laborer for a period of less than four weeks, provided that where such short-time or causal labor is employed during four successive weeks or more, it shall be deemed an employment within the scope of this act.
(6) Employment of a physically handicapped person by an institution financed largely by charitable donations and organized not for profit but primarily for the relief and rehabilitation of such handicapped persons.
(7) Employment as a physician, surgeon, interns, or nurse in a hospital, sanatorium, or other similar privately endowed institutions not operated for profit.
(8) Employment of the father, mother, spouse, or minor child of the employer.
e. "Benefits" means money allowance payable to an employee as insurance or compensation for losses of wages due to unemployment as provided in this act.
f. "Wages" means what is customarily meant by the term, the money rate at which the employee is recompensed under the contract of hire, except that it shall include commissions and bonuses and the reasonable value of board, rent, housing, lodging, or similar advantages received from the employer.
g. "Average Weekly Wages" means the weekly earning than an employee subject to this act would average if he were employed full time, i.e. the full number of scheduled or customary working hours per week in the employment or employment's in which he is or was engaged prior to applying for benefits under this act. The commission shall make suitable rules for the purpose of calculating the average wages on the basis of which benefits under the act are to be paid, and for this purpose may average full time earnings over a period of three months or more in order to include reasonable proportions of busy and slack weeks, and may adopt such method or methods of calculating the said average weekly wages as may be suitable and reasonable under this act.
h. "Payroll" means and shall include all wages, salaries and remuneration paid to employees subject to this act.
i. "Total Unemployment," except where the context clearly shows otherwise, means the condition caused by the inability of an employee, who is capable of and available for employment, to obtain work in his usual employment, or in suitable employment as defined by this act; which condition causes total loss of wages.
j. "Partial Unemployment" means part-time employment resulting in loss of wages amount to forty per cent (40%) or more of an employee's weekly wages.
Section 9. MISCELLANEOUS PROVISIONS.
a. This act shall take effect upon its passage and publication, but none of the premiums provided for shall be payable by employers or employees until on and after July 1, 1936.
b. The entire cost of the administration of this act, including salaries, cost of public employment bureaus and other expenditures required, shall be paid upon vouchers of the commission out of the unemployment insurance fund. The commission shall set up a separate account in the fund, not to exceed six per cent of the total annual income of the fund, to be known as the administrative account, to which all expenditures for the administration of this act shall be paid out of the general revenue of the state not otherwise appropriated. Such expenses shall not exceed fifty thousand dollars, and the amount so expended shall be returned to the general revenue fund from the unemployment insurance fund not later than January 1, 1935.
c. The sections of this act and every part of such sections are hereby declared to be independent sections and parts of sections, and the holding of any section or part thereof to be void or ineffective shall not effect any other section or part thereof.
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