U. S. DEPARTMENT OF LABOR

OFFICE OF THE SECRETARY

WASHINGTON

 

In the Matter of

THE QUESTION OF WHETHER THE
STATE OF NEW YORK'S UNEMPLOYMENT
INSURANCE LAW CONFORMS WITH THE
REQUIREMENTS OF THE FEDERAL
UNEMPLOYMENT TAX ACT

 

H.A. Kelley, Esquire
Room No. N2101
New Department of Labor Building
200 Constitution Avenue, N.W.
Washington, D. C. 20210

 

 

For the U.S. Department of Labor
Harris Levy, Esquire
2 World Trade Center
New York, New York 10047
Erwin Memelsdorff, Esquire
New York State Department of Labor
State Office Campus, Building 12
Albany, New York

 

For the State of New York
Before: BURTON S. STERNBURG
Administrative Law Judge

 

DECISION OF THE SECRETARY

Statement of the Case

Pursuant to "Notice of Hearing" issued by the Secretary of Labor on July 8, 1974, the captioned matter was referred to Administrative Law Judge Burton S. Sternburg, for the purpose of conducting a hearing and issuing a recommended decision on the question of whether or not, the State of New York's unemployment insurance law conforms with the requirements of the Federal Unemployment Tax Act, as amended by Public Law 91-373, 84 Stat. 695, "Employment Security Amendments of 1970."

Hearing was held on August 7, 1974, in Washington, D.C. All parties were afforded full opportunity to be heard, to examine and cross-examine witnesses, and to introduce evidence bearing upon the issues involved herein.

Upon the basis of the entire record, including the posthearing briefs and reply briefs of the parties, and the exceptions and respective responses of the parties to his Proposed Recommended Decision of October 10, 1974, the Administrative Law Judge made findings of fact, conclusions of law, and recommendations in his Recommended Decision dated November 11, 1974.

This matter is now before me for consideration and review of the Administrative Law Judge's Recommended Decision. I have reviewed the entire record in this case certified to me by the Administrative Law Judge and I adopt the Administrative Law Judge's decision to the extent that it is consistent with the following.

Discussion

A. Statutory Background.

Under the Federal Unemployment Tax Act, 26 U.S.C. 3301-3311 (hereinafter, FUTA), covered employers are
assessed a Federal tax of 3.2 percent of the first $4,200 of each covered employee's wages. However, if a State has a
law which meets certain minimum Federal statutory requirements, the employer may offset against this Federal tax the
amounts paid to the State in State unemployment taxes; the employer may also receive further credits against the
Federal tax as a result of an approved "experience rating" plan. Under these provisions, an employer may be relieved of
a substantial portion of the Federal tax. On the other hand, if a State unemployment insurance law does not meet
Federal requirements, all employers in that State lose their entitlement to offsetting credits against the Federal tax. The
Secretary of Labor annually certifies to the Secretary of the Treasury those States which meet Federal requirements.
26 U.S.C. 3304 (c) .

The Employment Security Amendments of 1970, Public Law 91-373, 84 Stat. 696 (August 10, 1970) (hereafter, 1970
Amendments), amended FUTA by, among other things, adding to section 3304(a) of that Act certain new requirements
for annual certification of States by the Secretary of Labor. Two of these amendments are directly at issue in this case:
26 U.S.C. 3304 (a) (6) (A) and 26 U.S.C. 3304 (a) (12). In addition, another of the 1970 Amendments provided that
the Secretary of Labor is prohibited from certifying any State which he finds:

. . . after reasonable notice and opportunity for hearing . . . has failed to amend its law so that
it contains each of the provisions required by reason of the enactment of the Employment
Security Amendments of 1970 to be included therein, or has . . . failed to comply substantially
with any such provision. 26 U.S.C. 3304 (c)

Essentially, 26 U.S.C. 3304(a)(6)(A) requires, as a condition precedent to approval by the Secretary of Labor, that the
State law provide for coverage of employees of non-profit organizations and for coverage of employees of State
hospitals and State institutions of higher education. The amendment at 26 U.S.C. 3304(a)(2) requires, as a condition
precedent to approval by the Secretary of Labor, that the State law allow political subdivisions of the State to elect
coverage for employees of hospitals and institutions of higher education operated by the political subdivision. However,
the 1970 Amendments do not extend the Federal FUTA tax to the employers of such employees.

The State of New York, in amending the New York unemployment insurance law to cover the services referred to in
sections 3304 (a) (6) (A) and 3304 (a) (12), has nevertheless retained certain exclusions from the State statute's
definition of "employment." These exclusions are applicable to services which are to be covered pursuant to 26
U.S.C. 3304 (a) (6) (A) and 3304 (a) (12).

The relevant exclusions are contained in subdivisions 8, 9, 13, and 14 of section 511 of the New York Unemployment
Insurance law, and provide as follows:

8. The term 'employment' does not include service as a golf caddy.

9. The term 'employment' does not include service during all or any part of the year or regular
vacation-periods as a part time worker or any person actually in attendance during the day
time as a student in an elementary or secondary school.

*** *** *** ***
13. The term 'employment' does not include services of a minor engaged in casual labor
consisting of yard work and household chores in and about a residence or the premises of
a non-profit, non-commercial organization, not involving the use of power-driven machinery.

14. The term 'employment' does not include service by a child under the age of fourteen year.

The basic issue is, therefore, whether the State of New York, by creating such exclusions to the required
coverage, has failed to amend its law in conformity with the 1970 Amendments and thus cannot be certified by the
Secretary of Labor.

B. Requirements of 26 U.S.C. 3304 (a) (6) (A) .

The amendment of 26 U.S.C. 3304(a)(6)(A) provides, in pertinent part:

(a) The Secretary of Labor shall approve any State law submitted to him . . . which he finds provides
that:

***

(6) (A) compensation is payable on the basis of service to which section 3309 (a) (1) applies,
in the same amount, on the same terms, and subject to the same conditions as compensation
payable on the basis of other service subject to such law . . .

Accordingly, as a condition of approval and certification, the Secretary must find that under State law,
unemployment compensation is payable to persons who have performed services to which the provisions
of section 3309(a) (1) apply. In turn, section 3309 (a) (1) states:

(a) State Law Requirements. -- For purposes of section 3304 (a) (6) --

(1) except as otherwise provided in subsections (b) and (c), the services to which this paragraph applies
are --

(A) service excluded from the term 'employment' solely by reason of paragraph (8) of section
3306 (c) , and

(B) service performed in the employ of a State, or any instrumentality of the State . . . for a
hospital or institution of higher education located in the State; if such service is excluded from the
term 'employment' solely by reason of paragraph (7) of section 3306 (c) .

Coverage under State unemployment compensation law is therefore required for workers performing certain services
which would not be deemed, and are still not deemed, 'employment' for purposes of FUTA tax assessments. The
services set forth in sections 3306 (c) (8) and 3306 (c) (7) are:

(8) service performed in the employ of a religious, charitable, educational, or other organization described in section
501(c)(3) which is exempt from income tax under section 501(a); [i.e., non-profit institutions]

and

(7) service performed in the employ of a State, or any political subdivision thereof . . . .

Accordingly, in order for the State to be certified by the Secretary of Labor, the State law must provide for
unemployment compensation benefits to persons who are performing service in the employ of nonprofit organizations,
State hospitals, and State institutions of higher education.

C. Requirements of 26 U.S.C. 3004(a)(12).

With respect to 26 U.S.C. 3304(a)(12), that requirement provides:

. . . each political subdivision of the State shall have the right to elect to have compensation payable to the
employees thereof . . . based on service performed . . . in the hospitals and institutions of higher education . . .
operated by such political subdivision; and if any such political subdivision does elect to have compensation
payable to such employees thereof (A) the political subdivision shall pay into the State unemployment fund, with
respect to the service of such employees, payments (in lieu of contributions), and (B) such employees will be
entitled to receive, on the basis of such service, compensation payable on the same conditions as compensation
which is payable on the basis of similar service for the State which is subject to such law.

This provision simply requires the States to permit political subdivisions to elect coverage for employees working in their
hospitals and institutions of higher education, in a sense, the interpretation and application of this provision depends upon
26 U.S.C. 3304(a) (6) (A), since the conditions of coverage, once elected, are to be the same as those pertaining to
service in State hospitals and institutions of higher education.

D. Analysis of New York's arguments.

The State of New York maintains that, despite the exclusions from coverage in its law, it has amended its unemployment
compensation statutes in conformity with the 1970 Amendments to FUTA, and therefore should be certified. This
conclusion is based on its own interpretation of the relevant 1970 Amendments.

The position advanced by the State of New York is basically two-pronged.

First, it asserts that the exclusions from the State's definition of "employment" under section 511 of its unemployment
compensation law apply equally to profit, non-profit, and State institutions. This proposition appears to be correct.
However, New York proceeds to argue that 26 U.S.C. 3304(a)(6)(a) requires only that coverage for services performed
for non-profit organizations, State hospitals, and State institutions of higher education be co-extensive with the coverage
the State requires for services performed for all other employers. (Transcript, pp. 19-20) In reaching this conclusion,
New York places heavy reliance upon certain language of 26 U.S.C. 3304 (a) (6) (A):

. . . compensation is payable on the basis of service to which section 3309(a)(1) applies, in the
same amount, on the same terms, and subject to the same conditions as compensation payable on the
basis of other service subject to such law . . . . (emphasis added)

Since profit-making enterprises and the State and non-profit institutions at issue here are all subject to the New York
exclusions from the State's definition of "employment," New York argues that such even-handedness satisfies the
requirements of 26 U.S.C. 3304(a)(6)(A), and, by implication, 26 U.S.C. 3304 (a) (12).

The interpretation advanced by the State of New York in this regard is based upon a misconception of the purpose of 26
U.S.C. 3304 (a) (6) (A) . That provision merely describes the manner in which compensation benefits are to be
administratively dispensed. It does not follow that a provision which deals with terms and conditions of compensation can
be cited as justification for eliminating categories of coverage because similarly situated employees of profit-making
enterprises would not receive unemployment benefits.

The provisions of 26 U.S.C. 3304 (a) (6) (A) must be read in the context of the fundamental Congressional purpose to
extend coverage. The new coverage mandated by the 1970 Amendments is a creation of Federal law. The scope of that
coverage is delineated by Federal law, and it is the Federal law, not the State law, which provides the governing test of
compliance with Federal requirements.

Identical language appears in both the House and Senate Committee Reports:

Section 104 of the bill amends section 3304 (c) of the Internal Revenue Code of 1954 by inserting
a new paragraph (6) providing that to be approved (for purposes of the credit against the Federal
unemployment tax) a State must cover certain employees of non-profit organizations and State
hospitals and institutions of higher education. (emphasis added) (H.R. 91-612, p. 43; S.R. 91-752, p. 47)

The "certain employees" Congress intended to cover are delineated in the same reports:

Section 3309(a)(1) describes the required coverage as (A) service excluded from the term
"employment" for purposes of the Federal tax solely by reason of paragraph (8) of section 3306(c)
-- i.e., solely because it is performed in the employ of a religious, charitable, education or other
non-profit organization . . .; and (B) service performed in the employ of a State or any
instrumentality of the State . . . for a hospital or institution of higher education if such service is
excluded solely by reason of paragraph (7) of section 3306(c) of the code. (emphasis added)
(H.R. 91-612, pp. 43-44; S.R. 91-752, p. 48)

The whole thrust of the Congressional intent was the extension of coverage, and the limitation of exceptions to
the new coverage. (See S.R. No. 91-752, pp. 14-15, 47-49; H.R. No. 91-612, pp. 11-12, 43-45). The only
exceptions to coverage which may properly be applied, and the only persons (or categories of persons) who may
properly be excluded from coverage, are those which are set forth in the Federal statute. To allow otherwise is to
fly in the face of the 1970 Amendments Congress can hardly be deemed to have engaged in a self-defeating exercise
by, on the one hand, providing for extension of coverage, and, on the other hand, allowing the States to carve out
exceptions to the new coverage as the States see fit.

Moreover from the standpoint of statutory structure, as it reflects congressional purpose, the 1970 Amendments
themselves contain exceptions to the general coverage provisions. It is a fundamental principle of statutory
interpretation that where there is an express exception, that exception comprises the only limitation upon the operation
of the statute, and no other exceptions will be implied. An enumeration of exceptions from the operation of a statute
indicates that it should apply to all cases not specifically enumerated. 2A Sutherland, Statutory Construction 47.11.
Congress, having set forth both coverage and exceptions to coverage within the 1970 Amendments, can hardly be
deemed to have intended that the States would be at liberty to add further exceptions.

Moreover, the language relied upon by the State of New York does not itself support the construction placed upon it
by New York.

Viewed individually, the qualifying phrases cited by New York may be analyzed as follows.

Benefits are to be payable "in the same amount." The word "amount" is a non-technical, everyday term which, in common
usage, signifies some quantity. Webster's New World Dictionary, Second College Edition, 1972, p. 46. Zero is not a
quantity.

The words "terms" and "subject to the same conditions" frequently occur in a more legalistic context. The word "terms" is
a word of broad connotations and ordinarily embraces all limiting conditions. Shawmut Ass'n v. SEC, 146 F.2d 791,
795 (CA 1, 1945). Therefore, for our purposes, "terms" is synonymous with "conditions."

"Conditions" in turn are future or uncertain events upon the happening of which is made to depend the existence of an
obligation, or that which subordinates the existence of a liability to a certain future event. Black's Law Dictionary, Rev.
Fourth Edition, 365. However, the exclusion from the definition of "employment" which exists in the New York law at
issue in this case is not a "condition," or a "term." It is an exception, and there is a distinction between an "exception" and
a "condition." No future or uncertain event (which is the essence of a "condition") is involved in an "exception," which
involves the creation of an exempt category. Stated another way, a condition presupposes an absolute obligation which
may be avoided or annulled, whereas an exception is an exclusion from a general obligation of a certain class or classes,
which, were it not for the exclusion, would be comprehended within the subject covered by the general obligation. See, 8
Words & Phrases 621, col. 2.

Putting the constituent parts of the statutory provision at issue back together, and viewing them as a whole, it would not
be unfair to characterize New York's position as an argument that the provision should be read as follows:

. . . payable [not payable] . . . in the same amount [zero dollars], on the same terms [no payment], and
subject to the same conditions [categorical disqualification] as compensation payable [not payable] on
the basis of other service [not covered by State law] subject to such law . . . .

The anomalies of such an interpretation are obvious.

The second basic line of argument advanced by the State of New York focuses upon the nature of the exclusions under
New York law. In essence, it is alleged that there are few or no employees working for non-profit institutions or State
hospitals or institutions of higher education who fall within the New York exception from the definition of "employment."
Hence, the excluded categories are really irrelevant. (Transcript, p. 15), and the whole affair is de minimis. New York
advances the argument that substantial compliance of its legislation with the 1970 Amendments is all that is required, and
that minor deviations are permissible. Indeed, it seems to be argued that the Secretary has inherent authority to dispense
with strict compliance and substitute, insofar as the organic legislation of the State is concerned, a concept akin to
common law "substantial performance" of a contract. (Transcript, pp. 24-25)

Under the 1970 Amendments, the Secretary is prohibited from certifying any State which he finds has failed to amend its
law so that the law contains "each of the provisions" required by the 1970 Amendments, or has failed "to comply
substantially" with provisions required by the 1970 Amendments 26 U.S.C. 3304(c). It does not require extensive
analysis to determine the plain import of this provision. There are two separate and distinct legs to this provision. First,
the basic State legislation must contain the provisions required by the 1970 Amendments. Second, once the legislation is
operative, the State must carry out the legislation in a manner which complies substantially with FUTA requirements.

Statutorily, there is no provision allowing mere "substantial compliance" of the State law with FUTA requirements placed
upon the law itself. Substantial compliance is relevant only to the operation of the State under its law. Nor is "substantial
compliance" in the operation of its law some sort of substitute for conformity of the State law with the Federal statutory
mandate. If the State law has riot been amended to contain each of the provisions required by reason of the 1970
Amendments, it cannot, by terms of 26 U.S.C. 3304(c), be certified by the Secretary. "Substantial compliance" under a
nonexistent law is a contradiction in terms. A State law which does not contain the provisions required by the 1970
Amendments is a State law which, by definition, cannot be administered so as to comply substantially with the required
provisions.

Nevertheless, the State of New York, despite conceding that neither the word "substantial" nor any synonym thereof is
used in connection with that portion of section 3304(c) which goes to the requirements imposed-upon the State legislation
itself, argues that the concept of "substantial conformity" should be read into the requirements regarding State laws. The
Secretary, it is argued, may overlook minor deviations. (Memorandum on behalf of New York State Department of
Labor, p. 11)

There is no such provision in section 3304(c), and one should not be implied. The explicit use of a "substantial
compliance" test on a related issue in the selfsame section, coupled with the absence of such a test on the issue at hand,
argues strongly against any such latitude with respect to the requirements that the State legislation must meet to qualify for
certification.

In any event, the principle inherent in the exclusion of entire categories of persons gainfully employed and drawing wages
from the definition of "employment" can hardly be characterized as deminimis, even if we accept the allegation made by
New York that the number of persons within such categories is minimal.

E. Summary.

In summary, 26 U.S.C. 3304 (a) (6) (A) requires an approved State unemployment. compensation law to include
provisions for mandatory coverage of-services performed in the employ of non-profit organizations and services
performed in the employ of State hospitals and State institutions of higher education, while 26 U.S.C. 3304(a)(12)
requires an approved State unemployment compensation law to include provision for election by political subdivisions of
services performed in the employ of hospitals and institutions of higher education operated by the political subdivisions.
Allowable exceptions are to be found in the Federal statute itself. For instance, certain small non-profit organizations may
be excepted under section 3309(c). In addition, the services described in section 3309(b) may be excluded from
coverage; as may the services described in paragraphs (1) through (6) and (9) through (18) of section 3306 (c) .
However, a State cannot successfully maintain that its law meets the requirements of section 3304 (a) (6) (A) and section
3304 (a) (12) if it excludes from coverage any services that Congress has mandated shall be covered or be allowed to be
covered.

As found by the Administrative Law Judge, New York State's unemployment insurance law fails to provide coverage for
the following jobs and employees at non-profit organizations and State and local hospitals and institutions of higher
education:

(1) golf caddies;

(2) students in elementary or secondary school who work part-time during the school year or regular vacation
periods;

(3) minors engaged in casual labor consisting of yard work and household chores not involving the use of
power driven machinery;

(4) all employment performed by persons under 14 years of age. (Administrative Law Judge Recommended
Decision, p. 13)

As further found by the Administrative Law Judge, there is no exclusion set forth in the Federal Unemployment Tax Act
(FUTA) applicable to the above categories as such, and the New York State exclusions are within the definition of
"employment" contained in 26 U. S . C. 3306 (c) . (Administrative Law Judge Recommended Decision, pp. 13-14).

Conclusion

The Findings of Fact and Conclusions of Law submitted by the Administrative Law Judge are approved.

The Secretary of Labor finds that the exclusions contained in subdivisions eight (8), nine (9), thirteen (13), and fourteen (14)
of section 511 of the New York Unemployment Compensation law do not meet the requirements of the Federal
Unemployment Tax Act (FUTA), and, consequently, the New York State Unemployment Insurance law fails to contain the
provisions required by reason of the enactment of the Employment Security Amendments of 1970 to be included therein.

___________________
Secretary of Labor
Dated: JUN 6 1975
Washington, D. C.


U.S. DEPARTMENT OF LABOR
OFFICE OF ADMINISTRATIVE LAW JUDGES
WASHINGTON, D.C. 20210





November 11, 1974

H. A. Kelley, Esquire
Room No. 4315
Main Labor Building
U.S. Department of Labor
14th & Constitution Avenue, N.W.
Washington, D.C. 20210

Harris Levy, Esquire
Room 7330
2 World Trade Center
New York, New York 10047

RE: The Question Of Whether The State Of New York's Unemployment Insurance Law Conforms With The
Requirements Of The Federal Unemployment Tax Act

Gentlemen:

Having fully considered your respective exceptions and "responses" to my Proposed Recommended Decision of October
10, 1974, which in the main constitute a reiteration of your previously stated positions, I have decided to adhere to my proposed decision in this matter as modified by certain inconsequential changes. Accordingly, please find enclosed a copy of my Final Recommended Decision, the original of which is being forwarded today, along with the complete record of the proceedings, to the Secretary of Labor for his consideration.

Very truly yours,

BURTON S. STERNBURG
Administrative Law Judge


U.S. DEPARTMENT OF LABOR
OFFICE OF ADMINISTRATIVE LAW JUDGES
WASHINGTON, D.C. 20210

In the Matter of

THE QUESTION OF WHETHER THE
STATE OF NEW YORK'S UNEMPLOYMENT
INSURANCE LAW CONFORMS WITH THE
REQUIREMENTS OF THE FEDERAL
UNEMPLOYMENT TAX ACT

H.A. Kelley, Esquire
Room No. 4315
Main Labor Building
U.S. Department of Labor
14th-& Constitution Avenue, N. W.
Washington, D. C . 20210

For the U.S. Department of Labor

Harris Levy, Esquire
2 World Trade Center
New York, New York 10047

Erwin Memelsdorff, Esquire
New York State Department of Labor
State Office Campus, Building 12
Albany, New York

For the State of New York

Before: BURTON S. STERNBURG
Administrative Law Judge

RECOMMENDED DECISION

Statement of the Case

Pursuant to "Notice of Hearing" issued by the Secretary of Labor on July 8, 1974, the captioned matter was referred to the undersigned Administrative Law Judge for purposes of conducting a hearing and issuing both a proposed and final recommded decision on the question of whether of not the State of New York's unemployment insurance law conforms with the requirements of the Federal Unemployment Tax Act, as amended by Public Law 91-373, 84 Stat. 695, "Employment Security Amendments of 1970."

A hearing was held in the captioned matter on August 7, 1974, in Washington, D.C. All parties were afforded full opportunity to be heard, to examine and cross-examine witnesses, and to introduce evidence bearing on the issues involved herein.

Upon the basis of the entire record, including the post-hearing briefs and reply briefs of the parties and the exceptions and respective responses of the parties to my Proposed Recommeded Decision of October 10, 1974, I make the following findings of fact, conclusions of law and recommendations:

Findings of Fact

While the parties agree on the facts underlying the instant dispute, they differ as to the intrepretation and application of the 1970 amendments to the Federal Unemployment Tax Act with respect to the issue of conformity.

The Employment Security Amendments of 1970, Public Law 91-373, 84 Stat. 695, enacted into law on August 10, 1970, amended the Federal Unemployment Tax Act, 26 U.S.C. 3301-3311, by adding to section 3304 (a) of that Act certain new requirements for approved State unemployment compensation laws. Insofar as is pertinent to this matter the new requirements were to be addes to the New York unemployment insurance law effective no later than January 1, 1972.

Paragraph (6) (A) of section 3304(a) of the Federal Unemployment Tax Act is a new requirement added to the
Federal law by section 104(a) of the Employment Security Amendments of 1970. Section 3304(a) (6) (A)
requires an approved State unemployment compensation law to provide for the payment of unemployment
compensation to certain employees of the State and to employees of certain non-profit organizations, in the
following terms:

" (6) (A) compensation is payable on the basis of service to which section 3309 (a) (1)
applies, in the same amount, on the same terms, and subject to the same conditions as
compensation payable on the basis of other service subject to such law; except that, with
respect to service in an instructional, research, or principal administrative capacity for
an institution of higher education to which section 3309(a)(1) applies, compensation shall
not be payable based on such service for any week commencing during the period
between two successive academic years (or, when the contract provides instead for a
similar period between two regular but not successive terms, during such period) to any
individual who has a contract to perform services in any such capacity for any
institution or institutions of higher education for both of such academic years or both of
such terms."

Section 3309(a)(1), which is referred to in new section 3304 (a)(6)(A), prescribes in the following language the
services on the basis of which unemployment compensation is required by section 3304 (a)(6)(A) to be paid
under the State law:

"(a) State Law Requirements. --For purposes of section 3304(a)(6)--

" (1) except as otherwise provided in subsections (b) and (c), the services
to which this paragraph applies are-

"(A) service excluded from the term 'employment' solely by reason of paragraph (8)
of section 3306(c), and

"(B) service performed in the employ of the State, or any instrumentality of the State
or of the State and one or more other States, for a hospital or institution of higher
education located in the State, if such service is excluded from the, term 'employment'
solely by reason of paragraph (7) of section 3306 (c)." 1

Subsections (b) and (c) of section 3309, which are referred to in section 3309(a)(1), provide that:

"(b) Section Not To Apply To Certain Service.--This section shall not apply to service performed--

"(1) in the employ of (A) a church or convention or association of churches, or (B) are organization
which is operated primarily for
______________________________________________________
1 Paragraphs (7) and (8) of section 3306(c) referred to above, read as follows:

(7) service performed in the employ of a State, or any political subdivision thereof, or any instrumentality
of any one or more of the foregoing which is wholly owned by one or more States or political subdivisions;
and any instrumentality of one or more States or political subdivisions to the extent that the instrumentality is,
with respect to such service, immune under the Constitution of the United States from the tax imposed by
section 3301.

(8) service performed in the employ of a religious, charitable, educational, or other organization described
in section 501(c)(3) which is exempt from income tax under section 501(a) [i.e., non-profit organizations].

religious purposes and which is operated, supervised, controlled, or principally
supported by a church or convention or association of churches;

"(2) by a duly ordained, commissioned, or licensed minister of a church in the
exercise of his ministry or by a member of a religious order in the exercise of duties
required by such order;

"(3) in the employ of a school which is not an institution of higher education;

"(4) in a facility conducted for the purpose of carrying out a program of--

" (A) rehabilitation for individuals whose earning capacity is impaired by age
or physical or mental deficiency or injury, or

"(B) providing remunerative work for individuals who because of their impaired
physical or mental capacity cannot be readily absorbed in the competitive labor market,

by an individual receiving such rehabilitation or remunerative work;

"(5) as part of an unemployment work-relief or work-training program assisted or financed
in whole or in part by any Federal agency or an agency of a State or political subdivision thereof;
by an individual receiving such work relief or work training; and

"(6) for a hospital in a State prison or other State correctional institution by an inmate
of the prison or correctional institution."

"(c) Nonprofit Organization Must Employ 4 or More.--This section shall not apply to service performed
during any calendar year in the employ of any organization unless an each of some 20 days during such
calendar year or the preceding calendar year, each day being in a different calendar week, the total number
of individuals who were employed by such organization in employment (determined without regard to section
3306(c) (8) and by excluding service to which this section does not apply by reason of subsection (b)) for some
portion of the day ( whether or not at the same moment of time) was 4 or more."

Paragraph (12) of section 3304(a) of the Federal Unemployment Tax Act is another new requirement added to the
Federal law by section 108(a) of the Employment Security Amendments of 1970. It requires an approved State
unemployment compensation law to provide for the right of each political subdivision of the State to elect to have
compensation payable under the State law to employees of the hospitals and institutions of higher education operated by the political subdivision, in the following terms:

"(12) each political subdivision of the State shall have the right to elect to have compensation payable
to employees thereof ( whose services are not otherwise subject to such law) based on service
performed by such employees in the hospitals and institutions of higher education (as defined in
section 3309(d)) operated by such political subdivision; and, if any such political subdivision does
elect to have compensation payable to such employees thereof (A) the political subdivision shall
pay into the State unemployment fund, with respect to the service of such employees, payments (in
lieu of contributions), and (B) such employees will be entitled to receive, on the basis of such service,
compensation payable on the same basis, in the same amount, on the same terms, and subject to the
same conditions as compensation which is payable on the basis of similar service for the State
which is subject to such law."

Chapter 1027 of the Laws of New York, which became a law on July 2, 1971, amended the New York
Unemployment insurance law in a number of respects so that the services referred to in section 3304(a)(6)(A) of
the Federal Unemployment Tax Act would be covered by the State law on January 1, 1972, and so that the
services referred to in section 3304(a)(12) of the Federal Unemployment Tax Act could be covered by an election
by a political subdivision on and after January 1, 1971, except as noted below.

By virtue of existing provisions of the New York unemployment insurance law and the amendments made by
Chapter 1027, the exclusions from the term "employment" which are contained in subdivisions 8, 9, 13, and
14 of section 511 of the New York unemployment insurance law were made applicable to the services referred
to in section 3304 (a)(6)(A) of the Federal Unemployment Tax-Act which other wise were covered by the State
law. By virtue of an amendment to section 561.4 of the State law the exclusions in subdivisions 8, 9, 13, and 14
of section 511 were made applicable to the services referred to in section 3304 (a)(12) of the Federal Unemployment
Tax Act with respect to which political subdivisions otherwise are afforded the right to elect coverage.

The exclusions contained in subdivisions 8, 9, 13, and 14 of section 511 read as follows:

8. The term "employment" does not include service as a golf caddy.

9. The term "employment" does not include service during all or any part of the school year or regular
vacation periods as a part-time worker of any person actually in attendance during the day time as a
student in an elementary or secondary school.

* * *

13. The term "employment" does not include services of a minor engaged in casual labor consisting of
yard work and household chores in and about a residence or the premises of a non-profit, non-commercial
organization, not involving the use of power-driven machinery.

14. The term "employment" does not include service by a child under the age of fourteen years.

These exclusions from coverage are also applied under New York State law for employees of "private, for profit" employers. There are no similar exclusions in the Federal Unemployment Tax Act, and "private, for profit" employers are liable for the Federal tax-on wages paid for the afore-cited excluded employments.

Discussion

As noted above, N.Y. State does not dispute the facts but merely the Department of Labor's interpretation and
application of them with respect to the 1970 amendments. Thus New York State contends (1) that the
Department of Labor has misinterpreted the 1970 amendments and (2) that even accepting such misinterpretation, the inconsequential and irrelevant nature of the deviations occasioned by subdivisions 8, 9, 13, and 14 of section 511, New York unemployment compensation law compels a finding that such law conforms to the Federal Unemployment Tax Act as amended. In essence, New York State argues that substantial conformity with the statutory requirements is all that is needed for certification.

New York State would interpret the Amendments to only require that "coverage for services performed for non-profit organizations and State institutions is to be co-extensive with the coverage the State provides for services performed for all other employers". "In other words, the State is to pay unemployment insurance benefits on work for non-profit organizations, just as if they were identical to any other employer in the State. "

The Department of Labor, on the other hand, takes the position that its interpretation of the 1970 amendments is both correct and reasonable and must therefore prevail. Additionally, the Department of Labor takes the position that irrespective of the "inconsequential impact" of the New York State exclusions a literal and logical reading of the amendments allow for no variance with respect to conformation to the Federal Unemployment Tax Act, as amended.

Section 3309 (a) (1) , Federal Unemployment Tax Act, sets forth basic coverage for nonprofit organizations and State and local hospitals and institutions of higher education. Subsections (b) and (c) set forth exceptions to that coverage. There is no question but that section 3309(a)(1) covers all employment in such organizations and governmental institutions referred to in paragraphs (7) and (8) of section 3306(c), except as that coverage is narrowed by 3309 (b) and (c).

Thus, section 3309(a)(1) states that, except as provided in subsections (b) and (c) of that section "the services to which this paragraph applies are--

(A) service excluded from the term 'employment' solely by reason of paragraph (8) of section 3306 (c)
[which refers to nonprofit organizations]; and

(B) service performed in the employ of the State, or any instrumentality of the State or of the State and
one or more other States, for a hospital or institution of higher education located in the State, if
such service is excluded from the term 'employment' solely by reason of paragraph (7) of section
3306(c) ."

Subsection (b) of section 3309 sets forth six specific categories of services to which it is provided that section 3309 "shall not apply". Subsection .(c) of section 3309 provides that coverage is not required for service performed in the employ of a nonprofit organization unless the nonprofit organization, in the current or preceding calendar year, employed at least four persons.

Section 3306(c), which is referred to above in paragraphs (A) and (B) of section 3309(a)(1), defines the
term "employment" for Federal Unemployment Tax Act purposes. That definition says, in pertinent part, that
"For the purposes of . . ., the term 'employment' means any service of whatever nature performed . . . by
an employee for the person employing him . . . except . . . [then eighteen specific exclusions are listed].
Two of those exclusions -- those found in paragraphs (7) and (8) -- are the exclusions specifically referred to
in paragraphs "(A)" and "(B)" of section 3309 (a) (1) set out above, and which provide the heart of the coverage
under the 1970 Amendments. Paragraph (7) refers to "service performed in the employ of a State, or any
political subdivision thereof . . ." Paragraph (8) refers to "service performed in the employ of a religious,
charitable, educational, or other organization . . . which is exempt from income tax . . . [i.e., a nonprofit
organization].

The definition of the term "employment", therefore, makes it absolutely clear that employment means every employee of a covered employer, unless there is a specific exception set out to the contrary in the Act. Thus, when reference is made to employment covered by paragraphs (7) and (8) of the section which defines "employment"- -- section 3306(c) -- it means
"any service of whatever nature performed by an employee" of an organization or institution covered by paragraph (7) or paragraph (8).

The only questions then remaining are whether there is, in fact, an exclusion set out specifically in the Federal Unemployment Tax Act, for the types of employees and jobs involved in this proceeding, and whether those jobs or employees are excluded from coverage "solely by reason" of paragraphs (7) and (8) of section 3306(c). If there is no specific exclusion for these employees and jobs in the Federal Unemployment Tax Act, and if the sole reason for their not being covered by the Act is
the exclusions provided by paragraphs (7) and (8), then the broad definition of employment would clearly cover the employees and jobs at issue here, and New York State would be required to cover them in its law. As noted below, I find, in agreement with the Department of Labor, that there is no specific exclusion for these employees and jobs in the Act and that the sole reason for their absence of coverage is paragraphs (7) and (8).

The foregoing analysis constitutes, in essence, the Department of Labor's interpretation of the 1970 Amendments to the Federal Unemployment Tax Act. Inasmuch as such analysis or interpretation comports with a literal and logical reading of the 1970 Amendments as applied to the then existing Act, I find it to be reasonable and hereby adopt and subscribe to such interpretation.

In this latter context, it is noted that as a general rule interpretations issued by agencies or administrators empowered and authorized to administer legislative acts are entitled to controlling weight, subject only to the test of " reasonableness . " C f. Norwegian Nitrogen Products Co. v. United States, 288 U.S. 294; Udall v. Tallman, 380 U.S. 1; Brennan v. Southern-Contractors Service, 492 F. 2d 498, 501; Red Lion Broadcasting Co., Inc. v. FCC, 395 U.S. 367, 381.

Accordingly, in view of the foregoing, I need not and do not pass upon the merits of the conflicting interpretation urged by New York State, save to note that it does not, in my view, constitute a more reasonable interpretation of the amendments than that presented by the Department of Labor. To do otherwise, and possibly sustain New York State's interpretation, which is unsupported by any significant and/or compelling legislative history, would have a disastrous effect on the uniform application of the Act. Thus, each of the remaining forty nine States could conceivable present or propound other supportable interpretations of the Act, and amendments thereto, in order to justify their respective individual State actions.

Applying the above interpretation to the New York State law, I find that New York State's unemployment insurance law fails to provide coverage for the following jobs and employees at nonprofit organizations and State and local hospitals and institutions of higher education:

(1) golf caddies; .

(2) students in elementary or secondary schools who work part-time during the school year or regular vacation periods;

(3) minors engaged in casual labor consisting of yard work and household chores, not involving the use of power driven
machinery;

(4) all employment performed by persons under 14 years of age.

A comparison of the afore-cited exclusions from coverage under the New York State law with the exclusions set out in section 3309 (b) and (c) of the Act discloses that the New York exclusions are no where to be found in the Federal Unemployment Tax Act. Thus, the New York State exclusions are within the definition of employment set forth in section 3306 (c) of the Act.

Morevoer, but for the exclusions contained in paragraphs (7) and (8) of section 3306 (c), there is no question that the employment of the four categories of employees currently excluded by the New York State law would be covered by the definition of "employment" in section 3306 (c) which speaks of "any service of whatever nature performed . . . by an employee for the person employing him." However, since the 1970 Amendments to the Act make it clear that the exclusions in paragraphs (7) and (8) shall not be applicable to non-profit organizations and State and local hospitals and institutions of higher learning for purposes of State law coverage under such amendments, all employment in these organizations and governmental units is now covered.

In view of the foregoing, and since the new York State law does not cover the above-quoted four categories of employees, I find that the New York State Law is not in conformity with the requirements set forth in the Federal Unemployment Tax Act, as amended.

While New York State does not contest that its law is not in conformity in all respects with the Federal Unemployment Tax Act as interpreted above by the Department of Labor, it does take issue with the test applied by the Department of Labor, i.e., total conformity. Thus, according to New York State, the true test should be "substantial" rather than "total" conformity. In support of this latter position, New York State contends that the impact on the Act by the exclusion of the four categories is a de-minimus, if not non-existent, since some of the excluded categories would never have an opportunity for employment with the organizations opportunity for employment with the organizations involved. New York State further points out that the effect of the Department of Labor's interpretation would cause New York State's non-profit employers to make payments not required of profit-making concerns.

While I sympathize with New York State's plight in the above respect, I find no qualifying language and/or exceptions to the certification requirements setforth in Section 3304 (c) of the Federal unemployment Tax Act with respect to the inclusion of the "provisions specified in subsection (a)" of Section 3304. In these circumstances, and absent any clear congressional intent to the contary, I deem New York State's argument to be without merit. 2 As to New York State's argument with respect to the disruption the Department of Labor's interpretation will have on the equal application of its own unemployment law, sufficeth to say that New York must take the good with the bad. Thus, New York having voluntarily opted to have a state plan and receive the benefits of the unemployment tax, it then is obligated to conform to the conditions and/or requirements precedent to the vesting of same.

Conclusions of Law

1. Section 3304 (a)(6)(A) of the Federal Unemployment Tax Act expressly requires an approved State unemployment compensation law, on and after January 1, 1972 in the case of New York's unemployment insurance law, to cover under the State law, for the purpose of paying unemployment compensation, all services in employment described in that section and in-section 3309 (a) (1) of the Federal Unemployment Tax Act; except that the State law may


2 The word "substantial" does, however, appear before "compliance" in Section 3304 (c). Thus, it is
entirely possible that New York, which I have found not to be in conformity with the requirements, may
well be in "substantial compliance." However, inasmuch as the issue of "substantial compliance"
was not fully litigated before me, I make no findings or recommendations thereon.

exclude the services described in section 3309(b) of the Federal Unemployment Tax Act, the services described in section 3306(c)(7) of the Federal Unemployment Tax Act which are not specifically described in section 3309(a)(1)(B), and any of the services described in the provisions of section 3306(c) of the Federal Unemployment Tax Act other than the services described in paragraphs (7) and (8) of that section.

2. Section 3304(a)(12) of the Federal Unemployment Tax Act expressly requires an approved State unemployment compensation law, on and after January 1, 1972 in the case of New York's unemployment insurance law, to provide for the right of each political subdivision of the State to elect to cover under the State law, for the purpose of paying unemployment compensation, all services performed in the employ of the hospitals and institutions of higher education operated by the political subdivision, and the services required to be covered by such an election are the same as the services for State hospitals and institutions of higher education which are required by section 3304(a)(6)(A) of the Federal Unemployment Tax Act to be covered by the State law.

3. The services excluded by subdivisions 8, 9, 13, and 14 of section 511 of the New York unemployment
insurance law are not the same as or similar to any of the services described in section 3309(b), or those services
described in section 3306(c)(7) which are not among the services specifically described in section 3309(a)(1)(B),
or any of the services described in the provisions of section 3306(c) (other than paragraphs (7) and (8) of that section),
of the Federal Unemployment Tax Act, and therefore are services which are required to be within the scope of provisions meeting the requirements of section 3304(a) (6) (A) and section 3304(a) (12) of the Federal Unemployment Tax Act.

4. The payment of unemployment benefits to persons covered by the State law pursuant to the provision required by sections 3304 (a)(6)(A) , "in the same amount, on the same terms, and subject to the same conditions" as apply to other persons covered by the State law, pertains to entitlement to and amount of benefits rather than to whether certain services may be excluded from coverage by the State law.

5. The payment of unemployment benefits to persons covered by the State law pursuant to the provision
required by section 3304(a)(12), "on the same basis, in the same amount, on the same terms; and subject to the
same conditions" as apply to other persons performing similar services for the State which are covered by the State law, pertains to entitlement to and amount of benefits rather than whether certain services may be excluded from coverage by the State law.

6. The third sentence of section 3304 (c) of the Federal Unemployment Tax Act requires an approved State
unemployment compensation law to include each of the provisions required by reason of the enactment of the
Employment Security Amendments of 1970 to be included therein. As this provision for required conformity is
stated in the law it does not permit of deviations from the requirements that Congress has prescribed. A State
law, as a condition of its continued approval under section 3304(a), must include each of the provisions
required by sections 3304 (a) (6) (A) and 3304 (a) (12) to be included therein.

7. In devising the terms of its unemployment compensation law according to its interests and concerns
a State must yield wherever a conflict between the State's interests and the requirements of the Federal
Unemployment Tax Act arise, as a condition of the continued approval of the State law with respect to
the tax credit provided for in section 3302 (a) of the Federal Unemployment Tax Act.

8. The State of New York has failed to amend the New York unemployment insurance law so as to make
the exclusions of service in subdivisions 8, 9, 13, and 14 of section 551 of the New York unemployment
insurance law inapplicable to the provisions required by sections 3304(a)(6)(A) and 3304(a)(12) of the Federal
Unemployment Tax Act, as amended, to be included in the New York unemployment insurance law.

9. From January 1, 1972 to the date of the hearing in this matter the New York unemployment insurance law
accordingly has failed to conform to the requirements of section 3304 (a) of the Federal Unemployment Tax Act, as amended, by the Employment Security Amendments of 1970.

RECOMMENDATION

In accordance with the findings of fact and conclusions of law set forth above, it is hereby recommended that the Secretary of Labor find that the New York State Unemployment Insurance Law fails to contain all the requirements set forth in "Employment Security Amendments of 1970."


____________________

BURTON S. STERNBURG
Administrative Law Judge

Dated: November 11, 1974
Washington, D.C.