34 Pa. Commw. 488 | Pa. Commw. Ct. | 1978
Opinion by
This case comes before tbe Court upon a petition for review of a decision by tbe Employer Accounts Review Board of tbe Bureau of Employment Security, Commonwealth of Pennsylvania, Department of Labor and Industry (Board). Tbe decision denies a claim for refund filed by Bagley & Huntsberger, Inc. (Employer), for unemployment compensation taxes assessed and paid on tbe wages of two of its share-bolder-off icer-employes. We will affirm.
By letter dated November 23, 1976, the Supervisor of Registration Unit for the Bureau of Employment Security notified the Employer that its claim for refund was denied. Thereafter, the Employer requested a final appealable decision from the Board. This request was honored and the Employer’s claim for refund was considered by the Board at its January meeting. On January 20, 1976, the Board informed the Employer by letter that its claim would not be granted. The Employer thereupon filed a petition for review.
The narrow question of law with which we are faced is whether the taxation of a corporation, pursuant to Section 301(a)(1) of the Unemployment Compensation Law (Act), Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, 43 P.S. §781 (a) (1), on wages earned by shareholder-officer-employes, is either a denial of due process under the United States Constitution or a violation of the uniformity requirement of the Pennsylvania Constitution.
The Employer argues that the liability imposed upon it for the wages earned by the shareholder-officer-employes is not founded upon any quid pro quo relationship between the payment of the tax and the benefit received as required by the Fourteenth Amendment to the United States Constitution. This
The Employer’s argument is without merit and was specifically answered in Labe’s Men’s Shop v. Young, 35 D. & C. 2d 135, 141-42, 82 Dauphin 383, 388-89 (1964). In that case, Judge Bowman, now President Judge Bowman of our Court, said this:
While not specifically advanced, there underlies plaintiff’s argument the apparent dilemma in which some small closely held corporations and their owners find themselves in being subject to employer contributions under the Unemployment Compensation Law, with the possibility that a substantial shareholder of the corporation upon Ms termination of employment by it being declared ineligible for compensation benefits under the authority of the cited Superior Court decisions. This suggested ineqMty, however, is more apparent than real and misconceives the intent and purposes of the law. As stated in Edgewood Amusement Company, Inc., supra, pages 125-126
. . The Unemployment Compensation Law may aptly be termed a statute having two somewhat related but nevertheless distinct and separate purposes. The one purpose is that of creating a fund out of which compensation benefits may be paid to persons who are unem*492 ployed through no fault of their own. To accomplish this purpose the act imposes contributions upon all employers, as defined in said act, which contributions are paid into the fund created for the payment of compensation benefits to eligible persons.
* * %
‘. . . The imposition of the tax is absolute and without regard to the economic status of the employe or to any job protection which he may happen to enjoy by reason of such employment or any other employment.
‘The other purpose or objective of this act is to afford to certain persons unemployment compensation benefits, and the provisions thereof establishing eligibility, amount and duration of such benefits accomplish this purpose. None of the many and complex provisions relating to benefits provide for or even suggest the conclusion which appellant would have the Court reach. While it is true that a fully employed person is not eligible for unemployment compensation benefits whether so employed in covered or noncovered employment, this is so because of the fact of employment and not the reason for being so employed. ’
The quid pro quo relationship of employer contributions to eligibility for compensation benefits which this ‘injustice’ suggests simply does not exist within the intent and purposes of the law or under the provisions. (Emphasis in original.)
In Labe’s Men’s Shop, the corporation attempted to circumvent the unemployment compensation tax by requesting the Court to pierce its corporate veil.
The second argument raised by the Employer, that the imposition of tax on the wages paid its shareholder-officer-employes violates the Uniformity Clause of the Pennsylvania Constitution,
Order
And Now, this 31st day of March, 1978, the decision of the Employer Accounts Review Board of the Bureau of Employment Security denying the claim for refund filed by Bagley & Huntsberger, Inc. is hereby affirmed.
Pa. Const. art. VIII, §1, requires that “All taxes shall he uniform upon the same class of subjects. . . .”
Section 301(a)(1) of the Act, 43 P.S. §781 (a) (1) provides: “Bach employer shall pay contributions with respect to . . . wages paid by him for employment.” Section 4(1) (1) of the Act, 43 P.S. §753(1) (1) includes within employment, services as an officer of a corporation.