Vitolins Unemployment Compensation Case. Department of Labor and Industry, Bureau of Employment Security, Appellant, v. Unemployment Compensation Board of Review.
Superior Court of Pennsylvania
April 14, 1964
203 Pa. Super. Ct. 183 | 199 A.2d 491
Morley W. Bаker, Assistant Attorney General, with him Walter E. Alessandroni, Attorney General, for Department of Labor and Industry, Bureau of Employment Security, appellant.
Jerome H. Gerber, with him Sidney G. Handler, for claimant, intervening appellee.
OPINION BY ERVIN, J., April 14, 1964:
The сlaimant, Adolf Vitolins, who had been employed by the Bethlehem Steel Company for 12 years, was laid off on February 21, 1963. In 1962 his wages from the Bethlehem Steel Company were $5,310.87. Since 1956 Vitolins, with his family, owned and operated a farm as a side line activity. He had worked the farm during nonworking hours at the steel plant. A great deal of the work at the farm was done by his wife and children. The gross income from the farm during 1962 was $4,591.24, it having come from the sale of livestock, patronage dividends, rebates or refunds, agricultural program payments and rent received from a tenant. His expenses, itemized on his Federal income tax form1 (and accepted by the Federal government as legitimate deductions in arriving at net farm profit or loss) were as follows:
| Items | Amount |
| Labor hired | $ 89.00 |
| Repairs, maintenance | 429.10 |
| Interest | 1,027.22 |
| Feed purchases | 1,635.01 |
| Seed, plants purchased | 178.00 |
| Fertilizers, lime | 470.97 |
| Machine hire | 179.00 |
| Supplies purchased | 243.75 |
| Breeding fees | 48.00 |
| Veterinary medicine | 137.65 |
| Gasoline, fuel, oil | 532.32 |
| Taxes | 818.67 |
| Insurance | 268.70 |
| Utilities (5%) | 282.64 |
| Rent of farm pasture | 120.00 |
| Trucking | 222.36 |
| Truck hire | 36.00 |
| Car expenses | 226.12 |
| Advertising | 9.06 |
| Cattle registering | 8.50 |
| Baby chicks | 70.89 |
| Depreciation | 772.26 |
| Total | $7,805.22 |
He had a net operating loss of $3,213.98.
The Bureau of Employment Security, in reliance upon its Regulation 120, allowed only the expenses for labor, feed, seeds and plants, fertilizer and lime. Departmental Regulation 120, which became effective October 1, 1960, provided as follows: “1. For a claimant engaged in farming, ‘gross income’ from sales and services shall be reduced by subtraction of expenses for labor, feed, seeds and plants, fertilizer and lime.” The bureau, therefore, found that the claimant had weekly earnings of $44.00.
| Claimant‘s weekly benefit amount was | $40.00 |
| to which the bureau added a partial credit | 12.00 |
| making a total of | 52.00 |
| and then subtracted his weekly earnings | 44.00 |
| which left claimant with a partial benefit of only | 8.00 |
The claimant filed an appeal and the referee modified the decision of the bureau and awarded benefits at the rate of $40.00 per week. The bureau then ap-
Prior to the 1959 session of the General Assembly a claimant who operated a farm during a period of unemployment was ineligible for unemployment compensation benefits on the ground thаt he was self-employed, regardless of whether or not he received any net income from his farming operation: Meckes Unemployment Compensation Case (1959), 190 Pa. Superior Ct. 578, 155 A. 2d 463; Kespelher Unemployment Compensation Case (1955), 178 Pa. Superior Ct. 511, 116 A. 2d 239; Muchant Unemployment Compensation Case (1954), 175 Pa. Superior Ct. 85, 103 A. 2d 438.
These decisions made it clear that the Unemployment Compensation Law created a gross inequity against some partially self-employed individuals as against individuals who performed the same services for wages while in the employ of anothеr. To correct this inequity the legislature in 1959 amended the law by adding thereto subsection 402(h), which provided: “An employe shall be ineligible for compensation for any week . . .
“(h) In which he is engaged in self-employment: Provided, however, That an employe who is able and available for full-time work shall be deemed not engaged in self-employment by reason of continued participation without substantial change during a period of unemployment in any activity including farming operations undertaken while customarily employed by an employer in full-time work whether or not such work is in ‘employment’ as defined in this act and continued subsequent to separation from such work when such activity is not engaged in as a primary source of livelihood. Net earnings recеived by the employe with
respect to such activity shall be deemed remuneration paid or payable with respect to such period as shall be determined by rules and regulations of the department.” 43 PS §802(h) .
The bureau interpreted the 1959 amendment in such a way as to give it power to further define “net earnings” as it did in Regulation 120. While it is true that the legislature, in
If the claimant met these three tests, his unemployment compensation benefits were to be reduced by his “net earnings” from the self-employment. The legislature undoubtedly realized that a self-employed person‘s income might be produced in irregular amounts and at irregular periods. For example, a self-employed farmer works many months withоut income and then sells his crops at one time. It would be unfair to the claimant if his period of unemployment coincided with his harvest time income. He would be totally ineligible for benefits. On the other hand, if the same claimant were laid off at planting time, he would have no farm income during this period and his unemployment
It is a fundamental precept of statutory construction that words and phrases shall be construed according to their common and approved usage.
A word used in a statute must be given its plain everyday meaning where not defined in the statute: Com. v. McHugh, 406 Pa. 566, 178 A. 2d 556.
Statutes are presumed to employ words in their popular sense, and when words used are susceptible of more than one meaning, the popular meaning will prevail: Ferraro v. Crowell, 198 Pa. Superior Ct. 222, 182 A. 2d 98.
Webster‘s New International Dictionary (Second ed. p. 1644) defines “net earnings” as: “excess of earnings over expenses, sometimes including interest charges, during a given period.”
In the case of Jones and Nimick Manufacturing Co. v. Com., 69 Pa. 137, our Supreme Court laid down this definition: “Net earnings or incоme are the products of the business, deducting the expenses only. . . .”
“Net earnings” are the excess of gross earnings over expenditures defrayed in producing them, aside from, and exclusive of capital laid out in constructing and equipping a business: Grand Traverse Hotel Co. v. U.S., 79 F. Supp. 860.
“Net earnings” is an accounting term describing what remains after various deductions, including depreciation, from gross earnings: Bellingham Securities Syndicate v. Bellingham Coal Mines, Inc., 13 Wash. 2d 370, 125 P. 2d 668 (See Syllabus No. 4).
Interest on a debt is a proper deduction from gross earnings in determining “net earnings“: Belfast & M. L. R. Co. v. City of Belfast, 77 Me. 445, 1 A. 362.
The bureau, by selecting only a few of the numerous farming expenses to the exclusion of all others, completely disregards the common meaning of “net earnings.” To say that a farmer may deduct the cost of fertilizer from gross earnings, but cannot deduct the cost of repairing and maintaining his fertilizer spreader, or the gasoline necessary to run it, the hiring of the truck to haul it, or the taxes and insurance on his barn wherein he stores it, is absurd. No provision in Regulation 120 is made for the dairy farmer. He may not have to purchase seeds, plants and fertilizer and lime, but he will incur, as did the claimant, expenses for breeding fees, veterinary medicine and cattle registration. No provision is made in Regulation 120 for the deduction of these expenses. Each of the expenses listed by the claimant was essential to the production of the farm income. Without these items there would be no farm income with which to charge the claimant.
It is also argued that the Board of Review does not have the power to strike down any part of Regulation 120. The answer to this is that the board, under
Decision affirmed.
DISSENTING OPINION BY WOODSIDE, J.:
I dissent in this case and in the Springer Unemployment Compensation Case. I agree with the majority that the bureau‘s rules concerning the deductions allowed to determine “net earnings” are tоo restrictive, but I do not agree with the majority that all the deductions allowed by the board are proper. In the Springer case this Court approves the board‘s allowance of “donations” as a deduction. In effect this is granting the claimant additional unemployment compensation to pay his donations. Such allowances do not fall within the purpose of unemployment compensation.
In the Vitolins case, the steel worker residing on a farm, is allowed deductions for payments of $1027 interest, $818 taxes, $268 insurance and $772 depreciation which, as I interpret the record, relate to the entire farm including his own residence. Furthermore,
I would remand these cases to the board for consideration of the net income on some more realistic standards than the blind acceptance of deductions carried on the claimant‘s income tax returns. It should be the burden of the claimant to establish before the compensation authorities the necessary items to establish his net income.
DISSENTING OPINION BY MONTGOMERY, J.:
I cannot accept the conclusion reached by the majority that the Unemployment Compensation Board of Review has the right to nullify regulations adopted by the Department of Labor and Industry.
The Administrative Code does not add to the powers of the board beyond what is given to it in the Unemployment Compensation Act since the former is procedural in purpose.
A valid rule or regulation duly promulgated by an administrative agency is binding on the agency as well as upon all those to whom its terms apply and has the force and effect of law. 1 P.L.E. Administrative Law and Procedure §35. Clearly the board has no power to ignore Regulation 120 and use its own method of determining net earnings in this case. Although the board performs quasi-judiсial duties, it is not a court and is without power to set aside the law or a duly promulgated regulation which has the effect of law. That privilege must be exercised by this Court if such regulation is inconsistent with the law which authorized its promulgation.
Prior to the 1959 amendment of the Unemployment Compensation Act anyone engaged in self-employment during a period of unemployment from regular work was denied benefits under the act. The Act of 1959 continued to render such persons ineligible except in cases “of continued participation without substantial change during а period of unemployment in any activity including farming operations undertaken while customarily employed by an employer in full-time work . . . and continued subsequent to separation from such work when such activity is not engaged in as a primary source of livelihood.” (Emphasis supplied) It is further provided in that amendment that “Net earnings received by the employe with respect to such activity shall be deemed remuneration paid or payable with respect to such period as shall be determined by rules and regulations of the department.”
The majority interprets that last sentence to mean that the department may determine only what portion of net earnings from part-time employment shall be applicable to the period of unemployment from the claimant‘s full-time employment, but thаt it has no power to set rules for the general determination of net earnings in those cases. In adopting this restrictive interpretation of the amendment the majority ignores the previous requirement that such activity shall not be engaged in as a primary source of livelihood.
I see no good reason for denying the department full power to set reasonable rules for determining net earnings. Such claimants are exceptions to the general rule that persons who are self-employed during layoffs
If the majority view is to prevail, the bureau and the board will be required to examine thoroughly, and audit, every outside business and farming activity engaged in by unemployment compensation claimants so as to determine their gross income, which should include the farm products used by farmers and their families and the use of the building thereon as their place of abode; and further, the propriety of all actual and technical deductions, such as labor payments to other members of his family, depreciation, obsolescence, casualty losses, taxes, donations, inventory buildup, and innumerable other items taxpayers generally claim in order to secure reduction of their federal income obligations, in ascertaining their taxable income. The legislature did not intend to impose this burden on the unemployment compensation authorities when it provided that special consideration be given to claimants who had been engaged in outside business activities on a part-time basis when regularly employed. It is a rare case when a person who has lost his regular employment does not render full-time effort and attention to his “sideline” during his period of unemployment to make it his primary source of livelihood during that period. However this may be, it is unfair to other unemployed persons who are denied compensation because they are truly self-employed during their periods of layoff or secure temporary employment during such periods. It bears repeating that thе Unemployment Compensation Law was not designed to insure a weekly income for those engaged in business ventures who may not realize a profit during various weekly
I think the department acted reasonably in adopting Regulation 120 as a means of distinguishing between enterprises which constitute a primary source of livelihood and those which constitute part-time or merely additional and secondary sources.
I would sustain Regulation 120 and remand this case to the board for an adjudication in accordance with it.
Therefore, I dissent.