For the plaintiff, Louis B. LeDuc, W. Louis Bossle and Edward West.
For the defendant, Charles A. Malloy (Herman D. Ringle, of counsel).
Before Brogan, Chief Justice, and Justices Parker and Porter.
The opinion of the court was delivered by
BROGAN, CHIEF JUSTICE. The Unemployment Compensation Commission of New Jersey determined that Merlin F. Raines had "attained the status of an employer subject to the provisions of the Unemployment Compensation Law of New Jersey on July 14th, 1940, as of January 1st, 1940." As a consequence, certain contributions were assessed against him by the Commission, plus a penalty for failure to file reports, and interest on the amount assessed.
We allowed certiorari to review this finding, and from the return made thereto and the reasons for reversal it appears that the only question involved is whether section 19 (g) of R.S. 43:21 is constitutional. That section reads as follows:
"(g) 'Employing unit' means any individual or type of organization, including any partnership, association, trust, estate, joint stock company, insurance company or corporation, whether domestic or foreign, or the receiver, trustee in bankruptcy, trustee or successor thereof, or the legal representative of a deceased person, which has or subsequent to January first, one thousand nine hundred and thirty-six, had in its employ one or more individuals performing services for it within this State. All individuals performing services within this State for any employing unit which maintains two or more separate establishments within this State shall be deemed to be employed by a single employing unit for all the purposes of this chapter. Whenever any employing unit contracts with or has under it any contractor or subcontractor for any employment which is part of its usual trade, occupation, profession, or business, unless the employing unit as well as each such contractor or subcontractor is an employer by reason of subsection (c) of section 43:21-8 of this Title or subsection (h) of this section, the employing unit shall for all the purposes of this chapter be deemed to employ each individual in the employ of each such contractor or subcontractor for each day during which such individual is engaged in performing such employment; except that each such contractor or subcontractor who is an employer by reason of subsection (c) of section 43:21-8 of this Title or subsection (h) of this section, shall alone be liable for the contributions measured by wages payable to individuals in his employ, and except that any employing unit who shall become liable for and pay contributions with respect to individuals in the employ of any such contractor or subcontractor who is not an employer by reason of subsection (c) of section 43:21-8 of this Title or subsection (h) of this section, may recover the same from such contractor or subcontractor. Each individual employed to perform or to assist in performing the
work of any agent or employee of an employing unit shall be deemed to be employed by such employing unit for all the purposes of this chapter, whether such individual was hired or paid directly by such employing unit or by such agent or employee; provided, the employing unit had actual or constructive knowledge of the work."
For the year 1940 Raines, in his affidavit, describes himself as a builder engaged in constructing dwelling houses, and other buildings, under contracts with landowners. It was his custom to use subcontractors, working independently to perform work necessary for the completion of his contract with his principal. Mr. Raines said that, to the best of his knowledge, most of the subcontractors in the work performed by them on his buildings employed less than eight employees. From the correspondence between the representatives of the Commission and Mr. Raines, and the conferences had with him or on his behalf, it is clear that Raines was a "subject employer" under the statute and, therefore, liable for the assessment in question, unless that section of the statute, supra, is unconstitutional.
Two reasons for reversal have been filed. The first is that levying and collecting such taxes based upon wages paid by prosecutor's subcontractors to their employees is invalid under our Constitution in that thereby prosecutor's property is not assessed for taxes under general laws or by uniform rules; the second is that taxation thus arrived at violates prosecutor's rights under the Fourteenth Amendment of the Federal Constitution in that the ...