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Pioneer Potato Co. v. Division of Employment Security

Decided: February 28, 1955.

PIONEER POTATO CO., INC., RESPONDENT,
v.
DIVISION OF EMPLOYMENT SECURITY, DEPARTMENT OF LABOR AND INDUSTRY, STATE OF NEW JERSEY, APPELLANT



On appeal from Superior Court, Appellate Division, whose opinion is reported at 31 N.J. Super. 553.

For affirmance -- Chief Justice Vanderbilt, and Justices Heher, Oliphant, Wachenfeld, Burling, Jacobs and Brennan. For reversal -- None. The opinion of the court was delivered by William J. Brennan, Jr., J.

Brennan

The question is whether Pioneer Potato Co., Inc., is liable to pay contributions under R.S. 43:21-7 of the Unemployment Compensation Law as to wages paid migrant workers employed in 1949 to clean, grade and pack potatoes after the potato harvest of that year. The Appellate Division determined that the services of the migrant workers constituted "agricultural labor" expressly excluded by R.S. 43:21-19(i)(7)(A) of the act, 31 N.J. Super. 553 (1954). We granted certification on the petition of the Division of Employment Security, 16 N.J. 414 (1954).

Pioneer's stockholders are potato farmers. The post-harvesting services of washing, grading and packing are essential to the preparation of the potatoes for market. The farmer-stockholders

have these services performed at Pioneer's plant and thus avoid the higher cost of equipping their own farms and employing their own workers to do the work on the farms. Each farmer-stockholder brings his crop in 100-pound field bags from the fields to the plant where Pioneer's migrant workers wash, dry, pick, grade and finally pack them in wired or sewn 5, 10 and 15-pound bags for shipment to buyers.

Pioneer secured the migrant workers through one Barney Boston, who, for $550, supervised their performance of the work according to Pioneer's instructions. At the end of each week Boston paid the wages of the workers with funds supplied to him by Pioneer. The operation entailed the dumping of the potatoes from the field sacks into a grading machine hopper from which the potatoes proceeded by conveyor belt through a washing unit and a drying unit, over a picking table where defective potatoes were picked out, thence over grading tables, and finally to a packing platform for packaging. Some of the migrant laborers also loaded the bags on trucks or freight cars for shipment.

Pioneer arranged for the sale of the packaged potatoes at prices and on terms suitable to it. Whether or not Pioneer received immediate payment of the sales price, each farmer-stockholder was paid for his potatoes at the end of each week at a rate representing the average of the unit prices at which Pioneer sold potatoes during that week. Any excess of actual sales prices over such average unit prices, after expenses, represented Pioneer's profit. The company also sold seeds and fertilizers.

The Federal Government's national plan for social security originated with the Social Security Act of 1935, 49 Stat. 620, ch. 531, Public No. 271, 74 th Cong., approved August 14, 1935. The plan makes provision for old age and survivors insurance and for unemployment insurance. Both are financed by taxes, imposed, in the case of old age and survivors insurance, by the Federal Insurance Contribution Act, 26 U.S.C.A., sec. 1400 et seq., Internal Revenue Code of 1939, now sec. 3101 et seq. of the Internal Revenue Code

of 1954, and, in the case of unemployment insurance, by the Federal Unemployment Tax Act, 26 U.S.C.A., sec. 1600 et seq., Internal Revenue Code of 1939, now sec. 3301 et seq. of the 1954 Code. Each state establishes its own unemployment insurance fund and contributions thereto are allowed as credits against the taxes payable under the Federal Unemployment Tax Act to the extent provided by the latter law, Internal Revenue Code of 1954, sec. 3302. The state statutes form an integral part of the national plan and are designed to work closely with the federal legislation.

Agricultural workers are excluded from unemployment insurance coverage and, after 1950 amendments to the Federal Insurance Contribution Act, in less numbers, from old age and survivors insurance. It is not that such workers are in less need of the coverage than industrial workers; objection to their inclusion stemmed chiefly from apprehended difficulties in administering a farm program and from fears of excessively high costs. "Determination of employment relationship, record keeping, and wage reporting, and collection of taxes are stressed as major obstacles to covering farm workers." Greenfield, Unemployment Insurance for Farm Workers, p.i (Bureau of Public Administration, University of California, 1953).

The federal unemployment insurance statutes and the original state statutes patterned upon them accomplished the exclusion under the term "agricultural labor" without definition or limitation. Wide variation in interpretation was inevitable. For tax collection purposes the Bureau of Internal Revenue developed Treasury Regulations (Regulation 90 for unemployment insurance taxes), which confined the excluded services to those performed for a farm operator, on his farm, and to processes which were incidental to ordinary farm operations. Many states, like California, adopted a substantially identical regulation, California Employment Commission v. Kovacevich, ...


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