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Provident Institution for Savings v. Division of Employment Security

Decided: June 6, 1960.


For affirmance -- Chief Justice Weintraub, and Justices Burling, Jacobs, Francis, Proctor, Hall and Schettino. For reversal -- None. The opinion of the court was delivered by Schettino, J.


This is an appeal from a ruling of the Division of Employment Security which held that certain individuals were employees of the petitioner and thus within the Unemployment Compensation Law. While appeal was pending in the Appellate Division, we certified the matter on our own motion.

On appeal the parties agreed to submit the matter for determination on a stipulation of facts in lieu of the record pursuant to R.R. 4:88-8. The following facts are contained therein. Petitioner is a registered employer under the New Jersey Unemployment Compensation Law and as the result of an audit made in 1957, respondent made an assessment against it for supplemental contributions for the years 1954, 1955, 1956, and for the second quarter of 1957. The appeal herein was then filed.

Petitioner was incorporated in 1839 under an act of the Legislature and since about 1870 it has been governed by the General Savings Bank Act and particularly the last statute on the subject known as the Banking Act of 1948, N.J.S.A. 17:9 A -188 et seq. It is a mutual savings bank and has no stockholders as the assets of the bank are owned by the depositors. All of the earnings of the bank are distributed to the depositors as dividends or interest. Under the act of incorporation and under the statute, Provident's business affairs are managed by a Board of Managers which group is self-perpetuating. A vacancy is filled by an election held by the remaining Managers.

The present statute also provides for an Executive Committee. Each year the members of the Board of Managers designate four of their number to serve on the Executive Committee and those individuals and the bank president, who acts ex officio, constitute the Committee. The Board of Managers meets once a month. The Executive Committee meets once a week and, under the statute, between meetings of the Board of Managers exercises all the functions of the Board of Managers.

The issue presented is whether the services performed by the members of petitioner's Executive Committee constitute employment as defined by the Unemployment Compensation Law (N.J.S.A. 43:21-19(i)(1), (6) and (p))?

Each member of the Executive Committee receives $4,000 annually for his services on that Committee and receives $40 for attendance at each meeting of the Board of Managers. All members are engaged in businesses other than petitioner's when not performing services on the Executive Committee. They are paid by check of Provident every two weeks on the same day of the week. The Managers are paid their fee in cash at each meeting. Deductions are made from their Executive Committee checks for hospitalization and group life insurance in which the Committee members participate and for Christmas Club as directed. Petitioner contributes towards the group life insurance. All employees as well as the Committee members receive bonuses at the end of the year as determined by the Managers.

The duties of the Executive Committee include the operation of the bank between meetings of the Managers; the hiring and discharging of employees except officers; the management of the bank's real and personal property; the purchase and sale of investments on behalf of the bank; passing on and determining all loans, mortgages, and investments to be made; obtaining information relating to loan and mortgage applications; reviewing mortgage applications with the appraisal and mortgage department of the bank; examining the neighborhood where property is located;

hiring appraisers on mortgage applications of over $5,000 where property is located outside of Jersey City; examining properties on which applications are made for a loan on mortgages of $50,000 or more; obtaining information from bank employees as needed and from other bankers and investment services. All loans, mortgages and investments made by the Executive Committee are binding on the bank. In passing, we note that for its operation the Board of Managers must select from its membership a president and a vice-president. N.J.S.A. 17:9 A -191.

Petitioner contended before respondent Board that the members of the Executive Committee are not employees but the employer itself and that there exists therefore no master and servant relationship. Respondent held that the Committee members performed "services" for petitioner for which they received remuneration under a contract of hire within the meaning of N.J.S.A. 43:21-19(i)(1) and that their services are necessary to maintain petitioner as a bank. Respondent stated:

"* * * As managers they performed purely ministerial and directorial duties, but as executive committee members they did more than that. Their services were beyond the scope of managerial and directorial duties. They did more than merely attend and participate in meetings of the board. The services rendered by the executive committee members were not of a purely ceremonial or formal nature required only for the maintenance of the corporate organization. In performing the services of the executive committee the members were not acting for themselves but for the ...

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