On certification to the Superior Court, Appellate Division.
For reversal -- Chief Justice Wilentz and Justices Sullivan, Pashman, Clifford, Schreiber, Handler and Pollock. For affirmance -- None. The opinion of the Court was delivered by Pashman, J.
In this case a wife seeks dependency benefits under the Workers' Compensation Act, N.J.S.A. 34:15-1 et seq., by reason of the death of her husband in the course of his employment by the wife. We must consider whether the common law rule that contracts between spouses are unenforceable prevented the existence of a valid employment relationship -- a prerequisite for recovery.
The essential facts are undisputed. Petitioner Irene Romeo and decedent Joseph Romeo were married in 1963 and lived together without separation until the husband's death. In June 1973 petitioner purchased the Club 37, a tavern and restaurant located in Newark, New Jersey. She owned the business as sole proprietor. The husband worked at the tavern on a part-time basis until September 1973, when he left other employment and began working for his wife full-time for a salary of $150 per week. His various duties included several trips each week to a nearby bank necessitated by the tavern's practice of cashing paychecks for local factory workers.
Sometime in the early afternoon on February 22, 1974, decedent went to the bank to deposit checks that the tavern had
cashed and to withdraw more cash. Petitioner testified that she observed her husband put the checks in his pocket and then gave him the keys to her car.*fn1 Her husband never returned to the tavern. Later that afternoon a Newark police officer found Joseph Romeo's body, with gunshot wounds in the back of the head, in the passenger seat of petitioner's car on the corner of Paris and Magazine Streets in Newark. The police officer found only a few dollars on the body. He testified that after investigation the police department concluded that the decedent had been ambushed as he returned from the bank to petitioner's car, driven to an isolated area and then robbed and shot.
On February 23, 1976, petitioner filed a petition under the Workers' Compensation Act, N.J.S.A. 34:15-1 to -128, for dependency benefits allegedly due her as a result of her husband's death. The New Jersey Department of Labor and Industry, Division of Workers' Compensation, held hearings on four days between March 1977 and February 1978. On May 5, 1978, the compensation judge ruled that petitioner was entitled to dependency benefits of $75 per week. See N.J.S.A. 34:15-12(b).*fn2
The compensation judge found that decedent worked for petitioner and that his death was a result of an accident which arose out of and in the course of his employment. See N.J.S.A. 34:15-7. Addressing the effect of petitioner's status as her late husband's employer on her right to recover dependency benefits, the judge considered "whether interspousal immunity prohibits payment of compensation if the employee and employer are husband and wife." He recognized that this Court had already determined the issue in Bendler v. Bendler, 3 N.J. 161 (1949), which had denied compensation because of the incapacity of
spouses to contract between themselves. Nevertheless, the compensation judge felt "compelled to look beyond the specific pronouncement in the Bendler decision of 1949 to see whether there has been any change in the doctrine of interspousal immunity which is relevant to [that] issue * * *." Finding persuasive this Court's reasoning in later decisions abolishing interspousal tort immunity, the judge concluded that the common law rule should not be allowed to defeat the strong public policy behind the Workers' Compensation Act.
Respondent appealed and the Appellate Division reversed. The court concluded that the compensation judge had erred by framing the issue in terms of interspousal immunity. Viewing the question as one of contractual capacity, the Appellate Division considered itself bound by our decision in Bendler.*fn3 We granted certification, 82 N.J. 288 (1980), and now reverse.
The Existing Lack of Capacity
In Bendler, supra, this Court rejected a claim for compensation by a husband injured while working for his wife's embroidery business. Basing its determination on a three-part analysis, the Court concluded that the statutory right of recovery did not apply when employer and employee were married.
In the first part of its analysis, the Court reviewed the general scheme of the Compensation Act and concluded that
[t]he evident legislative design was the incorporation, in default of adverse action by the parties, of the compensatory system provided by Article II [elective compensation] into the common-law contract of hire * * *. [3 N.J. at 167]
Thus, a contract of hire, either express or implied in fact, was a "basic prerequisite" to the right of compensation. Id. The
Court next observed that such a contractual relationship could not exist between a husband and a wife. Id. at 168. "[A] contract of hire between spouses is utterly void and unenforceable at law." Id. The Court noted two reasons for this common law rule:
Contracts between husband and wife have been deemed objectionable, not only because they are inconsistent with the common-law doctrine of unity of person and interest, "but because they introduce the disturbing influence of bargain and sale into the marriage relation, and induce a ...