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Nota v. Board of Review

Decided: March 29, 1989.

NEIL NOTA, APPELLANT,
v.
BOARD OF REVIEW, DEPARTMENT OF LABOR AND ILN ASSOCIATES, INC., RESPONDENTS



On appeal from Board of Review, Department of Labor.

King and Brody. The opinion of the court was delivered by Brody, J.A.D.

Brody

[231 NJSuper Page 342] The Board of Review (Board), Department of Labor, Division of Unemployment and Disability Insurance (Division), affirmed

the determination of an Appeals Examiner (AE) that appellant (claimant) had received unemployment benefits totaling $5,564 which he was not entitled to receive. Pursuant to N.J.S.A. 43:21-16(d), the Board ordered him to repay the sum in full. The determination was based upon an exception to the statutory definition of "unemployment" (the exception) that disqualifies a person otherwise unemployed from receiving benefits if he is an officer or is a more than 5% owner or creditor of a corporation that was his last employer. Claimant contends in this appeal that he was not subject to the exception because his corporation had permanently ceased doing business before be became unemployed. The Board applied the exception because claimant had not dissolved his corporation.

The exception, which appears in a 1984 amendment to the N.J.S.A. 43:21-19(m)(1) definition of "unemployment," provides:

The exception does not disqualify a person from receiving benefits because he had been an officer or had been a more than 5% owner or creditor of a corporation that was his last employer. The disqualification attaches only if the person continues to be an officer or a more than 5% owner or creditor in any week for which he claims benefits.

The exception is meant to prevent a claimant from receiving benefits for being unemployed at a time when, as an officer or more than 5% owner or creditor of his former corporate employer,

he is in a position to influence its decision to rehire him. He is not in that position if he is no longer an officer, owner or creditor of the corporation or if the corporation has permanently ceased doing business.*fn1

The evidence before the AE was uncontradicted. In 1985 claimant, a data processing consultant, sought employment by the American Telephone & Telegraph Company (AT & T). AT & T agreed to his being engaged for one year as a subcontractor to one of its contractors provided he did business in the corporate form. Claimant thereupon formed ILN Associates, Inc. (ILN) which entered into a one-year subcontract in April 1985. He drew a salary of $700 a week from ILN for the duration of the contract. AT & T did not authorize renewal of the contract and at the end of March 1986 claimant was out of work.

He then consulted an accountant for advice as to what to do with ILN because it no longer served any purpose. The AE received in evidence a written statement of the accountant in which he described the situation and recounted the advice he had given claimant.

Mr. Nota was the president of ILN Associates, Inc., a corporation which was incorporated on April 25, 1985 in New Jersey and ceased to exist on March 31, 1986. The corporate checking account was totally depleted upon payment of all corporate payroll taxes and ...


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