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Fernicola v. Board of Review

December 20, 2000

GIOVANNI FERNICOLA,
PETITIONER-APPELLANT,
V.
BOARD OF REVIEW,
RESPONDENT-RESPONDENT.
AND
GFV INC. T/A LA ROSA RISTORANTE,
RESPONDENT.



On appeal from final agency decision of the Board of Review, Department of Labor, 99-B- 03803-000-X0.

Before Judges Pressler, Kestin and Alley

The opinion of the court was delivered by: Alley, J.A.D.

Submitted November 28, 2000

Petitioner, Giovanni Fernicola, appeals from a final decision of the Board of Review of the New Jersey Department of Labor, which affirmed the Appeal Tribunal's decision denying his claim for unemployment benefits. A focal point of the case is the definition of "unemployed" in N.J.S.A. 43:21-19(m)(1)(A), which in relevant part includes this language:

... except that ... an officer of a corporation, or a person who has more than a 5% equitable or debt interest in the corporation, whose claim for benefits is based on wages with that corporation shall not be deemed to be unemployed in any week during the individual's term of office or ownership in the corporation ...."

In Nota v. Board of Review, 231 N.J. Super. 341, 343-44(App. Div. 1989), we wrote,

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.

The claimant in Nota was denied benefits because the corporation had not been dissolved. At the time, there was no regulation supporting that interpretation, however, and the court stated, 231 N.J. Super. at 347-48,

Here, without benefit of a regulation, the Board as a matter of policy engrafted onto the statutory exception a requirement that a corporation must be dissolved before it can be considered to have permanently ceased doing business.

Although dissolution of a corporation is certain proof that it has permanently ceased doing business, it is not unusual for owners of a corporation that has permanently ceased doing business simply to abandon it, as was done here, in order to avoid the expense of formal dissolution. In the absence of a regulation to the contrary, a claimant who was an officer or a more than 5% owner or creditor of a corporation that was his last employer, and who otherwise qualifies, is "unemployed" as defined by N.J.S.A. 43:21-19(m)(1) if the corporation had permanently ceased doing business before the period for which he claims benefits, even though the corporation has not been dissolved. (Footnotes omitted).

The Department of Labor then promulgated N.J.A.C. 12:17- 12.1(a), which provides:

(a) An officer of a corporation and/or a person who has more than five percent equitable or debt interest in the corporation, whose claim for benefits is based on wages with that corporation, shall not be considered unemployed in any week during the individual's term of office or ownership in the corporation and the claim shall be determined invalid.

1. An equitable interest in the corporation is defined as the ownership of ...


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