Preissman v. Board of Appeals

Moore, J., delivered the opinion of the Court. Appellant, Isidore Gordon Preissman, a member of the Bar, is also engaged in business in Baltimore City. In his capacity as an employer, he challenges the constitutionality of the provisions of the Maryland Unemployment Insurance Law whereby his experience-rating was charged with benefits paid to a former employee who had not been laid off but had resigned. Specifically, appellant contends that the Unemployment Insurance Law, Annot.

Code of Maryland, Article 95A, § 8 (c) (2) (1975 Cum. Supp.), which permits the charging of unemployment compensation benefits to the experience-rating account of an employer even where the employee left his service voluntarily and without a cause attributable to the employer, is violative of the Due Process and Equal Protection clauses of the Fourteenth Amendment, and of Article 23 of the Maryland Declaration of Rights and Article III, § 40 of the Constitution of Maryland. I William Thompson, employed by appellant in maintenance work, quit his employment on August 29, 1972. He was at that point disqualified for employment insurance benefits under Article 95A, § 6 which provides: “An individual shall be disqualified for benefits — (a) Voluntarily leaving work. — For the week in which his unemployment is due to his leaving work voluntarily without good cause, if so found by the Executive Director and for not less than the one nor ⁶⁸¹ more than nine weeks which immediately follow such week as determined by the Executive Director in each case or until he has become reemployed and, has earnings therein equal to at least ten (10) times his weekly benefit amount. ’’(Emphasis added.) During the next several months, however, Mr. Thompson worked for three different employers and earned “at least ten (10) times his weekly benefit amount,” as the latter term is defined in Article 95A, § 3.

In June 1973 he lost his third job and then made application for unemployment insurance benefits. In the determination of such benefits, the Unemployment Insurance Law prescribes, inter alia, a “base period” which is defined in § 20 (a) as “the first four of the last five completed calendar quarters immediately preceding” the effective date of the claim for benefits. Appellant was, by definition, one of Mr. Thompson’s base period employers and in June 1973 he received from the Maryland Employment Security Administration a form requesting separation information with respect to Mr. Thompson. He returned the form with the notation “subject resigned August 29,1972.” Thereafter, the former employee received employment insurance benefits for the period June 9, 1973 to October 13, 1973 in the amount of $1,430.

Under the Unemployment Insurance Law, benefits thus paid are required to be charged under a percentage formula against employers’ experience-rating records. Article 95A, § 8 (c) (2). Where an employee has more than one employer during the base period and no single employer paid 75 percent or more of his wages during that period, the statute provides that the benefits paid must be charged on a pro rata basis against all base period employers. This requirement is imposed by § 8 (c) (2), supra, which provides: “If the claimant earned 75 percent or more of his base period wages from the principal base period employer, all regular benefits and one half of any extended benefits paid to such individual shall be charged against the experience-rating record of his ⁶⁸² principal base period employer (as defined in paragraph (9) of this subsection).

If the claimant earned less than 75 percent of his base period wages from the principal base period employer, all regular benefits and one half of any extended benefits paid to such individuals shall be charged on a pro rata basis to all base period employers. The percentage of the charge to each base period employer shall be in the same proportion as the amount of wages paid to the claimant by each such employer is to the total amount of wages received by the claimant during the base period, and shall be computed as a whole number without decimals.” (Emphasis added.) Since none of Mr. Thompson’s four (4) base period employers paid as much as 75 percent of his wages, the experience-rating records of all — including that of appellant — were charged. Appellant was assessed 29 percent of the benefits and this resulted in an increase, the percentage of which is not disclosed in the record, in his annual rate of contribution under the “Table of Basic Rates” prescribed by Article 95A, § 8 (c) (4) (ii). Appellant protested the action of the Department in charging Thompson’s benefits to his experience-rating record and was granted a hearing before a Hearing Officer for the Executive Director of the Department of Employment and Social Services on February 6, 1974.

The Executive Director of the Department, James N. Phillips, made a determination as of February 13, 1974 that the benefits paid to the claimant Thompson were properly chargeable to the appellant’s experience-rating account. Appellant then appealed the decision of the Executive Director to the Board of Appeals of the Department. Art. 95A, § 7 (f). The Board conducted a hearing on November 29, 1974 and affirmed the decision of the Executive Director.

Mr. Preissman thereupon sought judicial review of the decision of the Board of Appeals pursuant to Article 95A, § 7 (h), and the matter came before the Superior Court of ⁶⁸³ Baltimore City (Liss, J.) on April 25, 1975. As he had before the Department, appellant raised before the court the issue of the constitutionality of the Unemployment Insurance Law. In an oral opinion from the bench, followed by a formal order entered on June 4, 1975, the Court refused to declare the statute unconstitutional and affirmed the decision of the Board, finding that the benefits paid to Mr. Thompson were properly chargeable to Mr. Preissman’s experience-rating account. Judge Liss stated, in part: “The Court finds the scheme devised by the Legislature in the 1964 amendment to be reasonable and clearly within its powers.

It is not unreasonable or arbitrary or capricious, nor does it burden or deprive the employer of his property without due process.” From that decision, this appeal has been taken as we are also urged to hold the statute unconstitutional. For the reasons stated herein, we decline to do so. II Under existing provisions of the Maryland Unemployment Insurance Law, as noted above, benefits paid to a claimant are automatically chargeable to the experience-rating account of all “base period” employers regardless of the reason for separation. No discretion is lodged in the office of the Executive Director to waive such charges.

This has been the situation since June 1, 1964. The statute previously permitted the non-charging of an employer’s experience-rating account when an individual left the employer’s employment voluntarily, without good cause attributable to the employer, or for any reason that might disqualify him from receipt of benefits. In 1964, however, the General Assembly deleted a provision in what was then Article 95A, § 8 (c) (6) which stated that: “an employer’s account shall not be charged with benefits paid ... if [the claimant] left the service of the employer voluntarily without good cause ⁶⁸⁴ attributable to his employer.. ..” L. 1964, c. 25 at 62. While counsel for appellee conceded at oral argument that some element of inequity exists as a result of the deletion by the General Assembly of the above provision, it was maintained that the inequity is not of constitutional dimension. 1 We agree.

The constitutionality of the statute in question here is clear. The Supreme Court considered a similar attack on the Alabama Unemployment Compensation Act in Carmichael v. Southern Coal and Coke Co., 301 U. S. 495 (1937). There, Mr. Justice Stone, writing for the Court, said: “It is inherent in the exercise of the power to tax that a state be free to select the subjects of taxation and to grant exemptions. Neither due process nor equal protection imposes upon a state any rigid rule of equality of taxation. . . .

This Court has repeatedly held that inequalities which result from a singling out of one particular class for taxation or exemption, infringe no constitutional limitation. [Citations omitted.] “.. . A legislature is not bound to tax every member of a class or none. It may make distinctions of degree having a rational basis, and when subjected to judicial scrutiny they must be presumed to rest on that basis if there is any conceivable state of facts which would support it. . . . “This restriction upon the judicial function, in passing on the constitutionality of statutes, is not ⁶⁸⁵ artificial or irrational. A state legislature, in the enactment of laws, has the widest possible latitude within the limits of the Constitution.

In the nature of the case it cannot record a complete catalogue of the considerations which move its members to enact laws. In the absence of such a record courts cannot assume that its action is capricious, or that, with its informed acquaintance with local conditions to which the legislation is to be applied, it was not aware of facts which afford reasonable basis for its action. Only by faithful adherence to this guiding principle of judicial review of legislation is it possible to preserve to the legislative branch its rightful independence and its ability to function.” 301 U. S. at 509-510 . (Emphasis added.) The Court in Carmichael found no constitutional infirmity in an unemployment insurance statute which, unlike Maryland’s, made no provision for adjustments to employers’ contribution rates based upon the frequency with which their unemployed workers received compensation.

The following language strikes us as being particularly apposite here: “It is not a valid objection to the present tax, conforming in other respects to the Fourteenth A