Friedman v. American Surety Co. of New York

ON MOTION FOR REHEARING.

This case is before us on motion for rehearing filed by American Surety Company of New York. In such motion the Surety Company Contends that we were in error in all the *175rulings contained in our original opinion, and in addition thereto presents a question of constitutional law not formerly discussed or decided. We deem it proper to here discuss and decide such additional question.

During the time pertinent to this case Subdivision (e) of Article 5221b-17 read as follows:

“(e) ‘Employing unit’ means any individual or type of organization, including any partnership, association, trust, estate, joint-stock company, insurance company, or corporation, whether domestic or foreign, or the receiver, trustee in bankruptcy, trustee or successor thereof,. or the legal representative of a deceased person, which has or subsequent to January 1, 1936, had in its employ one or more individuals performing services for it within this State. All individuals performing services within this State for any employing unit which maintains two or more separate establishments within this State shall be deemed to- be employed by a single employing unit for all purposes of this Act. Whenever any employing unit contracts with or has under it any contractor or subcontractor for any work which is a part of its usual trade, occupation, profession, or business, unless the employing unit as Well as each such contractor or subcontractor is an employer by reason of Section 19(f) or Section 8(c) of this Act, the employing unit shall for all the purposes of this Act be deemed to employ each individual in the employ of each such contractor or subcontractor for each day during which such individual is engaged in performing such work; except that each such contractor or subcontractor who is an employer by reason of Section 19(f) or Section 8(c) of this Act shall alone be liable for the contributions measured by wages payable to individuals in his employ, and except that any employing unit who shall become liable for any pay contributions with respect to individuals in the employ of any such contractor or subcontractor who is not an employer by reason of Section 19(f) or Section 8 (c) of this Act, may recover the same from such contractor or subcontractor. Each individual employed to perform or to assist in performing the work of any agent or employee of an employing unit shall "be deemed to be employed by such employing unit for all the purposes of this Act, whether such individual was hired or paid directly by such employing unit or by such agent or employee, provided the employing unit had actual or constructive knowledge of the work.”

Effective since the time involved in this case the above-*176quoted statute has been amended so that it now reads as follows:

“(e) ‘Employing unit’ means any individual or type of organization, including any partnership, association, trust, estate, joint-stock company, insurance company, or corporation, whether domestic or foreign, or the receiver, trustees in bankruptcy, trustee or successor thereof, or the legal representative of a deceased peson, which has or subsequent to January 1, 1936, had in its employ one or more individuals performing services for it within this State. All individuals performing services within this State for any employing unit which maintains two or more separate establishments within this State shall be deemed to be employed by a single employing unit for all purposes of this Act. Each individual employed to perform or to assist in performing the work of any agent or employee of an employing unit shall be deemed to be employed by such employing unit for all the purposes of this Act, whether such individual was hired or paid directly by such employing unit or by such agent or employee, provided the employing unit had actual or constructive knowledge of the work.”

A reading of the above statutes will disclose that the present statute is exactly the same as the original, except that the present statute does not contain the following provisions which were contained in the original statute:

“Whenever any employing unit contracts with or has under it any contractor or subcontractor for any employment which is a part of its usual trade, occupation, profession, or business, unless the employing unit as well as each such contractor or subcontractor is an employer by reason of Section 19(f) or Section 8(c) of this Act, the employing unit shall for all the purposes of this Act be deemed to employ each individual in the employ of each such contractor or subcontractor for each day during which such individual is engaged in performing such employment; except that each such contractor or subcontractor who is an employer by reason of Section 19(f) or Section 8(c) of this Act shall alone be liable for the contributions measured by wages payable to individuals in his employ, and except that any employing unit who has become liable for any pay contributions with respect to individuals in the employ of any such contractor or subcontractor who is not an employer by reason of Section 19(f) or Section 8(c) of this Act, may recover the same from such contractor or subcontractor.”

*177As pertinent to the facts of this case, Subdivision (e), sitpra, of our Unemployment Compensation Statutes prior to amendment, in effect, provided that if any employing unit which employed eight or more employees should subcontract with another employing unit which did not employ as many as eight employees, the employing unit with eight or more employeees should be liable for the taxes levied by the Act, measure by the wages paid to- his own employees and also by the wages paid by the subcontractor. It was then provided that the contractor paying such taxes could recover from the subcontractor the taxes paid on account of the wages paid by the subcontractor.

In the case at bar the original contractor employed more than eight employees. He therefore came within the taxing provisions of the Act under consideration. The contractor sublet a part of his contract to a subcontractor who did not employ as many as eight employees. Such subcontractor therefore did not come within the taxing provisions of the Act. The contractor paid the taxes occasioned by the wages of the employees of the subcontractor as well as the taxes occasioned by the wages of his own employees. Under the provisions of the law then in force giving him that right, the contractor is here suing to recover for the taxes paid by him occasioned by the wages of the employees of the subcontractor. The American Surety Company, the surety of the subcontractor, contends that the part of Subdivision (e) in force at the time here involved, which required the subcontractor, not taxed, to reimburse the contractor, taxed, for the taxes levied against and paid by the contractor on account of the wages of the employees of the subcontractor, was unconstitutional and void because in violation of Section 19 of Article I of our State Constitution. Such constitutional provision provides: “No citizen of this State shall be deprived of life, liberty, property, privileges or immunities, or in any manner disfranchised, except by the due course of the law of the land.”

5 We overrule the above contention. The subcontractor contracted with the contractor. The Legislature certainly had a right to regulate such contracts. When the subcontractor contracted with the contractor, the pertinent provisions of our Unemployment Compensation Statutes applied to and became a part of such contract. Such statutes required this contractor to pay taxes, counting the wages paid by this- subcontractor as his own. Such statute also required the subcontractor to reim*178burse the contractor. It follows that this subcontractor contracted to make such reimbursement. Strickland v. Natalbany Lumber Co. (La. Ct. of App.), 200 So. 652. We think the principle of contract law upheld by this Court in Middleton v. Texas Power & Light Co., 108 Texas 96, 185 S. W. 556, applies here.

We have carefully read and considered this motion for rehearing as touching all other questions decided in our original opinion, and still adhere to the views expressed in such opinion.

Chief Justice Alexander aheres to the views expressed in his dissenting opinion. Granting, however, that the original opinion of the majority of the Court in this case is correct, Judge Alexander does not dissent from this opinion.

The motion for rehearing above mentioned is in all things overruled.

Opinion delivered May 28, 1941.