Unemployment Compensation Commission v. Jefferson Standard Life Insurance

Clarkson, J.

Two questions are decisive of this appeal: (1) Is the membership of a North Carolina insurance corporation in the Federal *482Home Loan Bank of "Winston-Salem sufficient to constitute tbe corporation such an instrumentality of tbe United States as to exempt it from tbe provisions of tbe N. C. Unemployment Compensation Law? "We think not. (2) Does tbe relationship between defendant and its soliciting agents and managers (in their capacity as soliciting agents) constitute “employment,” and tbe compensation paid them constitute “wages” and “remuneration,” as those terms are defined and used in tbe N. C. Compensation Law? We think so.

(1) Home Loan Bank Member as Federal Instrumentality. In Capitol Building & Loan Assn. et al. v. Kansas Commission of Labor and Industry, 148 Kansas, 446, 83 P. (2nd), 106, recently decided, a building and loan association sought exemption from a state unemployment compensation act by reason of its membership in a Federal Home Loan Bank. In a clear and logical opinion speaking to tbe subject, it is stated: “Tested by all tbe light tbe diligence of counsel for tbe litigants has supplied us, as well as by our own researches, we do not regard tbe plaintiffs’ mere stockholder membership in tbe Federal Home Loan Bank of Topeka, with tbe privileges and duties attendant on that relationship, as sufficient to constitute them Federal instrumentalities, nor to relieve them from making contributions to tbe unemployment compensation fund created by tbe statute of 1937.”

Although we recognize that, as stated in Metcalf & Eddy v. Mitchell, 269 U. S., 514, 522, 70 L. Ed., 384, “Just what instrumentalities of either a state or tbe Federal Government are exempt from taxation by tbe other cannot be stated in terms of universal application,” we think that tbe conclusion in tbe Capitol Building & Loan Asm. case, supra, indicates tbe sound view in tbe instant case. We agree with tbe view indicated in Clallam County v. United States, 263 U. S., 341, 68 L. Ed., 328, that there is a very real distinction between tbe creation of an agency primarily and fundamentally to discharge a function of the Federal Government and tbe grant of incidental powers, functions or duties of tbe Federal Government to a private enterprise existing primarily for profit. See tbe opinion by Justice Holmes, Clallam County v. United States, 263 U. S., 341 (344). A similar distinction was recognized in Federal Land Bank v. Priddy, 295 U. S., 229 (233-4), where it was pointed out that, although Federal Land Banks are “Instru-mentalities of tbe Federal Government,” “joint stock land banks are privately owned corporations for profit to their stockholders through the business of making loans on farm mortgages” and “there is nothing in their organization and powers to suggest that they are governmental instrumentalities.” Again, in Federal Compress & Warehouse Co. v. McLean, 291 U. S., 17, 78 L. Ed., 622, a private warehouse business sought to escape state taxation on the ground that it had been licensed *483for tbe storage of agricultural products by the Federal Government; in answer to this the Court said, “It can no longer be thought that the enjoyment of a privilege conferred by either the national or a state government upon the individual, even though to promote some governmental policy, relieves him from the taxation by the other of his property or his business used or carried on in the enjoyment of the privilege or of the profits derived from it. Susquehanna Power Co. v. Tax Commission, 283 U. S., 291, 75 L. Ed., 1042; Fox Film Corp. v. Doyal, 286 U. S., 123, 76 L. Ed., 1010; Broad Fiver Power Co. v. Query, 288 U. S., 178, 77 L. Ed., 685.” It thus appears that the meaning of the term “Federal instrumentality” has consistently been treated as having a more precise meaning than that assigned it by defendants here, and that the term is not properly applicable to a private corporation, existing primarily for profit but granted certain incidental duties or privileges by the Federal Government. This doctrine of immunity, protecting instrumentalities of either the State or the Federal Government from interference at the hands of the other, developed by Marshall (McCulloch v. Maryland, 4 Wheaton, 316, 432, 436) to aid the perpetuation of the dual sovereignty established by our Constitution, is not undergoing a process of expansion. Rather, the more recent cases indicate a tendency to restrict more sharply than ever the various exemptions which arise out of the doctrine. See Clallam County v. United States, supra; Helvering v. Gerhardt, 304 U. S., 405, 82 L. Ed., 1427. In view of the restricted meaning which has always been given the term “Federal instrumentality,” it seems doubtful whether at any time in the history of our highest Court a private insurance corporation owning stock in a Federal Home Loan Bank would have been considered a “Federal instrumentality”; certainly the possibility of such a determination today, in the light of recent cases touching upon the subject, is extremely remote. See Helvering v. Gerhardt, supra; Clallam County v. United States, supra; Rogers v. Graves, 299 U. S., 401. We are constrained to hold that, in this record, the defendant insurance corporation is not such a Federal instrumentality as would exempt it from the unemployment contributions here sought.

(2) “Employment” of Agents and Managers for "Remuneration.” An examination of the pertinent definitions in the Unemployment Compensation Act makes it readily apparent that such words as “employment,” “employer,” “employing unit,” “wages,” and “remuneration,” when used in the act, are not used as words of art having rigid, precise and restricted meanings, but rather, as defined by the act itself, are used as broad terms of description, evidencing a legislative intent to give to the act a broad and liberal coverage to the end that the far-reaching effects of unemployment may be alleviated. For example, “ 'Employing *484unit’ means any individual or type of organization, including any partnership, association, trust, estate, joint stock company, insurance company, or corporation, whether domestic or foreign.” (Section 19e); “ ‘Employer’ means (1) any employing unit wbicb in each of twenty different weeks within either the current or the preceding calendar year (whether or not such weeks are or were consecutive) has or had in employment, eight or more individuals (not necessarily simultaneously and irrespective of whether the same individuals are or were employed in each such week;” (Section 19f.l) ; “‘Employment’ means service, including service in interstate commerce, performed for remuneration or under any contract of hire, written or oral, express or implied” (Section 19g.l); “ ‘Wages’ means all remuneration payable by employers for employment” (Section 19m); “ ‘Remuneration’ means all compensation payable for personal services including commissions and bonuses and the cash value of all compensation payable in any medium other than cash.” (Section 19n.) Insurance companies such as defendant are expressly included under the term “employing unit.” Since it is an employing unit having more than eight soliciting agents and district managers, defendant is an “employer” under Section 19f.l, if the relation of these agents and managers to the defendant constitute “employment.” Soliciting agents and district managers (as soliciting agents), each under individual contract with defendant, to solicit and write insurance and perform other services for defendant, perform such services in return for commissions. Accordingly, if commissions constitute “remuneration,” as defined by Section 19n, the relationship of the soliciting agents and managers (as soliciting agents) to defendant is “employment” within the definitions of the Unemployment Compensation Act. Since “remuneration” includes “all compensation payable for personal services including commissions and bonuses” (Section 19n), the relationship of the soliciting agents and the district managers (as soliciting agents), by the definitions of the Unemployment Compensation Act, is clearly brought within the terms “employment.” Accordingly, defendant is an “employing unit” as to these agents and managers and is their “employer” and, within the terms of this act, such agents and managers are within the “employment” of defendant.

This conclusion is further reinforced by the act. Section 19 (6), A, E, and C, provides that where “services” (in the present case, soliciting insurance) are performed for “remuneration” (in this case, commissions), such services are “deemed to be employment subject to this act unless and until it is shown to the satisfaction of the commission that: (A) Such individual has been-and will continue to be free from control or direction over the performance of such services, both under his contract of service and in fact; and (B) such service is either outside the *485usual course of the business for which such service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and (C) such individual is customarily engaged in an independently established trade, occupation, profession, or business.” The burden of showing these matters of exemption is placed by the statute on the defendant, and, since they are stated conjunctively and not disjunctively, all three of these elements must be shown in order that exemption from the act be secured. Without entering here upon an elaborate analysis of the application of this rule to the instant case, it is significant (a) that the soliciting agents and managers (as soliciting agents) were subject to a high degree of control by the defendant by reason of their written contracts, (b) that their services were rendered in the manner usual and customary for such services were generally performed in the offices of defendant, and (c) that such services were directly related to, and contributed to, the primary purpose for which defendant was organized. Further, the Commission decided that the exemption did not exist here, and the extent to which this Court may review the determinations of the Commission is, at least, open to doubt. See Unemployment Compensation Commission v. Kirby, 212 N. C., 763.

In passing upon a similar Unemployment Compensation Act as it applied to soliciting and district agents of an insurance company, the ColorAado Supreme Court, since the argument of this cause, filed an opinion on 14 February, 1939, in accord with the view here expressed to the effect that the agents of the company are covered by the act. It is there said (Industrial Commission of the State of Colorado v. Northwestern Mutual Life Insurance Company), “Even if the test of coverage in this case is a technical relationship of master and servant, notwithstanding the legislative tests of ‘employment’ ... of the statute, the company’s agents are servants within the relationship and not independent contractors. Since it is oUr opinion that the activities of the company’s agents are within the legislative definition of ‘employment,’ . . . it is unnecessary for us to make a determination of the master and servant issue.” The Connecticut Supreme Court, at the December Term, 1938, in Northwestern Mutual Life Insurance Company v. Joseph M. Tone et al., reached a contrary decision (Maltbie, C. J., writing the opinion), but the act there construed places a greater emphasis than does ours upon the common law concepts involved of master and servant, principal and agent.

Likewise, the case of The Texas Company v. Leon L. Wheeless et al., decided recently (but not yet reported) by the Supreme Court of Mississippi, is clearly distinguishable from the instant ease; there the status of retail oil and gas distributors under independent contracts was in*486volved, a status mucb more clearly that of independent contractor than is the case with the insurance agents here discussed.

It is not surprising that a wide disparity of views is appearing, since not only are the different cases raising the question argued upon a number of different theories, but there are numerous variations apparent in the respective state unemployment compensation acts. Such variations in the state laws and the interpretations given them are but reflections of the considerable latitude necessarily allowed the individual states to the end that they may work out compensation acts suited to their own peculiar needs. In the words of the late Justice Cardozo, speaking to this point in Steward Machine Company v. Davis, 301 U. S., 548 (593-4), 81 L. Ed., 1279: “A wide range of judgment is given to the several states as to the particular type of statute to be spread upon their books. . . . What they may not do, if they would earn the credits, is to depart from those standards which in the judgment of Congress are to be ranked as fundamental. Even if opinion may differ as to the fundamental quality of one or more of the conditions, the definer will not avail to vitiate the statute.” Accordingly, it would appear settled that the matter here involved is one of state law, to be interpreted finally by this Court.

The scope and purpose of the present act are exceptional in breadth. The draftsmanship of the definition section, which gives flesh and sinew to the whole, shows a carefully considered and deliberate purpose to leap many legal barriers which would halt less ambitious enactments. As far as language will permit it, the act evinces a studied effort to sweep beyond and to include, by redefinition, many individuals who would have been otherwise excluded from the benefits of the act by the former concepts of master and servant and principal and agent as recognized at common law. In the words of the late Justice Holmes, in Johnson v. U. S., 163 Fed., 30 (32), (C. C. A., 1st) : “The legislature has the power to decide what the policy of the law shall be, and if it has intimated its will, however indirectly, that will should be recognized and obeyed. The major premises of the conclusion expressed in a statute, the change of policy that induces the enactment, may not be set out in terms, but it is not an adequate discharge of duty for the courts to say: We see what you are driving at, but you have not said it, and therefore we shall go on as before.” This is quoted with approval in Eeifer and Keifer v. Reconstruction Finance Corporation et al., decided by the United States Supreme Court, 27 February, 1939. It is our task to interpret the law, as it is written, fairly and accurately. “Whether wisdom or unwisdom resides in the scheme . . . it is not for us to say.” Helvering v. Davis, 301 U. S., 619 (644), 81 L. Ed., 1307.

*487“Tbe primary and general rule of statutory construction is tbat tbe intent of tbe lawmaker is to be found in tbe language tbat be bas used. . . . Tbe courts bave no function of legislation and simply seek to ascertain tbe will of tbe legislature.” United States v. Goldenburg, 168 U. S., 95, 102-3, 42 L. Ed., 394. Tbe General Assembly, in tbe instant act, in order to discharge more precisely its legislative function, assumed tbe role of definer. Tbis is not unusual. Fox v. Standard Oil Co., 294 U. S., 87; Steinberg v. U. S., 14 Fed. (2nd), 564; Spano v. Fruit Growers, Inc., 83 Fed. (2nd), 150; also see Supply Co. v. Maxwell, 212 N. C., 624, 626, where it was said: “Tbe act contains its own glossary or definition of terms.” Tbe clear and unequivocal meanings of those definitions are strongly indicative of tbe legislative intent as to tbe detailed applications of tbe act, and in them tbe legislative intent to disregard a number of tbe neat categories of tbe common law is apparent. “Tbe heart of a statute is tbe intention of tbe law-making body. Trust Co. v. Hood, Comr., 206 N. C., 268, 173 S. E., 601.” Supply Co. v. Maxwell, supra (627); Belk Bros. v. Maxwell, ante, 10.

Tbe power of tbe General Assembly to broaden or restrict common law concepts is widely recognized (N. Y. Central Railroad v. White, 243 U. S., 300, 61 L. Ed., 667; McDermott v. State of Washington, 82 P. 2nd, 568) and is not here challenged. Although tbe extent of tbe area encompassed by some of tbe definitions may cause surprise, tbe duty of tbis Court is to expound and to interpret tbe law as it is given to us, not to redraft it along lines which may seem to us more conservative and more desirable. Tbe economic and social evil of unemployment in its broad sweep frequently disregards man-made geographic and political boundaries; perhaps, it follows tbat former boundaries must be surrendered in seeking a remedy for such an evil. If new social evils produce, as counter-forces, new ideas of control of these evils, and such ideas are brought to us from tbe legislative forum, we must guard against falling victims to tbat suspicion which is born of tbe mere novelty of things.

Upon a careful examination of tbe record in tbis case and tbe act itself, giving due consideration to tbe meanings assigned by tbe General Assembly to tbe “key words” of tbe act, we are constrained to bold tbat defendant’s soliciting agents and district managers (in their capacities as soliciting agents) are in tbe “employment” of defendant, as tbe same is used in tbe N. C. Unemployment Compensation Act. Accordingly, defendant is liable for tbe contributions here sought.

Tbe judgment of tbe court below is

Affirmed.

Seawell, J\, took no part in.tbe consideration or decision of tbis case.