Texas Employment Commission v. Todd Shipyards Corp.

Court of Appeals of Texas

Texas Employment Commission v. Todd Shipyards Corp.

257 S.W.2d 720, 1953 Tex. App. LEXIS 2363

CourtCourt of Appeals of Texas

DecidedMarch 25, 1953

DocketNo. 10114

StatusPublished

Cited by2 cases

This text of 257 S.W.2d 720 (Texas Employment Commission v. Todd Shipyards Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Texas Employment Commission v. Todd Shipyards Corp., 257 S.W.2d 720, 1953 Tex. App. LEXIS 2363 (Tex. Ct. App. 1953).

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Opinion

HUGHES, Justice.

Todd Shipyards Corporation, appellee, filed this suit July 19, 1951, against the Texas Employment Commission,¹ its members, the Treasurer and Attorney General of the State of Texas.

Todd, alleging itself to be an “employer” and “employing unit” within the meaning of and subject to taxation under the provisions of the Texas Unemployment Compensation Act² since “more than three years next preceding December 31, 1947, and at all times subsequent thereto” sued for the recovery of $106,260.55 paid as unemployment taxes or contributions during the -years 1948 to 1951, inclusive, and for incidental relief..

Trial was nonjury and resulted in a .judgment for appellee against the Commission and. the members thereof in the sum of $63,837.22 for taxes “illegally exacted” for the years 1948, 1949 and 1950 and against the State Treasurer for the sum $42,423.33 for taxes “illegally exacted” for the year 1951 and paid under protest , in accordance with the provisions of Art. 7057b, V.A.C.S., together with interest thereon as therein provided.

. It, was further decreed that the Commission and its members “delete and expunge from their records each and all of the illegal charges to plaintiff’s benefit wage account tabulated on Exhibits ‘A’, ‘B’, ‘C’, ‘D’ and ‘E’' of plaintiff’s Third Amended Original Petition.”

Findings of fact or conclusions of law were not requested of nor filed by the trial judge.

Todd describes this suit as being a “púrely statutory .proceeding brought under the refund provisions of Art. 5221b-l et seq. and under the protest statute, Art. 7057b.” and states the basis .of its claim and the question presented to be:

■ “This is a notice and hearing case. The question involved can be easily stated: May the Commission pay benefits' to those claiming unemployment insurance, charge appellee’s benefit-wage account as the result of such payments, thereby increasing appellee’s contribution or tax rate,. -and at the same time not only fail to notify appel-lee of the claims but affirmatively deny appellee the right to appear and be heard?” ;

Before particularizing appellee’s complaint and without attempting a detailed analysis of Federal and State Employment [722]*722Tax Acts it will, we believe, aid in the understanding of this opinion for us to briefly recite the history and salient features of these laws.

The Social Security Act of 1935, as amended, levied an annual excise tax upon every employer employing eight or more persons equal to 3% of all wages paid by the employer during the calendar year.³

The proceeds of this tax were paid into the Federal Treasury and were not dedicated for any special purpose.⁴

An employer was entitled to credit on this tax in any amount, not to exceed 90% thereof, paid by him into an unemployment fund maintained during the taxable year under the unemployment compensation law of a State which met the approval of the Federal Government.

Additional credits were also allowed employers for the difference between lower than maximum State rates, approved by Federal officials, and the rate of 2.7 (90% of the Federal tax) or the highest State tax, whichever rate is lower.⁵

Among the requirements exacted of States in order that their laws might meet Federal approval are the following:

(1) That all monies received by the States under its laws were to be immediately paid into the Federal 'Treasury except for “refunds of sums erroneously paid into such fund”.⁶

(2) That all monies withdrawn from their accounts in the Federal Treasury by the States should be used “solely in the payment of unemployment compensation” with the same exceptions noted in (1) above.⁷

(3) That additional credit to the employer with respect to any reduced rate of contributions permitted by State law shall be allowed only if such reduced rate is permitted on the basis of the particular employer’s experience with respect to unemployment or. other factors bearing a direct relation to unemployment risk during not less than three consecutive years immediately preceding the computation date.⁸ •

The Federal Security Administration is required to certify to State laws' and their enforcement annually and procedure is outlined in cases of noncertification.⁹

The persuasive effect of- this Federal legislation was that since its adoption some forty-three States, including Texas, have passed employment tax and unemployment compensation laws. The remaining five States had previously enacted such laws.

The Texas Unemployment Compensation Act was passed in 1936¹⁰ and has been and currently is certified as being in compliance with Federal law. This Act provides a comprehensive system for the payment of unemployment insurance or compensation to the unemployed and for the collection oí contributions from employers covered by the Act to maintain a fund with which to pay such benefits. The Act provides for an experience rating plan under which certain employers pay contributions at a lower rate than do other employers.

The contribution rate oí an employer for a calendar year depends upon two factors: a factor known as the State experience factor and a factor referred to as the employ-eris benefit' wage ratio. The employer’s benefit wage ratio is a percentage arrived at by dividing the employer’s benefit wages for the three year period immediately preceding the calendar year in question by the employer’s total taxable payroll for the same three year period. This fraction is then referred to a table where, by reference to various State experience factors, the employer’s contribution rate is determined.¹¹

It follows that the contribution rate of an employer increases when the total of his [723]*723benefit wages for the pertinent three year period increases.

The benefit wages charged against an employer, sometimes referred, to as “charge backs” or as “benefit wage charges,” result from the filing of successful claims for unemployment compensation, usually referred to as benefits by individuals who were at one time employed by said employer. For example, if A applies for benefits and is actually paid benefits for a full week, a benefit wage charge is made against all covered employers who paid A wages during his base period. The base period of an employee who becomes unemployed and claims ■benefits consists of the first four of the last five calendar quarters immediately preceding the quarter in which the former employee files a compensable claim for benefits. For example, if A files a valid claim for benefits in January, 1952, his base period comprises the last quarter of 1950 and the first three quarters of 1951. If covered employers X, Y and Z paid wages to A during this base period, the account of each employer is charged with benefit wages when the claim is paid.¹²

Consequently the more individuals who were at one time employed by a particular employer that are paid benefits, the greater the amount of benefit wage charges made against the account of such employer and the higher his contribution rate.

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