Opinion ID: 2995714
Heading Depth: 2
Heading Rank: 2

Heading: Federal Unemployment Tax Act

Text: The Federal Unemployment Tax Act (FUTA) taxes employers on the wages they pay to their employees and provides a tax credit for employers’ contributions to federally-approved state unemployment compensation laws. See 26 U.S.C. sec.sec. 3301 & 3302(a)(1). For the Secretary of Labor to approve a state’s unemployment compensation law (as the Secretary of Labor did in this case), he must find, among other things, that the state law does not operate to cancel wage credits or reduce benefit rights for reasons other than fraud or misconduct. Id. at sec. 3304(a)(10). Zambrano asserts that the Cannery Rule cancels wage credits or benefit rights for reasons other than fraud or misconduct and thus violates 26 U.S.C. sec. 3304(a)(10). In order for the Cannery Rule to have cancelled Zambrano’s wage credits or reduced his benefit rights, he must have had such wage credits or benefits in the first place. Thus, the initial issue is whether Zambrano earned wage credits or benefit rights--a matter of state law. We have previously noted that states have free rein to design eligibility requirements for receiving unemployment compensation. Pennington I, 22 F.3d at 1382. In the present case, eligibility is calculated from wages earned during employment-- employment being a statutorily defined term. See Wis. Stat. sec.sec. 108.02(4) & 108.02(15)(a). The Cannery Rule qualifies that statutory definition of employment, excluding wages earned by fruit and vegetable processors unless those workers meet one of the three aforementioned conditions. See id. at sec. 108.02(15)(k)(14). As discussed above, the Cannery Rule merely sets forth requirements for being eligible to receive unemployment compensation, and Zambrano concedes that he did not meet those requirements. Therefore, he never had any wage credits or benefit rights to cancel or reduce in the first place, and accordingly, the application of the Cannery Rule in this case does not violate FUTA.