Opinion ID: 1169485
Heading Depth: 1
Heading Rank: 5

Heading: applying ors 657.072 to comply with futa and constitution

Text: The Court of Appeals, omitting any analysis under Oregon's constitution, reached the same result under the First Amendment. 61 Or. App. at 629, 659 P.2d at 423. It therefore necessarily held FUTA's section 3309(b)(1) unconstitutional as well as ORS 657.072(1)(a), insofar as they discriminate among organizations operated primarily for religious purposes by the test whether the organization also is operated, supervised, controlled or principally supported by a church or convention or association of churches. The court then concluded that the proper remedy is to exempt the Academy from ORS chapter 657 even though it is not operated, supervised, controlled, or principally supported by a church or churches. We turn to that question. The Court of Appeals recognized that if it was mistaken in assessing what the Supreme Court might hold as to 26 U.S.C. § 3309(b)(1), a decision to exempt Salem Academy might jeopardize Oregon's compliance with FUTA and therefore the federal unemployment tax credits of all Oregon employers. 61 Or. App. at 629, 659 P.2d at 423. The court continued: The alternative remedy of subjecting all church schools to the Act is contrary to the language of ORS 657.072(1). However, it is clear that the legislature has intended to conform Oregon's statutory scheme to FUTA. ORS 657.030(2)(b) expressly so provides. We do not know whether the Secretary of Labor will persist in his interpretation of the exemptions from FUTA involved here until the United States Supreme Court resolves the constitutional questions. Neither do we know how the Supreme Court would decide those questions nor how Congress might respond to a decision that the provision is unconstitutional under the Establishment Clause. It seems reasonably clear, however, that Congress intended to exempt church-operated schools and, accordingly, would probably expand the exemption to include religious schools like petitioner's. 61 Or. App. at 630, 659 P.2d at 423. In effect, the court speculated on the Supreme Court or Congress to save Oregon's status under FUTA by striking the federal requirement that schools like the Academy must be affiliated with a church to avoid coverage under the act. We do not know what view the United States Supreme Court may take of 26 U.S.C. § 3309(b)(1) under the First Amendment. The Court of Appeals may have anticipated it correctly. If the Supreme Court agrees that the distinction based on church affiliation is untenable, it will not now overcome the flaw by bringing all schools under FUTA as the Secretary of Labor argued; St. Martin Lutheran Church v. South Dakota, supra , has foreclosed that interpretation of FUTA, though not of state laws. The Court therefore may strike the church affiliation requirement as unconstitutional, allowing religious schools like the Academy to qualify for exemption and saving Oregon's compliance with FUTA, as the Court of Appeals suggests. But this is uncertain. The Supreme Court may find that in a statute focusing on the nature of the employer, St. Martin Lutheran Church, 451 U.S. at 783, 101 S.Ct. at 2149, 68 L.Ed.2d at 621, a line between employment directly by a church and employment by a separately incorporated religious organization that has a legal identity separate from a church, id. at 782 n. 12, 101 S.Ct. at 2148 n. 12, 68 L.Ed.2d at 620 n. 12, is constitutionally permissible, perhaps on the theory that the state's entanglement in applying the statute to such an organization stops at the separate legal entity without involving the related church. We do not find the theory convincing when, under the statute, the separate entity itself is an organization operated primarily for religious purposes, but we cannot exclude it. If FUTA validly requires coverage of independent religious schools, a holding that excludes them from coverage under ORS chapter 657 would have consequences directly contrary to the legislature's dominant objective of maintaining Oregon's conformity with FUTA. In a choice between exempting independent religious schools and losing conformity with FUTA or maintaining that conformity and extending coverage to all religious schools, the legislature in 1977 surely would have chosen the latter course. In fact the legislature may well have believed that it made that choice when it repealed the previous exemption of a school which is not an institution of higher education. Or. Laws 1977, ch. 446, § 4. The Court of Appeals thought that such a holding would do violence to ORS 657.072(1), but that is not so. To the contrary, considering the repeal of the express exclusion of schools and the subsequent doubt whether religious schools that also provide the required non-religious curriculum are primarily schools or operated primarily for religious purposes, it is equally possible that the legislature did not expect any schools that satisfy the state's school attendance laws to be excluded. This, as noted above, was the position taken by the United States Labor Department for some years after the Oregon legislature's 1977 session, and if the secretary's interpretation of FUTA had prevailed, we have no doubt that ORS 657.072(1) was meant to comply with it. It therefore does no violence to that section to give it the same interpretation despite the Supreme Court's later decision in St. Martin Lutheran Church. If the legislature prefers to risk the uncertainty of the position set out by the Court of Appeals, supra, and exclude all organizations operated for religious purposes, whether or not affiliated with churches, our decision leaves it the opportunity to do so. Meanwhile our decision leaves no doubt that Oregon's unemployment compensation law complies both with FUTA and with Oregon's constitution.