Court Opinion

ID: 9678769
Source: CourtListenerOpinion
Date Created: 2023-08-24 06:31:40.266401+00
Date Added: 2024-06-11T18:17:07.797744
License: Public Domain

FOSHEIM, Chief Justice
(dissenting).
I dissent. Appellants Jerry and Larry Zeig were business owners and operators. They were not employees within the meaning of the unemployment compensation act. This was the initial issue at the agency level. It remains the central impediment to claimants’ qualification for unemployment compensation, a blizzard of procedural error allegations notwithstanding.
An officer of a corporation, as such, is not ineligible for unemployment compensation by virtue of SDCL 61-1-10. By owning 94% of the outstanding shares of J & L Gravel, however, appellants exercised full control of the corporation. They decided when to hire themselves. They decided *441when to write the paychecks and when to lay themselves off. They were totally their own employment masters.
The purpose of unemployment compensation is to insure a diligent worker against the vicissitudes of involuntary unemployment. Ex Parte Alabama Textile Products Corp., 242 Ala. 609, 7 So.2d 303, 141 A.L.R. 87 (1942); California Portland Cement Co. v. Unemployment Ins. Appeals Board, 178 Cal.App.2d 263, 3 Cal.Rptr. 37 (1960); 76 Am.Jur.2d Unemployment Compensation, § 5 (1975). Unemployment compensation laws were not enacted as a cushion or hedge for corporate business ventures nor were they intended to be a means of compensating business failures. Steppler v. Com., Unemployment Compensation Board of Review, 48 Pa.Cmwlth. 54, 408 A.2d 1185 (1979).
Where unemployment compensation claimants are the principal officers and controlling stockholders of their corporate employer, the unemployment insurance agency can lift the corporate veil. It is not required to ignore their true status and accept them as mere employees of the corporate entity. Hyman v. Unemployment Compensation Board of Review, 199 Pa.Super. 532, 185 A.2d 821 (1962); De Priest Unemployment Compensation Case, 196 Pa.Super. 612, 177 A.2d 20 (1961). Thus in the case of Mednick v. Unemployment Compensation Bd. of Rev., 196 Pa.Super. 73, 173 A.2d 665 (1961), a claimant who was owner of 50% of the stock of a corporation which quit business because of financial difficulties was held not to be an employee entitled to unemployment compensation benefits.
If an unemployment insurance claimant exercises a substantial degree of control over the corporation he should be deemed a businessman and not an employee. Starinieri v. Unemployment Compensation Board of Review, 447 Pa. 256, 289 A.2d 726 (1972). Any individual who is an officer and major shareholder of the corporation should be deemed to exercise a substantial degree of control over the corporation and thus be ineligible for unemployment insurance benefits. If the majority position prevails, virtually anyone could enjoy the benefits of government largesse by incorporating a business destined for insolvency or bankruptcy.
Claimants acknowledge in their brief that the disqualifying effect of their ownership of the corporation “[throughout these entire proceedings ... has been the only issue pleaded.” The circuit court did not reverse or vacate the agency’s resolution of this issue against the claimants. The agency’s decision remained intact when the parties, while the first circuit court appeal was pending, stipulated that the matter “be remanded to the ... agency for an additional hearing.” Neither the stipulation nor the remand order provided that the second agency decision was to replace or neutralize the first. Actually, the remand order indicated the supplemental nature of the second hearing by providing that the second decision was to be “based upon the evidence and testimony submitted at this [second] hearing.” The memorandum decision of the circuit court covers both hearings. The allegations of procedural error did not weaken the force of the initial agency decision, which the circuit court left intact. Hence, the issue from the initial agency decision remains viable and central, and like a jealous mistress, is not lost by neglect. On review of an administrative agency action, it is our province to decide whether the law has been correctly applied. Matter of Certain Territorial Electric Boundaries (Mitchell Area), 281 N.W.2d 65 (S.D.1979). Claimants cannot derive unwarranted benefits via a smokescreen of procedural errors.
I would affirm the agency.
I am hereby authorized to state that Justice WOLLMAN joins in this dissent.