U.S. Supreme Court CARMICHAEL v. SOUTHERN COAL & COKE CO., 301 U.S. 495 (1937)

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process and equal protection clauses of the Fourteenth Amendment, and whether it is invalid because its enactment was coerced by the action of the Federal Government in adopting the Social Security Act (42 U.S.C.A. 301-1305), and because it involves an unconstitutional surrender to the national government of the sovereign power of the state.

Appellee the Southern Coal & Coke Company, is a Delaware corporation employing more than eight persons in its business of coal mining in Alabama. Appellee Gulf States Paper Corporation is a Delaware corporation employing more than eight persons in its business of manufacturing paper within the state. They brought the present suits in the District Court for the Middle District of Alabama, to restrain appellants, the Attorney General and the Unemployment Compensation Commission of Alabama, from collecting the money contributions exacted of them by the provisions of the Alabama Unemployment Compensation Act. From the decrees of the district court, three judges sitting (Jud.Code, 266, 28 U.S.C. 380, 28 U.S.C.A. 380), granting the relief prayed, the case comes here on appeal. Jud.Code, 238(3), 28 U.S.C. 345(3), 28 U.S.C.A. 345(3).

The Unemployment Compensation Act, Ala.Gen.Acts 1935, No. 447, p. 950; Ala. Code of 1928 (1936 Cum.Supp.) 7597(1) et seq., as amended by Gen. Acts 1936 (Ex. Sess.), Nos. 156 (page 176), 194 (page 225), 195 (page 228), and Acts of Feb. 10, 1937 (Laws 1936-1937, p. 92), and March 1, 1937 (Laws 1936-1937, p. 211), Spec.Sess.1937, sets up a comprehensive scheme for providing unemployment benefits for workers employed within the state by employers designated by the Act. These employers include all who employ eight or more persons for twenty or more weeks in the year, section 2(f), except those engaged in certain specified employments. [Footnote 1] It imposes

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Corp. v. Shanks, 273 U.S. 407, 413, 47 S.Ct. 393, 395; Lawrence v. State Tax Commission, supra; cf. Metropolitan Casualty Insurance Co. v. Brownell, 294 U.S. 580, 584, 55 S.Ct. 538, 540.

This restriction upon the judicial function, in passing on the constitutionality of statutes, is not artificial or irrational. A state legislature, in the enactment of laws, has the widest possible latitude within the limits of the Constitution. In the nature of the case it cannot record a complete catalogue of the considerations which move its members to enact laws. In the absence of such a record courts cannot assume that its action is capricious, or that, with its informed acquaintance with local conditions to which the legislation is to be applied, it was not aware of facts which afford reasonable basis for its action. Only by faithful adherence to this guiding principle of judicial review of legislation is it possible to preserve to the legislative branch its rightful independence and its ability to function.

Exclusion of Employers of Less than Eight. Distinctions in degree, stated in terms of differences in number, have often been the target of attack, see Booth v. Indiana, 237 U.S. 391, 397, 35 S.Ct. 617. It is argued here, and it was ruled by the court below, that there can be no reason for a distinction, for purposes of taxation, between those who have only seven employees and those who have eight. Yet, this is the type of distinction which the law is often called upon to make. [Footnote 2] It is only a difference in numbers

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the health of the unemployed and their families7 and malnutrition of their children. [Footnote 8]

Although employment in Alabama is predominantly in agriculture, and the court below found that agricultural unemployment is not an acute problem, the census reports disclose the steadily increasing percentage of those employed in industrial pursuits in Alabama. [Footnote 9] The total amount spent for emergency relief in Alabama, in the years 1933 to 1935 inclusive, exceeded $47,000,000, of which $312,000 came from state funds, $2,243,000 from local sources and the balance from relief funds of the federal government. [Footnote 10] These figures bear eloquent witness to the inability of local agencies to cope with the problem without state action and resort to new taxing legislation. Expenditure of public funds under the present statute, for relief of unemployment, will afford some

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valid. [Footnote 12] Here the legislative choice finds support in the conclusion reached by students of the problem,13 that unemployment is less likely to occur in businesses having a small number of employees.

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benefit from its expenditure, and who are not responsible for the condition to be remedied. [Footnote 14]

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den on those who pay them, and would involve the abandonment of the most fundamental principle of government-that it exists primarily to privide for the common good. A corporation cannot object to the use of the taxes which it pays for the maintenance of schools because it has no children. Thomas v. Gay, 169 U.S. 264, 280, 18 S.Ct. 340. This Court has repudiated the suggestion, whenever made, that the Constitution requires the benefits derived from the expenditure of public moneys to be apportioned to the burdens of the taxpayer, or that he can resist the payment of the tax because it is not expended for purposes which are peculiarly beneficial to him. [Footnote 15] Cincinnati Soap Co. v. United States, supra; Carley & Hamilton v. Snook, supra, 281 U.S. 66, 72, 50 S.Ct. 204, 206, 68 A.L.R. 194; Nashville, C. & St. L.R. Co. v. Wallace, 288 U.S. 249, 268, 53 S.Ct. 345, 350, 87 A.L.R. 1191; see Union Refrigerator Transit Co. v. Kentucky, 199 U.S. 194, 203, 26 S.Ct. 36, 4 Ann.Cas. 493.

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according to their unemployment experience. Unemployment in the plant of one employer may be due to competition with another, within or without the state, whose factory is running to capacity; or to tariffs, inventions, changes in fashions or in market or business conditions, for which no employer is responsible, but which may stimulate the business of one and impair or even destroy that of another. Many believe that the responsibility for the business cycle, the chief cause of unemployment, cannot be apportioned to individual employers in accordance with their employment experience; that a business may be least responsible for the depression from which it suffers the most.

The Alabama legislature may have proceeded upon the view, for which there is abundant authority, that the causes of unemployment are too complex to admit of a meticulous appraisal of employer responsibility. [Footnote 16] It may have concluded that unemployment is an inseparable incident of modern industry, with its most serious manifestations in industrial production; that employees will be best protected, and that the cost of the remedy, at least until more accurate and complete data are available, may best be distributed, by imposing the tax evenly upon all industrial production,17 and in such form that it will be

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bears his own burdens, and not those of his competitor or of other employers. The difference between the Wisconsin and the Alabama acts is thus succinctly stated by the Social Security Board in its Informational Service Circular No. 5, issued November, 1936, pp. 8, 9: '(1) The plan for individual employer accounts provides for employer-reserve accounts in the State fund. Each employer's contributions are credited to his separate account, and benefits are paid from his account only to his former employees. If he is able to build up a specified reserve in his account, his contribution rate is reduced.' Such is the Wisconsin plan; while under the Alabama statute: '(2) The pooled-fund plan provides for a pooling of all contributions in a single undivided fund from which benefits are paid to eligible employees, irrespective of their former employers.'

Which of these plans is more advantageous from a purely economic standpoint does not present a judicial question. But from the constitutional point of view, in so far as it involves the ground upon which I think the Alabama act should be condemned, I entertain no doubt that the Wisconsin plan is so fair, reasonable and just as to make plain its constitutional validity; and that the Alabama statute, like the New York statute involved in Chamberlin, Inc., v. Andrews et al., 299 U.S. 515, 57 S.Ct. 122, 81 L.Ed. --, affirmed by an equally-divided court during the present term, is so arbitrary as to result in a denial both of due process and equal protection of the laws.

I am authorized to say that Mr. Justice VAN DEVANTER and Mr. Justice BUTLER concur in this opinion. Footnotes

Footnote 1 See section 2(g). 'Employment' is defined to exclude:

(1) Agricultural labor;

(2) Domestic service in a private home;

(3) Service performed as an officer Bar Pilot or member of the crew of a vessel on the navigable waters of the United States;

(4) Service performed by an individual in the employ of his son, daughter, or spouse, and service performed by a child under the age of twenty-one in the employ of his father or mother;

(5) Service performed in the employ of the United States Government or of an instrumentality of the United States;

(6) Service performed in the employ of a carrier engaged in interstate commerce and subject to the Act of Congress known as The Railway Labor Act; as amended or as hereafter amended. Service performed by those engaged as Solicitors or agents for Insurance Companies;

(7) Service performed in the employ of a state, or political subdivision thereof, or an instrumentality of one or more states or political subdivisions;

(8) Service performed in the employ of a corporation, community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual.

Footnote 2 St. Louis Consol. Coal Co. v. Illinois, 185 U.S. 203, 207, 22 S.Ct. 616 (coal mines employing five or more subject to inspection ); McLean v. Arkansas, 211 U.S. 539, 551, 29 S.Ct. 206 ( mines employing ten or more required to measure coal for payment of wages before screening); Booth v. Indiana, 237 U.S. 391, 397, 35 S.Ct. 617 (mines required to supply wash-houses upon demand of twenty employees); Jeffrey Mfg. Co. v. Blagg, 235 U.S. 571, 576, 35 S.Ct. 167; Middleton v. Texas Power & L. Co., 249 U.S. 152, 159, 39 S.Ct. 227 (employers of five or more included within workmen's compensation act).

Footnote 3 See, e.g., National Commission on Law Observance and Enforcement ( 1931), Report on the Causes of Crime, No. 13, especially p. 312.

Footnote 4 From 1924 to 1932, inclusive, the marriage rate in Alabama, determined by marriages per 1,000 population, was as follows: 11.4; 11.9; 11.9; 11.6; 11.2; 11.2; 10.4; 9.7; 9.4 (derived from Statistical Abstract of the United States, 1926, Table 90; Id., 1928, Table 95; Id., 1930, Table 99; Id., 1932, Table 80; Id., 1936, Table 92). The first sizeable decline came in 1930.

Footnote 5 See State Board of Health, Bureau of Vital Statistics, Report relating to the registration of births and deaths in the State of Alabama for the year ending 31st December, 1935, p. XXXVII: 'Between 1910 and 1927, the trend in the birth rate was upward, except in 1918, the year in which the outbreak of influenza occurred and the following year. From 1927 to 1935, the trend has been downward, the rate of decline having been practically constant since 1928 forward, with the single exception in 1934. The rise in 1934 was due to a number of factors, including an increase in birth registration following the registration campaign and marriages.'

Footnote 6 See Annual Report of the State Board of Health of Alabama, 1933, p. 166, Table XXV. The rate of illegitimate births per 1,000 live births, for the years 1929 through 1933, were 70.4; 74.6; 81.6; 88.7; 95.1.

Footnote 7 A survey of 4,137 people in Birmingham, Alabama, and covering three months in the spring of 1933, showed that the rate of illness (disabling illness per 1,000 persons) was 165 in families with no employed workers; 148 in families with at least one part-time worker, but no full-time workers; and 140 in families with at least one full-time worker. See Perrott and Collins, Relation of sickness to income and income change in 10 surveyed communities, Public Health Reports (United States Public Health Service), vol. 50, p. 595, at 606, Table 6.

Footnote 8 See Eliot, Martha M., Some effects of the depression on the nutrition of children, Hospital Social Service, vol. 28, p. 585; Palmer, Carroll E., Height and weight of children of the depression poor, Public Health Reports, vol. 50, p. 1106.

Footnote 9 Of those employed in Alabama the per cent. employed in industry were 19.5% in 1900; 21.4% in 1910; 30.7% in 1920; 33.6% in 1930; 24.3% in 1935. (Last figure estimated at the trial by Gist, formerly statistician of the Department of Agriculture, and since Feb. 1, 1936, economic adviser to the Commissioner of Agriculture of Alabama.) The decline in 1935 may be taken to corroborate the greater susceptibility of employment in industry to the depression.

Footnote 10 Figures obtained from Federal Emergency Relief Administration, as stated in Appendix to the Brief of Respondent, No. 837, Chas. C. Steward Machine Co. v. Davis, pp. 74-75, Table 17.

Footnote 11 Appellees point to an estimate that, largely because of the large agricultural population, only 26.81% of those employed in Alabama as of October 14, 1936, were covered by the Act.

But it was estimated at the trial by Gist (formerly statistician of the Department of Agriculture, and since Feb. 1, 1936, economic adviser to the Commissioner of Agriculture of Alabama), that if in 1941 there should be a recurrence of unemployment 'somewhat equivalent to the period we have just come through, and employment in the industrial groups under consideration should drop to, say 170,000 (approximately the number employed in 1932), we would find Alabama with something like 64,000 unemployed persons who would be entitled to the benefits of this Act.'

Footnote 12 See supra, footnote 2.

Footnote 13 W. I. King, Employment Hours and Earnings in Prosperity and Depression; Hansen, Bjornaraa, and Sogge, Decline of employment in the 1930-1931 depression in St. Paul, Minneapolis and Duluth, U. of Minn., Employment Stabilization Research Institute, vol. 1, No. 5, p. 20-25.

Footnote 14 Cigarette and tobacco taxes are earmarked, in some states, for school funds and educational purposes, Ala.Gen.Acts 1927, No. 163, p. 139 , 2(j), (k); Gen. Acts 1932, Ex.Sess., No. 113, p. 125, 15; Ark.Acts 1933, No. 135, p. 439; No. 140, p. 452, 2; Tenn.Code (1932), 1242; Tex. Laws 1935, c. 241, 3 (Vernon's Ann.Civ.St. art. 7047c-1, 3), and in Georgia for pensions for Confederate soldiers, Ga.Laws 1923, pp. 39, 41.

Liquor license fees and taxes are paid into old age pension funds, Colo.Laws 1933, Ex.Sess., c. 12, 27; Police pension funds, N.Y.Tax Law, Consol.Laws, c. 60 (1934) 435, subds. 4, 4-a; and school funds, N.M.Laws 1933, c. 159, 10(b); Wis.Laws Sp.Sess.1933-34, chs. 3, 14.

Chain store taxes are sometimes earmarked for school funds, Ala.Gen. Acts 1935, No. 194, p. 441, 348, Schedule 155.9; Fla.Laws 1935, c. 16848 , 15; Idaho Laws 1933, c. 113, 10.

License and pari-mutuel taxes in states authorizing horse racing are devoted to fairs and agricultural purposes, Cal.Stst. 1933, p. 2052, c. 769, 13; Smith-Hurd Ill.Stats. c. 8, 37f; Ill.Rev.Stat.(Cahill) 1933, c. 38, 316(6); Mich.Acts 1933, No. 199, 10; to highway funds, Nev.Comp. Laws (Hillyer, 1929) 6223; and to an old age pension fund in Washington, Laws 1933, p. 294, c. 55, 9.

Unemployment relief, though financed in most states by special bond issues, has in some instances been financed by Gasoline Taxes, Ohio Laws 1933, File No. 8, p. 26, 1, 2; File No. 28, p. 61; Okla.Laws 1931, c. 66, article 10, 2, 3; Sales Taxes, Ill.Laws 1933, pp. 924, 926, 3 ( Smith-Hurd Ill.Stats. c. 120, 442 and note); Mich.Acts 1933, No. 167, 25(b); Utah Laws 1933, c. 63, 21; Income Taxes, Wis.Laws 1933, c. 363, 2; Miscellaneous Excise Taxes, Ohio Gen.Code (Page Supp.1935) 6212-49 ( beer); 5543-2 (cosmetics); 5544-2 (admissions); Utah Rev.Stat. 46-0- 47, as added by Laws 1933, c. 35 (beer).

Footnote 15 Similarly, special taxing districts for the maintenance of roads or public improvements within the district have been sustained, without proof of the nature or amount of special benefits. See St. Louis & S.W. Ry. Co. v. Nattin, 277 U.S. 157, 159, 48 S.Ct. 438; Memphis & Chicago Ry. Co. v. Pace, 282 U.S. 241, 248, 249 S., 51 S.Ct. 108, 110, 111, 72 A.L.R. 1096; cf. Missouri Pacific R. Co. v. Western Crawford Road Imp. Dist., , 45 S.Ct. 31. A different question is presented when a state undertakes to levy local assessments apportioned to local benefits. In that case, it it fails to conform to the standard of apportionment adopted, its action is arbitrary, see Georgia Ry. & Elec. Co. v. Decatur, 295 U.S. 165, 170, 55 S.Ct. 701, 703, because there is a denial of equal protection. Road Improvement Dist. v. Missouri Pacific R. Co., , 191-194, 47 S. Ct. 563, 564, 565; cf. Georgia Ry. & Elec. Co. v. Decatur, 297 U.S. 620, 56 S.Ct. 606. But if the assessment is apportioned to benefits it is not constitutionally defective because the assessment exceeds the benefits. Roberts v. Richland Irrigation Dist., 289 U.S. 71, 75, 53 S.Ct. 519, 520.

Footnote 16 Report of President Hoover's Committee on Recent Social Trends ( 1933) 807ff; J. M. Clark, Economics of Overhead Costs (1929) pp. 366, 367;, douglas, Hitchcock, and Atkins, The Worker in Modern Economic Society ( 1925) p. 491 et seq.; Beveridge, Unemployment, a Problem of Industry (1930) pp. 100-103; W. C. Mitchell, Business Cycles; the problem and its setting ( 1927) pp. 87, 210, 238.

Footnote 17 See E. M. Burns, Toward Social Security (1936) pp. 70-73; P. Douglas, Social Security in the United States (1936) pp. 253-355; A. Epstein, Insecurity-A Challenge to America (3d ed. 1936) pp. 311, 312, 317; Hansen, Murray, Stevenson, and Stewart, A Program for Unemployment Insurance and Relifef in the United States (1934) pp. 16, 65-73.