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Employment Security Commission of Arizona v. Arizona Citrus Growers

Supreme Court of Arizona

January 4, 1944

EMPLOYMENT SECURITY COMMISSION OF ARIZONA, DEAN A. SISK, ROBERT D. KENDALL and JOHN M. SAKRISON, as members of and constituting the Employment Security Commission of Arizona, Appellants,
ARIZONA CITRUS GROWERS, a corporation, Appellee

APPEAL from a judgment of the Superior Court of the County of Maricopa. Dudley W. Windes, Judge. Judgment reversed.

Mr. Arthur W. Davis, for Appellants.

Messrs. Ellinwood & Ross, Mr. Francis J. Ryley and Mr. George E. Wood, for Appellee.


[61 Ariz. 97] UDALL, Superior Judge.

The question presented by this appeal is whether services rendered by certain [61 Ariz. 98] employees of the Arizona Citrus Growers, a corporation, during the period in controversy (January 1, 1940, to June 16, 1941) were, as the law then stood, engaged in "agricultural labor" and therefore exempt from coverage under the Unemployment Compensation Law of 1936, as amended.

The appellee, the Arizona Citrus Growers, hereinafter referred to as the Association,

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is a corporation organized under the cooperative marketing laws of Arizona, Article 7, Section 49-701, et seq., Arizona Code Annotated 1939. It is the usual nonprofit cooperative marketing association, without capital stock. It was created for the purpose of marketing the citrus products of its members. Only persons, firms or corporations engaged in growing citrus fruit may become members of the association. There is no membership fee and no dues are paid. Membership is limited to persons engaged in the growing of citrus fruit. The property rights and interests of each member in the association are equal. The members receive all the proceeds from sales of products after administrative costs are deducted. Insofar as the operations in question here are concerned, they were confined solely to handling the fruit of its members, although under its charter and by-laws it might buy or sell citrus fruit from or for other than its members where there was an insufficiency of its members' products to provide a continuity of service. The record discloses that the association had not dealt with any except its own 268 members who have their groves within a ten-mile radius of Phoenix where the packing house is located, and for whom nearly a million boxes of citrus fruit had been handled that season.

The Association was concededly subject to the payment of unemployment compensation benefits with respect to a portion of its employees and such contributions [61 Ariz. 99] have been regularly paid. It is interesting to note that at all times from the passage of the Unemployment Compensation Acts up to January 1, 1940, (the date the amendment to the Federal Act became effective) the Association recognized its liability under both the Federal and State laws and paid taxes on the wages of persons performing the same services as it now contends are exempt.

The action originated as a result of claims filed by certain employees of the Association for unemployment compensation benefits. The procedural steps outlined in Section 56-1006, Arizona Code Annotated 1939, were strictly followed. The deputy of the Commission found that these individuals were eligible to receive such benefits and approved their claims for payment. The Association appealed from this award on the grounds that these employees were engaged in picking or packing fresh citrus fruits and were therefore engaged in "agricultural labor" and consequently exempt from the provisions of the Unemployment Compensation Law. This appeal was heard by the Appeal Tribunal which took testimony and thereafter, by a majority vote, affirmed the ruling of the deputy. From this decision an appeal was taken to the Unemployment Compensation Commission and a further hearing, with additional testimony, was conducted, as a result of which the Commission unanimously affirmed the action of the Appeal Tribunal and ordered that benefits be paid. The Association then filed in the Superior Court of the State of Arizona, in and for the county of Maricopa, its Petition for Review of the Decision. The record before the Commission was thereupon transmitted to the Court below and after appearance and argument by counsel for both parties, the Court entered its judgment reversing the action of the Commission. [61 Ariz. 100] From this judgment the Commission alone has appealed to this Court.

Of the twelve original claimants, all of whom were parties in the proceedings below, but none of whom are appellants herein, all but one were engaged at the Association's plant in the manual work of grading, sorting, cleaning, wrapping and boxing fresh citrus fruits for the purpose of preparing the fruit for market. The other claimant was engaged in the work of picking citrus fruit from the trees belonging to members of the association. The Association hired the men, paid their wages and directed their work. None of the claimants were employed or controlled in any way by the growers themselves.

A brief recitation of the Federal and State legislation on unemployment compensation will be necessary in determining this appeal. The initial legislation on the subject matter was the adoption by the Federal Congress of the original Social Security Act of 1935 (42 U.S.C.A. §§ 501 et seq., 901 et seq., 49 U.S. Stat. pp. 626, 635), and by its terms "agricultural labor" was denied the benefits thereof. In February of 1936 the Commissioner of Internal Revenue issued comprehensive regulation No. 90, which defined the term "agricultural labor" as used in the Federal Statute. On February 10, 1939, Congress enacted into law the Internal Revenue Code, 53 Stat. 1, 26 U.S.C.A. Int. Rev. Code, § 1 et seq., adopting the 1935 Act without change and with the knowledge of the definition contained in Regulation 90. On August 10, 1939, Congress amended the Law (53 Stat. 187, 1392,

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26 U.S.C.A. Int. Rev. Code § 1607) and for the first time it defined the term "agricultural labor." This law became effective January 1, 1940.

Along with a goodly number of the other states, the Twelfth Legislature of Arizona, in special session assembled, was quick to take advantage of this [61 Ariz. 101] beneficent Federal Law covering unemployment compensation. On December 2, 1936, it passed as an emergency measure what is known as the "Unemployment Compensation Law of 1936" (Chap. 13, 1st S.S., now Article 10, c. 56 of the 1939 Arizona Code Annotated). Here again in general terms only "Agricultural Labor" was exempted from the provisions of the State law. Some amendments to the original Act were made at the regular Session of the Thirteenth Legislature (Chap. 68, 1937 S.L.) but the provision as to "agricultural labor" remained the same. The Act (Sec. 56-1011) authorized the Commission "to adopt... rules and regulations" for the administration of the Law. Pursuant to this authorization the Commission, on June 18, 1937, adopted its Rule I, the validity and interpretation of which will be largely determinative of this appeal. This Rule I is substantially identical with Regulation No. 90, supra, adopted by the Internal Revenue Department. The Law remained in this condition until the enactment of Chap. 124, Laws of 1941, which became effective on June 16, 1941; this is known as the Employment Security Act of Arizona. Herein for the first time the Legislature defined the term "agricultural labor" (Sec. 56-1002), which is in the same identical terms as the August 10, 1939, amendment to the Federal Law. The declared purpose of all these acts "was to protect employees from the serious consequences of unemployment" and the courts have universally liberally construed their provisions.

It seems crystal clear that Arizona was endeavoring to and did pattern its law, insofar as the controversial matters here are concerned, after the Federal enactment; that conclusion seems inescapable. That the definition of "agricultural labor" as contained in the Employment Security Act of Arizona [61 Ariz. 102] differs greatly from Rule I adopted in 1937 is best evidenced by the fact that both appellant and appellee agree that subsequent to June 16, 1941, there is no liability on the part of the Association for ...

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