Record and brief — Frances E. Porcher, Etc. v. Mary E. Brown, Etc.

un Ned

In The Supreme Co

of the United States

OCTOBER TERM 1981

FRANCES E. PORCHER, in her official capacity as Claims

adjudicator of the South Carolina Employment Security Commission,

H. C. SLOAN, in his officiai capacity as Appeals Referee of the South

Carolina Employment Security Commission, C. LEM HARPER, in

his official capacity as Chairman of the South Carolina Employment

Security Commission, CECIL SANDIFER, in his official capacity as

Vice Chairman of the South Carolina Employment Security

Commission, and FRANK E. BALDWIN, JR., in his official capacity

as Commissioner of the South Carolina Employment Security

Commission,

Petitioners,

vs

MARY E. BROWN, on behalf of herself and all others similarly

situated, and LIBERIA JOHNSON,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Daniet R. McLeop

Attorney General

C. Totpert Goorssy, Jr.

Deputy Attorney General

KENNETH P. WooDINGTON

Senior Assistant Attorney General

Davip C. EckstTrom

Assistant Attorney General

P. O. Box 11549

Columbia, S.C. 29211

(803) 758-8667

WILLIAM H. GrirFIn

General Counsel, South Carolina

Employment Security Commission

P. O. Box 995

Columbia, S.C. 29202

ATTORNEYS FOR PETITIONERS

QUESTIONS PRESENTED FOR REVIEW

1. Whether the South Carolina Employment Security

Commission denied unemployment compensation benefits to

class members solely on the basis of pregnancy, in violation of

the Federal Unemployment Tax Act, when it denies benefits

generally to all claimants who are unemployed because of a

physical disability not related to one’s employment?

2. Whether the Eleventh Amendment permits a retroactive

award of benefits from the South Carolina unemployment

compensation fund?

3. Whether the doctrine of non-retroactivity may be

applied to a case of first impression construing a statute?

4. Whether 42 U.S.C. § 1983 provides a private remedy to

enforce the provisions of the Federal Unemployment Tax Act,

28 U.S.C. § 3304(a)?

TABLE OF CONTENTS AND OF AUTHORITIES

PAGE

Questions Presented for Review ......cccccccccccccccces i

Table of Contents and of Aiiticriiies ...... cc ccc cece cece il

SEEN ‘a cudecnsdeenesdbdddsccedsseunsccevedee l

PD nub ddbhedabccbercabesdcdccaccotcctinseses l

Constitutional and Statutory Provisions Involved ......... l

BPE UEN GAEDE co oc.cdiddcctecccbccccccocectoucevac 3

TY CIR TIED ic ccecdcccvdsecesessenccceus 5

SNE Gdndeboveouidtdsdues db0netebGisocdercenabat 16

Appendix A: Order of the Court of Appeals ............. 17

Appendix B: Opinion of the Court of Appeals ........... 18

Appendix C: Opinion of the District Court .............. 28

Appendix D: Order of the District Court ................ 55

AUTHORITIES

Cases: Page

Allen v. State Board of Elections, 393 U.S.

PED Kb roc cedacusedevetoucccsaddcaccccceee 13,14

California Dept. of Human Resources v. Java,

SP UNUED EbS bec edccccstsaskesecedecccese 6

Carmichael v. Southern Coal & Coke Co., 301 U.S.

SEED cwébecnuctbncesdesnsags dactacdesnacecetess 6

Chapman v. Houston Welfare Rights Organization,

eA EOE cecedeceddesbatessdeesdcescccecs 16

Chevron Oil Co. v. Huson, 404 U.S. 97 (1971) ......... 13,14

Edelman v. Jordan, 415 U.S. 651 (1974) ........... 11,12,13

Great Northern Life Insurance Co. v. Read,

Ss MEP 6 onlecd cacceddteedsencetiéccceen 12,13

Kennecott Copper Corp. v. State Tax Commission,

Be Ws DUNE 6 6 Sh ewedcccdccéeceddavecescss 12,13

Maine v. Thiboutot, 448 U.S. 1 (1980) ..........000ee eee 14

Middlesex County Sewerage Authority v. National Sea

Clammers Association, __ U.S. ——, 69

EOE ODEED occcduccuccecceccscteosccoese 14,15

Miller v. Youakin, 440 U.S. 125 (1979) ....... 0. cee ee cues 11

Pennhurst State School and Hospital v. Halderman,

eee I eg OF Re GPO ETTSED vc cccdscccce 14,15,16

Steward Machine Co. v. Davis, 301 U.S. 548 (1937) ..... 6,16

Stone Mfg. Co. v. South Carolina Employment

Security Commission, 219 S.C. 239, 64

A PED 0 CdGbESRRERASOn eee esidccceesrcese 4

Turner v. Dept. of Employment Security, 423 U.S.

RRUETED On snbedccebds chndeeedacccccedoaencenton 8,9

eee

-ill-

Page

United States Constitution:

ROVE FAGMGREMIOEE oo ccc ccccccecscscecscecese 2,11,12,13

Statutes:

United States Code:

PEG ove ccddccdevecccencesccocescetdges 15

POE 6h bc cidacuctceseeascveséececcesese 15

SPN UD 0 0cccceeckucsetecesccocessesve passim

aes REED Sov veducdsvcedceccsccdcvessecvecses 15

Se We GED cc ccedeccedecsedsccsoscusesvcccces I

yf ft a ft PPPPOPTVTT TT TT TTTTT ITT TTT ee 4

Be Bae © CPE Cocccdccvcccsecccenccccesscccectere 4

Ge Gen BORED hedevecs cdvccecscesevccesvce 2,4, 15,16

Ge > OED Se vec cccvcccesvccccosccceesanse 8

Code of Laws of South Carolina:

DS GROSS scvcovesccocecccvcevce wTTUSTT TT Trey 12

DE PGE Seeoceccccedseccoveccovdcvesceecenes 12

BGP Coeeivacsesbeccbovevendecancoausesceene 12

Miscell-neous:

Hearings before the Subcommittee on Unemployment

Compensation of the Committee on Ways and Means,

Sey GE, CUP Us Badd cccdcssncsoccccccsvecesss 9,10

H.Rep. No. 615, 74th Cong., Ist Sess. ............0005 7

H.Rep. No. 94-755, 94th Cong., Ist Sess. ...........4. 9

Sen.Rep. No. 628, 74th Cong., Ist Sess. ...........46. 6

Sen.Rep. No. 94-1265, 94th Cong., Ist Sess. ........... 9

-iv-

OPINIONS BELOW

The order of the United States Court of Appeals for the

Fourth Circuit denying petition for rehearing and refusing

suggestion for rehearing in banc, filed January 22, 1982, is

unreported and is appended hereto at p. 17.

The opinion of the United States Court of Appeals for the

Fourth Circuit affirming the decision of the United States

District Court for the District of South Carolina, reported at

660 F.2d 1001, is appended hereto at p. 18.

The opinion of the United States District Court for the

District of South Carolina, awarding judgment for respondents

on the merits and reported at 502 F.Supp. 946, is appended

hereto at p. 28.

The unreported order of the United States District Court

for the District of South Carolina denying petitioners’ motion

for summary judgment is appended hereto at p. 55.

JURISDICTION

This petition for writ of certiorari is for review of the

judgment of the United States Court of Appeals for the Fourth

Circuit entered on October 6, 1981. By order filed January 22,

1982, petition for rehearing and suggestion for rehearing en

banc were denied.

This Court has jurisdiction to review the opinion rendered

below pursuant to the provisions of 28 U.S.C. § 1254(1).

CONSTITUTIONAL AND STATUTORY PROVISIONS

INVOLVED

Federal Unemployment Tax Act

(26 U.S.C. § 3304)

Section 3304(a) Requirements. The Secretary of Labor shall

approve any state law submitted to him, within 30 days of such

submission, which he finds provides that —

(12) no person shall be denied compensation under such

State law solely on the basis of pregnancy or termination of

pregnancy;

Civil Rights Act

(42 U.S.C. § 1983)

Every person who, under color of any statute, ordinance,

regulation, custom, or usage, of any State or Territory,

subjects, or causes to be subjected, any citizen of the United

States or other person within the jurisdiction thereof to the

deprivation of any rights, privileges, or immunities secured

by the Constitution and laws, shall be liable to the party

injured in an action at law, suit in equity, or other proper

proceeding for redress.

Eleventh Amendment, U.S. Constitution

The judicial power of the United States shall not be

construed to extend to any suit in law or equity, commenced

or prosecuted against one of the United States by citizens of

another state, or by citizens or subjects of any foreign state.

NO. 82 —

In The Supreme Court

of the United States

OCTOBER TERM 1981

FRANCES E. PORCHER, in her official capacity as Claims

adjudicator of the South Carolina Employment Security

Commission, H. C. SLOAN, in his official capacity as Appeals

Referee of the South Carolina Employment Security Commis-

sion, C. LEM HARPER, in his official capacity as Chairman

of the South Carolina Employment Security Commission,

CECIL SANDIFER, in his official capacity as Vice Chairman

of the South Carolina Employment Security Commission, and

FRANK E. BALDWIN, JR., in his official capacity as

Commissioner of the South Carolina Employment Security

Commission,

Petitioners,

vs.

MARY E. BROWN, on behalf of herself and all others

similarly situated, and LIBERIA JOHNSON,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES CCURT OF APPEALS

FOR THE FOURTH CIRCUIT

STATEMENT OF THE CASE

This class action was filed against officials of the South

Carolina Employment Security Commission by two women

who had been denied unemployment compensation by the

Commission. The Commission’s decisions were based on state

laws and regulations which deny unemployment compensation

to anyone who voluntarily leaves work for reasons of personal

health.' The respondents left work because they were pregnant.

The action was brought pursuant to 42 U.S.C. § 1983, with

jurisdiction founded on 28 U.S.C. §§ 1331 and 1343. The

District Court certified the case as a class action. The

respondents sought declaratory and injunctive relief which

would prohibit the Commission from denying unemployment

compensation to women who voluntarily leave work because

of pregnancy.’

The basis of respondents’ case is a provision in the Federal

Unemployment Tax Act, 26 U.S.C. § 3304(a)(12) which

prohibits the denial of benefits “solely on the basis of

pregnancy (emphasis added).” (Respondents also alleged the

unconstitutionality of the Commission’s practice, but neither

the District Court nor the Court of Appeals reached the issue

of constitutionality; see 660 F.2d at 1003, n.2).

The case was instituted on March 31, 1979. On February

13, 1980, the District Court denied petitioners’ motion for

summary judgment which was based on the Eleventh

Amendment. On October 22, 1980, following a bench trial,’

the District Court determined that 26 U.S.C. § 3304(a)(12) was

intended by Congress to require unemployment compensation

to be paid (beginning with claims that matured on January 1,

1978, the act’s effective date) to the respondents and those

similarly situated even though no other persons who

voluntarily left work because of personal health could be

'At least 17 states disqualify persons who leave work for personal health reasons;

see U.S. Dept. of Labor, Comparison of State Unemployment Insurance Laws, pp.

4-6, 4-27, 28. (South Carolina is not listed, but is in the same category through case

law and administrative decisions; see, e.g., Stone Mfg. Co. v. S.C. Emp. Sec. Comm.,

219 S.C. 239, 64 S.E.2d 644 (1951).) These provisions, insofar as they apply to

ordinary cases of disability, are in an area which Congress has left to the states.

2No challenge was made to the Commission's general practice of denying benefits

to persons who quit work fcr health reasons, except insofar as that practice affected

pregnant women.

‘The facts of the case are essentially undisputed.

awarded such compensation.* The Court of Appeals affirmed,

essentially for the same reasons set forth in the District Court's

opinion. 660 F.2d 1001 (4th Cir. 1981).

A petition for rehearing and suggestion for rehearing en

banc were filed with the Fourth Circuit by petitioners. The

petition was denied on January 22, 1982. By consent order,

(subject to possible additional motions in this Court), some

payments are beginning to be made and cthers have been

stayed.

REASONS Fi. ¢ GRANTING THE WRIT

The Court of Appeals has ordered the retroactive payment

of approximately 4.9 million dollars from South Carolina’s

hard-pressed’ unemployment compensation fund, and will

further cause nearly two million dollars to be paid annually in

future years. The decision may have a similar impact on two

states within the Circuit (Maryland and West Virginia) and

could lead to similar requirements in a number of other states

as well. Moreover, the decision of the Fourth Circuit

undermines the principles of federalism under which the

unemployment compensation laws were conceived and have

since been operated. The evidence refutes the suggestion that

the federal government, through the Secretary of Labor, ever

intended to regulate State systems in the detail required by the

Court's decision; the decision, indeed, disregards the practice

of the Department of Labor to leave the question at issue to

the states. Furthermore, the decision conflicts with prior

decisions of this Court regarding Eleventh Amendment

immunity and the non-retroactive application of judgments

generally. Finally the decision presents an important question

of federal law insofar as it implies a private right of action to

enforce the Federal Unemployment Tax Act.

*At issue is whether compensation should be paid once pregnancy has ended and

the woman is again physically able to work. Respondents do not contend that

payments should have been mace during the period of physica? incapacity.

‘In February 1982, unemployment in South Carolina was 11.4%, 1.5% highe: than

the national average.

A.

The decision of the Court of Appeals extends federal

control of unemployment compensation into areas which

Congress has never intended to enter.

The history of the federal-state cooperative unemployment

insurance system has been documented in severai decisions of

this Court. See generally, Steward Machine Co. v. Davis, 301

U.S. 548 (1937); California Dept. of Human Resources v.

Java, 402 U.S. 121 (1971). In Carmichael v. Southern Coal &

Coke Co., 301 U.S. 495, 526 (1937), the Court described the

program as “a cooperative legislative effort by state and

national governments, for carrying out a public purpose

common to both, which neither could fully achieve without the

cooperation of the other.” The states could not have enacted

such programs by themselves because some states would have

sought a competitive advantage by not enacting such

legislation. The power of the federal government was also

viewed as limited because of the variety of types and durations

of unempioyment in different regions of the nation.

Thus the present federal-state system was created in the late

1930's, beginning in 1935 with the passage of the Social

Security Act, 49 Stat. 620, followed quickly by the passage of

unemployment compensation acts by all the states. In practice,

employers pay a tax, nine-tenths of which goes into a state

fund for the payment of benefits for unemployed workers and

one-tenth of which goes to the federal government for state

and federal administrative expenses. As prerequisites for

approval of state unemployment compensation laws, the

federal government has established “fundamental standards.”

Steward Machine Co., supra, 201 U.S. at 594, in 26 U.S.C. §

3304. These standards were enacted “to make certain that the

States actually have unemployment compensation laws, rather

than mere relief measures.” Sen.Rep. No. 628 (to accompany

HR 7260), 74th Cong., Ist Sess., at 12 (1935). Once this aim

became secure, Congress intended to leave the details of the

programs to the states:

Except for a few standards which are necessary to render

certain that the State unemployment compensation laws are

genuine unemployment compensation acts and not merely

relief measures, the States are left free to set up any

unemployment compensation systems they wish, without

dictation from Washington.

Id. at 13. (emphasis added).

Accord, H.Rep. No. 615 (to accompany H.R. 7260), 74th

Cong., Ist Sess. at 7-8.

These “fundamental standards,” six in number in 1935,

have swollen to seventeen in the present 26 U.S.C. § 3304. The

essential character of the standards, however, has not changed

from the original aim of maintaining a true unemployment

compensation system, at least until the Court of Appeals set

forth in its interpretation of 26 U.S.C. § 3304(a)(12) in this

case. Under the Court's interpretation, Congress has moved

away from prescribing the standards necessary to insure that a

true unemployment compensation system exists arid has

elected to enter a field which had been left to the states,

namely, the prescribing of such details as what may disqualify

a person for benefits. This, however, has never been the intent

of Congress. Moreover, if specific classes of unemployed

persons (such as pregnant or formerly pregnant women) are to

receive benefits, the program will move in the opposite

direction (i.e., toward being “relief”) from the one originally

intended. In addition, the program would cease to be insurance

against economic uncertainty and would instead become a

form of health insurance.®

The Court of Appeals decision requires the states to do

more for unemployed pregnant or formerly pregnant women

than Title VII, as amended, requires employers to do for

*The possibility also exists that South Carolina and other states will be forced to

make all health-related terminations subject to coverage, in order to prevent a

challenge to the practice of only covering one type of health-related termination for

reasons not rationally distinguishable from any other.

employed pregnant women. Title VII (42 U.S.C. § 2000e(k), as

amended in 1978) provides that “women affected by

pregnancy, childbirth, or other related medical conditions shall

be treated the same for all employment-related purposes . . . as

other persons not so affected but similar in their ability or

inability to work.” It strains credulity to suggest that Congress

intended for pregnant women to enjoy the same rights as

others physically disabled when they are on the job, but that

they were intended to have an elevated status once their

employment had ceased.

The few,’ but consistent, references in the legislative history

of 26 U.S.C. § 3304(a)(12) indicate that Congress intended

only that pregnant women were to be treated the same as

others similarly situated (i.e., other physically disabled

persons). The provision was first formulated in 1975, when a

number of states had “pregnancy disqualifications,” i.e.,

provii ons which deemed pregnant women “unable and

unavailable” for work within a fixed number of weeks before

and after childbirth. These provisions were becoming the

subject of litigation because the presumed period of unavail-

ability often bore no relation to the woman's actual ability to

work. In late 1975, one such provision was held unconstitutional

in Turner v. Dept. of Employment Security, 423 U.S. 44.

Turner, however, only affected one state (Utah). In order to

change the remaining similar statutes in approximately 20

States without the need for individual court challenges,

Congress made the enforcement of Turner an administrative

matter, to be accomplished by approval or disapproval of state

laws by the Secretary of Labor. The constitutional requirement

of Turner was put into 26 U.S.C. § 3304(a)(12) because it was a

constitutionai requirement, not, as the lower court thought,

because Congress suddenly decided to legislate in the field cf

unemployment compensation disqualifications.

"The relative lack of discussion of this provision in the legislative history is

explained by the fact that it was part of a large unemployment legislation package

which included highly controversial matters not here relevant.

When Congress added 26 U.S.C. § 3304(a)(12) in !976, the

Senate Report referred only to Turner and to other automatic-

disqualification provisions.* Sen Rep. No. 94-1265 (1976) at

19-21. The House Report was similar: in referring to the need

for individualized rather than automatic determination of the

worker's ability to return to work, it indicated an intent to

abolish fixed, automatic periods of disqualification, as Turner,

supra, did. H.Rep. (Ways & Means Committee) No. 94-755

(1975) at 50.

The most revealing insight into the problem which

Congress intended to face is found in the hearings before the

House subcommittee which in 1975 was considering changes in

the unemployment laws.? Rep. Corman, author of the bill

which eventually became P.L. 94-566 and which contained the

pregnancy clause, stated that

[W]e are talking about disqualification of a worker because

she has a physical condition that does not prevent [sic] her

ability to work [i.e., an automatic disqualifier].

Hearings, Phase I, supra n. 9 at 87.

Ms. Margaret Dahm, Director of the Department of Labor's

Office of Research Legislation relating to unemployment

compensation, also stated that the problem was

the special provision for disqualifications in cases of

pregnancy which treats inability to work because of

pregnancy . . . as different from any other kind of physical

disability.

*South Carolina's policy has never been counted when lists of Turner-type state

laws have been compiled. The reason for this is that South Carolina's policy is not one

of automatic disqualification: under certain conditions, evidence of which is in the

record, pregnant women can and have been held entitled to unemployment

compensation benefits in South Carolina, even when they left work because of

pregnancy.

*Printed under the title “Hearings before the Subcommittee on Unemployment

Compensation of the Committee on Ways and Means, 94th Cong.. Ist Sess. (in two

volumes, one containing Phases | and I! of the hearings. the other containing Phase

I).

9-

‘T]he ability to work of a pregnant woman should be

considered on the same basis as the ability to work of any

worker.

Id. (emphasis added).

In anotner exchange, Congresswoman Keys asked a witness

whether there was “automatically . . . any time in a pregnancy

in which you refuse to pay unemployment benefits?” Hearings,

supra n. 9, Phase III at 168. (emphasis added).

There can thus be little doubt that Congress intended only

to remove automatic pregnancy disqualifiers. South Carolina

has never had such a provision. Its policy is one of

disqualifying all persons who voluntarily leave for personal

health reasons and of re-qualifying those persons when they

fulfill certain conditions. If a pregnant woman is fired, whether

for pregnancy or for other reasons, and is still able to work,

she is entitled to benefits in South Carolina, unlike the

situation in states which automatically disqualified pregnant

women. The Court of Appeals thus overextended the hand of

Congress.

The decision of the Court of Appeals overturns the

administrative construction of the statute by the Department

of Labor.

Faced with an unequivocal body of evidence that the

Department of Labor has construed 26 U.S.C. § 3304(a)(12) as

South Carolina has construed it,'° the Court of Appeals

concluded that the Department’s interpretation was not

The Secretary of Labor certified to the Secretary of the Treasury that South

Carolina’s laws were approved as consistent with 26 U.S.C. § 3304 for the 12-month

period ending October 31, 1979. In addition, the Department's Administrator,

Unemployment Insurance Service, in a letter written in connection with this case,

reaffirmed the Department's interpretation that the statute only requires pregnant

claimants to be treated no differently from others who quit for reasons of personal

health.

‘thoroughly considered,’ 660 F.2d 1001, 1004, 1005, and hence

not entitled to weight. In so doing, the Court ignored the rule

that “the construction of a statute by those charged with its

execution should be followed unless there are compelling

indications that it is wrong.” Miller v. Youakin, 440 U.S. 125,

144 (1979). The rule is especially applicable here, where the

Department was “present at the creation” of the statute in

question and where its interpretation at the hearings was the

same as the one expressed by the author of the bill and by

others (see p. 9, supra).

Cc.

The decision of the Court of Appeals denying Eleventh

Amendment immunity to the South Carolina Employment

Security Commission conflicts with prior decisions of this

Court.

The petitioners opposed the retroactive award of 4.9

million dollars in unemployment compensation benefits to

class members on the ground, among others, of Eleventh

Amendment itamunity. Nonetheless, the Court of Appeals

affirmed the Order of the District Court awarding these

benefits retroactively to the effective date of the federal statute.

The petitioners submit that the lower court erred.

The Court of Appeals held that the retroactive award of

benefits was permitted under the Eleventh Amendment, 660

F.2d 1001, 1007 (4th Cir., 1981). It based its conclusion on a

restrictive reading of Edelman v. Jordan, 415 U.S. 651 (1974),

which limited that decision to “retroactive award[s] . . . which

‘must inevitably come from the general revenues’ of a state.”

660 F.2d at 1006. The lower court reasoned that “[i]n this case,

therefore, we must determine whether a retroactive award

would be drawn from a general revenue fund of the type

protected by the Court’s decision in Edelman.” Id. The Court

of Appeals concluded that since the retroactive award would

be paid out of an “insulated, separately financed state

unemployment compensation fund[,J” such an award would

not violate the Eleventh Amendment. 660 F.2d at 1007.

This reasoning is in direct conflict with the decisions of this

Court in Kennecott Copper Corp. v. State Tax Commission,

327 U.S. 573 (1946), and Great Northern Life Insurance

Company v. Read, 322 U.S. 47 (1944), both cited with

approval in Edelman v. Jordan, supra at 663. In Kennecott

Copper Corp., this Court held that the Eleventh Amendment

barred a suit against a state official for the recovery of taxes

paid under protest, even when the moneys thus claimed were

“segregated,” supra at 576, and “not conveyed into the general

fund.” Supra at 576, n. 2. In another decision upholding the

immunity of the state under the Eleventh Amendment, this

Court noted that it was an “immaterial difference that the

money [sought to be recovered] is directed to be held separate

and apart by the collector instead of being held in the general

funds of the State Treasurer.” Great Northern Life Insurance

Company v. Read, 322 U.S. 51, 53 (1944). Nonetheless the

Court of Appeals relied on that precise distinction and held

that the Eleventh Amendment was no bar to the recovery of

retroactive benefits against the South Carolina Employment

Security Commission because the award would be paid out of

a separate state fund and not out of the general revenue fund

of the State. 660 F.2d at 1006-1007.

The retroactive award of benefits in this case would be paid

by the South Carolina Employment Security Commission, an

agency of the State, out of the unemployment compensation

fund. The fund consists primarily of employer “contributions”

that are “deemed taxes owing the State.” § 41-31-380, § 41-33-

10(1), Code of Laws of South Carolina, 1976. The fund is

maintained and administered by the State Treasurer. §

41-33-30, id. Admittedly, the unemployment compensation

fund is a “special fund . . . administered separate and apart

from all public moneys and funds of the State.” 660 F.2d at

1006. And, furthermore, “the state has expressly protected

general revenues from liability” for claims against the fund.

-12-

Supra at 1007. Nonetheless, those factors were expressly found

in two previous decisions of this Court not to defeat the State’s

Eleventh Amendment immunity. Kennecott Copper Corp. v.

State Tax Commission, supra; Great Northern Life Insurance

Co. v. Read, supra. Citing those two cases as authority, this

Court held in Edelman v. Jordan that “a suit by private parties

seeking to impose a liability which must be paid from public

funds in the State Treasury is barred by the Eleventh

Amendment.” Supra, 415 U.S. at 663. For these reasons, the

decision of the Court of Appeals s in direct conflict with those

decisions of this Court and it should be reversed.

D.

The decision of the Court of Appeals refusing to apply the

doctrine of nonretroactivity is in direct conflict with a prior

decision of this Court.

The petitioners urged the Court of Appeals to apply the

test set out in Chevron Oil Co. v. Huson, 404 U.S. 97 (1971) to

determine whether the judgment in this case should be applied

retroactively. However, the Court of Appeals refused that test

as being “inapposite,” 660 F.2d at 1005, because the Chevron

test involved “the propriety of applying a recent decision

retrospectively to the great harm of a litigant who had

followed a line of decisions that, until overturrei, had

represented the law governing his case.” 660 F.2d at 1005, n. 6.

The Court of Appeals determined that that test was

“inapposite” here because the District Court did not “depart

from or overrule prior judicial decisions.” Supra at 1005.

However, this Court, in setting out the Chevron test, stated

expressly that it should be applied to determine whether a

decision on an “issue of first impression” construing a statute

should be applied retroactively. Chevron Oil Co. v. Huson, 404

U.S. 97, 106 (1971). This Court in articulating the Chevron test

relied in part on its decision in Allen v. State Board of

Elections, 393 U.S. 544 (1969), in which it declined to enforce

3

retroactively its decision construing the statutory language of

the Voting Rights Act of 1964. Supra at 571. Nonetheless the

Court of Appeals held that the Chevron test for nonretroactivity

was inapplicable because the instant case did not involve “a

litigant who had followed a line of cases that [were]

overturned.” 660 F.2d at 1005, n. 6. But neither did the

defendants in Allen, yet the Chevron test was deemed

applicable there. For the above reasons this decision of the

Court of Appeals is in conflict with a prior decision of this

Court and it should be reversed.

E.

The decision of the Court of Appeals presents an important

question of federal law insofar as it permits a private right of

action to enforce the Federal Unemployment Tax Act.

The decision of the Court of Appeals implied the existence

of a private right of action to enforce the Federal

Unemployment Tax Act (FUTA).'! The petitioners submit that

no such private right of action exists.

This Court had implied in Maine v. Thiboutot that a

private right of action would exist pursuant to 42 U.S.C. §

1983 to enforce any federal statute. Supra, 448 U.S. 1, 4

(1980). However, during the iast term this Court held that

some federal statutes may not be enforced by a private right of

''This issue was first raised by the Petitioners in their Petition for Rehearing before

the Court of Appeals. They had not pressed this issue earlier because they had relied

on Maine v. Thiboutot, 448 U.S. | (1980), and lower court decisions, as permitting a

private right of action to enforce any federal statute. That issue was again examined,

however, by this Court in Pernhurst State School and Hospital v. Halderman, .—

U.S. —__., 67 L.Ed. 2d 694 (1981), handed down on April 20, 1981, only fourteen days

before the instant case was argued in the Court of Appeals. The decision in Pennhurst

appeared to limit Maine v. Thiboutot. Then, three weeks after the instant case was

argued in the Court of Appeals, the decision of this Court in Middlesex County

Sewerage Authority v. National Sea Clammers Association, _. U.S. —_., 69 L.Ed.2d

435 (1981) was handed down, further distinguishing Maine v. Thiboutot with respect

© the existence of a private right of action to enforce a federal statute. The Court of

Appeals dic not examine this question, however, because it denied the petition for

rehearing.

action under § 1983. Middlesex County Sewerage Authority v.

National Sea Clammers Association, __ U.S. ——, 69 L.Ed.2d

435, 451 (1981); Pennhurst State School and Hospital v.

Halderman, —— U.S. ——, 67 L.Ed.2d 694, 705-706 (1971). The

appropriate test from those decisions is:

(i) whether Congress had foreclosed private enforcement of

that statute in the enactment itself, and (ii) whether the

statute at issue there was the kind that created enforceable

“rights” under § 1983. Middlesex County Sewerage

Authority v. National Sea Clammers Association, supra at

—_—., 69 L.Ed.2d at 450.

As to the first element, “when the remedial devices

provided in the act at issue are sufficiently comprehensive, they

may suffice to demonstrate congressional intent to preclude the

remedy of suits under § 1983.” /d. The Federal Unemployment

Tax Act does contain such remedial devices. The act itself

imposes an excise tax on employers, and further contains an

elaborate system of credits against that tax based on employer

contributions to a state unemployment fund certified by the

Secretary of Labor as conforming to certain federal law

requirements. 26 U.S.C. §§ 3301, 3302. (The federal statute at

issue in this case, 26 U.S.C. § 3304(a)(12) is one such

requirement.) According to the FUTA, the Secretary is

directed to review the relevant state laws annually and make or

withhold his certification as to each state to the Secretary of

the Treasury on October 31 of each year. 26 U.S.C. § 3304(c).

Provision is then made for judicial review of the Secretary's

decision, 26 U.S.C. § 3310. In this manner the Secretary of the

Treasury is able to allow or disallow tax credits to employers

in every state and thus enforce the federal act. No mention is

made in the FUTA of a private remedy to enforce the act.

Indeed a private remedy against a state would be inconsistent

with the act insofar as the act is essentially a system of tax

credits in the Internal Revenue Code. A private right of action

against a state could result in a judgment against that state

with no corresponding effect on the system of tax credits set

at.

out in the act. This anomolous result would suggest strongly

that Congress intended that there be no private right of action

pursuant to the act.

As to the second element of the test for a private right of

action under § 1983, this act is not one which created “rights,

privileges, or immunities” within the meaning of § 1983.

Section 1983 provides a cause of action for enforcement of

“rights, privileges, or immunities, secured by the Constitution

and laws .. . .” (emphasis added). See Chapman v. Houston

Welfare Rights Organization, 441 U.S. 600, 617 (1979).

However, the “right” being claimed under 26 U.S.C. § 3304 is

simply a condition imposed on a state for approval of its

unemployment compensation laws to the Secretary of the

Treasury. Furthermore, this “right” is expressly deemed by

that act to “exist subject to the power of the legislature to

amend or repeal. . . at any time.” 26 U.S.C. § 3304(a)(17). See

Steward, supra, 301 U.S. at 594. If this right claimed by the

respondents exists subject to the power of the state legislature

to repeal at any time, it can scarcely be said that it is a right

secured by the Constitution and laws of the United States. At

most the “right” provided by this act is the right to require the

Secretary cf Labor not to certify the state law to the Secretary

of the Treasury, and even then only after the Secretary of

Labor has exhausted certain specific compliance procedures

against the state. 26 U.S.C. § 3304(c). But this can hardly be a

right encompassed by § 1983. See Pennhurst State School and

Hospital v. Halderman, supra at —_, 67 L.Ed.2d at 714. For

these reasons the petitioners submit that the Court of Appeals

erred in implying a private right to action to enforce the

subject act, and the decision of the Court of Appeals should be

reversed.

CONCLUSION

For all the foregoing reasons, this petition for certiorari

should be granted.

Office of the Attorney General

Attorneys for Petitioners

-16-

xipueddy

APPENDIX A

United States Court of Appeals

For the Fourth Circuit

No. 81-1077

MARY E. BROWN, et al,

Appellees,

versus

FRANCES E. PORCHER, etc., et al,

Appellants,

WOMEN’S RIGHTS PROJECT, et al,

Amici Curiae,

INTERNATIONAL UNION, et al,

Amici Curiae,

SOUTH CAROLINA CHAMBER OF COMMERCE,

Amicus Curiae,

WEST VIRGINIA DEPARTMENT OF EMPLOYMENT

SECURITY,

Amicus Curiae

ORDER

Upon consideration of the appellants’ petition for rehearing and

suggestion for rehearing en banc, and no judge having requested a poll

on the sugzestion for rehearing en banc,

It is ADJUDGED and ORDERED that the petition for rehearing

is denied.

Entered at the direction of Judge Butzner with the concurrence of

Judge Ervin and Judge Britt, U.S.D.J.

For the Court,

/s/ WiLtiaM K. Stare, Hl

Clerk

th.

APPENDIX B

United States Court of Appeals

For the Fourth Circuit

No. 81-1077

MARY E. BROWN, on behalf of herself and all others

similarly situated; LIBERIA JOHNSON,

Appellees,

vs.

FRANCES E. PORCHER, in her official capacity as Claims

Adjudicator of the South Carolina Employment Security

Commission; H. C. SLOAN, in his official capacity as Appeals

Referee of the South Carolina Employment Security Commis-

sion; C. LEM HARPER, in his officia! capacity as Chairman

of the South Carolina Employment Security Commission;

CECIL SANDIFER, in his official capacity as Vice Chairman

of the South Carolina Employment Security Commission;

FRANK E. BALDWIN, JR., in his official capacity as

Commissioner of the South Carolina Employment Security

Commission,

Appellants.

Argued June 3, 1981.

Decided Oct. 6, 1981.

David C. Eckstrom, Asst. Atty. Gen., Columbia. S. C.

(Daniel R. McLeod, Atty. Gen., C. Tolbert Goolsby, Jr.,

Deputy Atty. Gen.; William H. Griffin, Gen. Counsel

Columbia, S. C. on brief), for appellants.

Thomas J. Rubillo, Neighborhood Legal Assistance

Program, Inc., Pawleys Island, S. C. (Armand Derfner, Jill A.

-18-

Hanken, VA Poverty Law Center, Charleston, S. C., on brief),

for appellees.

(Thompson, Mann & Hutson, Greenville, S. C., on brief),

for amicus curiae.

Women’s Rights Project and the Reproductive Freedom

Project of the American Civil Liberties Union Foundation,

American Civil Liberties Union of South Carolina, National

Center on Women and Family Law, Inc., Women’s Legal

Defense Fund, amici curiae.

International Union, United Automobile, Aerospace, and

Agricultural Implement Workers of America-UAW, United

Steelworkers of America, AFL-CIO, National Employment

Law Project, National Center on Women and Family Law,

amici curiae.

Before BUTZNER, and ERVIN, Circuit Judges, and W.

EARL BRITT, United States District Judge for the Eastern

District of North Carolina, sitting by designation.

BUTZNER, Circuit Judge:

Title 26 U.S.C. § 3304(a)(12) provides “no person shall be

denied [unemployment] compensation under . . . State law

solely on the basis of pregnancy or termination of pregnancy.”

The principal issue in this appeal is whether this statute

prohibits the South Carolina Employment Security Commis-

sion from denying women, who are available and able to work,

unemployment compensation solely because they left work on

account of pregnancy.' The district court held that the

Commission's practices conflicted with § 3304(a)(12) and

awarded injunctive and monetary relief to an appropriate class.

We affirm this judgment with one exception: on remand the

court should modify the computation of individual awards as

directed in Part III of this opinion.

'Soutn Carolina, like other states, requires unemployment claimants (o be available

and able to work before being eligible to receive unemployment compensation. The

plaintiffs do not challenge this requirement, and they do not claim that pregnant

women unable to work should be given unemployment compensation.

-19-

The district court’s opinion, reported at 502 F.Supp. 946

(D.S.C.1980), recounts in detail the facts pertaining to this

action. In summary, the record discloses that Mary E. Brown

and Liberia Johnson, appellees, each left their respective

employment due to the physical discomfort and _ illnesses

occasioned by their pregnancies. After giving birth to their

children, Brown and Johnson sought to return to their former

jobs, but they were informed that the positions were no longer

available. Each then filed a claim with the Commission for

unemployment compensation.

The Commission denied both claims on the ground that the

applicants had voluntarily quit their former jobs for personal

reasons not constituting good cause. Section 41-35-120(1) of

the South Carolina Code provides that a claimant shall be

ineligible for benefits “{i]f the Commission finds that he has

left voluntarily without good cause his most recent work . . .”

Although the South Carolina statute does not mention

pregnancy, the Commission has construed it to disqualify any

claimant who voluntarily left her most recent employment

because of pregnancy.”

We agree with the district court’s conclusion that 26

U.S.C. § 3304(a)(12) prohibits the challenged South Carolina

practice. Congress has required the states to comply with a

limited number “fundamental standards” in order to receive the

2The Commission, however, awards compensation to employees whose employers

grant maternity leave and to those employees who are discharged because of

pregnancy. These distinctions are the basis of a claim that the Commission's practice

denied the complainants equal protection of the laws. Quite properly, the district court

found it unnecessary to address this constitutional issue in view of the disposition of

the case on statutory grounds.

-20-

advantages of federal approval. Because § 3304(a)(12) is a

fundamental standard, the only issue is whether the challenged

practice violates this statute.

Section 3304(a)(12) was enacted in the wake of Turner v.

Department of Employment Security, 423 U.S. 44, 96 S.Ct.

249, 46 L.Ed.2d 181 (1975). There the Court overturned, on

constitutional grounds, a presumption that pregnant women

could not work and therefore were incligible for unemploy-

ment compensation. Turner, however, did not address the issue

presented by this case.

The Commission argues that § 3304(a)(12) was intended

only to eliminate the semewhat shorter presumptive periods of

disqualification that some sta.es continued to impose after

Turner and to “pro ibit states from creating a special category

for pregnancy-related claims, and then denying benefits to

those claimants thereby basing the denial on the fact of

pregnancy alone.”* The Commission points out that it treats

pregnant women like any employee who quits a job because of

iil health. Consequently, the Commission asserts, its practice

does not conflict with the federal statute.

We cannot accept the Commission’s argument. As the

district court pointed out, § 3304(a)(12) is remedial in nature

and should be broadly construed. Tcherepnin v. Knight, 389

U.S. 332, 88 S.Ct. 548, 553, 19 L.Ed.2d 564 (1967). If Congress

had intended, as the Commission argues, only to codify the

Turner decision and take the additional step of barring

discrimination on the basis of pregnancy, it could easily have

drafted a statute reflecting those limited purposes. Instead, it

broadly provided that “[n]o person shall be denied compensa-

tion under . . . state law solely on the basis of pregnancy or

‘in Steward Machine Co. v. Davis, 301 U.S. 548, 594, 57 S.Ct. 883, 894, 81 L.Ed.

1279 (1937), the Court pointed out that a state may not “depart from those standards

which in the judgment of Congress are to be ranked as fundamental” if it is to

participate in the federal-state program for unemployment compensation.

*Appellants’ brief at 21.

-2|-

termination of pregnancy.” These words must be interpreted

“in their ordinary everyday senses.” Hanover Bank v.

Commissioner, 369 U.S. 672, 687, 82 S.Ct. 1080, 1088, 8

L.Ed.2d 187 (1962). Regardless of how the Commission treats

employees with other disabilities, the mandate of the statute is

clear: the Commission cannot deny compensation “solely on

the basis of pregnancy or termination of pregnancy.” Because

the statute is unambiguous, resort to legislative history is

unwarranted. Sutherland, Statutes and Statutory Construction

§ 46.04 (4th ed. C. Sands 1973). It may not be amiss, however,

to note that nothing in the scant legislative history indicates

that Congress intended the statute to be read other than

literally.

Contrary to an argument advanced by the Commission,

the Secretary of Labor's certification of South Carolina’s

compensation law pursuant to 26 U.S.C. § 3304 is neither

controlling nor entitled to great weight. As we have previously

mentioned, § 41-35-120 of the South Carolina Code does not

mention pregnancy. Consequently, it is not facially in conflict

with federal law. The Secretary's certification in summary

fashion purports to approve a number of states’ “unemploy-

ment compensation laws.” It makes no reference to the

interpretation that the South Carolina Commission has placed

on the state law.

For reasons adequately explained by the district court,

502 F.Supp. at 957 n.20, we find no error in its refusal to defer

to the view expressed by the Department of Labor's

Administrator, Unemployment Insurance Service. In a letter

solicited during the course of this litigation, the administrator

wrote that § 3304(a)(12) has been interpreted to do no more

than prohibit discrimination on the basis of pregnancy. As the

Supreme Court has recently noted, “[t}he amount of deference

due an administrative agency's interpretation of a statute... .

‘will depend upon the thoroughness evident in its cousideration,

the validity of its reasoning, [and] its consistency with earlier

-22-

and later pronouncements .. . ."” St. Martin Evangelical

Lutheran Church v. South Dakota, —_— U.S. ——~, 101 S.Ct.

2142, 2148-49 n.13, 68 L.Ed.2d 612 (1981). Tested by these

criteria, the letter is entitled to little weight. The administrator

cites neither authority nor legislative history for the interpre-

tation he espouses. He accepts the premise that pregnancy

should be treated like any other illness without explaining how

this premise can be reconciled with the exceptional treatment

of pregnancy embodied in § 3304(a\{ 12).

We therefore conclude that the district court properly

declared that the Commission’s practices contravened §

3304(a)(12). We also conclude that the injunctive relief the

court ordered to correct these practices is appropriate.

The district court also ordered the Commission to make

retroactive payments to claimants who have been denied

compensation since January 1, 1978.5 The Commission

challenges the award as both inequitable and violative of the

eleventh amendment.

The words “retroactive” and “retrospective” have been

commonly used in several different contexts. It is therefore

essential to understand the context in which the court ordered

“retroactive” payments in this case. The court construed §

312(c) of the Unemployment Compensation Amendments of

1976, Pub.L.No. 94-566, 90 Stat. 2667, 2679 (1976), to make §

3304(a)(12) effective January 1, 1978. See 26 U.S.C. § 3304

note. No party challenges this interpretation of the Act. The

court awarded payments only from the effective date of §

3304(a)(12). It did not apply the statute retrospectively. Nor

did the court depart from or overrule prior judicial decisions

and apply a new principle retrospectively. For these reasons,

‘The court directed the Commission to process the claims but stayed disbursement

pending appeal.

23.

cases dealing with retrospective application of statutes or

innovative judicial decisions are inapposite.®

In short, the court enforced an Act of Congress in

accordance with the date that Congress indicated it should

become effective. Whether the court abused its discretion should

be tested by the criteria formulated by Judge McGowan in

Rothstein v. Wyman, 467 F.2d 226, 234 (2d Cir. 1972):

A federal court in this situation is called upon to

perform two related functions. First, in wielding equity

power, it must weigh competing claims and determine

where a preponderance of the equities lies. Second, as an

instrumentality of the United States, it must attempt to

identify and effectuate the policies of the United States, as

formulated by the Congress.

Subject to an adjustment, which we will subsequently

discuss, the district court’s award satisfies both aspects of the

Rothstein test.

The nature of unemployment compensation creates strong

equities in favor of the claimants. The Committee on

Economic Security, which in 1935 recommended unemploy-

ment insurance compensation, described the program in these

terms: “This should be a contractual right not dependent on

any means test.” See California Department of Human

Resources Development v. Java, 402 U.S. 121, 131, 91 S.Ct.

1347, 1353, 28 L.Ed.2d 666 (1971) (quoting the committee’s

- report).’? South Carolina law reflects the committee’s concept.

To be eligible for compensation an insured worker must satisfy

minimal time and wage requirements. See, e. g., S.C.Code §§

6The Commission's reliance on Chevron Oil Co. v. Huson, 404 U.S. 97, 92, S.Ct. 349,

30 L.Ed.2d 296 (1971), therefore is misplaced. That case dealt with the propriety of

applying a recent decision retrospectively to the great harm of a litigant who had

followed a line of decisions that, unt:! overturned, had represented the law governing

his case. See 404 U.S. at 107, 92 S.Ct. at 355.

’Thus, although unemployment compensation redresses a pressing need in

industrial societies, it is not welfare. Consequently, cases prohibiting the retroactive

payments of welfare grants deal with quite different equitable considerations.

-24-

41-27-310 and 41-35-110. After an employee has worked long

enough and has earned enough to become eligible for

compensation, equitable principles of fair dealing support the

conclusion that he or she should be entitled to payment in

accordance with state and federal statutes governing the

system.

We find no significant countervailing equities in favor of

the Commission. Although the award may eventually be as

large as several million dollars when all claims are processed,

the compensation fund will not be rendered insolvent.

Administrative costs will be defrayed by federal contributions.

Additionally, apart from the fund’s reserves, the Commission

acknowledges that retroactive payments “could likely increase

individual employers’ rates of contribution because of the

resulting changes to their individual accounts.”* It therefore

appears that in due course through the adjustment of

individual accounts the Commission can, if it chooses to do so,

recoup, on an actuarial basis, sums that are attributable to the

awards. Moreover, since January |, 1978, the Commission has

received substantial benefits from the federal government

which the law makes available only to states that comply with

standards Congress deemed fundamental. These facts indicate

that the award will inflict no irreparable harm on the

Commission.

We also find no compelling equity in the Commission’s

reliance on the Secretary’s certification of the South Carolina

law. Certification enabled the Commission to receive the

benefits that follow federal approval, but it did not purport to

resolve every claimant’s entitlement to compensation. More-

over, the Commission was not prejudiced by relying on the

certification. It has not shown that its reliance caused it to

forego permanently significant increases in employers’ contri-

butions.

‘Appellants’ brief at 42.

23.

With respect to the second part of the Rothstein test, there

can be no doubt that the district court’s order effect uates “the

policies of the United States, as formulated by the Congress.”

Congress adopted § 3304(a)(12) as a fundamental standard to

prohibit a state from denying compensation solely on the basis

of pregnancy. Congress postponed the effective date of this

mandate to enable the states to make any necessary changes in

their laws. There is no provision in the Act, nor any suggestion

in the legislative history, that indicates an intent to defer

implementation of the statute beyond the effective date that

Congress provided.

Applying the Rothstein test, we conclude that the

equities favor the claimants and that the district court properly

gave effect to congressional policy in ordering awards from the

effective date of §3304(a)(12). Not all claimants, however, now

stand on equal footing. Those who have received welfare

payments that would not have been available had they been

receiving unemployment compensation should not be entitled

to dual payments. For these claimants, the welfare payments

have served as a substitute, at least in part, for the omitted

compensation. Individual awards, therefore, should be reduced

to this extent.

Finally, we must consider whether the award, though

equitably justified, violates the bar of the eleventh amendment.

In the context of the eleventh amendment, the Supreme Court

has classified equitable remedies as retroactive or prospective

depending on whether the remedy compensates for past

delinquencies or mandates future compliance. In Edelman v.

Jordan, 415 U.S. 651, 665, 94 S.Ct. 1347, 1356, 39 L.Ed.2d 662

(1974), the Court held that the eleventh amendment proscribes

a retroactive award of welfare benefits which “must inevitably

come from the general revenues” of a state. In this case

therefore, we must determine whether a retroactive award

would be drawn from a general revenue fund of the type

protected by the Court’s decision in Edelman.

-26-

South Carolina’s unemployment compensation fund is “a

special fund . . . administered separate and apart from all

public moneys or funds of the State.” S.C.Code § 41-33-10.

The money paid into the fund consists of employer

contributions, federal funding, investment income, and other

receipts. S.C. Code § 41-33-10. Unemployment compensation

is “deemed to be due and payable . . . to the extent that

moneys are available therefor to the credit of the unemploy-

ment compensation fund and neither the State nor the

Commission shall be liable for any amount in excess of such

sums.” S.C.Code § 41-27-630.

District courts considering the question have concluded

that retroactive remedial relief may lie against state unem-

ployment compensation funds when the funds are special and

the state has expressly protected general revenues from

liability. See Bowen v. Hackett, 387 F.Supp. 1212 (D.R.1.

1975); accord, Bigelow v. Mesc, [1975-1979 Transfer Binder]

Unemp! Ins Rep (CCH) § 21,520 (E.D. Mich., May 15, 1978);

Black v. Caldwell, [1975-1979 Transfer Binder] Unemp! Ins

Rep (CCH) 4 21,485 (N.D.Ga., Jan 6, 1976). Although no

court of appeals has decided whether insulated, separately

financed state unemployment compensation funds are embraced

by the eleventh amendment, two courts have acknowledged the

validity of the analysis undergirding Bowen. See, e. g.,

Fitzpatrick v. Bitzer, 519 F.2d 559, 564-65 (2d Cir. 1975), aff'd

in part and rev'd in part, 427 U.S. 445, 459-60, 96 S.Ct. 2666,

2673, 49 L.Ed.2d 614 (1976) (Stevens, J., concurring);

Hutchison v. Lake Oswego School District, 519 F.2d 961, 966

(9th Cir. 1975). Accordingly, we agree with the district court's

conclusion that a retroactive award against the South Carolina

Employment Security Commission does not violate the eleventh

amendment.

The judgment of the district court is affirmed, subject to

modification of individual awards, and the case is remanded

for further proceedings consistent with this opinion.

-27-

APPENDIX C

United States District Court,

D. South Carolina,

Charleston Division.

Oct. 22, 1980

MARY E. BROWN, on behalf of herself and all others

similarly situated,

and Plaintiffs,

LIBERIA JOHNSON,

Intervening Plaintiff,

Vv

FRANCES E. PORCHER, in her official capacity as Claims

Adjudicator of the South Carolina Employment Security

Commission, and H. C. SLOAN, in his official capacity as

Appeals Referee of the South Carolina Employment Security

Commission, and C. LEM HARPER, in his official capacity

as Chairman of the South Carolina Employment Security

Commission, and CECIL SANDIFER, in his official capacity

as Vice Chairman of the South Carolina Employment Security

Commission, and FRANK E. BALDWIN, JR.., in his official

capacity as Commissioner of the South Carolina Employment

Security Commission,

Defendants.

ORDER

HAWKINS, District Judge.

-28-

INTRODUCTION

This is a case of first impression. It is a class action

challenge to the policies and practices of the South Carolina

Employment Security Commission which deny employment

compensation to women due to pregnancy. The Employment

Security Commission regularly imposes the penalty of

disqualification from employment compensation upon women

who are otherwise eligible for aid if they left their most recent

work due to pregnancy. The disqualification is imposed based

upon a routine finding that women who left work because of

pregnancy voluntarily quit their most recent work without

good cause. Plaintiffs contend these policies abridge federal

statutory and constitutiona! rights. Accordingly, they seek

declaratory and injunctive relief to halt implementation of the

policies of which they complain. Equitable restitution is sought

on behalf of those who have been injured by these policies in

the past. It bears emphasizing that plaintiffs do not seek

payment of unemployment compensation to women who

cannot work because of pregnancy. Plaintiffs seek only to have

compensation paid to women who are able to work and

available for work. !

THE UNEMPLOYMENT COMPENSATION SYSTEM

The unemployment compensation program is a joint

federa!-state effort. Its purpose is to provide partial wage

replacement for workers during periods of unemployment. The

system was created during the Great Depression to ease the

economic burden of unemployment “which so often falls with

crushing force upon the unemployed worker and his family . . .”

S.C. Code Ann. § 41-27-20 (1976). This cooperative system is

governed by both federal and state law. Under it, benefits are

paid to eligible unemployed workers from a special trust fund.

‘Plaintiffs’ action focuses principally on those situations in which women have

returned to the job market and are actively seeking work after having a child. In a few

instances, the issues addressed in this action touch upon women who are seeking work

while they are still pregnant.

This fund is administered “separate and apart from all public

monies or funds of the state.” S.C.Code Ann. § 41-33-10

(1976). The fund is composed of monies paid by employers

who are subject to the State’s unemployment compensation

laws. The system is similar in many respects to a simple

insurance system. The amount of an employer's contribution is

based upon the number of insured workers in his or her

employ and the number of claims made against the employer's

accounts. S.C.Code Ann. § 41-31.30 (1976). It, like other

fringe benefit programs for employees, provides workers with

partial protection against economic loss when they are out of

work. Employer contributions to the unemployment trust fund

can, therefore, be fairly characterized as payments made in lieu

of wages. It is not a “welfare” system, but an entitlement

system.

Funds for the administration of the State’s unemployment

compensation program do not come from the compensation

trust fund. Federal tax dollars pay these latter costs. The

federal funding mechanism is set out in both the Social

Security Act and the Federal Unemployment Tax Act. 42

U.S.C. § 501, et. seg., and 26 U.S.C. § 3301, et seg. These

federal laws allow the states to operate their unemployment

compensation systems free from undue federal interference.

However, as part of this system of operating grants, the federal

government has placed a very limited number of explicit

conditions on receipt of federal operating funds by the states.

See New York Tel. Co. v. New York Labor Department, 440

U.S. 519, 99 S.Ct. 1328, 59 L.Ed.2d 553 (1979). These

standards apply to all states and “in the judgment of Congress

are to be ranked as fundamental.” Steward Machine Co. v.

Davis, 301 U.S. 548, 594, §7 S.Ct. 883, 81 L.Ed. 1279 (1937).?

2The leading case on the issue of fundamental standards is California Department

of Human Resources v. Java, 402 U.S. 121, 91 S.Ct. 1347, 28 L.Ed.2d 666 (1971). In

that case the U.S. Supreme Court ordered the state of California to amend its

procedures to comply with the federal requirement that its administrative system for

payment of unemployment compensation “be reasonably calculated to insure full

payment of benefits when due.” 42 U.S.C. § 502(a)(1). In that action, the court allowed

an individual! claimant injured by California's practices to seek judicial redress under

the federal funding statutes.

-30-

In the instant case, plaintiffs seek to have the court enforce

one of these fundamental standards. It is plaintiffs’ position

that the policies and practices of the South Carolina

Employment Security Commission which deny unemployment

compensation to otherwise eligible women because of

pregnancy, violate the fundamental federal standard set out in

26 U.S.C. § 3304(a)(12). That provision states in relevant part

that “no person shall be denied compensation . . . solely on the

basis of pregnancy or termination of pregnancy.”

South Carolina Law

South Carolina’s unemployment compensation law creates

a three-stage process for determining whether a claimant will

receive payment. The first stage is a decision regarding whether

the worker is “insured” pursuant to S.C.Code Ann. § 41-27-

210. If the person is not “insured”, benefits are denied. If the

worker is “insured”, a decision is next made as to whether he

or she is “eligible” for benefits. Eligibility determinations turn

on the claimant’s ability to work, her availability for work, and

whether the claimant is actually seeking work. S.C.Code Ann.

§ 41-35-110. An “insured” and “eligible” worker may

nonetheless be denied compensation at stage three of the

process. The penalty of “disqualification” can be imposed upon

an otherwise eligible claimant pursuant to S.C.Code Ann. §

41-35-120. By far the two most common reasons for

disqualification are those imposed because (1) an otherwise

eligible worker “has left voluntarily without good cause his

most recent work”, or (2) because the worker was “discharged

for misconduct connected with his most recent work . . .” S.C.

Code Ann. § 41-35-120(1) and (2). Payment of benefits to

those discharged for misconduct generally is deiayed for a

number of weeks. Those found to have “voluntarily quit” their

last job are “indefinitely disqualified” from receipt of benefits.’

‘When disqualified “indefinitely”, an insured worker can only requalify for

unemployment compensation by returning to work and earning an amour” equal to

eight times his or her weekly benefit amount. S.C.Code Ann. § 41-35-120(1).

Ste

The South Carolina Employment Security Commission uses

these two provisions — principally the “voluntary quit”

provision — to deny unemployment compensaticn to

otherwise “insured” and “eligible” women who left their most

recent work because of pregnancy. It has done so since at least

the year 1972.

FINDINGS OF FACT

Parties

Plaintiff Mary E. Brown and Plaintiff Liberia Johnson are

two women who were denied unemployment compensation

because they left their most recent work due to pregnancy.

They sue on behalf of themselves and a class of other women

who are similarly situated. Both plaintiffs were indefinitely

disqualified from receipt of unemployment compensation

based on a finding by the South Carolina Employment

Security Commission that they left their most recent work

“voluntarily” anc “without good cause” because they were

pregnant.

Plaintiff Brown

Plaintiff Mary E. Brown is a member of the Church of

Christ. It is a tenet of belief within the Church of Christ that it

is wrong to artificially terminate a pregnancy prior to term.

Plaintiff Brown had worked full-time as a dietary aide at

Georgetown County Memorial Hospital. She learned she was

pregnant in December 1977. She began to experience physical

discomfort and sickness sometime thereafter. Her physician

advised her not to work if work became too difficult for her.

On April 11, 1978, Plaintiff Brown informed her supervisor

that she would be unable to work the following day. Hospital

employees testified at Mrs. Brown’s unemployment compensa-

tion hearing that Mrs. Brown's position at the hospital was not

of the type which entitled her to a maternity leave. See

-32-

Transcript of Hearing, Claimant Mary E. Brown, 7.4 It is

undisputed that her last day of work was April 12, 1978.

Mrs. Brown gave birth to a son on September 14, 1978. On

or about November 20, 1978, she sought to return to work but

was informed by the supervisor of Food Services at the

hospital that there were no openings in that department. On

November 20, 1978, she applied for unemployment compensa-

tion benefits from the South Carolina Employment Security

Commission. This application for aid was initially denied on

December 15, 1978, by Defendant Frances E. Porcher.

Defendant Porcher gave as the sole reason for the denial that:

Claimant quit her job with [Georgetown County

Memorial Hospital] on 4-12-78 due to pregnancy. This is

a personal reason for quitting which is without good

cause under the SCESC law and a disqualification is

imposed.

The disqualification imposed was for an “indefinite” period.

Mrs. Brown appealed this initial determination. A hearing

was held before Defendant H. C. Sloan on January 5, 1979.

Defendant Sloan rendered his decision on January 10, 1979.

The decision affirmed the indefinite disqualification which had

previously been imposed.°

Filing a timely appeal, Mrs. Brown sought reversal of her

disqualification by the South Carelina Employment Security

“While there is some dispute on the record about whether or not Mrs. Brown was

granted a maternity leave from the hospital, that dispute is not relevant to the issues

tried in this case.

SIn addition to disqualifying Mrs. Brown because she left her most recent work due

to pregnancy, Defendant Sloan also found Mrs. Brown ineligible to receive aid. That

subsequent finding of ineligibility is not at issue in this action. Eligibility

determinations are made on a weekly basis. They depend upon whether a woman has

looked for a job that week. The undisputed record in this case shows that during the

month of January, 1979, Mrs. Brown made a number of in person job hunting

contacts and was subsequently employed as a maid. —- of Mary E. Brown, p.

25, line 10, through p. 29, line 25.)

-33-

- Commission. On February 23, 1979, Defendants Comer*,

Baldwin and Harper, acting in their official capacities as

chairman, vice-chairman and commissioner for the Commis-

sion, affirmed the determination denying Mrs. Brown

unemployment compensation.

Plaintiff Johnson

Mrs. Liberia Johnson worked for Sam Solomon Co., Inc.

in Charleston, S. C., for a period in excess of two years. She

was a Sales clerk. After becoming pregnant, she began

experiencing various physical problems and sickness. She had

to stop working as a result. She also believed she had been

granted a maternity leave.’ Whether she had been or not,

however, is not relevant to the issues in this case. Her last day

of employment at Sam Solomon Co., Inc. was sometime in

August, 1978.

Mrs. Johnson’s child was born on February 25, 1979.

When she returned to her old employer seeking work she was

advised that there was no work available for her.*

On April 20, 1979, Mrs. Johnson filed a claim for

unemployment compensation benefits. On May 8, 1979, a

claims adjudicator for the South Carolina Employment

Security Commission disqualified Mrs. Johnson from receipt

of benefits based upon a finding that Mrs. Johnson had quit

her most recent work without good cause.

Mrs. Johnson appealed this initial determination to an

appeals referee of the Commission. A hearing was held on

May 30, 1979, and a decision on that appeal was rendered on

June 15, 1979. The appeals referee found that Mrs. Johnson's

separation from work

*By oral order of this court on July 14, 1980, Comer was stricken as a defendant

and was replaced by Defendant Harper in his official capacity as Chairman of the

Commission, Defendant Baldwin was replaced by the naming of a new defendant,

Sandifer, in his official capacity as Vice-Chairman of the Commission, and Defendant

Harper was replaced by Defendant Baldwin in his official capacity as a Commissioner.

Transcript of Hearing, Liberia Johnson, |, 2.

"Id. 2.

. occurred as a result of complications resulting from

pregnancy. This is a personal reason not imposed upon her

by the employer. Her quitting is therefore considered to

have been for a personal reason, and personal reasons do

not constitute good cause for quitting available employment

within the purview of the law.

A timely appeal of the decision of the appeals referee was

filed with the South Carolina Employment Security Commis-

sion. Subsequently, Defendants Comer, Harper and Baidwin,

acting in their official capacities as members of that

Commission, affirmed the decision indefinitely disqualifying

Mrs. Johnson from receipt of unemployment compensation on

the grounds that she had voluntarily quit her most recent work

without good cause. Mrs. Johnson has never been found

otherwise ineligible to receive unemployment compensation

benefits by the South Carolina Employment Security Commis-

sion.

Leave to intervene as a plaintiff in this litigation was

granted to Mrs. Johnson by order of this court dated February

13, 1980. That order indicated that Mrs. Johnson was fully

qualified to serve as represetitative of the class sought to be

certified.

The record shows that Plaintiff Mary E. Brown applied for

unemployment compensation on November 20, 1978. She was

unemployed until on or about January 24, 1979. The record

also shows that Planitiff Liberia Johnson applied for

unemployment compensation on April 20, 1979. The date of

her reemployment, if any, is not shown on the record.

Defendants

The named defendants in this action were or are all

employees, agents or members of the South Carolina

Employment Security Commission. At all relevant times, each

was acting in his or her official capacity with the South

Carolina Employment Security Commission. All defendants

-35-

are residents of the State of South Carolina and are subject to

the jurisdiction of this court.

Policies

The policies at issue in this action are described in an

official document published by the South Carolina Employment

Security Commission. That document is entitled Payment of

Benefits to Pregnant and Post- Pregnant Claimants. \t reads in

relevant part:

2. Any individual who voluntarily leaves her most recent

work because of pregnancy is subject to the same

disqualification provision of . . . the South Carolina

Employment Security Law as any other individual who

voluntarily leaves for a personal reason not attributable

to the employment.

3. An individual who is separated by the employer because

of pregnancy will not be subject to a disqualification

period under . . . the Law.

4. A claimant who is separated from an employer because

of a policy which provides for separation of a woman

worker after a certain stage of pregnancy will not bk

subject to any disqualification under . . . the Law.

5. If an individual accepts a maternity leave of absence for

a definite period, the Commission's policy governing

leaves of absence will be followed if a claim is filed prior

to the expiration thereof or after the claimant does not

report back for duty.

(Unemployment Compensation Instruction MC-135 dated

October 16, 1972. This document has not been superceded.)

°A review of decisions introduced into evidence in this case reveals the

Commission's policy regarding maternity leaves of absence. In brief, a claimant will be

denied unemployment compensation if there is no job available for her when she

returns to work after maternity leave if (1) her leave did not have a definite

termination date (Decisions # 78-a-278 and # 78-a-617), or (2) if she attempts to return

to work prior to the end of her maternity leave (Decision # 78-A-98). If the employer's

policy is not to provide workers with maternity leave, no benefits are paid despite the

fact that an individual claimant is able to work and available for work (Decision #

78-A-194).

-36-

A document routinely distributed to claimants for

unemployment compensation by employees of the South

Carolina Employment Security Commission describes Com-

mission policy as follows:

The South Carolina Employment Security Law provides in

Section 41-35-120(1) that if the Commission finds that a

claimant voluntarily left his most recent employment

without good cause, such claimant shall be ineligible for

benefits from the effective date of the claim and continuing

unti! he has performed services in covered employment for

one or more employers and has earned wages for such

services in an amount equal to not less than eight times the

weekly benefit amount established for such individual. The

South Carolina Supreme Court has interpreted the words

“good cause” to mean a cause attributable to or connected

with the claimant’s employment.

Personal reasons, therefore, do not constitute good cause for

quitting. Examples of such personal reasons are as follows:

(d) Due to pregnancy.

The individual who quits because he is dissatisfied with his

job or for personal reasons as stated above will be

disqualified for quitting without good cause.

(document UCB-236, Rev. 11/77)

37

These policies are applied more or less uniformly in all

+ pregnancy-related cases.'° They were used to disqualify

indefinitely both plaintiffs from receipt of unemployment

compensation benefits. They are also applied on all levels of

the decision-making process and in a wide variety of factual

settings. The policies were effectuated, for example, in a case

decided by the Commission itself. In that case, the

Commission imposed an indefinite disqualification on a female

security guard who left work to get away from an x-ray

machine. After becoming pregnant, the woman was informed

by her doctor that she could not continue working around x-

rays. The employer had no other job available for the woman.

Nonetheless, the Commission found “her reason for quitting

was not connected to or attributable to her employment” and

an indefinite disqualification from receipt of unemployment

compensation was imposed (Decision # 79-C-265).

In another case, a woman’s maternity leave had been

rescinded by her employer. The company only granted leaves

to workers after they had been with the firm for more than one

year. The woman had been with the company for nine months.

After having her child, the claimant was disqualified from

receipt of unemployment benefits by an appeals referee for the

Commission for having voluntarily quit her most recent work

without good cause (Decision # 78-A-2403).

“Although the stated policy says that a woman who is fired because she was

pregnant should receive benefits, some women found to have been discharged from

their jobs because of pregnancy have been disqualified from aid under the

“misconduct” provision of S.C.Code Ann. § 41-35-120(2). In the case of one Minnie

re a claims adjudicator, on May 20, 1980 found that a claimant who left work

four days before the bir** «f her child should be disqualified under the “misconduct”

subsection because M.>». + . . 8 “{a}bsentecism, although for compelling reasons,

shows a disregard for emp soyer's interest.” In Decision # 78-A-1732, a disqualification

was imposed upon a woman who was discharged even though “. . . her reasons for

being absent were of a compelling nature. . . .” In addition, Decision # 78-A-5528,

involving a woman who was fired by her employer because she was hospitalized for five

days for pregnancy-related testing, imposed disqualification on a finding that the

woman had been discharged for work connected cause.

-38-

An additional application of the Commission’s policies was

made in case # 78-A-4510. In that case, a legal secretary had

become pregnant and was granted a maternity leave. The law

firm for which she worked dissolved during her absence and

there was no work available for her at the end of her leave. An

appeals referee stated that:

Had claimant not been on maternity leave at the time the

law partnership was dissolved, she would have been laid off

due to lack of work, and would therefore have been eligible

for benefits. However, since she was on pregnancy leave, at

the time, she does not qualify for benefits. Her separation is

considered to have been the result of personal factors.

An indefinite disqualification was imposed.

Another case involving the challenged policies contains the

following findings of fact by an appeals referee for the

Commission:

The employer had a policy for some of its departments

requiring that employees immediately report pregnancy.

This policy was necessitated by the existence of some

evidence that materials used in those departments could be

harmful to a human fetus.

Claimant was aware of this evidence of the possibility of

harm to her baby. Claimant indicated this concern to her

employer and separation took place on mutual agreement

between herself and the employer and involved medical

personnel. Employer conceded that legitimate evidence does

exist which would tend to reinforce claimant’s concern.

In the fact of these findings, the appeals referee imposed a

disqualification. The disqualification was for a five-week

period. (The initial claims adjudication had imposed an

indefinite disqualification as required by S.C.Code Ann. § 41-

35-120(1)). (Decision # 79-A-549.)

-39-

The Commission's policy also was given effect in the case

of a nurse’s aide who refused a 90-day maternity leave; she

believed it too short because she had encountered compli-

cations associated with her pregnancy. Three weeks after

resigning, she suffered a miscarriage. When she returned to her

prior employer, there was no work available for her. She was

disqualified indefinitely from receipt of unemployment com-

pensation (Decision # 78-A-3376).

Receipt of Federal Funds

The South Carolina Employment Security Commission

receives approximately 25 million dollars per year from the

United States Department of Labor to pay for the cost of

administering this State’s unemployment compensation pro-

gram. Accordingly, policies and practices must conform to the

“fundamental standards” set out in relevant federal laws.

CONCLUSIONS OF LAW

Jurisdiction

This court has personal jurisdiction over all of the

defendants. It also has subject matter jurisdiction over the

matters at issue in this action pursuant to 28 U.S.C. § 1337, 28

U.S.C. § 1331 and 28 U.S.C. § 1343(3) and (4), providing for

jurisdiction in District Court for claims arising out of

violations of 42 U.S.C. § 1983. Jurisdiction also exists

pursuant to the doctrine of pendent jurisdiction.

Class Certification

All of the prerequisites of a class action under Rule 23(b)(2)

of the Federal Rules of Civil Procedure have been met in this

action.!!

''This court has previously held that plaintiffs’ claim for amounts witliheld

pursuant to the policies and practices challenged in this action is not barred by the

Eleventh Amendment to the United States Constitution. Order, February 13, 1980.

The class certified in this action is described as being

composed of:

Those workers who have been, are or will be insured

under the South Carolina Employment Security law, who

became or will become pregnant and thereafter whose

employment terminated or will terminate for reasons arising

out of their pregnancy, and who made or will make claims

for unemployment compensation, who for any given week

while their claim was, is or will be pending, were, are or will

be able to work and available for work, and who were or

would otherwise be disqualified from receipt of unemploy-

ment compensation benefits pursuant to S.C.Code Ann. §

41-35-120(1) or (2).'?

As previously ordered by this court, plaintiff Liberia Johnson

is fully qualified to serve as representative of the class of

plaintiffs in this action.'?

Defendants’ Systematic Denial of Unemployment Compensa-

tion to Women Because of Pregnancy Violates Federal Law.

The first issue raised by the plaintiffs is whether the policies

and practices of the South Carolina Employment Security

"To foreclose any possibility that women might be penalized inappropriately in the

future, this class description includes imposition of a disqualification from

unemployment benefits under either the “voluntary quit” provision or the

“misconduct” provision of State law. A penalty based upon a finding that pregnancy-

related absence from work constitutes “misconduct” would be as improper as one

based on a finding that a woman who had to stop working because of the biological

imperatives of pregnancy “voluntarily quit” her job.

‘Defendants’ attempt at trial to relitigate the issue of whether plaintiff Johnson's

separation was pregnancy-related cannot be properly considered by this court. The

issue was conclusively determined in the administrative proceedings which preceded this

litigation. As a matter of state law, the findings of fact of the agency in an

unemployment claim are conclusive. Hyman v. South Carolina Employment Security

Commission, 234 S.C. 369, 108 S.E.2d 554 (1959). Moreover, since defendants failed

to dispute plaintiff Johnson's representativeness at an earlier hearing relating to her

intervention in this action, they are estopped from raising the issue at this late hour.

While it further appears from the record that plaintiff Brown is also qualified to

serve as representative plaintiff, that issue need not be decided here in light of the

conclusion stated above.

-41-

Commission relating to pregnancy violate federal law.

Pursuant to 26 U.S.C. § 3304(a)(12), a state unemployment

compensation system must be designed to ensure that

No person shall be denied compensation under such State

Law solely on the basis of pregnancy or termination of

pregnancy.

When Congress adopted 26 U.S.C. § 3304(a)(12), it

imposed a sweeping ban on withholding unemployment

compensation from women job seekers because they were

pregnant when they left their most recent work. That a broad

prohibition was intended can be readily seen if the statute is

viewed in its proper historical context.

In evaluating historical context, it is important to recognize

that the unemployment compensation system has undergone

constant growth and development over the years.

The early history of federal involvement in unemployment

compensation was detailed by the United States Supreme

Court in California Department of Human Resources v. Java,

402 U.S. 121, 91 S.Ct. 1347, 28 L.Ed.2d 666 (1971). When

originally adopted, the unemployment insurance program was

designed

to give prompt if only partial replacement of wages to the

unemployed, to enable workers “to tide themselves over,

until they get back to their old work or find other

employment . . .” Unemployment benefits provide cash to a

newly unemployed worker “at a time when otherwise he

would have nothing to spend,” serving to maintain the

recipient at subsistence levels without the necessity of his

turning to welfare or private charity. Further, providing for

“security during the period following unemployment” was

thought to be a means of assisting a worker find substantial

equivalent employment. The Feders! ®elief Administrator

testified that the Act “covers a great many thousands of

people who are thrown out of work suddenly. It is essential

-42-

that they be permitted to look for a job. They should not be

doing anything else but looking for a job... .”

Id. 131, 132, 91 S.Ct. 1354 (footnotes omitted)

In addition, the system was intended to stabilize industry in

times of economic decline. As the then Secretary of Labor told

Congress:

I think that the importance of providing purchasing power

for these people, even though temporarily, is of very great

significance in the beginning of a depression. I really believe

that putting purchasing power in the form of unemployment

insurance benefits in the hands of people at the moment

when the depression begins and when the first groups begin

to be laid off is bound to have a beneficial effect. Not only

will you stabilize their purchases, but through stabilization

of their purchases, you will keep other industries from going

downward, and immediately you spread work by that very

device.”

Id. at 132, 91 S.Ct. at 1354.

Since enactment of the first unemployment compensation

program, there have been enormous changes in the American

economy and work force. To keep pace with these changes,

Congress has necessarily adjusted the system periodically. Only

through constant legislative adjustment in a changing economy

can the system function and fulfill congressional objectives.

Examples of these adjustments can be seen, for instance, in the

post-Korean War provision of unemployment compensation

for ex-servicemen (5 U.S.C. § 8521, et seq.); in provision of

benefits to government employees (5 U.S.C. § 8501, ef. seq.); in

provision of insured status to employees of certain non-profit

organizations, state hospitals and institutions of higher

education (26 U.S.C. § 3309(a)(1)(A) and (B)); and, during the

periods of high and prolonged unemployment of the late 1960's

and early 1970's, in passage of the Federal-State Extended

Unemployment Compensation Act of 1970 and its subsequent

amendments (26 U.S.C. § 3304, Note).

-43-

As increasing numbers of ex-servicemen entered the job

market, as government employment grew even larger but less

secure, as non-profit organizations proliferated and as general

unemployment grew, Congress took affirmative steps to make

sure that otherwise en.,ioyable individuals did not fall out of

the mainstream of American economic life. It took these steps

so that newly unemployed workers could avoid “turning to

welfare or private charity” and thereby become members of a

subterranean economy. /d. 132, 91 S.Ct. 1354. It did so

because it recognized that it “is essential that they be permitted

to look for a job.” /d.

In recent years, increasing numbers of women —

particularly in the past decade — have entered the labor force.

Recognition of this change in the composition of the work

force has prompted congressional inquiry into the status of

women workers and an examination of ways in which their

participation in that arena can be encouraged.'4

One obvious obstruction to women seeking equal partner-

ship in economic life is that arising out of their unique

biological role as childbearer. Indeed, even a cursory reading

of the administrative decisions introduced into evidence in this

case illustrates the premise that the process of bringing

children into the world creates special problems for women

who seek to have an economic role as well as a maternal one.

Congressional inquiry into the status of women in the work

force was prompted in part by the United States Supreme

Court. In Turner v. Department of Employment Security and

Board of Review of the Industrial Commission of Utah, 423

U.S. 44, 96 S.Ct. 249, 46 L.Ed.2d 181 (1975), the Court

addressed one of many problems confronting women workers.

Until the Turner decision was rendered, many unemployment

compensation administrators automatically presumed that

Congress has acted in other ways to encourage participation of workers in the

national economy. The Civil Rights Act of 1964, for example, was designed to remove

impediments to full participation in the labor force by minorities and women.

pregnant women could not work. Based upon that presump-

tion, pregnant women were routinely held to be ineligible to

receive unemployment benefits. The U.S. Supreme Court

abruptly halted this practice in Turner.

So far as it went, the Turner case was a positive step in

removing barriers to the participation of women in the labor

market. But the decision left important problems unresolved.

It is an inevitable part of pregnancy that there are

physiological and biological changes in the expectant mother.

It is also an inevitable part of pregnancy that the health and

safety of the life growing within the woman can be affected by

the external environment. Additionally, in our culture, it is an

inevitable part of pregnancy that a woman must take time off

from work to have a child. The biological imperatives of

pregnancy, therefore, require women to seek a hiatus from

participation in the work force. The time at which this hiatus is

sought will, quite naturally, vary from individual to individual

depending upon the circumstances. Some employers try to

accommodate these needs and provide maternity leaves.

Unfortunately, this accommodation is not universal. In cases

where the employer makes no accommodation, another

inevitability enters the picture. There is a termination of

employment and attendant loss of income when the woman

joins the ranks of the unemployed. When a woman returns to

the job market after having a child, she and her family can

suffer real economic hardship if her employer does not re-hire

her and she cannot collect unempleyment compensation. The

Turner decision did not settle the question of whether women

faced with these circumstances could be denied unemployment

compensation.

It was in this historical context and faced with this

unanswered question that Congress passed 26 U.S.C. §

3304(a)(12). Relying upon its power to impose “fundamental

standards” on all unemployment insurance programs, Congress

prohibited denial of benefits to women because of pregnancy

-45-

or its termination. The primary issue to be decided by this

court is whether Congress in its wisdom. answered the question

that Turner did not address. Because this stetute imposes a

“fundamental standard,” appropriate deference must be given

by this court to insure that its full sweep and scope are

achieved.'5

By choosing to impose a “fundamental standard” upon the

States, Congress obviously believed that it was addressing a

problem of major proportions, significantly affecting large

numbers of women in the work force. The device it used and

the words it selected make this conclusion inescapable. It said,

in imposing a “fundamental standard,” that:

No person shall be denied [unemployment] compensation

. solely on the basis of pregnancy or termination of

pregnancy.

In plain, unambiguous language, Congress imposed a

sweeping ban on the use of pregnancy or its termination as an

excuse for denying benefits to otherwise eligible women. These

plain words must necessarily be construed to convey their

ordinary meaning. State of Maine, et al. v. Thiboutot, et vir.,

etc., __ U.S. —_, 100 S.Ct. 2502, 65 L.Ed.2d 555; Dobbs v.

Train, 409 F.Supp. 432 (D.Ga.i975), aff'd, 559 F.2d 946 (Sth

Cir. 1977); Federal Ins. Co. v. Speight, 220 F.Supp. 99

(E.D.S.C.1963). If Congress intended a more limited prohibi-

tion or carved out exceptions, it would not have imposed a

“fundamental standard” using such broad and sweeping

language. It would have relied upon much more specific

‘Precedent exists for reading “fundamental standards” in the context of

unemployment insurance broadly. In California Department of Human Resources v

Java, 402 U.S. 121, 91 S.Ct. 1347, 28 L.Ed.2d 666 (1971), judicial inquiry was made

into the meaning of the mandate that each unemployment system must be designed to

insure full payment of benefits “when due.” In that case, the U. S. Supreme Court

specifically rejected a narrow interpretation of the “when due” standard because

narrow construction would frustrate the congressional objective of guaranteeing early

replacement of lost wages.

language and used appropriately restrictive expressions.'* /n re

Nissen’s Estate, 345 F.2d 230 (4th Cir. 1965). The language it

did use, however, obviously left no room for exceptions. It

does not permit denial of benefits, as in South Carolina, solely

because (1) a woman, for pregnancy-related medical reasons,

voluntarily left work to have a child rather than wait for her

employer to fire her, (2) a woman was refused a maternity

leave or her leave had no fixed terminal date, or (3) a woman

attempted to return to her job either before or after her

maternity leave was scheduled to expire. The plain and

unambiguous words of the enactment do not contemplate

consideration of such irrelevant factors.'’

The foregoing conclusion is supported by an additional

consideration. Congress would not have expended any effort in

this area unless it thought it necessary to remedy a problem.'*

The statute being examined by this court is remedial in nature

and must, therefore, be broadly construed to reach the

problem it sought to end. Peyion v. Rowe, 391 U.S. 54, 88

S.Ct. 1549, 20 L.Ed.2d 426 (1968); Tcherepnin v. Knight, 389

U.S. 332, 88 S.Ct. 548, 19 L.Ed.2d 564 (1967); Wirtz v. Ti Ti

'*Appropriate words, for instance, to restrict the scope of the statute would have

been “no person shall be found unable to work because of pregnancy or termination of

pregnancy.”

"The statute at issue here is unambiguous on its face. Therefore, there is no real

need to consider its legisiative history. It is significant to note, however, that that

history supports the coriclusion stated above. In the Final Report of the House Ways

and Means Committee which considered the bill, its authors indicated that the statute

was proposed to outlaw state statutes viewed to be “inequitable” because they “deny

benefits without regard to the woman's ability to work, availability for work, or efforts

to find work.” These eligibility factors, the authors believed, “make discriminatory

disqualificatio. * because of pregnancy unnecessary.” H.R.Rep.No.94-755, 94th Cong..

Ist Sess., p. 50 (1975).

'*Defendants have argued that 26 U.S.C. § 3304(a\(12) simply bans the states from

presuming that pregnant women cannot work. This reading of the statute is

inappropriate. It reduces the law to a simple codification of the Turner decision. Read

so narrowly, the law has no independent force or effect. Congress should not, however,

be presumed to have adopted useless or unnecessary legislation. Jackson v. Kelly, 557

F.2d 735 (10th Cir. 1977); Knapezvk v. Ribicoff, 201 F.Supp. 283 (D.11. 1962).

-47-

Peat Humus Company, 373 F.2d 209 (4th Cir. 1967), cert.

denied, 389 U.S. 834, 88 S.Ct. 37, 19 L.Ed.2d 94.

The problem addressed by the statute under scrutiny was

that the period of unemployment (and attendant wage loss),

which necessarily accompani, ; pregnancy, can serve to force

otherwise employable women out of the job market. Like all

other unemployed workers, women who have stopped working

to have a child can readily remain effective participants in the

economy only if assistance is provided to encourage their

return to work when they are physically able to do so. By

providing partial wage replacement for pregnancy-related

periods of actual unemployment,'? Congress sought to

facilitate the process of seeking reemployment. Absent some

assistance, many women would be hampered in their effort to

rejoin the work force. Absent, for example, some income to

pay for child care expenses while looking for work, a woman

cannot effectively compete in the employment process with

others. If the statute is to fulfill the remedial purpose of

'*Congress has also acted to provide partial wage replacement for the period when

a woman cannot work because of pregnancy. In an amendment to 42 U.S.C. § 2000(e),

Congress has mandated that women not be excluded from receipt of disability

insurance because they are unable to work due to pregnancy. This change in the Civil

Rights Act assists women over an additional economic hurdle obstructing their

participation in the marketplace. Like 26 U.S.C. § 3304(a\12), the amendment

forecloses the possibility that women would have to choose between a role as wage

earner or a role as mother. Taken together, these two statutes implicitly preclude the

possibility that harsh economic realities which would otherwise attend pregnancy will

interfere with the right of working women freely to choose whether or not to have a

chi'!. Cleveland Board of Education v. LeFleur, 414 U.S. 632, 94 S.Ct. 791, 39

L.Ed.2d 52 (1974); Roe v. Wade, 410 U.S. 113, 93 S.Ct. 705, 35 L.Ed.2d 147 (1973),

Griswold v. Connecticut, 381 U.S. 479, 85 S.Ct. 1678, 14 L.Ed.2d 510 (1965). The fact

that the language of 26 U.S.C. § 3304(a(12) is coextensive with this fundamental

constitutional right (reaching “pregnancy” and “termination of pregnancy”) supports

this conclusion.

In reaching this conclusion, this court is mindful of another historical and

jurisprudential fact. In recent years, courts and Congress have expressly recognized

that the issues involved in the process of bringing life into the world are of

fundamental importance and require special consideration. For example, there has

been recent recognition of the legitimacy of Congress’ desire to promote and protect

the role of women as mother as well as wage earner. E.g.. Harris v. McCrea, — US.

—_—, ——____—., 100 §.Ct. 2671, 2690-92, 65 L.Ed.2d 784.

encouraging a woman's search for a suitable job after having a

child, it must be read to forbid the policies and practices

complained of in this case. For it was those very policies which

were used to deny plaintiffs the partial wage replacement that

would have facilitated their job hunting efforts.

Defendants have urged this court to adopt a narrow view

of the statute under examination and to sanction their practice

of penalizing women because of pregnancy. They, of course,

present various arguments in support of their views.?° None of

these arguments satisfactorily answers the question of why

some women who hve had a child should receive benefits

while other women similarly situated should not.?' The

decision of when to stop working because of pregnancy

necessarily will turn in each individual case on the facts and

circumstances surrounding that particular pregnancy. Whether

departure from work is prompted by environmental or health

hazards on the job, complications arising out of pregnancy or

the biological imperatives of childbirth, the decision to stop

*»During the course of this litigation, the U.S. Department of Labor has been silent

regarding its position on the issues before the court. At trial, however, defendants

produced a copy of a letter from the Labor Department dated July 9, 1980. The

location of the original letter is unknown. The copy of the letter set forth the

conclusion that the challenged policies of the South Carolina Employment Security

Commission are consistent with the Labor Department's understanding of 26 U.S.C. §

3304(a\(12). While due deference is generally given to agency opinions by courts

(Skidmore v. Swift Co., 323 U.S. 134, 140, 65 S.Ct. 161, 164, 89 L.Ed. 124 (1944), in

this case we find the evidence of the agency's view unpersuasive. It does not discuss the

policies or issues involved in this litigation and cites no cases to support its

conclusions. It also discusses concerns of the Labor Department clearly not at issue in

this case; for example, the prospect that benefits would be paid to women who are not

able to work should the plaintiffs prevail. As the foregoing discussion reveals, this

latter concern is an unreal one. Finally, no evidence was introduced indicating what

information had been given to the Labor Department by defendants which led the

agency to reach the conclusion it expressed i:. its letter.

“Plaintiffs have argued that this disparate treatment of otherwise identically

situated women violates the Equal Protection Clause of the Forteenth Amendment.

Because this court finds for plaintiffs on statutory grounds and because, for equitable

and practical reasons, retroactive relief is to be limited to the effective date of the

statute (making independent relief on constitutional grounds unavailable), this court

finds it unnecessary to reach this and plaintiffs’ other constitutional claims.

-49-

working must be left to the woman and her physician in each

case. That medical decision must be respected. Whether the

woman receives unemployment compensation when she can

return to work cannot and should not turn, as in South

Carolina, on the whim or calculations of the employer.

In conclusion, an analysis of the historical context of

unemployment compensation and the passage of 26 U.S.C. §

3304(a)(12) supports plaintiffs’ contention that the remedial

legislation at issue in this case was intended to and plainly did

address an issue inevitably touching a major part of the

American work force. As part of the process of bringing

women into full partnership in American economic life,

Congress continues a trend which began with passage of the

first unemployment compensation law and which is ongoing. It

has and continues to adjust the law to match the present day

realities of our economy.

Based on the foregoing, it is the finding of this court

that the policies and practices of the South Carolina

Employment Security Commission which disqualify otherwise

eligible women from receipt of unemployment compensation

because of pregnancy are in direct contravention of 26 U.S.C.

§ 3304(a)(12). Accordingly, those policies and practices must

be enjoined. Additionally, the class of plaintiffs are entitled to

relief prospectively and, to the extent practicable, retrospec-

tively. Because this court recognizes that (1) the cost of

locating many class members disqualified prior to the effective

date of 26 U.S.C. § 3304(a)(12) may be difficult, and (2) the

amount of any individual claim is relatively small, granting

retroactive relief to those disqualified prior to January |, 1978,

would be so cost ineffective as to be inequitable. Accordingly,

retrospective relief is limited to those otherwise eligible

applicants disqualified from receipt of unemployment compen-

sation because of pregnancy since January |, 1978. Further, it

is the view of this court that the named plaintiffs in this action

and other class members to be identified by name during the

course of this litigation are specifically entitled to retrospective

relief.

-50-

ORDER

In accordance with the preceding rationale, and to remedy

the violations of law occasioned by the policies and practices

of the South Carolina Employment Security Commission

complained of in this action, it is hereby

ORDERED, ADJUDGED AND DECREED, that:

Prospective Relief

(1) The policies and practices of the South Carolina

Employment Security Commission are declared to be in direct

contravention of 26 U.S.C. § 3304(a)( 12);

(2) That the defendants and the South Carolina Employ-

ment Security Commission are permanently enjoined from

formulation or implementation of any policy or engaging in

any practice which disqualifies otherwise eligible women from

receipt of unemployment compensation pursuant to S.C. Code

Ann. § 41-35-120(1) or (2) because those women left their most

recent work for pregnancy-related medical reasons.

(3) That the defendants and the South Carolina Employ-

ment Security Commission are ordered to make appropriate

changes in their various regulations, manuals, notices, policy

statements and other documents, whether used internally or

distributed to the public, in a manner not inconsistent with this

opinion, and furnish a copy of all such revised instruments to

counsel for plaintiffs within thirty (30) days of the date of this

order.

(4) That the defendants and the South Carolina Employ-

ment Security Commission are ordered to furnish unto counsel

for the plaintiffs copies of all decisions, including those of

claims adjudicators, appeals referecs ur commissioners of the

2As previously noted, because no independent relief is available and because

plaintiffs have prevailed on the merits of their statutory claim, this court does not

reach the constitutional issues pressed by plaintiffs.

-51-

South Carolina Employment Security Commission, regarding

women who were pregnant when they left their most recent

work for a period of one (1) year following the date of this

order;

(5) That the defendants and the South Carolina Employ-

ment Security Commission are ordered to post notices in each

of their several offices throughout the State of South Carolina

informing the public of this litigation and its outcome. The

content of this notice is to be agreed upon by counsel for the

respective parties within thirty (30) days of the date of this

order;

(6) That the defendants and the South Carolina Employ-

ment Security Commission are ordered to amend the

document now characterized as UCB-236 to make an

affirmative statement that leaving one’s most recent work due

to pregnancy-related medical problems is good cause for

voluntarily quitting an employment within the meaning of the

South Carolina Employment Security law. Counsel for the

respective parties shall agree upon the content of said

affirmative statement within thirty (30) days of the date of this

order.

Retrospective Relief

(1) The South Carolina Employment Security Commission

shall pay unto the named plaintiffs and class members whose

identities became known at trial an amount equal to the sum

of the weekly benefit amount to which each was entitled times

the number of weeks each was employed and eligible for

benefits, minus a credit for any such amount already paid.

(2) The defendants and the South Carolina Employment

Security Commission shall identify to counsel for plaintiffs

within ninety (90) days of the date of this order all women who

were pregnant when they left their most recent work, but

whose applications for unemployment compensation were

denied since January |, 1978. Counsel for plaintiffs shall have

-52-

access to the records of the Employment Security Commission

regarding all those so identified.

(3) Within one hundred and twenty (120) days of the date

of this order, counsel for the respective parties shall agree upon

a listing of those persons identified pursuant to the preceding

paragraph as to which ones shall be mailed written notice.

Within thirty (30) days thereafter, those persons who are to

receive notice shall be mailed, by first class mail, notice of this

litigation and its outcome and of the individual’s presumptive

right to receive retroactive unemployment compensation

benefits. Names and addresses of persons receiving such

notices shall be mailed by first class mail to counsel for the

plaintiffs. The content and form of said notice shall be agreed

upon between counsel for the respective parties within thirty

(30) days of the date of this order;

(4) The South Carolina Employment Security Commission

shall pay to all those who respond to the aforedescribed notice

within ninety (90) days of its mailing an amount equal to the

sum of the weekly benefit amount to which each individual

was entitled multiplied by the total number of weeks each was

unemployed and eligible for benefits, minus a credit for any

such amounts already paid to any individual. Such payments

shall be made within thirty (30) days after receipt of a notice of

claim from an individual.

(5) Defendants shall give notice to counsel for plaintiffs of

any claim or a class member it seeks to contest. Notice is to be

served on the individual class member and counsel for

plaintiffs within one hundred and twenty (120) days of

preparation of the list of potential class members set forth in

paragraph number (2) of the Retrospective Relief section of

this order. In the event there are any such challenges,

individual hearings before a special master, to be appointed by

this court, will be convened within sixty (60) days of receipt by

the court of a notice or letter from such class member

indicating a desire to contest the decision of the defendants or

-53-

the South Carolina Employment Security Commission. As the

contesting party, defendants will bear the burden of proving

that the claimant is entitled to a lesser amount of benefits than

otherwise presumptively due.

Attorneys Fees

Plaintiffs, as prevailing parties, are entitled to recover their

costs and reasonable atiorneys tees. 42 U.S.C. § 1988.

Plaintiffs are instructed to file their request for a specific

amount, together with supporting affidavits and memoranda,

within thirty (30) days from the date of this order. Defendants

shall have thirty (30) days after service thereof within which to

respond.

Plaintiffs are further entitled to additional attorneys fees

for work performed in implementing this order, including

matters relating to retrospective relief, and may apply to this

court for payment of such additional fees at an appropriate

time in the future.

Time Limits

Any time limits established by this order can be extended

or enlarged on application to this court and upon good cause

shown or by consent of counsel for the respective parties.

APPENDIX D

In The United States District Court

For The District of South Carolina,

Charleston Division.

Civil Action 79-561

MARY E. BROWN, etc.,

Plaintiffs,

vs.

FRANCES E. PORCHER, et al.,

Defendants,

LIBERIA JOHNSON,

Applicant for Intervention.

ORDER

Defendants have moved this Court for Summary Judgment

on the grounds, inter alia, that Plaintiffs’ claim for retroactive

benefits in the captioned case is barred by the eleventh

amendment to the United States Constitution. Oral argument

on this motion was heard on November 20, 1979.

Edelman v. Jordan, 414 U.S. 651 (1974) recognized that

suits for monetary relief to be paid out of a State’s treasury are

barred by the eleventh amendment. Defendants point to

Edelman as a barrier to recovery of retroactive benefits by

Plaintiffs in this action. They argue that the South Carolina

Employment Security Commission is the “alter ego” of the

State of South Carolina and, as such, is immune from a suit

seeking retroactive benefits. Defendants’ reliance on Edelman

is misplaced.

-55-

This precise question was presented in Bowen v. Hackett,

387 F. Supp 1212 (D.R.1. 1975). In a decision that carefully

considered Edelman, the U.S. District Court in Bowen found

that the nature and source of unemployment compensation

funds administered by the Rhode Island Department of

Employment Security were sufficiently independent from the

sovereign that the eleventh amendment did not bar the

recovery sought by the Plaintiff in that case. The two factors of

overriding significance, according to the Court in Bowen, were

that

“{1] a judgment of retroactive benefits would be satisfied

from separate funds which are independent from the

state’s general revenues and [2] that the state has

specifically immunized itself from responsibility for

benefit payments.”

Bowen v. Hackett, supra at 1212, n. 13. Other cases in which

the eleventh amendment has arisen in the context of

unemployment compensation are substantially in accord. See

New York Telephone Co. v. NY State Department of Labor,

434 F. Supp 819, 824 (1977), rev'd on other grounds, 566 F. 2d

388 (1978), affirmed __ U.S. —_, 59 L.Ed 2d 533 (1979)

Bigelow, et. al. v. MESC, (CCH) UNEMPLOY. INS. REPTS,

para. 21,520 (E.D. Mich, May 15, 1978); Black v. Caldwell,

(CCH) UNEMPLOY. INS. REPTS, para. 21,485 (N.D.Ga.,

Jan. 6, 1979). These cases are consistent with a clear line of

judicial authority holding that if a legislature has intentionally

insulated the state treasury from the liability of a legislatively

created instrumentality, that instrumentality does not constitute

an “alter ego” of the State. Recovery against such an

instrumentality is not barred by the eleventh amendment.

Matherson v. Long Island State Park Commission, 442 F. 2d

566 (2d Cir 1971); Urbano v. Board of Managers of New

Jersey State Prison, 415 F.2d 247 (3d Cir 1969), cert. denied

397 U.S. 948 (1970); Harrison Construction Co. v. Ohio

Turnpike Commission, 272 F.2d 337 (6th Cir, 1959).

In the instant case, as in Bowen v. Hackett and other

unemployment compensation cases, the two essential factors

are met. First, the fund from which unemployment benefits are

paid is “independent from the state’s general revenues.” By

statute, South Carolina’s unemployment fund is “. . . a special

fund . . . administered separate and apart from all public

monies or funds of the state.” S.C. Code § 41-33-10. It is

composed of contributions from employers (including interest

and earnings on those contributions) for the payment of

unemployment benefits. S.C. Code § 41-33-10, ef. seq.'

Second, “the state has specifically immunized itself from

responsibility for benefit payment.” Pursuant to statute,

unemployment compensation in South Carolina is due and

payable only

“. . . to the extent that monies are available therefor to the

credit of the unemployment compensation fund and neither

the state nor the Commission [is] liable for any amount in

excess of such sums.

S.C. Code 41-27-630.

Because there are no state treasury funds involved in the

payment of unemployment compensation benefits and the

State has specifically immunized itself from responsibility

for benefit payment, the eleventh amendment does not bar

recovery of retroactive benefits against the unemployment

compensation fund administered by the Defendants.

'The fund can also include money received from the Federal Government paid as

reimbursement pursuant to the Federal-State Extended Compensaion Act of 1970.

Additionally, even the administration of the program is paid for by the Federal

Government pursuant to 41 USC 501 et. seq. and 26 USC 3301 et. seq.

-$7-

BASED ON THE FOREGOING, it is hereby Ordered

that the Defendants’ Motion for Summary Judgment,

insofar as it seeks to interpose the eleventh amendment to

the United States Constitution as a barrier to recovery by

the Plaintiffs, is DENIED.

SO ORDERED.

FALCON B. HAWKINS,

JUDGE, United States District Court

Charleston, South Carolina

February 13th, 1980

ENTERED

2-13-80

-58-

uonisodd¢

No. 81-1972

IN THE

Supreme Court of the United States

OCTOBER TERM, 1981

FRANCES E. PORCHER, in her official capacity as Claims

Adjudicator of the South Carolina Employment Se-

curity Commission; H. C. SLOAN, in his official capacity

as Appeals Referee of the South Carolina Employment

Security Commission; C. LEM HARPER, in his official

capacity as Chairman of the South Carolina Employ-

ment Security Commission; CECIL SANDIFER, in his

official capacity as Vice Chairman of the South Caro-

lina Employment Security Commission; and FRANK

E. BALDWIN, JR., in his official capacity as Commis-

sioner of the South Carolina Employment Security

Commission,

Petitioners,

v.

Mary E. BRowN, on behalf of herself and all others

similarly situated, and LIBERIA JOHNSON,

Respondents.

On Petition fo: a Writ of Certiorari to the United States

Court of Appeals for the Fourth Circuit

BRIEF IN OPPOSITION TO CERTIORARI

ARMAND DERFNER

Counsel of Record

1301 Pennsylvania Avenue, N.W.

Washington, D.C. 20004

(202) 626-3524

Tuomas J. RuBILLo

Post Office Box 1412

Georgetown, South Carolina 29440

(808) 527-1466

[List of Attorneys continued on inside cover]

WILSON - Eres PRINTING Co., Inc. - 789-0096 - WASHINGTON. D.C. 20001

Ray P. McCLaIn

Post Office Box 608

Charleston, South Carolina 29402

(803) 577-3170

JmLL A. HANKIN

700 East Main Street

Richmond, Virginia 23219

(804) 782-2319

LEE ROBINSON

Neig»borhood Legal Assistance Program

438 King Street

Charleston, South Carolina 29403

(803) 722-0107

COUNTER STATEMENT OF QUESTIONS PRESENTED

1. Should this Court review the decision of the Dis-

trict Court (which was unanimously affirmed by the

Fourth Circuit Court of Appeals) that petitioners’ denial

of unemployment insurance to women solely due to preg-

nancy was in violation of 26 U.S.C. § 3304(a) (12)?

2. Did the Eleventh Amendment to the United States

Constitution bar the District Court from awarding un-

employment insurance payments wrongly withheld in the

past when those payments came from a trust fund con-

sisting of money collected from employers and kept in

the U.S. Treasury completely separate and apart from

the State Treasury?

3. Is there any basis for extinguishing the private

right of action in unemployment insurance cases recog-

nized by this Court in California Department of Human

Resources v. Java and succeeding cases and ratified by

subsequent passage of § 3304(a) (12) and numerous other

amendments to unemployment insurance laws by Con-

gress?

(i)

TABLE OF AUTHORITIES

TABLE OF CONTENTS

HOR eRe eR eRe een ene nn nee

COUNTER STATEMENT OF THE CASE ..................

REASONS FOR DENYING THE WRIT

CONCLUSION

APPENDIX

rr

(iii)

iv

12

la

iv

ee = ee > %;

CASES: Page

Bowen v. Hackett, 387 F.Supp. 1212 (D.R.I.

EE EES ae ON REE PSE | a OD ~

Burtton v. Johnson, 588 F.2d 765 (7th Cir. 1976) .. 9

California Department of Human Resources v.

I ninsiannened 3, 9, 10

Carmona v. Sheffield, 475 F.2d 738 (Sth Cir.

TE TS AIS "Tn tee eS Ai 9

Chevron Oil v. Huson, 404 U.S. 97 (1971) ............. 8

Edelman v. Jordan, 415 U.S. 651 (1974) —.............. 8

&

0

Fitzpatrick v. Bitzer, 427 U.S. 445 (1976) —..........

Fusari v. Steinberg, 419 U.S. 379 (1975) ................ 9,1

Great Northern Life Insurance Co. v. Read, 322

RE SSE TS ERI OO 8

Kennecott Copper Corp. v. State Tax Commission,

EE See 8

Indiana Employment Security Board v. U.A.W..,

ES SEE EC 7

Maine v. Thiboutot, 448 U.S. 1 (1980) _........... 10, 11

Merrill Lynch, Pierce, Fenner & Smith, Inc. v.

Curran, —— U.S. —, 50 U.S.L.W. 4457

=== iaieciiateiatealdlialibatiiariastuitiacae 9,10

Middlesex County Sewerage Authority v. National

Sea Clammers Association, 458 U.S. 1, (1981).. 10,11

Pennhurst State School & Hospital v. Halderman,

LS A ESSE 10, 11

Ross v. Horn, 598 F.2d 1312 (3d Cir. 1979) -........ 9

Rothstein v. Wyman, 467 F.2d 226 (2d Cir. 1972).. 8

Skidmore v. Swift & Co., 323 U.S. 184 (1944) ...... 6

St. Martin Evangelical Lutheran Church v. South

Dakota, 451 U.S. 772 (1981) ................-..............- 6

Steward Machine Co. v. Davis, 301 U.S. 548

a ial haan id eintansentaintaltii 3

Turner v. Department of Employment Security,

I I a aaeatnstnictiodencnn 4, 5,6

UNITED STATES CONSTITUTION:

SIE PE eee 7,8

Vv

AUTHORITIES—Continued

Page

UNITED STATES CODE:

TREN eis Lav NREL See 3

I I nina ceieeeninenihetatlinaneilenedicinincnd passim

RESP Se ncn Sama San 3

8 ETE, SL ee are 10

i Ee eee 7,10,11

NSAI ITS at ca enn ed 10, 11

TEES SNe EET 10, 11

NE ES a 5 Sea a 10

EI LS ERE Seo Pee Be oe 7

I 7

FT a 10, 11

CODE OF LAWS OF SOUTH CAROLINA:

ada lai ia i 7,8

EERE TNT Te Ee ke ON A ee 7,8

In THE

Supreme Court of the United States

OCTOBER TERM, 1981

No. 81-1972

FRANCES E. PORCHER, in her official capacity as Claims

Adjudicator of the South Carolina Employment Se-

curity Commission; H. C. SLOAN, in his official capacity

as Appeals Referee of the South Carolina Employment

Security Commission; C. LEM HARPER, in his official

capacity as Chairman of the South Carolina Employ-

ment Security Commission; CECIL SANDIFER, in his

official capacity as Vice Chairman of the South Caro-

lina Employment Security Commission; and FRANK

E. BALDWIN, JR., in his official capacity as Commis-

sioner of the South Carolina Employment Security

Commission,

Petitioners,

v.

Mary E. BROWN, on behalf of herself and all others

similarly situated, and LIBERIA JOHNSON,

Respondents.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Fourth Circuit

BRIEF IN OPPOSITION TO CERTIORARI

COUNTER STATEMENT OF THE CASE

This action challenges petitioners’ policy of penalizing

women because of pregnancy. Prior to this litigation,

petitioners reasoned that women compelled by pregnancy

to stop working temporarily had “voluntarily quit” their

jobs “without good cause.” Brown v. Porcher, 502 F.

Supp. 946 at 950-952 (D.S.C. 1980). Based on this logic,

petitioners routinely denied unemployment insurance pay-

ments to women who were not reinstated by their em-

ployers and, as a result, were actively seeking work after

giving birth.’ In all instances touched upon by this case,

those women were otherwise eligible to receive the pay-

ments in question.

After carefully reviewing petitioners’ policy, the Dis-

trict Court concluded it conflicted with 26 U.S.C. § 3304

(a) (12). That statute provides that “no person shall

be denied [unemployment] compensation under . . . State

law solely on the basis of pregnancy or termination of

pregnancy.” 02 F.Supp. at 957. The Fourth Circuit

unanimously affirmed that judgment. Brown v. Porcher,

660 F.2d 1001 (4th Cir. 1981). In denying petitioners’

request for rehearing, no judge requested a poll on the

suggestion that the case be reviewed en banc. (Peti-

tioners’ Appendix p. 17.) During this process, every issue

now raised by the petitioners was carefully considered by

the lower Courts. To date, not one of the numerous fed-

eral judges who have scrutinized petitioners’ assorted

contentions has expressed any support for them. There

is no indication of a need for additional review of those

contentions by this Court either in the record below or in

the instant Petition.

1In a relatively few instances, this case also deals with women

who are looking for work while still pregnant. 502 F.Supp. at 947,

n. 1.

3

REASONS FOR DENYING CERTIORARI

I.

THE LOWER COURTS PROPERLY FOUND THAT

PETITIONERS’ DENIAL OF UNEMPLOYMENT IN-

SURANCE PAYMENTS TO WOMEN SOLELY DUE

TO PREGNANCY VIOLATED 26 U.S.C. § 3304(a)(12).

In 1976, Congress enacted Public Law 94-566 after a

comprehensive review of the unemployment insurance

system. One of the provisions of that enactment is now

codified at 26 U.S.C. § 3304(a) (12). It reads, in rele-

vant part, that “no person shall be denied [unemploy-

ment] compensation under . . . State law solely on the

basis of pregnacy or termination of pregnancy.” Con-

gress included this provision among a limited number of

“fundamental standards” serving as a precondition to

receipt of substantial federal operating grants by un-

employment insurers.* Those “fundamental standards”

are set out in the Social Security Act, 42 U.S.C. § 501,

et. seg. and the Federal Unemployment Tax Act, 26

U.S.C. § 3301, et seg. They serve to effectuate the Con-

gressional purpose of giving “prompt if only partial re-

placement of wages to the unemployed, to enable workers

‘to tide themselves over, until they get back to their old

work or find other employment, without having to resort

to relief’.” California Department of Human Resources

v. Java, 402 U.S. 121, 1381 (1971) (Burger, C.J.). See

also Steward Machine Co. v. Davis, 301 U.S. 548, 594

(1937).

From the outset of this litigation, the substantive issue

has been whether petitioners had violated the mandate of

26 U.S.C. § 3304(a) (12). This issue was carefully can-

vassed by the District Court. That Court found that

2In recent years, the unemployment insurance program operated

by the petitioners has received about $25 million annually for

administration from the federal government. See 502 F.Supp. at 952.

4

petitioners were routinely denying unemployment insur-

ance payments to women who were able to work, avail-

able for work and looking for a job solely because those

women had previously been forced to stop working to

give birth to a child. In each instance touched upon by

this case, the sole reason the women had left their prior

jobs was pregnancy. In each instance, the sole reason

they were denied unemployment insurance was preg-

nancy. The District Court, therefore, concluded that pe-

titioners’ actions in denying payments violated a clear

federal mandate that “no person shall be denied [un-

employment] compensation . . . solely on the basis of

pregnancy or termination of pregnancy.” 26 U.S.C.

§ 3304(a) (12). The Fourth Circuit unanimously af-

firmed this holding. 660 F.2d 1001. The case was again

subjected to judicial scrutiny when petitioners sought re-

hearing and suggested the matter be reheard en banc.

No judge on the Fourth Circuit requested a poll on the

suggestion for rehearing en banc.

Despite the thorough and exhaustive review of the

substantive issue below, petitioners again assert that they

can disqualify women job-seekers from receiving unem-

ployment insurance payments if those women previously

stopped working to have a baby. In support of their

view, petitioners contend (1) that Congress never in-

tended to legislate in the field of unemployment insur-

ance “disqualifiers”; (2) that the scope of Subsection

(a) (12) is limited by this Court’s decision in Turner

v. Department of Employment Security, 423 U.S. 44

(1975) ; and (3) that the lower Courts erred in reject-

ing the opinion of a Labor Department functionary on

the issue to be decided by the Court. All three proposi-

tions lack merit.

Petitioners first proposition—that Congress never in-

tended to legislate in the field of unemployment insur-

ance “disqualifiers”—is rebutted by the actions of Con-

gress. Public Law 94-566 is not the only Congressional

5

prohibition of this type. Title 26 U.S.C. § 3304(a) con-

tains three other provisions limiting grounds for dis-

qualification from payment of unemployment insurance.

Subsection (5) prohibited disqualification of persons re-

fusing to work in anti-union shops or substandard places

of employment. Subsection (8) banned disqualification of

persons participating in approved job training programs.

Subsection (9) prohibited disqualification due to state of

residence or application. Conversely, Congress has also

imposed mandatory disqualifications in certain instances:

of teachers during summer recess [(a) (6)]; of profes-

sional athletes during their off-season [(a)(13]; and

of foreign nationals lacking work permits [(a) (14) }.

Clearly, Congress has prohibited some “disqualifiers” and

required others. Petitioners’ contention notwithstanding,

Congress has often legislated in this field. In Subsection

(a) (12), it prohibited the kinds of disqualifications pe-

titioners routinely imposed on women job-seekers who

previously had to stop wroking “solely due to pregnancy

or termination of pregnancy.”

Petitioners’ second argument is that the statute was

meant only to codify this Court’s decision in Turner

barring presumptions of inability to work because

of pregnancy. In light of the remedial nature of the

legislation and the broad, unambiguous language of the

enactment, both Courts rejected this interpretation. 660

F.2d at 1004; 502 F.Supp. at 954-957. In attempted re-

buttal, petitioners cite to fragments of the legislative

history to reargue this point. However, “nothing in the

scant legislative history indicates that Congress intended

the statute to be read other than literally.” 660 F.2d at

1004. The excerpts of the legislative history cited in the

instant petition do not support the notion that Turner

was intended to define the scope of § 3304(a) (12). They

suggest only that Turner helped stimulate passage of the

law—a conclusion that the District Court reached when

6

analyzing this issue.* 502 F.Supp. at 954-955. Given the

exhaustive treatment this question has already received,

the instant petition raises no novel question for review

by this Court.

Petitioners’ third argument concerns the lower Courts’

treatment of a letter from the Labor Department pe-

titioners had “solicited during the course of this litiga-

tion.” 660 F.2d at 1004. That letter purported to sup-

port petitioners’ interpretation of the subject statute.

The lower Courts found it to be unpersuasive. They did

so after carefully reviewing its contents in light of prior

opinions of this Court. They considered “the thorough-

ness evident in [the agency’s] consideration, the validity

of its reasoning, [and] its consistency with earlier and

later pronouncements. . . .” St. Martin Evangelical Lu-

theran Church v. South Dakota, 451 U.S. 772, 783 n. 12

(1981) citing Skidmore v. Swift & Co., 323 U.S. 134,

140 (1944). See 660 F.2d at 1004-1005 citing St. Martin

and 502 F.Supp. at 527, n. 20 citing Skidmore. (The

District Court’s opinion predated St. Martin by approxi-

mately 6 months.) There is nothing new, novel or incor-

rect in the analysis of the lower Courts requiring correc-

tive action by this Court.

* The bill containing the present language of 26 U.S.C. § 3304(a)

(12) (HR 10210) was introduced in October, 1975, a month before

this Court’s decision in Turner. It seems unlikely, therefore, that

it was intended as a simple codification of a Supreme Court decision

that was non-existent at the time of its introduction. Given the

law was to become effective in 1978 (660 F.2d 1005), it is also

unlikely that Congress sought to stay enforcement of the Turner

decision for over a year after it was handed down.

7

Il.

THE ELEVENTH AMENDMENT DOES NOT BAR

EQUITABLE RESTITUTION FROM A SPECIAL UN-

EMPLOYMENT INSURANCE TRUST FUND WHICH

IS NOT PART OF THE GENERAL REVENUES OF

THE STATE.

The lower Courts have ordered that equitable restitu-

tion be made in this case to women wrongly denied un-

employment insurance payments because of pregnancy

between January 1, 1978 (the effective date of 26 U.S.C.

§ 3304(a) (12)) and the date of the District Court’s Or-

der. Petitioners argue this restitution is barred by the

Eleventh Amendment. It is not.

The issue of whether restitution from an unemploy-

ment insurance trust fund is barred by the Eleventh

Amendment is not new to this Court. It was the first

question presented in a Petition for Writ of Certiorari

in Indiana Employment Security Board v. U.A.W., 444

U.S. 951 (1979). This Court did not grant certiorari.

In the instant case, the unemployment insurance trust

fund from which restitution is to be made is administered

in the same way as that in Indiana and every other

state. It is not part of the State Treasury. It is a

special insurance trust fund which is always maintained

“separate and apart from all public moneys or funds of

the State.” Code of Laws of South Carolina § 41-33-10.

It is composed of money collected from employers by the

petitioners which is promptly remitted to the United

States Treasury and held for use solely for unemploy-

ment insurance. 42 U.S.C. §§ 503(a) (4), 1103, 1104. /t

is thus not even in the hands of the State.

Moreover, by law, “neither the State nor the Com-

mission shall be liable for any amount in excess of such

sums” already on deposit with the federal government in

the unemployment trust fund. Code of Laws of South

Carolina § 41-27-630. The State treasury, therefore, is

completely insulated from payment of any claims against

the fund, including those “»volved in making restitution

to the respondents.

Given the foregoing, the lower Courts correctly re:og-

nized that respondents have laid no claim to tax money

in the state treasury of South Carolina; that this is not

a suit “by private parties seeking to impose a liability

which must be paid from public funds in the State

Treasury. ...” Edelman v. Jordan, 415 U.S. 651, 663

(1974). See also Fitzpatrick v. Bitzer, 427 U.S. 445,

459-460 (1976) (Stevens, J., concurring); Bowen v.

Hackett, 387 F.Supp. 1212, 1218 (D.R.I. 1975).* 660

F.2d 1006-1007. The Eleventh Amendment, therefore,

is no bar to restitution in this action and the case raises

no new substantive issue for review by this Court.®

*The cases relied upon by the petitioners (Kennecott Copper

Corp. v. State Tax Commission, 327 U.S. 573 (1946) and Great

Northern Life Insurance Co. v. Read, 322 U.S. 47 (1944)) involve

distinctly different considerations. In those cases, taxpayers sought

to recover state taxes they had paid under protest. Under ordinary

circumstances, those taxes were payable into the general revenues

of the State. Because litigation to recover them was commenced,

the money was deposited in escrow pending the outcome of the law-

suits. In one of those cases (Kennecott), the State Treasury could

be held liable for amounts in excess of the taxes in escrow (costs

and interest). See 327 U.S. at 576, n. 2. In this case, funds are

especially earmarked for deposit in a special fund for a special pur-

pose. That fund is always maintained “separate and apart from

all public moneys or funds of the State” and “neither the State

nor the Commission [is] liable for any amount in excess of such

sums.” Code of Laws of South Carolina § 41-33-10 and § 41-27-630.

5 Petitioners also argue that the “doctrine of nonretroactivity”

bars restitution here, citing Chevron Oil v. Huson, 404 U.S. 97

(1971). The Court of Appeals correctly noted that Chevron has

nothing to do with remedies, however. 660 F.2d 1005, n. 6. In

reviewing the propriety of the equitable relief the District Court

awarded, the Fourth Circuit properly relied upon and applied the

test of remedies set down in Rothstein v. Wyman, 467 F.2d 226,

234 (2d Cir. 1972). In doing so, it weighed criteria similar to those

in Chevron, but formulated in a manner more appropriate for

IIt.

THERE IS NO REASON TO EXTINGUISH THE

PRIVATE RIGHT OF ACTION TO ENFORCE CON-

GRESSIONALLY MANDATED “FUNDAMENTAL

STANDARDS” FOR UNEMPLOYMENT INSURANCE.

Petitioners’ final argument is that the “fundamental

standards” for unemployment insurance cannot be en-

forced by private litigants. In making this assertion, pe-

titioners neither cite nor analyze this Court’s unanimous

decision in California Department of Human Resources

v. Java, supra, even though Java was relied upon be-

low in disposing of this question. 502 F.Supp. 947, n. 2.

See also, 660 F.2d at 1005.

In Java, this Court enforced another of the “funda-

mental standards” for unemployment insurance in an

action by private litigants. In the decade since Java, the

case has been cited approvingly and relied upon by this

and other federal Courts in entertaining the challenges

of private litigants to actions of unemployment insurers.

See, for example, Fusari v. Steinberg, 419 U.S. 379

(1975) ; Ross v. Horn, 598 F.2d 1312 (3d Cir. 1979);

Burtton v. Johnson, 538 F.2d 765 (7th Cir. 1976);

Carmona v. Sheffield, 475 F.2d 738 (9th Cir. 1973).

Also during the intervening years, Congress has amended

the unemployment insurance laws on numerous occasions

(including the provision involved in this case) and has

never questioned this Court’s recognition of a private

right of action. Merrill Lynch, Pierce Fenner & Smith,

Inc. v. Curran, —— U.S. ——, 50 U.S8.L.W. 4457 at

evaluating remedies. The Court’s analysis of these more appropri-

ate criteria is thorough, cogent and correct. De novo review of that

analysis is unneecssary.

®*The question of judicial enforcement of these “fundamental

standards” by private litigants was discussed in the briefs in Java.

See, for example, Appellees’ Brief, p. 25.

10

4464-4465 (1982).7 See also, Maine v. Thiboutot, 448

US. 1, 8 (1980).

Arguing a contrary position, petitioners mistakenly

rely on Middlesex County Sewerage Authority v. National

Sea Clammers Association, 453 U.S. 1 (1981) and Penn-

hurst State School and Hospital v. Halderman, 451 U.S.

1 (1971). Neither of those cases involve a statute with

an history of judicial enforcement like the one at issue

here; both address the question of private enforcement

under different laws for the first time. Even if this case

did not involve a cause of action that had been previously

recognized, neither case would be dispositive of the issue.

It has been held that federal statutes are generally

enforceable by private individuals through 42 U.S.C.

§ 1983. Maine v. Thiboutout, supra. This case does not

involve either exception to that general rule.

First, Congress has never suggested that § 1983 is

withdrawn as to federal unemployment insurance. As

the foregoing discussion reveals, the contrary is true.

This conclusion is supported by an even closer analysis

of the question.

Congressional enactments for unemployment insurance

are closely analogous to those found to support a private

right of action in Thiboutot. In both instances, the State

plan for assistance must be federally approved. 42 U.S.C.

502, 503; 42 U.S.C. 602(b) and 604(a). Substantive

standards for payment of assistance are éstablished by

statute in both. 26 U.S.C. 3304(a) and 42 U.S.C. 503;

42 U.S.C. 602(a). States found to be out of compliance

with federal law are cut off from federal funding under

TIn Merrill Lynch, the dissenting Justices expressed woncern that

the majority had relied on congressional inaction in the face of older

lower court decisions erroneously upholding private rights of action.

See 50 U.S.L.W. at 4468, 4469, 4470, 4472. That concern is not

present in this case. Java and Fuseri were both correctly decided

by this Court.

iL

both laws. 42 U.S.C. 503(b) (1); 42 U.S.C. 604(a) (2).

Being substantially identical, it is obvious that both sets of

laws are subject to identical judicial enforcement. Con-

gress has taken no action to alter that perception. Mer-

rill Lynch, supra at 4464-4465. Sea Clammers is not

to the contrary. That action expressly relied on the fact

that there were two other express provisions for suits by

private individuals in the statutes being examined. Their

existence obviated the need for a right of action under

§$ 1983. That is not the case here and was not the case

in Thiboutout.

Second, it is clear that the “fundamental standards”

for unemployment insurance create “rights” enforceable

under § 1988. In Thiboutot, this Court held that plain-

tiffs’ claim to welfare benefits to which they were en-

titled under the federal Social Security Act stated a

private cause of action enforceable through § 1983. The

statute in question there did not create a substantive

federal right to receive welfare payments, except pur-

suant to a qualifying state plan. 42 U.S.C. 602(a). Un-

employment insurance is also payable under the coopera-

tive federal-state system only with respect to an ap-

proved state plan. 42 U.S.C. 503(b). Funding is termi-

nated if either the provisions of 26 U.S.C. 3304(a) or

42 U.S.C. 503(a) are violated. See 42 U.S.C. 503(b) (1),

and (b)(2). This Court recognized in Java, 402 U.S.

at 130, that the objectives of Congress in providing un-

employment insurance were closely analogous to the legis-

lative objectives in enacting the traditional “welfare”

system involved in Thiboutot. It would strain credulity

to suggest that federal law creates enforceable rights

under the welfare section of the Social Security Act

while not creating them under the mirror image pro-

visions for unemployment insurance.*

8 Pennhurst does not support an opposite result. That case involved

nebulous substantive requirements and insufficient federal funding

to carry them out. Here, the mandate of 26 U.S.C. § 3304(a) (12)

12

CONCLUSION

Based on the foregoing, respondents respectfully urge

this Court to deny the petition for writ of certiorari.

Respectfully submitted,

ARMAND DERFNER

1301 Pennsylvania Avenue, N.W.

Washington, D.C. 20004

Counsel of Record

THOMAS J. RUBILLO

Post Office Box 1412

Georgetown, South Carolina 29440

Ray P. McCLain

Post Office Box 608

Charleston, South Carolina 29402

Ju. A. HANKIN

700 East Main Street

Richmond, Virginia 23219

LeE ROBINSON

Neighborhood Legal Assistance Program

438 King Street

Charleston, South Carolina 29403

is clear and unambiguous. There is also ample funding to carry out

that mandate. Petitioners receive about $25 million per year from the

federal government for administration. See n. 1, supra. According

to their 44th Annual Report, for 1978-1979, for example, they

collected about $110 million from employers and paid approximately

$64 million of that to workers. As of June 30, 1979, they had nearly

$159 million on account in the unemployment insurance trust fund.

These figures drawf the $4 million petitioners have estimated are

due in retrospective payments in this case.

la

APPENDIX

Code of Laws of South Carolina 1976, as amended:

§ 41-33-10. Creation and content of unemployment

compensation fund.

There is established a special fund, to be known as

the unemployment compensation fund, which shal! be

administered separate and apart from all public

moneys or funds of the State. This fund shall con-

sist of :

(1) All contributions and payments in lieu of con-

tributions collected under Chapters 27 through 41 of

this Title;

(2) Interest earned upon any moneys in the fund;

(3) Any property or securities acquired through

the use of moneys belonging to the fund;

(4) All earnings of such property or securities;

(5) All money credited to this State’s account in

the unemployment trust fund pursuant to § 903 of

the Social Security Act, as amended ;

(6) All money received from the Federal Govern-

ment as reimbursements pursuant to § 204 of the

Federal-State Extended Compensation Act of 1970;

and

(7) All money received for the fund from any

other source. All money in the fund shall be com-

mingled and undivided.

Code of Laws of South Carolina 1976, as amended:

§ 41-27-630. Liability of State and Commission for

payment of benefits.

Benefits shall be deemed to be due and payable

under Chapters 27 through 41 of this Title only to

the extent provided in such chapters and to the ex-

2a

tent that moneys are available therefor to the credit

of the unemployment compensation fund and neither

the State nor the Commission shall be liable for any

amount in excess of such sums.

Sa} pallu

aU 10} Jaulg,

SnolWly

a

ere

No. 81-1972

In the Supreme Court of the

OCTOBER TERM, 1982

CLERK

FRANCES E. PORCHER, ET AL,, PETITIONERS

v.

Mary E. BROWN, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AM’CUS CURIAE

Rex E. LEE

Solicitor General

J. PAUL McGRaTH

Assistant Attorney General

ROBERT E. Kopp

MARLEIGH D. Dover

Attorneys

Department of Justice

Washington, D.C. 20530

(202) 633-2217

a mr ee een a remem

QUESTION PRESENTED

The United States will address the following

question :

Whether a state violates the Federal Unemploy-

ment Tax Act, 26 U.S.C. 3304(a) (12), by imposing

a disqualification from receipt of unemployment bene-

fits on women who voluntarily leave their jobs for

reasons related to pregnancy, when it imposes an

identical disqualification on all claimants who volun-

tarily leave their jobs because of a physical illness

or disability unrelated to their employment.

(1)

TABLE OF CONTENTS

TABLE OF AUTHORITIES

Cases:

(Alaska Employment Security Commission) Ap-

peal Referee Decision No. A-2063, digested in

1B Unempl. Ins. Rep. (CCH) (Alaska { 8027) ..

Batterton v. Francis, 482 U.S. 416 .........................-

California Department of Human Resources De-

velopment V. Java, 402 US. 121 ..........................

Cantrell v. Kentucky Unemployment Insurance

Commission, 450 S.W.2d 235 ~...........-.-.---.-----0-0--+

Conover V. Employment Division, 26 Or. Ct. App.

RE eee See

Davis v. Labor & Industrial Relations Commission,

a nillatalines

DeLorenzo Vv. Board of Review, Division of Em-

ployment Security, 54 N.J. 361, 255 A.2d 248...

Denby v. Board of Review of Industrial Commis-

OB gf EO a ee eee

Diversified Asphalt, Inc. v. Labor & industrial Re-

lations Commission, 622 S.W.2d 716 _................

Dohoney V. Director of Division of Employment

Security, 377 Mass. 333, 386 N.E.2d 10 .............

E. I. du Pont de Nemours & Co. v. Collins, 422

ERS SSR eNO Pies: neon eee: ema

Garrow v. Levine, 52 A.D.2d 708, 382 N.Y.S.2d

SAE a a ie 7 Ee

(Georgia) Board of Review Decision No. 131,

digested in 3 Unempl. Ins. Rep. (CCH) (Ga.

RIES RRS eS EE A PS

(Georgia) Board of Review Decision No. 2230,

digested in 3 Unempl. Ins. Rep. (CCH) (Ga.

| RRS ERIS TRC ER 2), ARE ee ae

21

IV

Cases—Continued

Goldman Vv. Ohio Bureau of Employment Services,

digested in 8 Unempl. Ins. Rep. (CCH) (Ohio

Ws TIMID ccciscaithctes thciciinahueniitenbadieapiteninns dinileamaiidiidibeameas

(Hawaii Commission of Labor and Industrial Rela-

tions) Comm. Decision No. 0-9-39, digested in 4

Unempl. Ins. Rep. (CCH) (Hawaii {| 1975.404) ..

Heimsoth v. Kellwood Co., 211 Neb. 167, 318

I eA ac ner seer eee co one mee

Lyons v. Appeal Board of the Michigan Employ-

ment Security Commission, 363 Mich. 201, 108

PIE TED sncticnilitsnccsainnbiedingitsansitdiaiiantiabiniesieai

Monroe v. Standard Oil Co., 452 U.S. 549 —............

Murphy V. Fascio, 115 R.1. 38, 340 A.2d 137 ..........

John R. Nelson, Pike Motor Co., & Employment

Security Commission, In re, (North Carolina

Employment Security Commission) Decision

No. 4184, aff’d by judgment of N.C. Super. Ct.,

Wayne County, reprinted in 8 Unempl. Ins. Rep.

9 3 | ee

New York Telephone Co. v. New York Department

ff j | ee

(North Dakota job service) Appeal Tribunal Deci-

sion No. AT-4485-57, digested in 8 Unempl. Ins.

Rep. (CCH) (N.D. 4 1975.401) -.........................

North Haven Board of Education v. Bell, No. 80-

EF BF een

Ohio Bureau of Employment Services v. Hodory,

GE: Ts IEE scien istdicasiteseeiinininienintidiacebipatinniadiines

RR SLT Pr Re

Reiter v. Sonotone Corp., 442 U.S. 330 _..................

Ribera v. Employment Security Commission, 92

OI

Robinson v. Unemployment Security Board of Re-

view, 181 Conn. 1, 434 A.2d 298 ........--......

Rodrigues v. Employment Security Department,

reprinted in 7 Unempl. Ins. Rep. (CCH) (Nev.

Ty ID icnticaninsieinestittgecepcicaintgteiciattiellnesietastaniiiesitiiadaiile

Sage Club, Inc. v. Employment Security Commis-

*. § re

Cases—Continued Page

South Central Bell Telephone Co. v. Department

of Employment Security, 389 So.2d 790 ............ 18

Southeastern Community College v. Davis, 442

RE FEE A RE RR OS Se 8

State v. Hix, 182 W.Va. 516, 54 S.E.2d 198 ........... 18

State Hospital, Jamestown v. North Dakota Em-

ployment Security Bureau, 239 N.W.2d 819...... 22

Steward Machine Co. v. Davis, 301 U.S. 548 .......... 14

Stone Mfg. Co. v. South Carolina Employment

Security Commission, 219 S.C. 239, 64 S.E.2d

A EE ee nee 4,15

Turner Vv. Department of Employment Security,

EEE ESS A ar ae 9

(Utah Department of Employment Security) Ap-

peal Referee Decision No. 49-A-639, digested in

10 Unempl. Ins. Rep. (CCH) (Utah { 1975.09) .. 22

(Virginia Employment Commission) Comm. Deci-

sion No. 5000-C, digested in 10 Unempl. Ins.

Rep. (CCH) (Va. 9 8280.08) ............................. 21

(Virginia Employment Commission) Appeal Ex-

aminer Decision No. VI-71-1840, digested in 10

Unempl. Ins. Rep. (Va. { 8237) ~......................... 21

Wells v. Lockwood, 371 So.2d 1192 —.........0.00...... 19

Statutes, regulations and rules:

Civil Rights Act of 1964, Title VII, 42 U.S.C.

<5 TEST ERE aennae 23

Federal Unemployment Tax Act, 26 U.S.C. -

i ce acerrrennenmenmatibnesion 1

RS PT ee ila 2

EE ee ea 2

I cceeleliotenll 2

LE ES 2, 3,12

ft * & ern passim

26 US.C. 3804(a) (18) .................................... 3

Be I ID acne icccnctecsecnsancessecsoece’ 3}

ERE a CEN 2-8, 6

Rehabilitation Act of 1973, Section 504, 29 U.S.C.

REP A Eee. Ie one 8

vi

Statutes, regulations and rules—Continued Page

Social Security Act of 1935, ch. 531, 49 Stat. 620,

42 U.S.C. (& Supp. . /) 301 et seq.:

Title III, 49 Stat. 626 (42 U.S.C. (& Supp.

Be I as cicinieticsnisininhinintiaiiaceniinnecseieaiieds 1

OL eS eae ads 2

£0 SRE et ered es en 3

2 FRESE 2,12

Title IX, 49 Stat. 6839 (26 U.S.C. 3301 et

GED ccsisictsiiccisininannnipldeiciniiiiepiiiaiinnapinipesenietianeinnnienins 1

es a cilipsenmnliian 5

Ala. Code § 25-4-78(2) a.1 (Supp. 1981) -.............. 17, 20

Ark. Stat. Ann. § 81-1106(a) (Supp. 1981) —........ 20

Colo. Rev. Stat. § 8-73-108(4) (b) (Supp. 1980) .... 20

Del. Code Ann. tit. 19, § 3315(8) (1979) -............... 20

Fila. Stat. Ann. § 443.101 (West 1981) —.................. 20

Idaho Code § 72-1366 (Supp. 1981) -...................... 22

Ill. Ann. Stat. ch. 48, § 431.B.1 (Smith-Hurd Supp.

SED cecsscuiiniaialenidittadlcethcttbaiiettlindslieicehteesinbibdinanalal 20

Ind. Code Ann. § 22-4-15-1(a) (Burns Supp.

STII cdi iaitestieesd cian iaesincainetteiinandsiaennssilibtipemendennntniiin 17, 20

Iowa Code Ann. § 96.5.1.d (West Supp. 1982-

EERE Ere oO oy sooren veo om ran? rem Ne IO e oae 17, 20

Kan. Stat. Ann. § 44-706 (1981) -............................ 20

Me. Rev. Stat. Ann. tit. 26, § 1193.1.A (Supp. 1981-

SEER SREY Sr SS EA ana ee 20

Md. Ann. Code art. 95A, § 6(a) (Supp. 1982) —...... 20, 23

Minn. Stat. Ann. § 268.09, subdivision 1(b) (West

SINE TEIIIIET - Glincicinnssononsietsialindndiiiaiaianmestenbaininnserincse 20

Miss. Code Ann. § 71-5-513A.(1) (Supp. 1982) ...... 20

Mont. Code Ann. § 39-51-2302(2) (1981) —............ 20

Okla. Stat. Ann. tit. 40, §§ 2-404, 2-405 (West

SII UIE <:ccsiesdieeillcaiietineesnasiensmsbsibnantnsinands 19

S.C. Code Ann. § 41-35-120 (Law. Co-op. 1977 &

I, TI tial aa lacta eesti ateanindeiaitltgeetianiiannanin 3,4

S.D. Codified Laws Ann. § 61-6-3 (1978) —............ 20

Tenn. Code Ann. § 50-1324(A) (Supp. 1982) ........ 20

Tex. Rev. Civ. Stat. Ann. art. 5221b-3(a) (Vernon

NRE LEE FSET EO 20

Utah Code Ann. § 35-4-5 (Supp. 1981) .................. 22

vil

Statutes, regulations and rules—Continued Page

Vt. Stat. Ann. tit. 21, § 1344(a) (3) (Supp. 1982) .. 19

Wash. Rev. Code Ann. § 50.20.050(2) (b) (Supp.

SD cevticenmnunsconnetntninceematinvinemtnasiasmaremmnsees 20

W.Va. Code § 21A-6-3 (Repl. 1981) ....................... 18

Wisc. Stat. Ann. § 108.04(7) (c) (West 1974) ........ 20

Arizona Department of Employment Security,

Benefit Policy Rules, Ch. 3, Art. 50, Subj. 235

(1978), reprinted in 2 Unempl. Ins. Rep. (CCH)

I ial a esa 19-20

California Unemployment Insurance Rule No.

1256-15(b), reprinted in 2 Unempl. Ins. Rep.

I 20

District of Columbia Unemployment Compensation

Act Rule 4612.7, reprinted in 3 Unempl. Ins.

MR, 19

(Hawaii Commission of Labor and Industrial Re-

lations) Regulation II—Rule 5(c), reprinted

in 4 Unempl. Ins. Rep. (CCH) (Hawaii {| 5314).. 21-22

(Idaho Employment Security) Rule 202-46, re-

printed in 4 Unempl. Ins. Rep. (CCH) (Idaho

a a 22

New Hampshire Unemployment Compensation

Regulation No. 21, reprinted in 7 Unempl. Ins.

Rep. (CCH) (N.H. 7 5021) ................................ 20

(Oregon State Employment Division) Adminis-

trative Rule § 30-38(6), reprinted in 8 Unempl.

Ins. Rep. (CCH) (Or. 4 5217C) —......0000000....... sa 22

Miscellaneous :

(Alaska) Employment Security Commis: on Man-

ual (1955), digested in 1B Unempl. Ins. Rep.

(CCH) (Alaska 7 1975.256) ................................ 21

Hearings on S. 1130 Before the Senate Comm. on

Finance, 74th Cong., Ist Sess. (1935) 2.0.0... 13-14

H.R. Rep. No. 94-755, 94th Cong., Ist Sess.

SRST: SRA roa ese a a ee 11, 12, 15

1974 Pa. Att’y. Gen. Op. 29 (Official Op. No. 9).... 20

Vur

Miscellaneous—Continued Page

Phase I: Existing Unemployment Compensation

Programs: Hearings Before the Subcomm. on

Unemployment Compensation of the House

Comm. on Ways and Means, 94th Cong., 1st

aS ers | va 11,12

S. Rep. No. 628, 74th Cong., Ist Sess. (1935) ........ 13

S. Rep. No. 94-1265, 94th Cong., 2d Sess. (1976) .. 10

2A C. Sands, Statutes & Statutory Construction

OS ee en. ae 9

Iu the Supreme Court of the United States

OCTOBER TERM, 1982

No. 81-1972

FRANCES E. PORCHER, ET AL., PETITIONERS

v.

Mary E. BROWN, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

This brief is filed in response to the Court’s invita-

tion to the Solicitor General to express the views of

the United States.

STATEMENT

1. Congress established a nationwide unemploy-

ment insurance system in 1935 in Titles III and IX

of the Social Security Act, ch. 531, 49 Stat. 626, 639."

The system is a joint federal-state program, the pur-

pose of which is to provide partial wage replacement

1 Titles III and IX are now found at 42 U.S.C. (& Supp.

IV) 501 et seq. and 26 U.S.C. (& Supp. IV) 33801 et seq.

(1)

2

for eligible workers during periods of unc-uploy-

ment.* Under the Federal Unemployment Tax Act

(FUTA), 26 U.S.C. 3301 et seg., a payroll tax is

levied on employers. An appropriation in an amount

equal to the proceeds of the tax is used primarily to

fund administrative costs of state programs admin-

istered in accordance with federal statutory require-

ments. See 42 U.S.C, 502, 1101. Employers within

a state receive the benefit of credits against the

FUTA tax for their contributions to state unemploy-

ment compensation funds if the state has adopted

an unemployment compensation statute that meets

federal requirements. See 26 U.S.C. 3302, 3304. All

50 states, the District of Columbia, Puerto Rico, and

the Virgin Islands have adopted qualifying unemploy-

ment compensation laws. Payment of unemployment

benefits is funded largely from state unemployment

funds.

Federal statutes define the basic outlines of the un-

employment insurance system, but each state has its

own comprehensive statute governing the program

within that state. All state statutes must conform to

certain federal standards set out in 26 U.S.C. 3304

(a) and 42 U.S.C. 503(a). The federal standard at

issue in this case, found at 26 U.S.C. 3304(a) (12),

prohibits states from denying unemployment compen-

sation “solely on the basis of pregnancy or termina-

tion of pregnancy.” The Secretary of Labor has the

statutory responsibility for determining whether

state iaws fail to conform to federal standards. 26

2 See, e.g., Batterton v. Francis, 432 U.S. 416, 427 (1977);

Ohio Bureau of Employment Services v. Hodory, 431 U.S. 471,

482-484, 487 n.15 (1977); California Department of Human

Resources Development Vv. Java, 402 U.S. 121, 130-131 (1971).

3

U.S.C. 3304(c); 42 U.S.C. 503.° In other respects

the details of the state programs are left to each

state.

All states apply some version of a three-part test

to determine whether an unemployed individual is

entitled to receive umemployment benefits: (1) has

the claimant earned a specified amount of wages or

worked a specified number of weeks in covered

employment during a one-year “base period’’?;

(2) if so, is the claimant “eligible”? (generaliy

referring to whether the employee is able to work

and available for work at the time he or she

applies for benefits); and (3) if the claimant has

earned the requisite amount of wages and is eligible,

is he or she nevertheless “disqualified” for some rea-

son?* Although the South Carolina policy at issue in

this case is sometimes discussed in terms of eligibil-

ity, it actually involves disqualification, rather than

eligibility, in the more precise sense of those terms.

Section 41-35-120 of the South Carolina Code gov-

erns disqualification of claimants. That section pro-

vides, inter alia, that a claimant will be ineligible for

unemployment benefits “[i]f the [South Carolina

Employment Security] Commission finds that he has

® Each year, on October 31, the Secretary must certify each

state whose unemployment compensation law he has previ-

ously approved under 26 U.S.C. 3304(a). The Secretary is

directed, however, not to certify a state if, after reasonable

notice and opportunity for a hearing, he finds that a state law

is not in conformity with all the requirements of 26 U.S.C.

3304(a) or that the state is not complying substantially with

such requirements. 26 U.S.C. 3304(c).

* The most common reasons for disqualification are leaving

a job voluntarily without good cause, discharge on the basis

of misconduct, and refusal to accept suitable employment.

Federal standards require states to impose disqualifications in

certain other cases. See, e.g., 26 U.S.C. 3804(a) (18), (14).

4

left voluntarily without good cause his most recent

work * * *.”*° S.C. Code Ann. § 41-35-120(1) (Law.

Co-op. 1977 & Supp 1981). The South Carolina Su-

preme Court has construed the term “good cause” as

limited to a cause attributable to or connected with a

claimant’s employment.* The South Carolina Employ-

ment Security Commission has issued an explaration

listing 12 examples of personal reasons that would not

constitute “good cause” within the meaning of the stat-

ute, including, for example, lack of transportation or

the need to care for sick members of the family (C.A.

App. 122). Also included among these examples are

departures “due to pregnancy” or “for health reasons

(even if under doctor’s orders) unless job con-

nected.” * In 1972, the Commission issued Unemploy-

ment Compensation Instructions No. MC-135, which

explains payment of benefits to pregnant and post-

pregnant claimants (C.A. App. 120-121). The in-

structions state in part: “The statutory requirement

that a claimant must be able and available to work

5 Disqualification under this provision continues until the

claimant has secured employment again and has earned wages

equal to at least eight times the weekly benefit amourt.

* See Stone Mfg. Co. v. South Carolina Employment Secur-

ity Commission, 219 S.C. 239, 64 S.E.2d 644, 647 (1951).

7 Other personal reasons that do not constitute good cause

for quitting under South Carolina law are (C.A. App. 122):

job dissatisfaction without recent material change in working

conditions; moving to another location; serving a jail or

prison sentence; friction with a supervisor or co-workers un-

less harrassment by the employer or co-worker (s) is involved;

distance to and from work without recent substantial change

in job location; lack of child care; domestic problems; and

work too difficult without recent material change in working

conditions. South Carolina awards compensation to employees

whose employers gran‘ maternity leave and to employees who

are discharged because of pregnancy (Pet. App. 20 n.2).

and must actively seek work can be no more strin-

gently administered for pregnant and post-pregnant

claimants than for other claimants who have had a

temporary physical disability” (id. at 120). In addi-

This text is long and has been trimmed here. Open the source document for the complete record.