The New York State Industrial Commissioner terminated
petitioners' registrations and liability for state taxation as
employers under the New York State Unemployment Insurance Law, and
the New York Court of Appeals sustained such action, on the ground
that it was required by the Communist Control Act of 1954, which
declares that the Communist Party of the United States is an
instrumentality of a conspiracy to overthrow the Government of the
United States by force and violence, and that it and any of its
successors
"are not entitled to any of the rights, privileges, and
immunities attendant upon legal bodies created under the
jurisdiction of the laws of the United States or any political
subdivision thereof."
This termination of state registration had the indirect effect
of increasing petitioners' tax rate under the Federal Unemployment
Tax Act from about 1% to 3%. The Internal Revenue Service continued
to treat petitioners as covered by the latter Act, and to collect
taxes from them thereunder.
Held: the Communist Control Act of 1954 does not
require exclusion of petitioners from New York's unemployment
compensation system; the judgment is reversed, and the case is
remanded for further proceedings. Pp.
367 U. S.
389-395.
8 N.Y.2d 77, 168 N.E.2d 242, reversed and case remanded.
MR. JUSTICE HARLAN delivered the opinion of the Court.
We here review the upholding by the New York Court of Appeals of
the action of the New York State Industrial
Page 367 U. S. 390
Commissioner terminating petitioners' registration and liability
to state taxation as employers under the New York State
Unemployment Insurance Law. N.Y. Labor Law, §§ 511, 512, 517, 518,
570, 577, 581. This determination was effected under what was
conceived to be the compulsion of a federal statute, the Communist
Control Act of 1954, 68 Stat. 775, 50 U.S.C. §§ 841-844, which
provides, in pertinent part:
"Section 2. The Congress [hereby] finds and declares that the
Communist Party of the United States, although purportedly a
political party, is in fact an instrumentality of a conspiracy to
overthrow the Government of the United States . . . . Therefore the
Communist Party should be outlawed."
"Section 3. The Communist Party of the United States, or any
successors of such party regardless of the assumed name, whose
object or purpose is to overthrow the Government of the United
States, or the government of any State, Territory, District, or
possession thereof, or the government of any political subdivision
therein by force and violence,
are not entitled to any of the
rights, privileges, and immunities attendant upon legal bodies
created under the jurisdiction of the laws of the United States or
any political subdivision thereof; and whatever rights, privileges,
and immunities which have heretofore been granted to said party or
any subsidiary organization by reason of the laws of the United
States or any political subdivision thereof, are hereby
terminated: Provided, however, That nothing in this section
shall be construed as amending the Internal Security Act of 1950,
as amended."
(Emphasis supplied.)
New York has an "experience rating" scheme whereby employers
with consistent records of high employment
Page 367 U. S. 391
levels are taxed at a lower rate than would otherwise obtain.
Under the Federal Unemployment Tax Act, 26 U.S.C. §§ 3301-3308, an
employer is entitled to a federal tax credit for the amount paid in
state unemployment taxes. If the state taxing structure allows for
a reduction in tax rate to employers with good employment records
under a federally certified "experience rating" system, the federal
tax is nevertheless reduced by the highest rate imposed by the
State, so that the employer retains the full benefit of his
experience rating reduction. Thus, before the termination of their
New York registration, the combined federal and state tax rate of
the petitioner, Communist Party, U.S.A., was 1%, and that the of
the petitioner, Communist Party of New York State, was, according
to its representations, 1.1%. The effect of the registration
termination as to both was to increase the rate to 3%, the rate
provided in the federal statute. [
Footnote 1]
We granted certiorari, 364 U.S. 918, to consider the
petitioners' claims that New York has mistakenly construed the
Communist Control Act of 1954 to require termination of their
status as employers under the New York statute, and, contrariwise,
that both § 3 of the Communist Control Act, so construed, and New
York's termination of registration infringed the Constitution of
the United States. [
Footnote
2]
We must reject at the outset respondent's contention that the
Court of Appeals' decision rested on a determination, based on
judicial notice which was not displaced by any proof, that
petitioners were not employers within the
Page 367 U. S. 392
meaning of § 512 of the New York Labor Law, but a criminal
conspiracy. It is entirely clear that the Industrial Commissioner
and the Unemployment Insurance Referee, [
Footnote 3] the Unemployment Insurance Appeal Board,
[
Footnote 4] and the Court of
Appeals [
Footnote 5] all based
their determination squarely on what they conceived to be the
compulsion of the Communist Control Act. The Court of Appeals'
amended remittitur, which states that the questions of the
construction and constitutionality of the Communist Control Act
"were presented and necessarily passed upon," puts the matter
beyond doubt. [
Footnote 6]
Following the familiar rule that decision of Constitutional
questions should be avoided wherever fairly possible, we turn at
once to the federal statute, which this Court has not heretofore
had occasion to construe. Apart from unrevealing random remarks
during the course of debate in the two Houses, there is no
legislative history which in any way serves to give content to the
vague terminology of § 3 of the Communist Control Act. The
Page 367 U. S. 393
statute contains no definition, and neither committee reports
nor authoritative spokesmen attempt to give any definition, of the
clause
"rights, privileges, and immunities attendant upon legal bodies
created under the jurisdiction of the United States or any
political subdivision thereof."
Respondent would have us construe this language to mean that,
wherever a situation advantageous to the petitioners occurs by
reference to the statutory or common law of a State or any other
government in the United States, this is to be considered a
"right," "privilege," or "immunity," and must be deemed to be
withheld by the Act. On this basis, New York has reasoned that
liability to taxation as an employer, though not a privilege in the
ordinary sense of the term, is nonetheless a recognition of the
common law contractual capacity to employ, and, as such, is
advantageous to petitioners; and further, that an employer whose
employees are unable to benefit from state and federal unemployment
insurance programs will be disadvantaged in finding and keeping
employees. Therefore it was thought that the Communist Control Act
required termination of the registration of petitioners as
employers.
This interpretation, raising as it does novel constitutional
questions the answers to which are not necessarily controlled by
decisions of this Court in connection with other legislation
dealing with the Communist Party, must, we think, be rejected. Not
only does the language of the statute fall far short of compelling
such an interpretation, but there are good indications that the
particular result of barring petitioners as employers under state
and federal unemployment insurance systems was not within the
contemplation of this Act. The Internal Revenue Service has
continued to collect taxes from petitioners under the Federal
Unemployment Tax Act, [
Footnote
7]
Page 367 U. S. 394
and Congress, in 1956, has dealt in terms with a like matter,
excluding from federal old-age, survivors and disability benefits,
42 U.S.C., c. 7, subchapter II, employment with any organization
required to register by the Subversive Activities Control Board and
removing from the coverage of the Federal Insurance Contributions
Act, 26 U.S.C., c. 21, any such organization, [
Footnote 8] thus tying the exclusion to the
administrative factfindings and determinations required by the
Internal Security Act of 1950, 64 Stat. 987;
see Communist
Party v. Subversive Activities Control Board, 367 U. S.
1.
In face of these considerations, we should hesitate long before
attributing to Congress a purpose to effectuate the similar
exclusion in this instance by legislative fiat. Our reluctance to
accept a state interpretation which would have that effect is
fortified both by the difficult constitutional questions that would
result and by the undesirability of having conflicting state and
federal administrative interpretations of a federal statute
establishing this "coordinated and . . . dual system"
(
Buckstaff Bath House Co. v. McKinley, 308 U.
S. 358,
308 U. S. 364)
of employment insurance.
Page 367 U. S. 395
We hold that the Communist Control Act of 1954 does not require
exclusion of the petitioners from New York's unemployment
compensation system. Since the New York Court of Appeals' decision
unmistakably rested on the contrary premise, its judgment must be
reversed, and the case remanded for further proceedings not
inconsistent with this opinion.
It is so ordered.
MR. JUSTICE BLACK concurs in the result.
[
Footnote 1]
The basic federal rate was increased to 3.1% by Public Law
86-778, § 523(c), 74 Stat. 924, 982, effective 1961. 26 U.S.C. §
3301.
[
Footnote 2]
Petitioners argue that the Act, on its face and as applied,
violates the Due Process Clause of the Fifth Amendment and Art. I,
§ 9, cl. 3 of the Federal Constitution, which provides that "no
Bill of Attainder or ex post facto Law shall be passed."
Petitioners also contingently assert a Fourteenth Amendment claim,
see note 6
infra.
[
Footnote 3]
The Referee, in reviewing the administrative action of the
Commissioner, stated that
"the Commissioner's representatives . . . urge that Congress has
effectively outlawed the Communist Party, and thus, by force of
law, the Referee is bound to find that . . . there could not have
been any valid employment . . . ."
(R. 5.) This contention the Referee accepted, holding that
"Congress effectively terminated the right of the Parties to enter
into contracts of employment . . . ." (R. 7.)
[
Footnote 4]
The Board affirmed the Referee's conclusions of law. (R. 2.)
[
Footnote 5]
See 8 N.Y.2d 77 at 83, 202 N.Y.S.2d 5 at 8, 168 N.E.2d
242 at 243, for the opinion of Chief Judge Desmond, with whom Judge
Dye concurred, and 8 N.Y.2d at 90-91, 202 N.Y.S.2d at 14-15, 168
N.E.2d at 248-249, for the opinion of Judge Van Voorhis, with whom
Judge Burke concurred. Two judges of the court dissented, and one
judge did not participate.
[
Footnote 6]
Petitioners also argue that if the administrative action rested
upon some state procedural ground, as respondent contends, then
that action violated the Due Process Clause of the Fourteenth
Amendment. We do not reach this contention.
[
Footnote 7]
The Solicitor General, in a letter to the Clerk of this Court
responding to a certification by the Court to the Attorney General
of the United States that the constitutionality of a federal
statute had been drawn into question in this case, stated that
"[t]here is no need to file a brief describing the practice of
federal agencies in interpreting the statute [The Communist Control
Act of 1954], for this information is already set forth in the
opinion of Judge Fuld in the New York Court of Appeals."
The dissenting opinion of Judge Fuld states that
"the federal authorities, admittedly aware of the Industrial
Commissioner's position, have taken one diametrically opposed, and
continue to recognize the Communist Party as an employer subject to
the Federal act."
[
Footnote 8]
42 U.S.C. § 410(a)(17) and 26 U.S.C. § 3121(b)(17), Act of
August 1, 1956, § 121(c) and (d), 70 Stat. 839. No similar
exclusion, however, has been made from the coverage of the Federal
Unemployment Tax Act, 26 U.S.C., c. 23, which imposes the federal
tax against which the state taxes involved in this case are
credited.
See p.
367 U. S. 391,
supra.