Mr. Chairman, that completes my testimony, and I thank you for the privilege of appearing before the committee.

(The prepared statement of Mr. McChesney follows:)

STATEMENT OF LEONARD E. MCCHESNEY, APPEARING ON BEHALF OF LAKE

CARRIERS' ASSSOCIATION

My name is Leonard E. McChesney. I am Assistant Secretary and Manager of Insurance of the Hanna Mining Company, 100 Erieview Plaza, Cleveland, Ohio. My appearance here is on behalf of Lake Carriers' Association, of which Hanna Mining Company is a member.

Lake Carriers' Association is an organization of vessel companies engaged in the transportation of bulk commodities between ports on the Great Lakes. In all, the Association has 25 members owning or operating a total of 212 merchant vessels under United States flag. The vessels enrolled in the Association aggre gate more than 1,703,610 gross tons of shipping and constitute better than 98% of all commercial vessels under American flag now engaged in trade and commerce on the Great Lakes.

Since 1943, Lake Carriers' Association has maintained a special Unemployment Compensation Study Committee. Since the Committee's inception I have served as Chairman.

ELIMINATION OF SECTION 123 URGED

My appearance here on behalf of Lake Carriers' Association relates solely to Section 123 of H.R. 15119, the "Unemployment Insurance Amendments of 1966" as passed by the House. Section 123 would amend Section 3305 of the Internal Revenue Code of 1954 in such a manner as to empower the Secretary of Labor to deny to maritime employers (as well as other employers in whom the Federal Government has a special jurisdictional interest) the tax credit against the Federal unemployment tax for amounts paid into a state unemployment compensation fund should the Secretary of Labor find that the unemployment compensation law of such state is inconsistent with any one or more of the conditions set forth in Section 3305 (f). Lake Carriers' Association strongly urges the elimination of Section 123, because it would impose a drastic and unwarranted penalty on Great Lakes vessel operators and would operate unfairly against Great Lakes seamen. Section 123 has no practical application to any employers except Great Lakes vessel operators in the State of Ohio, as will hereafter be shown.

THE STATED PURPOSE OF SECTION 123

When the "Unemployment Insurance Amendments" were originally introduced in the House (H.R. 8282), the explanatory statement prepared by the De partment of Labor stated, with respect to Section 123 (then Section 206 of H.R. 8282), pages 23-24, that while, as a matter of Federal law, states were given permission to levy unemployment taxes on maritime employment, specific conditions were prescribed in order to preclude discriminatory treatment of either maritime employers or maritime workers. It was then asserted that one state was failing to provide seamen equal protection and this failure affects a substantial proportion of the seamen engaged in Great Lakes shipping. It then asserted in justification of the proposed Section that no state should be given authority to collect unemployment taxes from maritime employers under conditions which violate the nondiscriminatory requirements of Federal law.

When the Secretary of Labor, the Hon. W. Willard Wirtz, testified before the House Committee on Ways and Means, he was asked specifically the state to which the explanatory statement referred and the precise manner in which the law of such state was discriminatory as against Great Lakes seamen. The Secretary replied that the law of the State of Ohio treats maritime workers differently from the way it treats other seasonal workers in two respects. Stated Secretary Wirtz:

"There are two differences. One is the use of a 40 week definition of 'seasonal employment' in this industry as compared with a 36 week definition in all others. And secondly, that the seaman must, under the present situation, work more time outside this particular employment to become entitled to ordinary unemployment insurance than is true of other seasonal workers."

Such being the stated purpose of Section 123, we urge that such section be eliminated for the reason that the arguments advanced by the Secretary of

Labor are not valid and Ohio law is in no way discriminatory against seamen. Indeed, if anything, it favors seamen. In substance, we maintain that the alleged shortcomings of the Ohio law in devising an unemployment compensation system as it applies to Great Lakes seamen, do not in fact exist.

THE EXISTING PROVISIONS OF OHIO LAW WITH RESPECT TO SEAMEN

Ohio law declares that employment as a seaman on an American vessel operating on the Great Lakes shall be deemed to be seasonal employment and such season shall consist of the 40 calendar week period beginning with the fourth Sunday in March. Thus the Legislature of Ohio has defined the Great Lakes navigation season and limited the payment of unemployment compensation benefits to seamen to the season as thus defined. Nevertheless, the Ohio Legislature has also provided that, with respect to an individual whose employment consists of both employment on a vessel and with shoreside employers, such wage credits may be combined, but if more than 50% of such individual's total weeks of employment during his base period is as a seaman, his eligibility for benefits is limited to the navigation season. The specific provisions of Ohio law are as follows: "§ 4141.33

SEASONAL EMPLOYMENT

"(B) Notwithstanding division (A) of this section, employment as a seaman on an American vessel operating on the Great Lakes shall be deemed to be seasonal employment, and such sason shall consist of the forty calendar week period beginning with the fourth Sunday of March. With respect to an individual whose employment consists exclusively of employment as a seaman on such vessel, excepting a vessel engaged in harbor towing or river and harbor improvement work, the right to benefits arising out of service performed in such seasonal employment shall be confined to weeks of unemployment occuring in such period of forty weeks and the administrator, in accordance with division (A) of this section, shall determine the proportionate number of weeks of employment and earnings required to qualify for benefit rights and the proportion. ate number of weeks for which benefits may be paid. If the individual is receiving benefits at the end of such period, there shall be a suspension of the payment of benefits until the following fourth Sunday of March upon which date, if such individual is still unemployed, the payment of benefits shall resume and continue until the full forty week period has expired since such individual first filed a valid application for determination of benefit rights.

"(C) With respect to an individual whose employment consists both of em. ployment on a vessel as provided in division (B) of this section and with any other employers subject to section 4141.01 to 4141.46, inclusive, of the Revised Code, the eligibility requirements and benefit rights shall be the same in all respects as those of an individual whose employment consists exclusively of employment with such other employers; provided if more than fifty per cent of such individual's total weeks of employment during his base period consists of employment as a seaman on such a vessel, his eligibility requirement and benefit rights shall be determined according to division (B) of this section." As will be hereinafter shown, these provisions are not in the least inconsistent with Federal law.

EXISTING REQUIREMENTS OF FEDERAL LAW

On May 24, 1943, the United States Supreme Court decided Standard Dredging Corporation v. Murphy, 319 U.S. 306. That case held that the provisions of the Federal Social Security Act, exempting from the federal tax thereby imposed the employers of persons employed as officers or members of the crews of vessels on navigable waters of the United States, did not operate to exempt such employers from state unemployment insurance laws. Thereafter the Congress enacted into law the Social Security Act amendments of 1946. Among other things, Section 301 of the Act (now Section 3305 (f) 1954 I.R.C.), authorized the Legislature of any state in which a person maintains the operating office, from which the operations of an American vessel operating on navigable waters within or within and without the United States are ordinarily and regularly supervised, managed, directed and controlled, to require such person and the officers and members of the crew of such vessel to make contributions to its unemployment fund to the same extent and with the same effect as though such service were performed entirely within such state.

In thus granting permission to the states to bring seamen under their unemployment compensation laws, the Congress specifically provided that:

"The permission granted by this subsection is subject to the condition that such service shall be treated, for purposes of wage credits given employees, like other services subject to such state unemployment compensation law performed for such person in such state ***" (1954 I.R.C. § 3305 (f)).

In explanation of the above provision, the Senate Finance Committee, in favorably reporting the bill to the Congress, stated that:

"The Committee believes, therefore, it would be inadvisable to lay down a blanket prohibition against discrimination or to attempt to fix standards for the benefit of seamen. There has been included in the bill, however, a provision which enunciates the principle of no discrimination as compared with other employees of the same employer as regards wage credits." (Senate Report No. 1862, 78th Congress, Second Session).

After thus commenting on the nature of the permission granted to the states, the Senate Finance Committee added:

"The provision is not intended to preclude treating certain maritime service, notably that on the Great Lakes, as seasonal employment, and denying compensation based on such service for unemployment occurring outside the season, if this is done on terms comparable to those applied to other seasonal occupations in the state." (Senate Report No. 1862, 79th Congress, Second Session).

Thus it is abundantly clear that, while a maritime employer is required to treat seamen employees in the same manner as his other employees as regards wage credits, this does not mean that the employer is precluded from treating seamen employees as seasonal, even though the employer's other employees, i.e.. shoreside personnel, may be non-seasonal. The Senate Finance Committee did say, however, that if certain maritime services are treated as seasonal employment it must be done on terms comparable to those applied to other seasonal occupations in the state.

It is now proposed to examine the objections of the Secretary of Labor to Ohio law in light of the specific requirements of Federal law and when this analysis is completed we believe all will be convinced that the alleged discrimination against seamen does not exist.

THE DEFINING OF THE NAVIGATION SEASON BY STATUTE IS NOT DISCRIMINATORY

The Secretary of Labor has singled out maritime employers generally and the Ohio law in particular as being unfair, simply because Ohio law specifies employment of Great Lakes seamen to be seasonal and defines the Great Lakes navigation season as a period of 40 weeks beginning with the fourth Sunday in March of each year, as compared with, in the words of the Secretary, “a 36 week definition in all others" (i.e., other industries). The Secretary is clearly in error in stating that a "36 week definition" applies to all other industries. What Ohio law does is to authorize the Administrator to fix the various seasons for the various seasonal industries but prevents him from fixing any season longer than 36 weeks. This authority existed in Ohio law long before the seaman provision was enacted fixing by law the Great Lakes navigation season at 40 weeks. Ohio, of course, could have provided that the duration of all seasonal employment would be determined administratively not to be in excess of 40 weeks and the Ohio unemployment compensation Administrator could have fixed 40 weeks as the Great Lakes navigation season, 30 weeks for those employed in professional baseball, 31 weeks for those employed in horse racing, 12 weeks for those employed in canning, etc. Under such circumstances, the Secretary of Labor could have no basis for charging that the Ohio law is discriminatory even though the season for each such operation is distinctly different. If the laws of Ohio are held by this Committee to be discriminatory because they themselves specify a 40-week season for Great Lakes vessel operations but delegate to the Administrator the function of prescribing the duration of the season for other opera tions, this Committee will denigrate not only legislative power in Ohio but legislative power everywhere. Arizona, for example, by legislation specifies a 43-week season for resorts and dude ranches, Arkansas a 36-week season for food freezing, cotton and rice warehousing and baseball. In the states of Colorado, Delaware, Indiana, Iowa, Minnesota, Virginia, West Virginia and Wisconsin. the season specified by legislation for the canning industry ranges anywhere from 24 weeks to 40 weeks. Obviously, it is immaterial whether the duration of the operation of a seasonal industry is specified in law or administratively, so long as the duration specified is seasonable and in accordance with the facts.

The Lakes' shipping season is susceptible of precise definition and the Ohio Legislature logically saw fit to define it. It did so, however, only after a careful search of the records covering the opening and closing dates of Great Lakes navigation over a period of 50 years. Weather conditions make Great Lakes navigation wholly impractical during the winter and the average opening and closing dates indicate that normal navigation usually commences about April 15 and terminates in early December. Thus, the navigation season approximates 240 days or about 35 weeks. In addition, it is necessary that the ships be fitted out preparatory to sailing in the spring and that work incidental to laying the vessel up for the winter be performed after the final trip in the fall. In the aggregate, these tasks ordinarily consume approximately 30 days or about four weeks. Thus, Ohio law is consistent in every respect to actual industry conditions. The facts as to the seasonal character of Great Lakes operations were fully known to the Ohio Legislature and there was no reason for delegating discretionary authority to an administrative agency to determine the length of the Great Lakes navigation season. Normally, state Legislatures, like the Congress, guard their legislative powers judiciously. This is the first attack we know of on either a state or Federal law on the grounds that the Legislature failed to delegate its authority to an administrative agency.

Why is it discriminatory for the Legislature to fix the duration of the Great Lakes navigation season at 40 weeks and authorize the administrator to fix the duration of all other seasonal industries for a period of operation of less than 36 weeks, particularly when there is no evidence of any industry in Ohio that is unable to qualify as a seasonal industry because of the "less than 36 weeks” maximum limit for seasonable industries? We believe that Ohio law does not discriminate against seamen because of the defined 40 weeks in the navigation

season.

OHIO LAW DOES NOT DISCRIMINATE AGAINST SEAMEN BY PERMITTING OTHER SEASONAL EMPLOYEES TO COMBINE WAGE CREDITS

The Secretary of Labor baldly asserted that seamen must, under Ohio law, work more time outside the navigation season to become entitled to ordinary employment insurance benefits than is true of other seasonal workers. Such is neither fact nor law in Ohio. The only provision of Ohio law which permits the combining of seasonal and non-seasonal wage credits is in the case of seamen, the only limitation on such combination being that if more than 50% of the individual's total weeks of employment during his base period consists of employment as a seaman, his eligibility for benefits is limited to the navigation season. For several years the Ohio administrator did, by administrative ruling, permit seasonal and non-seasonal wage credit to be combined so that if an individual accumulated more than 20 weeks of employment he was allowed benefits outside of the season. It has since been held in Ohio, however, that in permitting the combination of such wage credits the Ohio administrator exceeded his authority and, as a matter of law, seasonal and non-seasonal wage credit cannot be combined in Ohio except in the case of seamen. The administrative decision allowing the combining of shoreside seasonal and non-seasonal wage credits was overruled by the Board of Review in the case of In re Claim of Ned F. Babcock, et al., Appeals Docket No. 349302-M-1-BR. The decision of the Board of Review is set forth in full at the end of this statement. In this instance the employer, Northern Ohio Sugar Company, objected to a ruling of the administrator allowing the payment of benefits outside the season based upon the combination of seasonal weeks and wages with non-seasonal weeks and wages. Said the Board of Review:

"The sixth paragraph of the Journal Entry permits a valid application based on any combination of seasonal and non-seasonal weeks exceeding 20 weeks, computed as an ordinary claim and payable for unemployment outside the season, the only limitation being that claims outside the season are charged to the nonseasonal employer and in the season, charged to the seasonal employer. However, the weekly benefit amount and duration of benefits are increased for any claim by the addition of the seasonal weeks and wages and, to the extent of this increase in weekly benefit amount and duration of benefits, violate the purpose of the original determination of seasonal employment.

"By reason of the employer's liability under this sixth paragraph, he is, with only minor possible differences, liable as widely as a non-seasonal employer and in addition has the burden of paying seasonal claims in the season based on 7 to 17 weeks which the ordinary non-seasonal employer is entirely free of. Any

construction of the language of the statute which so subverts its purpose cannot be proper. This statute is clear and unequivocal. It permits seasonal or non-seasonal claims or one in place of the other. It does not provide for combining of the weeks of qualification and earnings in the two types of claim as has been done here. Section (C) of 4141.33, Revised Code of Ohio, does permit such combination in the claims of seamen, but in such combination, all of the claim is seasonal if more than 50% of the base period weeks are seasonal and the claimant can then claim only in the season. In addition, this is a specially legislated section limited only to seamen claims and does not give the Administrator authority to apply it to general claims. The sixth paragraph of the Administrator's Journal Entry is improper and assumes powers not granted under Section 4141.33 (A), Revised Code of Ohio. It furthermore violates this clear provisions of that section which provides only for seasonal claims in place of regular claims." (Referee's underlining).

The result of the Board of Review's ruling is that in Ohio only seamen are now permitted to combine seasonal and non-seasonal wage credits under specific statutory provision, while shoreside seasonal employees are not permitted such combination. This gives seamen a distinct advantage over other seasonal shoreside employees in Ohio and, of course, the alleged discrimination arising out of the combination of wage credits which the Secretary of Labor asserts violates Federal law does not, in fact, exist. Obviously, therefore, Section 123 of H.R. 15119 should be eliminated for want of the reasons upon which it is based.

THE SIGNIFICANCE OF SECTION 123 TO OHIO

Ohio, from which the majority of American flag Great Lakes shipping is regu larly supervised, managed, directed and controlled, has provided the necessary unemployment compensation coverage for Great Lakes seamen. It has defined such employment as seasonal in accordance with the findings of this Committee that Federal law was not intended to preclude the treating of such employment as seasonal. The Secretary of Labor, in his testimony before the House Ways and Means Committee, readily conceded that the employment of seamen on the Great Lakes is seasonal. As previously indicated, Ohio law does not discriminate against seamen in the matter of the combination of seasonal and non-seasonal wage credits. Thus Section 123 as presently constituted is based on mistaken assumptions of law and should be stricken from the bill. Undoubtedly, enactment of this section will place a serious burden on Ohio should the Secretary of Labor attempt to establish the alleged discrimination.

It is true that H.R. 15119 provides for appellate review of any decision of the Secretary of Labor in this regard. We do not believe it equitable to put the State of Ohio to the burden of seeking costly appellate review when it has already been amply demonstrated that the basis for authorizing the Secretary of Labor to disqualify maritime employers from receiving the Federal unemployment tax credit does not exist.

THE HOUSE WAYS AND MEANS COMMITTEE REFUSED TO FIND OHIO LAW

DISCRIMINATORY

During the testimony on H.R. 8282, which evenutally led to House passage of H.R. 15119, considerable testimony was offered concerning the attitude of the Department of Labor over the years toward the State of Ohio as to whether or not, with respect to maritime employers, it is complying with Federal law. During debate of the bill on the floor of the House, the Hon. Wilbur D. Mills, Chairman of the Ways and Means Committee, stated that his Committee made no decision whatsoever concerning the alleged discrimination against maritime employees. What the Committee attempted to do was to supply an enforcement provision which is now lacking in the law in those cases in which it might be determined that discrimination existed (Congressonal Record, Wednesday, June 22, 1966, Line 112, No. 102, page 13286). It has already been demonstrated, however, that such discrimination does not exist in Ohio law, first, because the objection to the Ohio Legislature's defining the navigation season is not valid and secondly, because the Board of Review has ruled that shoreside seasonal and non-seasonal wage credits cannot be combined under Ohio law. This means that if Section 123 is enacted, it might be construed as requiring that seamen be deprived of the advantage of combining seasonal and non-seasonal wage credits so that they will be treated in the same manner as other seasonal employees in