employment compensation benefits. Yet, in many states, we understand that discharge for dishonesty, drunkeness on the job, disregarding hospital rules, behavior which endangers others and similar causes would not prevent the discharged employee from obtaining compensation. It is these variable aspects of the administration of the program which perturb the hospital field. We feel that hospitals will be obligated to pay for unemployment compensation benefits in many instances when the employee is discharged in order to protect the health and safety of patients or where the employee chooses to leave for his own personal desires. Thus, even a self-insured program can prove to be unjustifiably expensive to hospitals and to those who pay for hospitalization. We trust the committee will bear in mind this concern of hospitals as employers. We appreciate the opportunity of bringing the views of the American Hospital Association to your committee and request that this statement be made a part of the record of the hearings on this legislation. Sincerely yours, 1 All voluntary separations constitute 37.98 percent of total personnel. These are percentages of that figure. Statistics are for the year 1962. 1 All involuntary separations constitute 7.88 percent of total personnel. centages of that figure. Statistics are for the year 1962. 37.8 23. 2 9.4 4.8 1.0 2.1 2.8 4.6 2.4 6 11.3 1 100. 0 These are per STATEMENT OF GEORGE S. BULLEN, LEGISLATIVE DIRECTOR, NATIONAL FEDERATION OF INDEPENDENT BUSINESS The National Federation of Independent Business is a national organization composed of more than 217,000 independents in all phases of commercial enter prise and the professions throughout the 50 States. As you probably know, our policies are determined by direct poll of the members-the majority vote on each issue being the deciding factor. Our membership is a representative cross section of the Nation's entire business community at the retail, wholesale, manufacturing, servicing, and professional occupation levels. The majority position of this large membership, distributed in all the States and so representative by type or trade of all the Nation's 4.7 million small businesses should carry extra weight inasmuch as it no doubt fairly accurately reflects the opinion of all independents. The independents or small businesses account for more than 30 million employees. They are vitally concerned over the legislation before you. In addtiion to policy-setting polls, we conduct yearly fact-finding surveys and, at the request of Members of Congress or Commitees, special surveys. In one section of last year's fact-finding survey ("Small Business-The Nation's Largest Employer") our members were asked if they had expanded during the past twelve months, and how many (if any) new job openings resulted. 70,700 responses were received. We all know small business is an essential vibrant part of our economy and that one of our prime national goals is the production of new job openings for our growing population and to reduce unemployment. In this connection, studies of our survey show that during the past year, projecting our representative rates to the entire American small business community, as many as 1.5 million smaller businesses created over 3 million new job openings. Obviously, anything that would affect the opportunity climate enjoyed by small business, such as the burdensome cost upon employers of increased tax rates, increased wage base and increased coverage for unemployment compensation, would ultimately affect our national economy and its goals. From the time of our founding in 1943, the Federation has polled its members on fifteen separate occasions on "amending the Federal Unemployment Statutes" concept or closely allied issues. Each time, our members, by very large majorities, have either opposed expanding the Federal-State unemployment system or voted that employees should pay a share of unemployment compensation payroll taxes. While we have not taken a policy-setting Mandate poll on H.R. 15119. a poll was conducted in Mandate No. 308 on H.R. 8282, introduced by Mr. Mills of Arkansas (Expand the Federal-State Unemployment Compensation System). In this poll we stated the issue as follows: 5. H.R. 8282. A bill to expand the Federal-State unemployment compensation system. (Cong. Mills, Ark.). Under this, about 5 million more workers would come under the law. The States would pay benefits for 26 weeks, and the Fed'l Gov't could continue payments for another 26 weeks. Firms with one or more workers would be brought into the system. For Against Following are brief arguments "FOR" and "AGAINST", which our members were asked to read before voting: 5. Argument for H.R. 8282: Supporters of this bill say revisions are necessary "to meet the changed needs of a changed economy." The original law was aimed to cope with short-term unemployment, whereas in an economy experiencing rapid technological change, increasing skill demands and constant shifting of work requirements, longterm unemployment becomes a more dangerous risk. Thus, long-term unemployment should be covered by insurance at least as fully as short-term joblessness. Moreover, existing benefits are far too low, in many cases, to meet essential living costs. 5. Argument against H.R. 8282: This bill would double employers Fed'l and State unemployment taxes and increase the present taxable wage base from $3,000 to $6,600 by 1971. Every State would have to pay at least 26 weeks benefits for no more than 20 weeks work . . . and pay 26 weeks more benefits directly directly from Fed'l funds. The bill would compensate not only workers who lost jobs, but those who voluntarily quit, those properly discharged for misconduct and those who refuse to accept suitable reemployment. This was not the aim of unemployment compensation as original proposed. Now, as to the bill before you there is no question that the small businessmen of this country, who are the Nation's largest employer, are greatly concerned over the proposed increases in tax rate, wage base and coverage. They are alarmed that passage of the bill could trigger a reverse in the trend of small business to provide jobs. The proposed tax constitutes a definite deterrent to the hiring of new employees, and to the establishment of new businesses. At the same time it could prove an insurmountable added burden upon those businesses which are finding it difficult to survive. We believe that too liberal unemployment compensation benefits tend to foster unemployment, and would lessen the incentive to seek, obtain, and retain employment. We feel that it is far more desirable to provide employment to promote self-respect and independence in the employee group than to encourage idleness by increasing unemployment benefits. We can see no reason to federalize, to a greater extent, State programs that have been doing an adequate job. Finally, it seems to us that the bill is out of keeping with our traditional relationship between States and the Federal Government. While we feel H.R. 15119 is less objectionable than H.R. 8282, we remain opposed to any expansion of the Federal-State unemployment compensation system. If an overhauling of the unemployment insurance system is required, our members have voted in favor of Congress requiring workers to pay a fair share of the taxes. Unemployment compensation is a benefit for employees-it protects them against want while they are out of jobs looking for work. It is only right then that they should at least pay part of the taxes that support the program, in the same manner as for their insurance programs. Furthermore, by paying part of this tax, they would gain a greater sense of responsibility in their own jobs and in discouraging "free loaders" who try to ride unemployment compensation as long as possible. TOM VAIL, Esq., STATE ADVISORY COUNCIL ON EMPLOYMENT AND UNEMPLOYMENT INSURANCE, Chief Counsel, Committee on Finance, DEPARTMENT OF LABOR, DEAR MR. VAIL: I wish this letter to be considered as a written statement for inclusion in the printed record of the hearings on H.R. 15119 in lieu of my personal appearance as a witness at the hearings. The New York State Advisory Council is a statutory body composed of nine members, appointed by the Governor of New York for 6-year staggered terms. The Advisory Council, under statutory mandate, reports annually its recommendations and findings to the Governor and the Legislature of New York State, and it advises the New York State Labor Department on legislative and administrative matters in connection with the employment security program. Three of the members represent labor; three, management; and three, the public. Among the public members are the President of St. Lawrence University, a woman business executive active in civic affairs, and the Impartial Chairman of major components of the garment industry; the three labor members include the President of the New York State AFL-CIO and two other union officials; the three management representatives include officials of McKesson and Robbins, Niagara Mohawk Power Corporation, and a former New York State Commissioner of Commerce now serving as a management consultant. The Advisory Council has been in existence since the adoption of the unemployment insurance program in New York State in May 1935. Among the nine original members of the Advisory Council were Marion B. Folsom, former Secretary of Health, Education, and Welfare, and George Meany, now President of the AFL-CIO. (A) Coverage of employees of nonprofit organizations The Council unanimously supports the coverage of employees of nonprofit organizations as embodied in H.R. 15119. As far back as 1939, the New York State Advisory Council on Employment and Unemployment Insurance said: "Another situation under the present law which gives us much concern is the exclusion of employees working for nonprofitmaking charitable and educational organizations. This problem presents distinctive aspects which must be carefully considered before sound measures can be taken. These exempted institutions do not have the ability to pass tax burdens on to the consumer in the same way that business enterprises generally can. In almost all cases they would have to absorb the added charges themselves and that might create a serious situation, particularly when so many of them are already having difficulty in balancing their budgets. Then, too, these institutions, not being industrial undertakings, do not present the same pattern of employment and turnover which prevails in industry generally. Conceivably, therefore, principles which may be used satisfactorily in dealing with industrial unemployment may in their case prove to be neither correct nor equitable. "It is the plan of the Council to call together representatives of the managing boards of the exempted institutions, as well as of their employees, for the purposes of considering this problem together in the hope that some acceptable solution can be found." Over the years, the New York State Advisory Council has studied this problem carefully. It has recognized that the nonprofit organizations are engaged in rendering public services which government, in the main, would be compelled to furnish if these institutions have their funds seriously depeleted by these proposed new taxes or were to go out of existence. The funds of the nonprofit agencies are totally dedicated to these services. No individual derives a personal profit from their operations. When New York State and the Federal government in recent years enacted legislation to provide unemployment insurance coverage for their employees on a cost basis, the Advisory Council came to the conclusion that a similar special financing arrangement was the answer for the nonprofit organization. After meeting with a cross-section of the State's nonprofit organizations, the Advisory Council drafted a standby bill which embodied the option plan as its key provision. The bill received the support of the Association of Colleges and Universities of the State of New York, State Association of Councils and Chests, New York State Catholic Welfare Committee, Federation of Jewish Philanthropies and New York State AFL-CIO. The New York State Legislature passed the Advisory Council's "nonprofit organization" bill and it was signed by Governor Rockefeller on July 2, 1965. The New York plan allows the nonprofit organizations the option of either reimbursing the unemployment insurance fund for the amount paid out in benefits to their employees or of contributing to the fund on the same basis as employers in private industry. The nonprofit organizations with little or no turnover would consequently be put to little or no cost. Those with high labor turnover would have no greater cost than borne by private industry. In addition, the New York plan does not contemplate the imposition of the Federal unemployment tax on nonprofit organizations. It appears that the authors of H.R. 15119 have recognized the benefits that accrue to all interested parties under the New York nonprofit organization plan and have adopted its two principal features. Therefore, the New York State Advisory Council fully supports the coverage of employees of nonprofit organizations as embodied in H.R. 15119. (A copy of the New York law on this subject is attached for your information as Appendix C.) (B) Judicial review H.R. 15119 includes a provision for judicial review of decisions of the Secretary of Labor. In its 1962 Annual Report, the Council detailed the necessity for "Judicial Review of Federal Determinations on the Conformity of the State Unemployment Insurance Systems." The Council believes that the passage of four years has only strengthened its position on the necessity for judicial review. (A copy of the pertinent section of the Council's 1962 Annual Report is attached hereto as Appendix A.) The Advisory Council unanimously recommends that the provision for judicial review set forth in H.R. 15119 be enacted into law. Sincerely yours, APPENDIX A GEORGE J. MINTZER, Chairman. JUDICIAL REVIEW OF FEDERAL DETERMINATIONS ON THE CONFORMITY OF STATE UNEMPLOYMENT INSURANCE SYSTEMS1 The right of the States to obtain review in the courts of Federal administrative rulings affecting their unemployment insurance systems remains unresolved. The question is of major concern to the employers whose contributions finance the State systems and to the employees for whose benefit they exist. The Federal Unemployment Tax Act imposes a levy of 3 per cent on the payrolls of employers coming within the purview of that statute. To the extent of 90 per cent of this tax, employers are given a credit for contributions made by them to a State system of unemployment insurance. This credit, however, is allowed only if the State system meets the conditions specified in the Federal act. To the United States Secretary of Labor is given the authority of determining whether the conditions have been met. A ruling by him that a State system is not in compliance would lead to the loss of the credit for the employers of that State. The result would be double taxation for them-the imposition of the Federal tax in full and the continuation of their contributions to the State. There would be a second result. The cost of administering the State unemployment insurance systems is at present met through Federal grants. A ruling that a State system was not in compliance with the federally presented conditions would stop the grant and the State system would be left without the money needed to operate. Obviously, the Secretary, busy with his manifold other duties, cannot give this matter detailed personal attention. Necessarily the work is done and the judgments made by his staff. These determinations, so vital to States, actuallly lie in the hands of some anonymous, subordinate officials whose recommendations he follows. Apparently it is the view of the Federal authorities that the rulings on the question of conformity made in the name of the Secretary are beyond the reach of judicial review. If that really be so, the situation is potentially too injurious to be continued. The view of subordinate officials in the Federal labor department-that action which a given State proposes to take in the further development of its unemployment insurance system is out of conformity-surely ought not to be the final judgment on matters of such importance to the people of each State, when the issue may involve complex questions of interpretation as to which reasonable minds may sharply differ. Whatever be the views of the officials of the labor department, whether their position be reasonable or arbitrary, whether their differences with the State reflect essentially a varying philosophy or a picayune technicality, the State in the absence of judicial review must bow. The injury done by being held out of conformity is too great to be endured. Its employers would be subjected to a double tax burden and the operation of its law would be halted." 1 Annual Report of the State Advisory Council on Employment and Unemployment Insurance, 1962. Department of Labor. State of New York, p. 38. 2 An illustration is to be found in the Advisory Council's recommendation for extending unemployment insurance to the employers of nonprofit organizations by relieving these organizations of the contributions imposed on other employers and requiring them to pay only the actual cost of the benefits to their employees. In the view of the Advisory Council this is not only socially sound but the only practical way of speedily achieving the objective. Serious consideration of this proposal by the Legislature has been prevented by a highly questionable Federal ruling that the enactment of the proposal would throw the New York act out of conformity. |