Johnson v. State , 187 Wash. 605 ( 1936 )

Plaintiff instituted this action under chapter 113, Laws of 1935, p. 305 (Rem. 1935 Sup., §§ 784-1 to 784-15 [P.C. §§ 8108-21 to 8108-35]), which may be designated as the declaratory judgment act. The purpose of the action was to restrain the enforcement of chapter 145, Laws of 1935, p. 438 (Rem. 1935 Sup., §§ 7796-1a to 7796-24 [P.C. §§ 3546-31 to 3546-54]), known as the unemployment compensation act. Plaintiff named as defendants the state of Washington, Otto A. Case, its treasurer, and Petroleum Navigation Company, a corporation, plaintiff's employer.

In his amended complaint, plaintiff alleged facts which he contended entitled him to a decree enjoining the enforcement of the act and restraining his employer from withholding from his wages any sums whatsoever as contributions under the provisions of the unemployment compensation act. Defendant Petroleum Navigation Company cross-complained, alleging the unconstitutionality of the act and praying for the entry of a declaratory judgment declaring the same void. The state demurred to the complaint and also to the cross-complaint, upon the ground, among others, that the pleadings failed to state facts sufficient to constitute a cause of action, and upon the overruling of these demurrers, elected to stand thereon and declined to plead further. The court thereupon entered a decree declaring the unemployment compensation act unconstitutional and void, and restraining defendant Petroleum Navigation Company from withholding from plaintiff's wages any sum whatsoever as a contribution from plaintiff under the act. From this decree, the state of Washington and Otto A. Case, as its treasurer, have appealed.

No question of the constitutionality of the declaratory judgment act of this state above referred to is raised in this case, and, in view of the importance of the questions presented, we assume, without deciding, that the act is a valid expression of the legislative will.

The unemployment compensation act above referred to initially passed the state senate March 8, and the house March 12, 1935, and after some amendments was formally enacted by the legislature, and was approved by the governor March 21st. Section 24, p. 471, of the act reads as follows:

"This act is to become operative in the State of Washington from and after the enactment date of the Wagner-Doughton bill which is now before the congress of the United States." (Rem. 1935 Sup., § 7796-24 [P.C. § 3546-54]).

In view of this section, it becomes necessary to consider the Federal legislation referred to therein.

January 17, 1935, there was introduced in both houses of the Congress a bill, designated by its terms as the "economic security act," which bill has been referred to as the Wagner-Doughton bill, and sometimes as the Wagner-Lewis-Doughton bill; Senator Wagner having introduced it in the Senate, and Congressmen Doughton and Lewis in the House. It is admitted by the pleadings herein that this act, as such, was never passed by the Congress of the United States, and it follows that there has never been an "enactment date of the Wagner-Doughton bill," as referred to in § 24, p. 471, supra, of the act here in question. There was, however, introduced in the House, April 4, 1935, several weeks after the enactment of chapter 145, p. 438, and after the adjournment of the legislature, a bill known as the "social security act," embracing the basic principles of the Wagner-Doughton bill, which act was passed by the Congress and approved by the President August 14, 1935.

[1] The first question to be determined herein is, consequently, whether it can be held that the legislature of this state, by referring to a specific bill which was then before the Congress, and having expressly fixed the enactment date of that bill as the operative date of the state act, intended to refer to another bill which was not then in existence, the provisions of which in many particulars differ from those of the bill referred to in the enactment clause of the state act. It should be observed that the history of the state legislation clearly indicates that it was not the intention of the legislature that the statute which it enacted should become effective irrespective of whether or not any Federal legislation along the same lines was enacted.

For the purposes of this case, we assume, without deciding, that a state legislature may provide that a statutory enactment shall become operative upon the enactment date of a Federal statute not yet passed by the Congress. It is clear, however, that such a provision as that contained in § 24, p. 471, supra, which refers specifically to a particular act then pending before the Congress, cannot be greatly extended by judicial interpretation, as, by referring to a particular pending bill instead of to a general legislative plan, the state legislature manifestly had in mind the terms of the act to which it referred — a matter which might conceivably become of great importance, and one upon which the legislative intent might well depend. Such a provision is vague at best, and if too liberally construed might place the state legislature in a position of attempting to abrogate its constitutional legislative functions.

Assuming, as above stated, however, that such a provision is valid, courts must have regard to substance rather than form, and if the act finally adopted by the Congress be found practically identical with the Wagner-Doughton bill, it should be held that the difference in designation is not material.

A copy of the Wagner-Doughton bill is attached to the amended complaint as an exhibit. The social security act is, of course, available in 49 Stat. 620, 42 U.S.C.A., § 301, et seq. (The Wagner-Doughton bill will hereinafter be referred to as the "bill," and the social security act as the "act.") The bill and the act differ in important particulars.

The tax rates of the bill and act may vary materially during the first two years of operation. The act imposes a flat one per cent rate for 1936 and two per cent for 1937, while the rates under the bill for the same two years were to be determined by the Federal Reserve Board's adjusted index of total industrial production averages, using the years 1923-25 as a base, not, however, to exceed three per cent.

The bill applies only to employers having four or more employees within each of thirteen or more calendar weeks in the taxable year, while the act applies to persons employing eight or more at least twenty days, each day being in a different week during the calendar year.

Referring to the tax for unemployment insurance, the bill embraces all employment save such as falls within any unemployment compensation system established by act of Congress, whereas the act excepts from the term "employment" four different classes, including such important and numerous classes as (1) agricultural labor, and (2) domestic service in a private home.

According to the confused provisions of the bill, an allowable credit seems to be based upon the contributions made during the taxable quarter to a state unemployment fund, while the corresponding provisions of the act contain different language. The provisions of the act allowing for additional credits differ materially from the corresponding provisions contained in the bill.

The act of our legislature adopts from the bill verbatim the method of determining the rate of tax for the first two years of operation. This suggests the possibility that the rate to be levied by the state may be greater than that levied under the Federal act. It was probably to avoid this danger that the state legislature made the operative date of the act dependent upon the enactment of the Wagner-Doughton bill; that is, a higher tax on Washington employers places the state of Washington at a competitive disadvantage with other industrial states. Manifestly, to avoid this evil was the primary reason for the adoption of a national plan of unemployment insurance.

It must, of course, be recognized that the state legislature knew that the bill, as pending legislation, might in some particulars be amended prior to its final enactment into law. At the same time, it must be held that the legislature, in making the operative date of its act dependent upon the enactment by the Congress of a specific bill then pending, enacted the statute in contemplation of the terms of the particular bill to which it referred, irrespective indeed of its name or designation, but in view of the provisions of the bill which the legislature had before it for study and consideration. The legislature did not choose to make the operative date of its act dependent upon the enactment by the Congress of some social security or unemployment insurance legislation, but for good and sufficient reasons made the act which they passed dependent for its effectiveness upon the enactment by the Congress of a certain bill then pending before the Congress. The legislature, then, acted in contemplation of a particular piece of Federal legislation which it seemed probable would be passed by the Congress; and if the act finally passed by the Congress differs materially from that upon which the state legislature based its action, it must be held that the state statute has never become operative.

It is impossible to pronounce any formula by which all similar questions can be decided. It would, doubtless, be agreed that some immaterial amendment to the bill would be held unimportant, and, on the other hand, that some essential departure from the terms of the proposed legislation upon which the state legislature based its action would prevent the state act from becoming effective. Between the two extremes lies much room for difference of opinion, but it must always be remembered that the underwriting of legislation to be enacted in the future is dangerous, and that a state legislature in particular must be held to the exercise of its important functions upon knowledge of existing facts and not upon expectations. If, as clearly shown by the act in question, the state legislature intended that its act should become operative only upon the enactment by the Congress of a particular bill, in our opinion it cannot be held that the state act became operative upon the enactment by the Congress of a statute differing in important and material particulars from the bill which the legislature had in contemplation.

In two respects, the difference between the bill and the act is marked: First, in the application of the bill to practically all employment, and the many important exclusions from the term "employment," set up by the act; and second, in the method of fixing the assessment rate for the first two years. Other differences exist, some of which are above noted, and the legislative act, having manifestly been patterned upon the bill, is in some respects not in harmony with the Federal act as finally passed. It is interesting to note that, as shown by the Congressional Record, one of the sponsors of the bill said, in the course of debate on the act:

"The proposed bill (referring to the act) has been entirely rewritten, and important modifications have been made at many points." 74 Congress, 1st Ses., 79 Congressional Record 5467.

After careful consideration of the case, we hold that, in view of the legislation as finally enacted by the Congress, chapter 145, Laws of 1935, p. 438, never became operative, and that, for the reasons herein stated, the superior court rightly enjoined the state authorities from putting the state law into operation.

Many other questions are argued in the briefs which have been filed in this case, including that of the constitutionality of the Federal social security act, but the view which we take of the question which we have discussed renders consideration of such questions unnecessary.

Decree affirmed.

MAIN, STEINERT, MITCHELL, and HOLCOMB, JJ., concur.