Zambrano, Rene v. Reinert, Jennifer ( 2002 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 01-2724
Rene Zambrano,
Plaintiff-Appellant,
v.
Jennifer Reinert, in her official capacity
as Secretary of the Wisconsin Department
of Workforce Development,
Defendant-Appellee.
Appeal from the United States District Court
for the Western District of Wisconsin.
No. 01-C-35-S--John C. Shabaz, Judge.
Argued November 13, 2001--Decided May 29, 2002
Before Harlington Wood, Jr., Easterbrook, and
Kanne, Circuit Judges.
Kanne, Circuit Judge. After being denied
unemployment compensation benefits in
accordance with Wis. Stat. sec.
108.02(15)(k)(14) (the "Cannery Rule"),
Rene Zambrano filed suit pursuant to 42
U.S.C. sec. 1983, alleging that the
Cannery Rule was in conflict with two
federal statutes and violated the Equal
Protection Clause of the Fourteenth
Amendment. The district court upheld the
validity of the Cannery Rule, and we
affirm.
I. Background
Under Wisconsin’s unemployment
compensation scheme, "base period" wages
count towards unemployment compensation
eligibility. See Wis. Stat. sec.sec.
108.02(4) & 108.06. Base period wages
include, inter alia, wages earned during
employment, see id. at sec. 108.02(4m),
and "employment" is defined as "any
service . . . performed by an individual
for pay." Id. at sec. 108.02(15)(a).
However, in applying the Cannery Rule,
the definition of employment does not
include services
[b]y an individual for an employer which
is engaged in the processing of fresh
perishable fruits or vegetables within a
given calendar year if the individual has
been employed by the employer solely
within the activeprocessing season or
seasons, as determined by the department
[of workforce development], of the
establishment in which the individual has
been employed by the employer, and the
individual’s base period wages with the
employer are less than the wages required
to start a benefit year under s.
108.04(4)(a), unless the individual was
paid wages of $200 or more for services
performed in employment or other work
covered by the unemployment insurance law
of any state or the federal government,
other than work performed for the
processing employer, during the 4 most
recently completed quarters preceding the
individual’s first week of employment by
the processing employer within that year.
Id. at sec. 108.02(15)(k)(14). In other
words, for a seasonal fruit or vegetable
processing worker to meet the definition
of "employment," and thus be eligible to
receive unemployment compensation
benefits, he must have 1) been employed
with the processor outside the "active
processing season"; 2) been separately
eligible under Wis. Stat. sec.
108.04(4)(a); or 3) earned over $200 in
another job during the time period
outlined in the statute. See id. at sec.
108.02(15)(k)(14).
Zambrano, a Texas resident, provided
seasonal labor for vegetable processor
Seneca Foods, Inc. in Mayville, Wisconsin
from June 11 to October 7, 1999, earning
$10,290.98. On April 4, 2000, Zambrano
filed for unemployment compensation in
Wisconsin. Because Zambrano was employed
by Seneca, a processor of vegetables, the
Department for Workforce Development (the
"DWD") noted that his claim for
unemployment compensation fell under the
purview of the Cannery Rule and thus
found that Zambrano was ineligible to
receive unemployment compensation
benefits.
To be eligible for benefits, Zambrano
had to meet one of three conditions
listed in the Cannery Rule: First,
Zambrano would have had to have worked
for Seneca outside the active processing
season. See id. at sec.
108.02(15)(k)(14). Zambrano concedes that
he did not, and therefore this provision
is irrelevant to our present review.
Second, he would have been eligible if
his "base period wages" with Seneca were
equal to or greater than the wages
described in Wis. Stat. sec.
108.04(4)(a). See id. at sec.
108.02(15)(k)(14). To start a benefit
year under that section, an applicant’s
base period wages must, among other
things, be equal to at least four times
his weekly benefit rate "in one or more
quarters outside of the quarter within
the claimant’s base period in which the
claimant has the highest base period
wages." Id. at sec. 108.04(4)(a). In this
case, as Zambrano concedes, the amount of
wages that he earned during this time
period was $1,159.81, and this amount was
less than four times his weekly benefit
rate of $305 (i.e., 4 x $305 = $1,200).
Thus, the DWD concluded that Zambrano did
not meet the second condition to be
eligible for unemployment compensation
benefits under the Cannery Rule.
Finally, Zambrano would have been
entitled to receive benefits had he
earned more than $200 from an employer
other than Seneca during the four most
recently completed quarters preceding his
first week of work at Seneca. See id. at
sec. 108.02(15)(k)(14) (the "Other
Employment" provision). Zambrano’s only
income from Wisconsin employers other
than Seneca that year was $1,250 that he
earned for work performed for Lifestyle
Staffing during May and June 1999.
However, because these wages were earned
in the same quarter as the start of his
employment with Seneca, and not in the
preceding quarter, the DWD concluded that
Zambrano was not eligible to receive
benefits because he did not meet the
requirements of the Other Employment
provision of the Cannery Rule. See id.
As a result of this ruling, Zambrano
brought suit against Jennifer Reinert in
her official capacity as Secretary of the
DWD, alleging that the Cannery Rule ran
afoul of two federal statutes and that it
violated principles of equal protection.
The district court granted summary
judgment in favor of the Secretary,
upholding the Cannery Rule in the face of
Zambrano’s challenges.
II. Analysis
The facts of this case are essentially
undisputed. The only issues on appeal
involve the interpretation of statutory
and constitutional provisions. We review
these questions of law de novo. See,
e.g., Publ’ns Int’l Ltd. v. Meredith
Corp., 88 F.3d 473, 478 (7th Cir. 1996).
A. Social Security Act
Initially, Zambrano contends that the
Cannery Rule conflicts with section
503(a)(1) (the "When Due Clause") of the
Social Security Act (the "SSA"). Under
the SSA, federal funds are made available
to states in order to encourage them to
enact unemployment insurance laws. See 42
U.S.C. sec.sec. 501-04; see also Jenkins
v. Bowling, 691 F.2d 1225, 1228 (7th Cir.
1982). However, before the federal
government will provide funds to a state
to administer its unemployment insurance
laws, the Secretary of Labor must certify
that the recipient state’s unemployment
program meets certain statutory
requirements. See 42 U.S.C. sec.sec. 502-
03; Jenkins, 691 F.2d at 1228. The When
Due Clause states that one of those
requirements is that the state’s program
must provide for "such methods of
administration . . . as are found by the
Secretary of Labor to be reasonably
calculated to insure full payment of
unemployment compensation when due."
Jenkins, 691 F.2d at 1228 (quoting 42
U.S.C. sec. 503(a)(1)). The basic thrust
of the When Due Clause is timeliness--the
state should determine who is eligible to
receive unemployment compensation and
make payments to such individuals at the
earliest stage that is administratively
feasible. See, e.g., California Human
Resources Dept. v. Java, 402 U.S. 121,
131, 91 S. Ct. 1347, 28 L. Ed. 2d 666(1971).
The first step in deciding whether a
state statute violates the When Due
Clause is to determine whether the state
provision is an administrative provision
or an eligibility requirement. See
Pennington v. Didrickson, 22 F.3d 1376,
1381 (7th Cir. 1994) (Pennington I),
rev’d on other grounds sub nom.
Pennington v. Doherty, 138 F.3d 1104,
1105 (7th Cir. 1998) (Pennington II). An
administrative provision governs when
eligibility is determined or when
unemployment benefits are paid, while an
eligibility requirement governs who is
eligible to receive unemployment
compensation benefits. See Pennington I,
22 F.3d at 1385-87. Drawing this
distinction is important because
eligibility requirements do not fall
under the purview of the When Due Clause,
whereas administrative provisions do. See
id. 1381 (stating that eligibility
requirements are "beyond the reach of the
’when due’ clause").
Zambrano contends that the Other
Employment provision of the Cannery Rule
violates the When Due Clause because it
operated to exclude the wages he earned
at Lifestyle Staffing from his
eligibility determination. Zambrano’s
claim is unavailing, however, because the
Other Employment provision sets forth a
method of determining whether work
performed by an applicant is "employment"
and thus whether the applicant is
eligible to receive benefits. See Wis.
Stat. sec. 108.02(15)(k)(14). Therefore,
because it determines who is eligible to
receive benefits, as opposed to when the
eligibility determination is made or when
an eligible person receives benefits, the
Cannery Rule is an eligibility
requirement that is "beyond the reach of
the ’when due’ clause." Pennington I, 22
F.3d at 1381.
Zambrano relies on Pennington I to
support his argument that the Cannery
Rule is an administrative provision. In
that case, we addressed whether the
definition of "base period" in section
237 of the Illinois Unemployment
Insurance Act (the "IUIA"), 820 ILCS
405/237, violated the When Due Clause.
See Pennington I, 22 F.3d at 1377. We
noted that in order to be eligible for
unemployment compensation in Illinois, a
claimant must have earned sufficient
wages during the "base period." Id. at
1378. We further noted that the IUIA
defined a base period as "the first four
of the last five completed calendar
quarters immediately preceding the
benefit year," thus excluding the wages
that a claimant earned in the quarter
immediately preceding the quarter in
which the claimant filed a claim (the
"lag quarter"). Id. (citation omitted).
We concluded that excluding wages earned
during the lag quarter had the purpose of
accommodating the time needs of those
administering Illinois’ unemployment
compensation program. See id. at 1387. We
also concluded that the lag quarter
affected the timing of when the claimant
would file his claim. See id. In sum, the
IUIA did not determine what wages would
be considered, but rather when certain
wages would be considered. See id. at
1385-87. Therefore, we held that the
provision of the IUIA was an
administrative provision subject to the
When Due Clause. See id. at 1387.
On appeal, Zambrano notes that
Pennington I was abrogated by federal
statute. See Pennington II, 138 F.3d at
1104-05. He posits, and we agree, that
the Balanced Budget Act of 1997, sec.
5401 does not apply to the Cannery Rule
because that Act only applies to state
law provisions that define "base
periods." However, he asserts that the
"reasoning of the original Pennington
decision . . . remains apt, since the
base period and the cannery rule period
serve similar purposes." Assuming,
arguendo, that Zambrano is correct in
this assertion, his claim is still
unavailing because our case is
distinguishable from Pennington I.
In contrast to the lag quarter at issue
in Pennington I, the Other Employment
provision affects what wages will be
considered, not when they will be
considered. Further, the Cannery Rule did
not have the effect of requiring Zambrano
to delay in filing his claim for
unemployment compensation, but rather
only determined whether or not Zambrano
was eligible to receive unemployment
compensation benefits based on his
earnings in non-food processing jobs
before his work with Seneca. Because the
wages that the Other Employment provision
excluded are not those earned prior to
filing a claim, but rather those earned
in the same quarter as when the claimant
started working for a fruit or vegetable
processors, Zambrano could have waited
forever and still would have been
ineligible to receive benefits under the
Cannery Rule. Therefore, in the absence
of the Cannery Rule’s delay of either the
determination or the payment of
unemployment compensation benefits, we
hold that it does not violate the When
Due Clause.
B. Federal Unemployment Tax Act
The Federal Unemployment Tax Act
("FUTA") taxes employers on the wages
they pay to their employees and provides
a tax credit for employers’ contributions
to federally-approved state unemployment
compensation laws. See 26 U.S.C. sec.sec.
3301 & 3302(a)(1). For the Secretary of
Labor to approve a state’s unemployment
compensation law (as the Secretary of
Labor did in this case), he must find,
among other things, that the state law
does not operate to cancel "wage credits"
or reduce "benefit rights" for reasons
other than fraud or misconduct. Id. at
sec. 3304(a)(10).
Zambrano asserts that the Cannery Rule
cancels wage credits or benefit rights
for reasons other than fraud or
misconduct and thus violates 26 U.S.C.
sec. 3304(a)(10). In order for the
Cannery Rule to have cancelled Zambrano’s
wage credits or reduced his benefit
rights, he must have had such wage
credits or benefits in the first place.
Thus, the initial issue is whether
Zambrano earned wage credits or benefit
rights--a matter of state law. We have
previously noted that states have "free
rein" to design eligibility requirements
for receiving unemployment compensation.
Pennington I, 22 F.3d at 1382. In the
present case, eligibility is calculated
from wages earned during employment--
employment being a statutorily defined
term. See Wis. Stat. sec.sec. 108.02(4) &
108.02(15)(a). The Cannery Rule qualifies
that statutory definition of employment,
excluding wages earned by fruit and
vegetable processors unless those workers
meet one of the three aforementioned
conditions. See id. at sec.
108.02(15)(k)(14). As discussed above,
the Cannery Rule merely sets forth
requirements for being eligible to
receive unemployment compensation, and
Zambrano concedes that he did not meet
those requirements. Therefore, he never
had any wage credits or benefit rights to
cancel or reduce in the first place, and
accordingly, the application of the
Cannery Rule in this case does not
violate FUTA.
C. Equal Protection
Zambrano argues that seasonal fruit and
vegetable workers are denied equal
protection because they are subject to
different eligibility requirements under
Wisconsin’s unemployment compensation
laws than are other workers. Seasonal
fruit and vegetable workers are not a
suspect classification, nor does
Zambrano’s claim implicate fundamental
rights. Therefore, we will address
Zambrano’s equal protection claim under
the familiar rational basis test, see,
e.g., Turner v. Glickman, 207 F.3d 419,
424 (7th Cir. 2000), and uphold the
Cannery Rule if "there is any reasonably
conceivable state of facts that could
provide a rational basis for the
classification." FCC v. Beach
Communications, Inc., 508 U.S. 307, 313,
113 S. Ct. 2096, 124 L. Ed. 2d 211(1993).
The Secretary asserts that Wisconsin’s
interest in treating seasonal fruit and
vegetable processing workers differently
is to ensure that workers receiving
unemployment compensation benefits are
firmly committed to the Wisconsin labor
market. Because fruit and vegetable
processing occurs during only three to
four months a year, employment
availability and duration in this line of
work is necessarily limited.
Nevertheless, under the Cannery Rule,
individuals working in seasonal fruit and
vegetable processing can show a
commitment to the Wisconsin labor market,
and consequently gain unemployment
compensation eligibility, by meeting the
requirements of the Other Employment
provision. See Wis. Stat. sec.
108.02(15)(k)(14). Under this provision,
seasonal fruit and vegetable processors
are eligible to receive benefits if they
earned a mere $200 in unrelated
employment in the year prior to the
quarter in which they began working for
seasonal processors. See id. Thus, the
Other Employment provision of the Cannery
Rule has a rational basis for its
classification, which is sufficiently
linked to the government purpose of
ensuring commitment to the Wisconsin
labor market. See FCC, 508 U.S. at 313.
III. Conclusion
For the foregoing reasons, we AFFIRM the
district court’s grant of summary
judgment in favor of the Secretary.
Easterbrook, Circuit Judge, concurring.
This case is shot through with procedural
issues, some concerning subject-matter
jurisdiction. Neither the parties nor the
district judge said "boo" about any of
them. Following that lead, my colleagues
let all pass in silence. Yet
jurisdictional questions should not be
swept under the rug. What one can say for
the parties’ assumption (and the
majority’s silence) is that they are
following the Supreme Court’s example,
for it has resolved on the merits a
series of cases in which one or more of
the same problems lurked in the
background. See, e.g., King v. Smith, 392
U.S. 309 (1968); Rosado v. Wyman, 397
U.S. 397 (1970); California Department of
Human Resources v. Java, 402 U.S. 121(1971); Fusari v. Steinberg, 419 U.S. 379(1975); Ohio Bureau of Employment
Services v. Hodory, 431 U.S. 471 (1977).
In Jenkins v. Bowling, 691 F.2d 1225,
1228 (7th Cir. 1982), we wrote that these
years of neglect by the Supreme Court
made the issues "too well settled to be
questioned by us". But times have changed
since 1982. The Justices now devote
greater attention to the issues that
arise in cooperative programs such as
unemployment insurance, and while this
appeal was under advisement the Court
granted certiorari in a case that poses
one of the questions that we deemed "well
settled" in 1982--whether 42 U.S.C.
sec.1983 allows a court to order a state
official to act in a particular way, when
the relevant federal statute names
cessation of federal funding as the only
remedy. See Gonzaga University v. Doe,
cert. granted, 122 S. Ct. 865 (2002)
(argued April 24, 2002). So it is time to
think about a few issues that for too
long have been ignored.
Rene Zambrano applied for unemployment
insurance in Wisconsin and was turned
down on the basis of Wis. Stat.
sec.108.02(15)(k)(14), known as the
Cannery Rule. This law makes it hard for
a person engaged in seasonal agricultural
employment to obtain unemployment
benefits when the season ends;
Wisconsin’s legislature likely thought
that the employee would find work in
another state whose agricultural products
mature on a different schedule. Benefits
are available only if the worker received
$200 in wages from a different Wisconsin
employer, in a different calendar
quarter. This tests whether the applicant
has an enduring connection to the state’s
labor force. Zambrano contends that the
Cannery Rule violates three laws with
superior authority: sec.303(a)(1) of the
Social Security Act, 42 U.S.C.
sec.503(a)(1), known as the When Due
Clause; 26 U.S.C. sec.3304(a)(10), part
of the Federal Unemployment Tax Act; and
the Equal Protection Clause of the
Fourteenth Amendment. My colleagues hold
that the Cannery Rule is compatible with
the Constitution and the two federal
statutes. I agree with their substantive
analysis and thus explore only the
question whether Zambrano’s claims should
be here in the first place.
1. No federal law requires any state to
have an unemployment-insurance program,
or to follow any particular rules if the
state chooses to have a program. But the
federal government does provide tax
breaks for employers and reimbursements
for state treasuries if states adopt pro
grams with certain features. Section 303
of the Social Security Act conditions
reimbursement of the state’s
administrative expenses on certification
by the Secretary of Labor that the
state’s law meets these conditions.
(Employers pay for the benefits; the
federal assistance covers overhead./1)
The Secretary "shall make no
certification for payment to any State
unless he finds that the law of such
State . . . includes provision for . . .
[s]uch methods of administration . . . as
are found by the [Secretary] to be
reasonably calculated to insure full
payment of unemployment compensation when
due". In other words, the national
government won’t cover the costs of
slapdash implementation. Like other
buyers, the Treasury wants to get what it
pays for. One would suppose, given the
language of the When Due Clause, that the
right way to contest a certification is
to sue the Secretary of Labor under the
Administrative Procedures Act, 5 U.S.C.
sec.sec. 701-06, and that the right
remedy if the plaintiff prevails is an
order revoking the certification, and
thus suspending federal funding until the
state gets its act in gear. But Zambrano
sued a state official, not the Secretary
(who as far as I know is unaware that her
certification of Wisconsin’s program has
been questioned), and seeks benefits
rather than an order suspending
reimbursement. The one remedy that a
court cannot provide is suspension of
funding, because the Secretary of Labor,
as a non-party, cannot be bound by the
judgment.
What the Justices said about this when
they briefly considered a related issue
in Rosado is: The more remedies, the
merrier. Does federal law forbid a
specific-performance or back-benefits
remedy against the state official? Only
by foreclosing a given remedy, Rosado
stated, may Congress preclude relief to
the beneficiary of a social-welfare
program (in Rosado, Aid for Families with
Dependent Children). See 397 U.S. at 420-
22. This view is of a piece with J.I.
Case Co. v. Borak, 377 U.S. 426 (1964);
Mills v. Electric Auto-Lite Co., 396 U.S.
375 (1970), and other decisions of the
time that blithely created private rights
of action for damages even if Congress
had left enforcement to public officials
and named specific remedies.
A lot of water has passed under the
bridge since then, and the question is no
longer whether the statute precludes a
private right of action, but whether the
law creates one. See, e.g., Cort v. Ash,
422 U.S. 66 (1975); Touche Ross & Co. v.
Redington, 442 U.S. 560 (1979);
Transamerica Mortgage Advisors, Inc. v.
Lewis, 444 U.S. 11 (1979); Aaron v. SEC,
446 U.S. 680 (1980); Central Bank of
Denver v. First Interstate Bank of
Denver, 511 U.S. 164 (1994). When the
defendant is a state official, sec.1983
gets part of the way there, see Maine v.
Thiboutot, 448 U.S. 1 (1980)--but the
general language of sec.1983 must not be
used to sidestep limitations built into
another federal statute. See, e.g.,
Blessing v. Freestone, 520 U.S. 329(1997); Golden State Transit Corp. v. Los
Angeles, 493 U.S. 103 (1989). Section
1983 allows courts to enforce personal
rights, but a statute may influence
behavior without creating "rights."
Conditional funding is an example. It
does not create "rules," let alone
"rights," for a state is free to turn
down the money and escape the strings.
The When Due Clause does not create
rights in favor of workers or impose
duties on states to pay particular
benefits; it just tells the Secretary of
Labor which states’ administrative
overhead may be reimbursed.
What is at stake is not just the
difference between public and private
enforcement, or the difference between
loss of subsidy and new substantive
eligibility criteria--though these
differences may be substantial. The main
question is whether the courts will play
by the rules that Congress has laid down.
Enforcement through threats of funding
cutoff is cumbersome. A Secretary of
Labor with only one tool, an unwieldy
hammer, may be reluctant to use it. Which
may be exactly the point; the states’
advocates in Congress may have succeeded
in limiting remedies in order to increase
states’ leeway in operating-unemployment-
insurance systems. Other cooperative
programs have a different structure. For
example, the Individuals with
Disabilities Education Act, another
federal program that attaches conditions
to grants, has a clause, 20 U.S.C.
sec.1403(a), requiring states that take
the money to consent to suits by private
persons. By requiring states to give up
their immunity under the eleventh
amendment, and by authorizing private
suits elsewhere in the idea, Congress
differentiated the idea from the
unemployment insurance system. See Oak
Park Board of Education v. Kelly E., 207
F.3d 931 (7th Cir. 2000). Congress put a
lot more cash into idea grants than into
unemployment-overhead grants,/2 so it
was able to extract larger concessions.
Wisconsin may be willing to give up the
modest federal subvention to retain the
Cannery Rule, though litigation of the
kind exemplified by this suit would deny
the state that choice. Zambrano wants us
to say that it just does not matter what
enforcement mechanisms Congress writes
down. I see no reason why courts should
strip the legislature of options in this
way. Judges hobble legislators when they
treat different statutory structures as
if all said the same thing. Changing the
conditions on which states have agreed to
participate in a federal program-- by
adding private to public enforcement and
adding different remedies in the process-
-also has little to recommend it as an
original matter.
The Social Security Act has two
provisions like the clause in the idea,
see 42 U.S.C. sec.sec. 1320a-2, 1320a-10,
but neither applies to the chapter
containing the When Due Clause. In the
absence of such provisions, the eleventh
amendment blocks retrospective monetary
relief. See Regents of the University of
California v. Doe, 519 U.S. 425 (1997);
Edelman v. Jordan, 415 U.S. 651 (1974);
Paschal v. Johnson, 936 F.2d 940 (1991).
And although, as Rosado observed, an
order requiring a state to abide
prospectively by the terms of a grant
that it has accepted does not encounter
constitutional obstacles, it does create
other problems--foremost among them the
problem of interpreting a discretionary
norm in the absence of the discretion-
holder. The When Due Clause forbids a
federal grant unless the state has
adopted "[s]uch methods of administration
. . . as are found by the [Secretary] to
be reasonably calculated to insure full
payment of unemployment compensation when
due". This is a double dose of
discretion--first through the vague term
"reasonably calculated" and second
through naming the person to make that
decision.
It is the Secretary of Labor, not a
judge, who must determine whether a given
state’s apparatus is "reasonably
calculated to insure full payment of
unemployment compensation when due". The
Secretary has approved Wisconsin’s
system, and her decision is entitled to
the formidable protection of the Chevron
doctrine. See Chevron U.S.A. Inc. v.
Natural Resources Defense Council, Inc.,
467 U.S. 837 (1984). Yet my colleagues do
not ask whether the Secretary abused her
discretion when concluding that
Wisconsin’s plan fit the elastic phrase
"reasonably calculated". Instead they
proceed as if these words were addressed
to judges and the decision were ours.
This is how the parties and the district
court proceeded, how we approached the
topic in earlier cases involving this
language. See, e.g., Pennington v.
Didrickson, 22 F.3d 1376 (7th Cir. 1984),
subsequent decision, Pennington v.
Doherty, 138 F.3d 1104 (7th Cir. 1998).
It would be the normal way to proceed, if
the When Due Clause were a rule creating
personal rights (as it must be for
sec.1983 to come into play). See Adams
Fruit Co. v. Barrett, 494 U.S. 638(1990). But here it is unsound, for the
When Due Clause creates no personal
rights and instead poses a question
calling for exercise of the Secretary’s
discretion. To proceed otherwise is to
warp the statutory scheme.
2. Employers’ costs of underwriting
their portion of an unemployment-
insurance system normally would be
deductable from income as ordinary and
necessary business expenses. The Federal
Unemployment Tax Act makes unemployment
insurance more attractive by extending
tax credits for certain outlays if the
state program to which the employer
contributes meets federal criteria. One
of these is that only an employee’s fraud
or misconduct may reduce "wage credits"
or "benefit rights". 26 U.S.C.
sec.3304(a)(10). Zambrano contends that
the Cannery Rule "violates"
sec.3304(a)(10). My colleagues hold that
it does not. But I don’t see how it is
possible for a state program to "violate"
a federal law giving tax credits if such-
and-such occurs, and I therefore do not
understand how this statute can be
enforced (against the state, no less) via
sec.1983. If Wisconsin’s program does not
satisfy sec.3304(a)(10), then employers
must settle for deductions rather than
credits, and the threat of paying more to
the national government may induce
employers to pressure the state to revise
its rules. (What employers would ask the
legislature to do depends on whether the
additional expense to expand ex-workers’
benefits would exceed the marginal value
of tax credits compared with tax
deductions.) But sec.3304(a)(10) does not
impose any legal obligations on states,
so there is no rule that can be enforced
under the approach of Thiboutot. At least
one could say, of Zambrano’s claim under
the When Due Clause, that Wisconsin must
live up to the promises it made to get
federal bucks; but so far as sec.3304(a)
is concerned Wisconsin made no pledges
and received no funds. How then could
sec.3304(a)(10) invalidate Wisconsin’s
Cannery Rule?
Indeed, I do not see why there is a case
or controversy between Zambrano and
Wisconsin about sec.3304(a)(10). What
skin is it off his nose whether his
former employer gets a credit rather than
a deduction? Allen v. Wright, 468 U.S.
737 (1984), holds that people lack
standing to litigate about strangers’
taxes. The problem is one of
redressability: A judicial order
increasing a third party’s taxes may or
may not lead to the relief the plaintiff
seeks. If the court were to declare that
employers in Wisconsin are limited to tax
deductions, rather than tax credits, this
would not lead by any direct path to a
change in the Cannery Rule, though it
might set off a round of lobbying in the
state legislature. Anyway, whatever bone
Zambrano may have to pick with his former
employer (for taking tax credits) or the
Commissioner of Internal Revenue (for
allowing those credits), he has not sued
either of these entities. He has sued the
Secretary of Wisconsin’s Department of
Workforce Development. If Zambrano is a
bystander to any tax dispute between the
employer and the Commissioner, the
Secretary is a bystander once removed.
See ASARCO Inc. v. Kadish, 490 U.S. 605,
615 (1989) (no standing if redressability
depends on choices of third parties not
before the court); Lujan v. Defenders of
Wildlife, 504 U.S. 555, 568-71 (1992).
But cf. Bryant v. Yellen, 447 U.S. 352(1980).
Having said this, I must acknowledge
that yet again the Supreme Court has
assumed otherwise. Wimberly v. Missouri
Labor Relations Commission, 479 U.S. 511,
512 (1987), holds that "26 U.S.C.
sec.3304(a)(12) does not prohibit a State
from disqualifying unemployment
compensation claimants who leave their
jobs because of pregnancy, when the State
imposes the same disqualification on all
claimants who leave their jobs for a
reason not causally connected to their
work or their employer." The Justices
assumed throughout the opinion that
sec.3304(a) "allows" or "prohibits"
certain provisions of state legislation.
And as the opinion’s caption reveals, the
contestants were a worker and a state
agency, rather than an employer and the
tax collector. Wimberly does not suggest
that there is anything unusual about this
lineup, and the opinion does not mention
standing or redressability. Thus it is
easy to understand why Wisconsin did not
protest Zambrano’s invocation of sec.3304
and why my colleagues do not advert to
the Article III problem--but it is real
nonetheless. Jurisdictional questions
lurking in the record, but unmentioned by
a court, remain open to decision.
Pennhurst State School & Hospital v.
Halderman, 465 U.S. 89, 119 & n.29
(1984); United States v. L.A. Tucker
Truck Lines, Inc., 344 U.S. 33, 37-38 &
n.9 (1952); R.R. Donnelley & Sons Co. v.
FTC, 931 F.2d 430, 433 (7th Cir. 1991).
See also Webster v. Fall, 266 U.S. 507,
511 (1925). I do not think it a breach of
duty for an appellate court to emulate
the Justices with respect to a
jurisdictional issue, especially one that
flies beneath the parties’ radar. But it
should be noticed next time.
3. Even the equal protection claim comes
with a procedural millstone. The sole
defendant is a state official, in her
official capacity. Yet an official-
capacity suit is one against the state
itself, Kentucky v. Graham, 473 U.S. 159,
167 (1985), and sec.1983 does not
authorize suits against states. See
Arizonans for Official English v.
Arizona, 520 U.S. 43, 69 (1997); Will v.
Michigan Department of State Police, 491
U.S. 58 (1989). That disposes of
Zambrano’s claim for damages representing
the benefits he sought. Footnote 10 to
Will, 491 U.S. at 71 n.10, tells us that
states are "persons" for purposes of
prospective relief, though it is not
clear what prospective relief Zambrano
(who represents only himself and not a
class) could be entitled to. Yet
Wisconsin does not stand on the limited
scope of sec.1983 and does not assert its
immunity under the eleventh amendment.
This is not the kind of jurisdictional
problem that the court must notice even
when the defendant is content to have the
plaintiff’s claim resolved in a federal
tribunal. See Lapides v. University of
Georgia, No. 01-298 (U.S. May 13, 2002)
(overruling Ford Motor Co. v. Indiana
Department of the Treasury, 323 U.S. 459(1945)); Wisconsin Department of
Corrections v. Schacht, 524 U.S. 381, 393
(1998) (Kennedy, J., concurring).
FOOTNOTES
/1 In exceptional circumstances the federal govern-
ment provides some money for benefits. When a
state has very high unemployment and extended
benefits are authorized, the federal government
pays half. From 1995 through 1997 Wisconsin’s
residents received a total of $17,000 under this
program. Second, when a state extends its benefit
period beyond 26 weeks, the federal Treasury pays
some of the costs. Wisconsin has not received a
nickel under this program since 1987 (and its
last substantial grant came in 1981). Finally,
Congress authorizes ad hoc subsidies from time to
time. In the main, however, the statement in the
text dominates: The federal grant covers only
states’ administrative expenses.
/2 Wisconsin received more than $117 million in idea
funds in fiscal year 2001. It received only $56.8
million in unemployment-related funds. In 2001
Wisconsin distributed $791 million in regular
unemployment benefits, so the federal reimburse-
ment is less than 7% of total program costs.