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Phoenix v. Summer Institute of Linguistics And Division of Employment Security

Court of Appeals of Missouri, Eastern District, Second Division

February 13, 2019


          Appeal from the Labor and Industrial Relations Commission

          ROBERT G. DO WD, JR, JUDGE

         Rebecca Phoenix ("Claimant") appeals from the decision of the Labor and Industrial Relations Commission denying her claim for unemployment benefits. We reverse and remand.

         Claimant was employed by Summer Institute of Linguistic, Incorporated ("SIL"). SIL is a 501(c)(3)[1] non-profit corporation located in Texas with approximately 75 employees, almost all of whom work in Texas. Claimant worked remotely from her home in Missouri and she was the only SIL employee working in this state. Claimant was terminated for budget reasons and filed for unemployment benefits in Texas, which were denied, and she then applied for unemployment benefits in Missouri. The Division of Employment Security denied her claim. The Division's position was, and is, that work for a non-profit corporation is only "employment" under Section 288.034.8 of the Missouri Employment Security Law ("MESL")[2] if the non-profit had four or more employees in the State of Missouri. The Appeals Tribunal and the Labor and Industrial Relations Commission affirmed the Division's denial, and this appeal follows. The sole issue on appeal is statutory construction of Section 288.034.8, though it is a somewhat long and winding road that leads to that provision.

         The purpose of the MESL is expressly codified in Section 288.020, "to promote employment security both by increasing opportunities for jobs through the maintenance of a system of public employment offices and by providing for the payment of compensation to individuals in respect to their unemployment." We are mandated to construe the law "liberally to accomplish its purpose." Section 288.020. When an employee is terminated from employment through no fault of her own, she is entitled to benefits under the MESL if she is an "insured worker," defined in Section 288.030.1(22) as "a worker who has been paid wages for insured work." "Insured work" is defined in that same section as "employment in the service of an employer." Section 288.030.1(21). Thus, a claimant's entitlement to benefits is dependent on the meaning of "employer" and "employment." Which employers and what employment is covered by the MESL is set out in Sections 288.032 and 288.034 respectively.

         The different entities that constitute "employers" are listed in Section 288.032.1(1)-(10). If deemed an "employer," the entity is required to report to the Division the wages it paid in a given period and to whom and contribute to the unemployment compensation fund; a claimant's wage credits are calculated based on these reports, which in turn determine the amount of benefits she is entitled to be paid from that fund. See Section 288.090, Section 288.030.1(9) and 8 C.S.R. 10-4.030. When Claimant filed her claim for benefits in this case, the Division initially determined she had no wage credits and then in a second determination found that SIL had filed no wage reports for her because it was an exempt non-profit, not subject to the obligations of the MESL.

         As a non-profit organization, SIL would only be subject to the wage report and fund contribution obligations of the MESL if it met the test for "employer" in Section 288.032.1(4).[3] That section provides that "employer" means "[a]ny employing unit for which service in employment as defined in subsection 8 of section 288.034 is performed during the current or preceding calendar year." An "employing unit" is an entity that has "in its employ one or more individuals performing service for it within this state." Section 288.030.1(15). There is no dispute that Claimant performed work in Missouri, and therefore SIL had at least one individual performing service for it in this state and constituted an "employing unit." Having met that threshold, the question is whether her service was "in employment as defined in" Section 288.034.8, which describes the circumstances under which service for a non-profit corporation is considered "employment":

Service performed by an individual in the employ of a corporation or any community chest, fund, or foundation organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, or other organization described in Section 501(c)(3) of the Internal Revenue Code which is exempt from income tax under Section 501(a) of that code if the organization had four or more individuals in employment for some portion of a day in each of twenty different weeks whether or not such weeks were consecutive within a calendar year regardless of whether they were employed at the same moment of time shall be employment subject to this law.

         Section 288.034.8 (emphasis added).

         The Division has been-for years apparently-interpreting Section 288.034.8 as if the "four or more individuals in employment" had to be located in this state. Under this interpretation, the services Claimant performed for SIL were not "employment" because the SIL did not have four employees in Missouri and was not an "employer." As a result, Claimant was not an "insured worker" entitled to any "wage credits," and her request for benefits was denied. In affirming that denial, the Appeals Tribunal agreed that the MESL excluded from coverage employment for any non-profit with fewer than four employees in this state.[4]

         "It is the duty of the courts to interpret and ascertain the legislative intent of the Missouri Employment Security Law." Christensen v. American Food & Vending Services, Inc., 191 S.W.3d 88, 90 (Mo. App. E.D. 2006). The primary rule of statutory construction is to determine the legislature's intent from the statute's language, considering the words in their plain and ordinary meaning. Id. Where the language of the statute is ambiguous or where its plain meaning would lead to an illogical result, then this Court will look past the plain and ordinary meaning of a statute. Higgins v. Missouri Division of Employment Security, 167 S.W.3d 275, 282 (Mo. App. W.D. 2005). Statutory interpretation is an issue of law, and this Court does not defer to the Commission on issues of law. Moore v. Swisher Mower & Machine Company, Inc., 49 S.W.3d 731, 738 (Mo. App. E.D. 2001).

         The Division admits that the phrase "in this state" is not contained anywhere in Section 288.034.8. But the Division argues that the phrase "employment" in that section must be given the meaning that "employment" has elsewhere in the MESL. The Division cites to Section 288.034.2, which provides that employment "shall include an individual's entire service, performed within or both within and without this state" if it is "localized" here. Section 288.034.2; Section 288.034.4 (service is "localized" in this state if only incidental services are performed out of state). To be "in employment," the Division reasons, the four or more individuals in Section 288.034.8 must be similarly localized. It also cites to Section 288.030.1(15), requiring one employee "within this state" for an entity to be an "employing unit," and Section 288.100.1(1), authorizing closure of an employer's account when it ceases to have employment "in this state." In other words, according to the Division, whenever "employment" is used in the MESL, it refers only to employment that qualifies for coverage thereunder, which means only employment in this state. This is at least one reasonable interpretation of the language in the statute. But Claimant's interpretation is also reasonable: that because there is no language in Section 288.034.8 limiting "employment" to only that which is performed in this state, the plain meaning is that there is no such geographic limitation in that section.

         Because the language of Section 288.034.8 could be reasonably interpreted in two different ways, it is ambiguous and we cannot glean the intent of the legislature from the words alone. See generally In re Laclede Gas Company, 417 S.W.3d 815, 820 (Mo. App. W.D. 2014). The Division suggests that its "administrative usage and interpretation" resolves any ambiguity here and we should simply adopt its long-standing construction of this provision, citing Springfield General Osteopathic Hospital v. Industrial Commission, 538 S.W.2d 364, 370-71 (Mo. App. 1976). Although the agency's interpretation of the MESL is entitled to some-even considerable-weight, it is not conclusive or binding on this Court. See Moore, 49 S.W.3d at 738. We have given the Division's position the weight to which it is entitled here and conclude that, while it is reasonable on its face, it is nevertheless untenable. The statutory framework of and the context in which the MESL was enacted reveals the general purpose of the law and the specific problem that Section 288.034.8 was enacted to remedy. See Doe v. St. Louis Community College, 526 S.W.3d 329, 336-37 (Mo. App. E.D. 2017). Against the backdrop of that legislative history, it is clear that the General Assembly did not intend to impose a geographic limitation on the minimum size requirement on non-profits contained in Section 288.034.8.

         The MESL is part of a cooperative federal-state scheme established by Congress in 1935 in response to the states' inability to provide public assistance to the unemployed during the Great Depression. See generally St. Martin Evangelical Lutheran Church v. South Dakota, 451 U.S. 772, 775 (1981). Congress encouraged the states to create their own unemployment insurance systems, and if a state plan complies with federal standards-now found in the Federal Unemployment Tax Act ("FUTA"), codified at 26 U.S.C. Section 3301, et seq.- the state is authorized to receive a federal grant to administer its plan. California v. Grace Brethren Church, 457 U.S. 393, 422 n.5 (1982). Employers are also allowed a credit on their federal tax for any contributions to a state unemployment compensation fund established under a federally approved plan. See St. Martin Evangelical, 451 U.S at 791 n.3. The "employment security acts of the several states and their federal counterparts represent a cooperative effort by the states and the national government to carry out a common public ...

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