Unemployment Compensation Benefits for Individual That Was Employed by an Entity That Was Owned or Operated by a Family Member

Another issue that arises involves the eligibility for New Jersey unemployment compensation benefits for an individual that was employed by an entity that owned or operated by a family member. Although N.J.S.A. 43:21-19(i)(7)(c) contains a provision excluding “[s]ervice performed by an individual in the employ of his son, daughter or spouse and service performed by a child under the age of 18 in the employ of his father or mother,” the New Jersey courts have held that this language, and the statute in particular, should not be applied to automatically disqualify an individual simply on the basis that they were employed by an entity that was owned or operated by their son or daughter.

In Palitto v. Board of Review , 312 N.J. Super. 157 (App. Div. 1998), the court noted that although the statute permits an employer to elect coverage of services for all purposes by filing a written election with the Division of Unemployment Security, the failure to do so is not fatal to an employee’s ability to collect unemployment benefits. Rather, the court emphasized New Jersey’s public policy recognizing the “beneficent and salutary purpose of the social legislation affording benefits to employees whose employment is lost through no fault of their own and requiring liberal construction of that legislation”.

The court held that an employer’s failure to file the written election pursuant to the statute when all the payments that would have been required by the election have actually been made should not be fatal to a Claimant’s eligibility to collect unemployment benefits. Noting that this was an issue of first impression, the court held that it was appropriate for the agency whose responsibility it was to administer and implement the statute to make the first determination and therefore remanded the matter to the Department of Labor for further proceedings.

The court emphasized that the agency should give consideration to the fact that the filing of the written election is purely unilateral, does not require the permission or approval of the Division and is apparently entirely self-effectuating and self-executing. Thus, the court noted that if the employer had done so, by way of claiming and reporting, everything that he would have been required to do had he filed the written election, the act of filing may well be regarded as a “purely ministerial act” whose omission would not dispute the election.

Moreover, the court noted that the payment and reporting may be deemed to be substantial in compliance with the written election opportunity. Accordingly, the court admonished the agency to be “mindful of the beneficent purpose of the legislation and the fairness and justice with which the facts here must be addressed in the context of the applicable statutory provisions”.

Finally, the court noted that the language within the statute excluding services by an individual in the employ of his son or daughter or spouse is limited by the provisions of N.J.S.A. 43:21-19(i)(7) which excludes the familial services only if they are “also exempt under the Federal Unemployment Tax Act, as amended, or… [if] contributions with respect to such services are not required to be paid into a state unemployment fund as a condition for a tax offset credit against the tax imposed by the Federal Unemployment Tax, as amended….”.

It may be important to seek the advice of a New Jersey Unemployment Compensation attorney or lawyer with respect to determining whether your qualify for New Jersey Unemployment Compensation benefits.