ISENBERG v. CALIFORNIA EMPLOYMENT STABILIZATION COMMISSION (1946)

The action herein was commenced by plaintiff and respondent to recover ‘contributions' paid under protest, in accordance with the provisions of Sec. 45.10 of the California Unemployment Insurance Act. The sum sought to be recovered was ‘contributed’ under the act referred to, on the remuneration received by jockeys performing services for plaintiff during a certain period. Following a trial on the merits, plaintiff prevailed and, from the judgment that followed, defendant appeals.

Appellant recites the facts as follows:

‘During the period in question, respondent owned a string of horses which he raced at Bay Meadows Race Track; various jockeys, whose status is in question, were engaged to ride respondent's horses; these jockeys secured their mounts by having their agents contract the owner of the horses, or the trainer of the horses, on the day before the race for all races except stake races; with relation to stake races, agreements were usually entered into two or three weeks before the race was run. The testimony disclosed that the custom and practice of the jockeys and their method of operation was that the jockeys reported to the jockey's room at noon on the day of the race; that they changed into the silks furnished by the owners at the time they were to ride the scheduled race and proceeded to the paddock, where the jockey met with the owner or the trainer. At this time the owner or trainer (the agent of the owner) advised the jockey regarding the reunning of the race; the jockeys received instructions as to how the horses were to be raced, whether they should be warmed up before going to the gate; whether the horse was to be whipped, or whether he was to be held back in the early part of the race. The owner, however, can give no instructions which do not have for their objective the winning of the race, with the exception of the instances where an owner has more than one horse entered in the same race, as such would be against public policy and against the express rules of racing in California, (Pl. Ex. 2, Rule 323(a). Either the trainer or the owner specifically informs the jockey as to the characteristics of the particular horse that he is to ride. Where the owner believes it is advantageous that the horse be ridden without a whip or stick, the owner may have the whip or stick taken from the jockey by application to the stewards. In such case, during the remainder of the racing meet, the horse must be ridden without a stick unless an application is made by the owner to the stewards to change the ruling.

‘In the instant matter, the statement of Mr. Molter, the respondent's trainer, who, as part of his duties, hired the jockeys whose status is in question, discloses that he instructed the jockeys as to the various characteristics of the horses they were to ride and how to ride them. After the race, the trainer or owner had the right to obtain information from the jockey as to the reason for the horse not running, or as to the type of race the horse did run. If the jockeys did not follow the instructions of the owner or trainer, the owner would not engage the jockey to ride again.

‘The same instructions were given to all jockeys, whether they were termed apprentices, free lance or contract riders. The jockeys received a fixed sum for riding the race, in the absence of a specific contract, which was the situation in the present matter, $35.00 for a winning mount and $10.00 for a losing mount.’

It is contended by appellant that ‘The sole issue presented to the court by this appeal is whether or not the free lance jockeys performing services for respondent were in ‘employment’ within the meaning of Section 6.5 of the California Unemployment Insurance Act.'

Respondent points out briefly that, ‘The facts as stated in Appellants' Opening Brief are to some extent erroneous, or are Appellants' interpretation of the testimony. There is no evidence in the record that the owner advised the jockey how to run the race, but there is testimony that not only did the owner not so advise but that it would be impossible. The whip is not taken from any jockey but is taken from the horse. There is no evidence that Mr. Molter told any of the jockeys whose status is in question how to ride their horses. There is no evidence that the owner would not engage the jockeys to ride again if the jockeys failed to follow instructions, but only that if done too often that the jockey ‘probably would not ride for that owner again’.' It is respondent's contention that, ‘The sole issue involved in this appeal is whether there was sufficient evidence to support the judgment of the trial court.’

Appellant replies that, ‘The challenge raised by Respondent to the statement of facts as set out in Appellants' Opening Brief clearly shows that there is no essential conflict in the facts in this case, but the question to be determined is one of law, and therefore, the Appellate Court is not bound by the findings of the Trial Court. The sole issue to be determined is whether, as a matter of law, from the uncontradicted facts these jockeys were ‘in employment’.'

‘Section 6.5 of the California Unemployment Insurance Act defines ‘employment’ as: ‘* * * service, including service in interstate commerce, performed for wages or under any contract of hire, written or oral, express or implied * * *.’

‘Section 8.5 of the California Unemployment Insurance Act provides in part: ‘* * * Each individual employed to perform or to assist in performing the work of any individual employed by an employing unit shall be deemed to be employed by such employing unit for all the purposes of this act, whether such individual was hired or paid directly by such employing unit or by such individual so employed, providing the employing unit had actual or constructive knowledge of the work.’

‘Section 11 of the California Unemployment Insurance Act provides as follows: ‘(a) Except as hereinafter in this section provided, the term ‘wages' means: (1) All remuneration payable for personal services, whether by private agreement or consent or by force of statute, including commissions and bonuses, and the cash value of all remuneration payable in any medium other than cash * * *.’'

Appellant argues that, ‘The California Unemployment Insurance Act is social legislation and as such must be liberally construed to the end that its purpose may be accomplished.’ California Employment Commission v. Butte County Rice Growers Association, 25 Cal.2d 624, 154 P.2d 892, 894, is cited in support of the above argument. There, the court held that, ‘The tax feature as to the reciprocal contributions of employers and their employees is but an incident, not the essence of the state unemployment insurance law, which in turn is integrated with the operation of comparable federal legislation. * * * Such legislation is remedial in character, subject to a liberal construction to effectuate its purpose and to coincide with its reflection of public policy.’ The statutory rule in this regard is that, ‘* * * The code establishes the law of this state respecting the subject to which it relates, and its provisions are to be liberally construed with a view to effect its objects and to promote justice.’ Civil Code, sec. 4. And with relation to the same subject, the rule has been declared to be that, ‘The different Codes are to be harmonized and construed together as parts of the same statute, as far as may be reasonably possible.’ Weber v. McCleverty, 149 Cal. 316, 86 P. 706, 708. Sec. 4480 of the Political Code as enacted in 1872 provides, ‘With relation to each other, the provisions of the four codes must be construed * * * as though all such codes had been passed at the same moment of time, and were parts of the same statute.’ Thus, there can be no question as to the validity of the contention that the statute here considered ‘must be liberally construed with a view to effect its purpose and to promote justice’, but, not because it is ‘social legislation’; it is the general rule and statutory law.

The case cited above, namely, the California Employment Commission v. Butte County Rice Growers Association, however, is not decisive of the issues involved in the within action. The question presented in the former action was whether, ‘the labor involved in the activities of the association constituted ‘agricultural labor’ and was therefore exempt from the coverage provisions of the act.' In the last mentioned case at page 629 of 25 Cal.2d, at page 894 of 154 P.2d, also appears the following, ‘The California Unemployment Insurance Act expressly excepts ‘agricultural labor’ but does not expand the term in any detail. * * * However, plaintiff, as the administrative agency created by the act and entrusted with its enforcement * * *, is authorized to ‘adopt and enforce rules and regulations which to is seem necessary and suitable to carry out the provisions of this act.’ * * * Upon this basis the plaintiff promulgated rule 7.1, effective February 14, 1937, and in force during the period here involved, which administrative aid defined the term ‘agricultural labor’ as including all services performed.' Then follows the definition of, ‘agricultural labor’, promulgated by the California Employment Commission. The opinion continues, ‘Considering at the outset the challenge of the validity of rule 7.1, the objection is not well taken. Where the Legislature has by its enactments declared policies and fixed primary standards, as it did in the Unemployment Insurance Act, there can be no question but what it may validly confer on administrative officers power to ‘fill up the details' by prescribing rules and regulations to promote the spirit and purpose of the legislation and its complete operation.’ However, it should be noted at this point that the question as to the authority of the legislature to thus delegate to a commission, its power to tax, and, its power to define and classify for taxation purposes, was not raised.

Appellant also quotes at length from Drillon v. Industrial Accident Commission, 17 Cal.2d 346, 110 P.2d 64, 65. There the petitioner sought the ‘annulment of an award made against him by the Industrial Accident Commission in favor of Claude Hooper, a jockey suffering injuries while riding a horse for petitioner in a race at Del Mar, California. The respondent commission found that Hooper was an employee, as against the defense that he was an independent contractor and accordingly made the award to Hooper including an increased indemnity as petitioner was found to be wilfully uninsured.’ The court adhered to the well established rule controlling in such circumstances and held, ‘We think it is clear therefore that the evidence is sufficient to support the respondent commission's finding that Hooper was an employee and not an independent contractor’. Following a comprehensive review of the facts, the court concludes, in part, with the following observation, ‘In any event the issue of whether or not a person is an employee or an independent contractor is a judicial question and not a legislative or executive one.’ The only issue in the Drillon case was whether Hooper was an ‘employee’ within the purview of the workman's compensation laws. The Industrial Accident Commission held that Hooper was such an employee; the Supreme Court decided that there was sufficient evidence to support the finding, and affirmed the award. And in the final analysis, whether Hooper, under applicable phases of other doctrines, might also have been an independent contractor as well as a ‘workman’, was beside the issue. It does not follow therefore, that all jockeys are necessarily employees, even within the purview of the Workmen's Compensation Act; the evidence in each case is controlling.

It also should be remembered, in connection with a consideration of the Drillon case, that Article XX, sec. 21 of the California Constitution is the authority for the Workmen's Compensation laws and the functions of the Industrial Accident Commission; they are not the product of the police power.

Unlike the California Workmen's Compensation Insurance and Safety Laws, which the legislature, by constitutional enactment was expressly vested with plenary power to create, the California Unemployment Insurance Act is purely a police power measure. Article I of the act recites a premise followed by the conclusion that, ‘The Legislature therefore declares that in its considered judgment the public good and the general welfare of the citizens of the State require the enactment of this measure under the police power of the State.’ Deerings General Laws, Vol. 3, p. 3322.

Pertinent phases of the police power are summarized in 5 Cal.Jur. p. 711 as follows: ‘In the exercise of the police power, a large discretion is necessarily vested in the legislature to determine not only what the interests of the public require, but also what measures are necessary for the protection of such interests. It is therefore settled that the decision of the legislative body as to the necessity or reasonableness of a given regulation is conclusive unless the court can see, in the light of facts properly brought to its knowledge, that such regulation has no just relation to the object which it purports to carry out, and no reasonable tendency to preserve or protect the public safety, health, comfort or morals. It is equally well settled that the question of whether or not an enactment so possesses this character of unreasonableness as to transcend the proper exercise of the law-making power is one to be determined by the court. Accordingly, where a statute, purporting to have been enacted to protect the public health, morals or safety, has no real or substantial relation to those objects, or is a palpable invasion of rights secured by the constitution, it is the duty of the courts so to adjudge and thereby give effect to the fundamental law.’ And, with regard to the same subject, the Supreme Court has declared, ‘Under our form of government by constitution, the individual, in becoming a member of organized society, unless the Constitution states otherwise, surrenders only so much of these personal rights as may be considered essential to the just and reasonable exercise of the police power in furtherance of the objects for which it exists. Cooley on Stat.Lim., pp. 68, 244; 1 Barb. on Rights, pp. 122, 284. * * * The police power is broad in its scope, but it is subject to the just limitations that it extends only to such measures as are reasonable in their application and which tend in some appreciable degree to promote, protect, or preserve the public health, morals, or safety, or the general welfare.’ Ex parte Quarg, 149 Cal. 79, at pages 80, 81, 84 P. 766, 5 L.R.A.,N.S., 183, 117 Am.St.Rep. 115, 9 Ann.Cas. 747.

It is the duty of the California Employment Commission to ‘carry out the provisions of this act’; imposed with this duty, the commission has extended and multiplied the provisions of the Act by the adoption of certain rules and regulations with reference to the ‘contributions' referred to in the Act. By whatever name it may be called, the ‘contribution’ is a tax. And, the failure to comply with the published rules of the commission is declared to be a crime. Article 8 sec. 101.5, Vol. 3, Deerings Gen.Laws, p. 3373. Thus, to the Commission is delegated, in effect, the power to tax, the power to determine who shall be taxed, and the power to initiate criminal prosecutions for the violations of its rules and regulations. The validity of the aforesaid power is not disputed in the within action.

The foregoing somewhat extended consideration of the law governing the California Employment Commission and the Commission itself, is to emphasize the proposition that they both are the product of the police power. The effect of police power regulations and the acts of those charged with the operation of such regulations are never conclusive. They frequently, if not invariably, precipitate legitimate controversies, the determination of which is exclusively judicial. All of which, it may be assumed, the trial judge took into account in the trial of the within action. It also may be assumed that the trial court knew of the differences between constitutional authority and authority that has its source in the police power; and, that in connection with the former, the governmental agency is not only vested with a power, but also is directly and affirmatively imposed with a duty, all of which is determined by the people through the medium of the Constitution; whereas, with the latter, its power is acknowledged only for certain purposes and within certain limitations. The courts are bound to uphold the former in any event, but with the latter, are frequently called upon to judicially determine the validity and limitation of police power statutes or regulations in the light of the many phases of the law that affect such validity and limitation.

In the within action the trial court properly assumed the function and responsibility of determining whether the relation of employer and employee actually existed within the meaning and application of the act in question and, in that connection, in effect, rejected the defendant commission's contention that all jockeys are in, ‘employment’, simply by being so classified by the commission. The court found, and the findings in part recite, ‘That it is true that during no portion of said quarter ending June 30, 1944, were any or all of said five free lance jockeys employees of plaintiff, and none of the aforementioned sums of money so paid to said free lance jockeys was wages, and during the entirety of said period none of said free lance jockeys was in the employment of plaintiff, and said plaintiff during the entirety of said period was not an employer of any or all of said free lance jockeys, nor was he an employing unit of said free lance jockeys, or any of them; and that the aforesaid sums of money, so paid during the said quarterly period to the aforementioned five free lance jockeys, were payments made by plaintiff to independent contractors, and no portion of said monies are, or at any time have been, subject to any or all of the provisions of said California Unemployment Insurance Act. * * * That it is true that during the entirety of said quarter ending June 30, 1944, and particularly during the time that said services were so rendered, as aforesaid, by said five free lance jockeys, and each of them, none of said free lance jockeys were subject to any or all of the provisions of said California Unemployment Insurance Act, and at none of said times did an employer-employee relationship exist between any or all of said five free lance jockeys.’ Moreover, it should be noted that, the right to contract freely is a personal right, and is of the very essence of liberty.

The sole issue on appeal, as contended by respondent, is whether the evidence sustains the findings and the judgment. That the evidence does in fact, and in law sustains the findings and the judgment, there can be no question. The fact that the evidence may have been conflicting to some extent, must be disregarded. In the circumstances, the judgment is conclusive on appeal. See California Empl. Stab. Comm. v. Wirta, 75 Cal.App.2d 739, 171 P.2d 728.

For the foregoing reasons the judgment is affirmed.

DORAN, Justice.

YORK, P. J., and WHITE, J., concur.