Section 1 1937 Act

• Library: Employer-Employee Law 2008

Title IX of the Social Security Act enacted in 1935 is the basis
for the federal and state system of unemployment insurance.
The constitutionality of the federal statute was unsuccessfully challenged in 1937. Chas. C. Steward Mach. Co. v. Davis,
301 U.S. 548 (1937). The grounds for attack were that:

• the tax was not uniform
• the tax was not an excise tax
• the exceptions were arbitrary; and
• the act violated the Fifth Amendment

In addition, it was claimed that the statute’s purpose was not revenue but an invasion of powers reserved to the states and that the states had yielded to coercion and had abandoned governmental functions that they were not permitted to surrender.

The state unemployment compensation laws of Alabama, New York, and Arkansas were found to be constitutional by the Supreme Court in Carmichael v. Southern Coal & Coke Co.,
301 U.S. 495 (1937), and W.H.H. Chamberlin, Inc. v. Andrews,
299 U.S. 515 (1936). The grounds for attack in these cases were essentially the same as in the case testing the federal statute.

The current enabling legislation is contained in the Social...