Carmichael v. Southern Coal & Coke Co., 301 U.S. 495 (1937)

Author: Justice Sutherland

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Carmichael v. Southern Coal & Coke Co., 301 U.S. 495 (1937)


The objective sought by the Alabama statute here in question, namely, the relief of unemployment, I do not doubt is one within the constitutional power of the state. But it is an objective which must be attained by legislation which does not violate the due process or the equal protection clause of the Fourteenth Amendment. This statute, in my opinion, does both, although it would have been a comparatively simple matter for the legislature to avoid both.

The statute lays a payroll tax upon employers, the proceeds of which go into a common fund to be distributed for the relief of such ex-employees, coming within the provisions of the statute, as shall have lost their employment in any of a designated variety of industries within the state. Some of these employers are engaged in industries where work continues the year round. Others are engaged in seasonal occupations, where the work is discontinued for a part of the year. Some of the employers are engaged in industries where the number of men employed remains stable, or fairly so, while others are engaged in industries where the number of the men employed fluctuates greatly from time to time. Plainly, a disproportionately heavy burden will be imposed by the tax upon those whose operations contribute least to the evils of unemployment, and, correspondingly, the burden will be lessened in respect of those whose operations contribute most.

An example will make this clear. Let us suppose that A, an employer of a thousand men, has retained all of his employees. B, an employer of a thousand men, has discharged half of his employees. The tax is upon the payroll of each. A, who has not discharged a single workman, is taxed upon his payroll twice as much as B, although the operation of B’s establishment has contributed enormously to the evil of unemployment, while that of A has contributed nothing at all. It thus results that the employer who has kept all his men at work pays twice as much toward the relief of the employees discharged by B as B himself pays. Moreover, when we consider the large number and the many kinds of industries, their differing characteristics, and the varied circumstances by which their operations are conditioned, the gross unfairness of this unequal burden of the tax becomes plain beyond peradventure. It is the same unfairness, in an aggravated form, as that which we so recently condemned as fatally arbitrary in Railroad Retirement Board v. Alton R. Co., 295 U.S. 330. That case dealt with a federal statute which established a pension plan requiring payments to be made by all interstate railroad carriers into a pooled fund to be used for the payment of annuities indiscriminately to railroad employees, of whatever company, when they had reached the age of 65 years. This Court, because of this pooling feature, among other things, held the act to be bad. We said (p. 357):

This Court has repeatedly had occasion to say that the railroads, though their property be dedicated to the public use, remain the private property of their owners, and that their assets may not be taken without just compensation. The carriers have not ceased to be privately operated and privately owned, however much subject to regulation in the interest of interstate commerce. There is no warrant for taking the property or money of one and transferring it to another without compensation, whether the object of the transfer be to build up the equipment of the transferee or to pension its employees. . . . The argument is that, since the railroads and the public have a common interest in the efficient performance of the whole transportation chain, it is proper and necessary to require all carriers to contribute to the cost of a plan designed to serve this end. It is said that the pooling principle is desirable because there are many small carriers whose employees are too few to justify maintenance of a separate retirement plan for each.

In support of that view, several cases had been cited. Those cases were reviewed and distinguished, and we concluded, p. 360,

that the provisions of the act which disregard the private and separate ownership of the several respondents, treat them all as a single employer, and pool all their assets, regardless of their individual obligations and the varying conditions found in their respective enterprises, cannot be justified as consistent with due process.

Cases which are relied upon here to sustain the Alabama statute were relied upon there to sustain the Retirement Act, Mountain Timber Co. v. Washington, 243 U.S. 219, among others. That case dealt with the Washington Workmen’s Compensation Act, requiring designated payments to be made by employers into a state fund for compensating injured workmen. But we pointed out (295 U.S. 330) that, although the payments were made into a common fund, accounts were to be kept with each industry in accordance with the classification, and no class was to be liable for the depletion of the fund by reason of accidents happening in another class. And we said:

The Railroad Retirement Act, on the contrary, makes no classification, but, as above said, treats all the carriers as a single employer, irrespective of their several conditions.

If the Alabama act had followed the plan of the Washington act in respect of classification, we should have a very different question to consider. The vice of the Alabama act is precisely that which was condemned in the Railroad Retirement Board case. Indeed, the vice is more pronounced, since the federal act, relating as it did to railroads only, dealt with a homogeneous group of employers, while the Alabama act seeks to impose the character of "a single employer" upon a large number of employers severally engaged in entirely dissimilar industries.

It must be borne in mind that we are not dealing with a general tax, the proceeds of which are to be appropriated for any public purpose which the legislature thereafter may select, but with a tax expressly levied for a specified purpose. The tax and the use of the tax are inseparably united, and if the proposed use contravenes the Constitution, it necessarily follows that the tax does the same. Cincinnati Soap Co. v. United States, ante, pp. 308, 313.

Other states have not found it impossible to adjust their unemployment laws to meet the constitutional difficulties thus presented by the Alabama act. The pioneer among these states is Wisconsin. That state provides (Act of January 28, 1932, c. 20, Laws of Wisc., Spec.Sess., 1931, p. 57, as amended) that, while the proceeds of the tax shall be paid into a common fund, an account shall be kept with each individual employer, to which account his payments are to be credited and against which only the amounts paid to his former employees are to be charged. If he maintains his roll of employees intact, he will be charged nothing, and, in any event, only to the extent that his employment roll is diminished. When his tax contributions have reached a certain percentage of his payroll, the amount of his tax is reduced, and when they reach 10%, the tax is discontinued as long as that percentage remains. The result is that each employer bears his own burdens, and not those of his competitor or of other employers. The difference between the Wisconsin and the Alabama acts is thus succinctly stated by the Social Security Board in its Informational Service Circular No. 5, issued November, 1936, pp. 8, 9:

(1) The plan for individual employer accounts provides for employer-reserve accounts in the State fund. Each employer’s contributions are credited to his separate account, and benefits are paid from his account only to his former employees. If he is able to build up a specified reserve in his account, his contribution rate is reduced.

Such is the Wisconsin plan; while under the Alabama statute:

(2) The pooled-fund plan provides for a pooling of all contributions in a single undivided fund from which benefits are paid to eligible employees, irrespective of their former employers.

Which of these plans is more advantageous from a purely economic standpoint does not present a judicial question. But, from the constitutional point of view, insofar as it involves the ground upon which I think the Alabama act should be condemned, I entertain no doubt that the Wisconsin plan is so fair, reasonable, and just as to make plain its constitutional validity, and that the Alabama statute, like the New York statute involved in Chamberlin, Inc. v. Andrews, 299 U.S. 515, affirmed by an equally divided court during the present term, is so arbitrary as to result in a denial both of due process and equal protection of the laws.

I am authorized to say that MR. JUSTICE VAN DEVANTER and MR. JUSTICE BUTLER concur in this opinion.


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Chicago: Sutherland, "Sutherland, J., Dissenting," Carmichael v. Southern Coal & Coke Co., 301 U.S. 495 (1937) in 301 U.S. 495 301 U.S. 528–301 U.S. 531. Original Sources, accessed January 22, 2019,

MLA: Sutherland. "Sutherland, J., Dissenting." Carmichael v. Southern Coal & Coke Co., 301 U.S. 495 (1937), in 301 U.S. 495, pp. 301 U.S. 528–301 U.S. 531. Original Sources. 22 Jan. 2019.

Harvard: Sutherland, 'Sutherland, J., Dissenting' in Carmichael v. Southern Coal & Coke Co., 301 U.S. 495 (1937). cited in 1937, 301 U.S. 495, pp.301 U.S. 528–301 U.S. 531. Original Sources, retrieved 22 January 2019, from