The opinion of the court was delivered by: HAYS
The complaint in this action alleges the deprivation of rights secured to the plaintiffs by the Fourteenth Amendment to the United States Constitution and by parts of the Social Security Act of 1935, 42 U.S.C. § 501 et seq. (1964). Plaintiffs seek a declaratory judgment pursuant to 28 U.S.C. § 2201 (1964) declaring N.Y. Labor Law §§ 597, 598 and 620 (McKinney 1965) to be in violation of the Fourteenth Amendment and the Social Security Act "insofar as they authorize the suspension or termination of unemployment compensation benefits without a prior hearing * * *." Plaintiffs also pray for the issuance of preliminary and permanent injunctions against the New York State defendants to prevent them from using these statutory procedures and to require prior hearings before termination of the unemployment compensation benefits of those who have been determined to be entitled to such benefits pursuant to N.Y. Labor Law § 597 (McKinney 1965).
The action was brought as a class action. In a memorandum opinion, 318 F. Supp. 1313, dated July 21, 1970, Judge Lasker held that the case was not moot as to plaintiff Torres or the other members of the class, that Torres was a proper representative of the class, and that it would be inappropriate to grant a preliminary injunction. In a further memorandum opinion dated September 14, 1970, Judge Lasker granted plaintiffs' motion for the convening of this three-judge statutory court pursuant to 28 U.S.C. § 2281 (1964).
Unemployment compensation was designed to assist those who, although generally attached to the labor market, are unable, through no fault of their own, to secure employment. N.Y. Labor Law § 501 (McKinney 1965). If the program is in compliance with provisions of federal law, the federal government pays the costs of administration. 42 U.S.C. §§ 502, 503 (1964). Benefits are paid entirely out of a fund maintained solely by contributions, interest and penalties paid by employers. N.Y. Labor Law § 550 (McKinney 1965). Employers who pay $300 or more in wages in any calendar quarter must contribute to the fund, N.Y. Labor Law § 560(1)(McKinney 1965); the basic rate of contribution is 2.7% of all wages paid. N.Y. Labor Law § 570, subd. 1 (McKinney Supp. 1970). Actually, an employer's rate will usually range from 0.2% to 3.2% depending on the amount of benefits actually paid his former employees. N.Y. Labor Law § 581 (McKinney 1965). Separate accounts are maintained as formalities to determine this basic contribution rate, but all moneys in the fund are pooled and available to pay benefits to any entitled individuals. There is also a General Account to which all moneys paid which are later determined to have been paid in error are debited. N.Y. Labor Law § 577, subd. 1(b)(4)(McKinney 1965). When the General Account is in danger of depletion, a subsidiary contribution is imposed uniformly on covered employers, N.Y. Labor Law § 577(2)(McKinney Supp. 1970) ranging from two tenths of one percent to one percent of wages paid during the period.
In order for a claimant to be entitled to benefits, he must meet the requirements of N.Y. Labor Law § 590(1)(McKinney 1965):
"A claimant shall be entitled to accumulate effective days for the purpose of benefit rights only if he has complied with the provisions of this article regarding the filing of his claim, including the filing of a valid original claim, registered as totally unemployed, reported his subsequent employment and unemployment, and reported for work or otherwise given notice of the continuance of his unemployment."
A "valid original claim" is defined as follows:
"'Valid original claim' is a claim filed by a claimant who meets the following qualifications:
(a) is able to work, and available to work;
(b) is not subject to any disqualification or suspension under this article;
(c) his previously established benefit year, if any, has expired;
(d) has had at least twenty weeks of unemployment in the fifty-two week period preceding the filing of such claim;
(e) has earned remuneration averaging at least thirty dollars per week in at least twenty weeks of employment in such fifty-two week period." (N.Y. Labor Law § 527(1)(McKinney Supp. 1970)).
The disqualifications referred to in § 527(1)(b) are voluntary separation from previous employment, refusal of employment, and dismissal from previous employment for misconduct or a criminal act. N.Y. Labor Law § 593 (McKinney ...