In Re Appeal of Anderson ( 1985 )

McCormac, J.,

dissenting. I dissent as the board correctly determined that the limited partners were employees rather than employers under the provisions of R.C. Chapter 4141.

“Employment” is defined in R.C. 4141.01(B)(1)(b), as pertinent, as follows:

“(B)(1) ‘Employment’ means:

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“(b) Services performed by an individual for remuneration unless it is shown to the satisfaction of the administrator that such individual:

“(i) Has been and will continue to be free from control or direction over the performance of such service, both-under his contract of service and in fact;

“(ii) That such service is outside the usual course of the business for which service is performed; and

“(iii) That such individual is customarily engaged in an independently established trade, occupation, profession, or business.”

If this definition is the sole test, then clearly the board did not err in finding that the partnership was required to pay into the Unemployment Compensation Fund for the draw paid to the limited partners since the services performed by the limited partners do not meet any of the three tests set forth in R.C. 4141.01 (B)(l)(b)(i), (ii), and (iii).

The trial court held that the limited partners of The Andersons were employers, not employees, under R.C. 4141.01(A)(1), and that compensation received by an employer is not subject to contributions to the Unemployment Compensation Fund.

R.C. 4141.01(A)(1) defines “employer” as follows:

“ ‘Employer’ means the state, its in-strumentalities, its political subdivisions and their instrumentalities, and any individual or type of organization including any partnership, association, trust, estate, joint-stock company, insurance company, or corporation, whether domestic or foreign * *

There is no specific exclusion of general partners contained within R.C. Chapter 4141. However, it is conceded that the wages received by a general partner are not subject to the Unemployment Compensation Act because the general partner is an “employer” rather than an “employee.” That distinction is consistent with the intent of the Act as contributions are levied against employers who are required to contribute to the fund at a rate based upon wages paid. R.C. 4141.24(A) and 4141.25(C)(1).

R.C. 4141.01(B)(1) defines “employment” as meaning:

“ ‘Employment’ means:

“(a) Service performed for wages under any contract of hire, written or oral, express or implied, including service performed in interstate commerce and service performed by an officer of a corporation, without regard to whether such service is executive, managerial, or manual in nature, and without regard to whether such officer is a stockholder or a member of the board of directors of the corporation;

“(b) Services performed by an individual for remuneration unless it is shown to the satisfaction of the administrator that such individual:

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In regard to a corporation, the services performed for wages or for remuneration is subject to contribution to the fund, even if paid to an officer or other employee who is a stockholder or a member of the board of the directors of the corporation. Therefore, since the corporation is the employer, the president of the corporation who receives wages and is a one-hundred-percent owner of the corporation would also have the remuneration paid to him taken into account in calculating the rate of contribution of the corporation.

There is no specific provision exempting a general partner of a limited partnership or of a general partnership from contribution for wages or remuneration received by him for services rendered to the partnership. However, in the instance of a partnership, the general partner is subject to liability for payment into the fund. A limited partner is in the same situation as a stockholder or a member of the board of directors of a corporation in regard to being an “employer,” which means one who is required to pay into the fund and who is personally liable for failure to make payment. Payments for wages or other remuneration to a limited partner are, thus, not exempt from being considered employment for which contributions must be made, unless the payments qualify for exemption under R.C. 4141.01(B)(1)(b).

It is not pertinent to the determination herein how a federal agency, such as the Internal Revenue Service, may regard the monies received as draw by limited partners in their day-to-day activities with the partnership since R.C. Chapter 4141, rather than provisions of any federal Act, controls the determination herein.

The trial court erred in finding that limited partners are “employers” under the Unemployment Compensation Act to whom payments received as a draw for day-to-day activities for the partnership would be exempt from the fund. The board correctly determined the law applicable to the facts herein.

Appellant’s assignment of error should be sustained, and the judgment of the trial court should be reversed.