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Faulknor v. Board of Review, Department of Labor

A-1104-02T5 (N.J. Super. App. Div. 2004) (Unpublished)

UNEMPLOYMENT INSURANCE; CORPORATIONS—A corporate shareholder or officer is not entitled to receive unemployment benefits through wages received from the corporation unless the corporation either has been dissolved or there has been substantial compliance with the dissolution requirement; but where no steps have been taken toward dissolution, the substantial compliance option is not satisfied.

The sole shareholder of a corporation worked as a consultant to the corporation for approximately eighteen years. When she stopped working for the company, the corporation was “still in existence” and she continued to “actively seek[] work for the corporation.” Nonetheless, she applied for unemployment benefits.

Under the law, “[i]ndividuals who are officers of a corporation or own more than 5% of its stock are not entitled to unemployment benefits based on wages earned from that corporation.” Further, “[a] corporation is considered viable unless it has been dissolved in accordance with [the New Jersey] Business Corporation Act or has filed for bankruptcy.” Nonetheless, the claimant, conceding her corporation had not been formally dissolved, contended that there had been “substantial compliance with the Administrative Rule in that her corporation [had] ceased operations and exist[ed] only on paper.” The Court thought otherwise. It found no effort to dissolve the corporation and, in fact, noted that the claimant conceded that she continued “to maintain the corporate identity in order to obtain work in the computer consulting field and when she finds works, bills through her corporation.” Consequently, her reliance on case law to the effect that there could be substantial compliance with the dissolution requirement was unavailing.


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