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Hasson v. Board of Review, Department of Labor

A-3935-02T2 (N.J. Super. App. Div. 2004) (Unpublished)

UNEMPLOYMENT—A 5% or greater shareholder or corporate debtholder is not eligible for unemployment benefits based on wages from that corporation until after the corporation is dissolved or until it files for bankruptcy.

After a corporation ceased its operations on December 31, 2000, the individual who was its director, officer, and sole shareholder did not work or earn any income. He applied for unemployment benefits on September 1, 2002. His claim was denied because he did not have sufficient base weeks or earnings to support his claim. At a hearing before the Appeal Tribunal, the man testified that he had not worked since December 31, 2000 and had no wages since then. He also admitted that his corporation was still in existence, even though it had ceased operations. In fact, his corporation was not dissolved until September 24, 2003. He claimed that he did not apply for benefits before September 1, 2002, because the local unemployment office advised him that he was ineligible for benefits due to his position as sole owner and president of a corporation. The Tribunal again declared him ineligible for benefits because he had insufficient weeks of employment and earnings that rendered his claim invalid under N.J.S.A. 43:21-4(e). Furthermore, the Tribunal pointed out that N.J.S.A. 43:21-19m(1) provides that an officer of a corporation, or one who has more than a five percent equitable or debt interest in the corporation, whose claim for benefits is based on wages, shall not be deemed to be unemployed in any week during the individual’s term of office or ownership in the corporation.

On appeal, the man contended that because his corporation permanently ceased doing business on December 31, 2000, he should be eligible for benefits despite the fact that the corporation had neither been dissolved nor filed for bankruptcy. The Appellate Division disagreed and affirmed the Tribunal’s analysis. N.J.A.C. 12:17-12.1(a)(3) provides that a corporation is still viable for unemployment compensation purposes until it is dissolved or until it files for bankruptcy. Here, because the man did not dissolve his corporation until September 24, 2003, more than a year after he filed his first claim and almost three years after the corporation ceased operations.

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