A U.S. District judge here denied a request yesterday by more than 1,200 state and local governments across the country to stop implementation of a federal law making them responsible for unemployment compensation benefits for their employees.
Spokesmen for the state and local governments had argued that they would be forced to fire more than 100,000 employees and curtail vital government services in order to meet the provisions of the new law, which takes effect Sunday.
Judge Charles R. Richey said, however, that the harm would be greater to about 2 million state and hundreds of thousands of local government employees who would be left without unemployment coverage if the court enjoined implementation of the law.
"Lack of such coverage could result in the inability to meet the rising costs of food, clothing, shelter . . . (an) irreparable injury - to these individuals and to soceity in general," Richey said in an 11-page opinion.
Attorneys for the state and local governments immediately took Richey's decision to the U.S. Court of Appeals and asked that court to enjoin emplementation of the law.
The dispute centers on 1976 unemployment compensation amendments to the Social Security Act of 1935, which would require state and local governments to finance unemployment benefits for former employees of those governments, Richey noted in his opinion.
Richey asserted that since 1975, state and local employees have been provided unemployment compensation coverage under a special federal program that will expire on Dec. 31. The plan was intended to cover employees not otherwise provided such compensation, such as domestic workers, agricultural employees and employees of state and local governments.
According to a Justice Department spokesman, 29 state now provide their state employees with unemployment compensation coverage. Nine of those states also have provisions to provide coverage for local employees. The special unemployment coverage that expires Saturday covered public employees in the 21 states that do not provide unemployment coverage, the spokesman said.
Under the 1976 amendments, the states must now assume the financing of unemployment benefits for their employees Richey said.
If the states failed to enact legislation in conformance with the amendments, various penalties would be invoked. These would include cut off of federal aid now provided to help administer state unemployment programs and discontinuance of federal tax credits for private employers who pay a federal unemployment payroll tax. The theory behind the latter is that private employers would exert pressure on government to conform to the new law.
The state and local governments had argued that if they had to raise the funds to cover their own employees, they could be forced to curtail or eliminate government services and fire some of their employees, Richey noted in his opinion.
In a footnote to his opinion, Richey commented that the "suggestion had been made" that if the new law were not stopped, the result would be "virtual bankruptcy," for some cities and states throughout the country.
"The court notes these allegations with sadness," Richey said, but added that it was his opinion that the new law was not unconstitutional, as the state and local governments had contended.
The state and local governments argued that the new law was unconstitutional because its effect was to coerce the states into adopting the unemployment compensation scheme covering the former public employees.
Richey, however, said that Congress' approval of the 1976 amendments to induce the states to pay the unemployment compensation "should not be confused with coercion."
The states could avoid the injuries they contend would result if they simply did "not enact the conforming legislation," Richey said. While the state might lose its federal contributions to unemployment administration, and private employers would lose their tax credits, the state "would not have to fire anyone or curtail any services," the judge said.
If the states do not adopt plans that conform to the frderal amendments, public employees would have no unemployment compensation coverage unless the states individually implemented compensation programs.
The suit was brought last fall by seven states and more than 1,200 local jurisdictions against the Labor and Treasury Departments and the Internal Revenue Service. The American Federation of State, County and Municipal Employees joined as defendants in the lawsuit.
Maryland was among the states that brought the litigation. Local jurisdictions included the cities of Baltimore and Alexandria and Fairfax County.
With its more than 1,200 plaintifs, the suit was one of the bulkiest ever filed in U.S. District Court here. The complaint itself totaled 491 pages, with 139 of them listing the state and local governments who brought it. In addition, 700 pages of exhibits were filed.
The suit was filed with a $2 million fund already in hand, raised by the National Institute of Municipal Law Officers from state and local governments.
This allowed them to hire "10 constitutional law experts developing every theory and case we can use for the litigation." reports NIMLO's president, Richmond City Attorney Conrad B. Mattox Jr.
"Twelve lawyers, 14 clerks, three para-legals, three personnel and financial experts" worked on the case, he continued in a report last July to NIMLO members.
The organization took an active part in urging state and local governments to join in the suit by contributing as much as $25,000 to the fund, which would pay legal fees.
NIMLO's counsel, Charles S. Rhyne, the attorney on the case, won a major victory last year when the Supreme Court struck down federal laws setting wage-and-hour standards for employees of state and local governments.
Rhyne said he would use that Supreme Court decision to bolster his argument in this case, but Judge Richey ruled it did not apply.