INTERPRETATION NO. 274
NORTH CAROLINA DEPARTMENT OF COMMERCE
DIVISION OF EMPLOYMENT SECURITY
Interoffice Communication
Date: October 25, 2023
TO: Holders of Interpretation Manual, All Directors, Adjudicators and Appeals Referees
FROM: R. Glen Peterson, Chief Counsel
SUBJECT: DES Interpretation No. 274
Pursuant to 2011 N.C. Sess. Laws 401, the Employment Security Commission of North Carolina became the North Carolina Department of Commerce, Division of Employment Security (“DES”) on November 1, 2011. Interpretations adopted prior to the amendments made by 2011 N.C. Sess. Laws 401 which were effective on that date continue to apply and should be construed as Interpretations of the Division.
In accordance with DES Interpretation No. 252, the attached DES Interpretation No. 274 has been adopted as an official interpretation by the North Carolina Department of Commerce, Division of Employment Security. “Interpretations issued by the Chief Counsel on behalf of [DES] will continue to be considered as a written interpretation or legal opinion of [DES] and shall be continued to be considered as a precedent in all issues considered in the written interpretation.” DES Interpretation No. 252. The attached material is relevant and suitable to be an interpretation of the Employment Security Law, and as such, it shall be distributed to all holders of interpretation manuals, all directors, all adjudicators, and all appeals referees. Also attached is a current index of the DES’s Interpretations. All of the foregoing materials shall be incorporated into the official DES website section on Laws & Rules at https://www.des.nc.gov/laws-rules/legal-information/interpretations-manual
Any questions about this Interpretation should be directed to the office of the Chief Counsel at (984) 236-5987.
DES INTERPRETATION NO. 274
TO: North Carolina Department of Commerce, Division of Employment Security
FROM: R. Glen Peterson, Chief Counsel
SUBJECT: Whether the phrase “four or more employees” under 26 U.S.C. § 3309(c) includes employees outside the state of North Carolina for purposes of determining whether a non-profit organization is a covered “employer” under N.C. Gen. Stat. § 96-1(11)(c), and whether a claimant’s service for a non-profit is covered “employment” under N.C. Gen. Stat. § 96-1(12)(a), (b)
Preliminary Considerations
North Carolina’s Employment Security Law has defined the term “employer” to include a “nonprofit organization required to provide unemployment compensation to its employees under section 3309 of the Code.” N.C. Gen. Stat. § 96-1(11)(c). “Employment” under North Carolina law is defined under 26 U.S.C. § 3306, in part, as any service performed by an employee for the person employing him within the United States. N.C. Gen. Stat. § 96-1(12); 26 U.S.C. § 3306(c). While federal law excludes services performed in the employ of a religious, charitable, educational, or other organization described under 501(c)(3), North Carolina specifically covers those services under its Employment Security Law. N.C. Gen. Stat. § 96-1(12)(a); see 26 U.S.C. § 3306(c)(8). North Carolina, however, does limit coverage for services performed for non-profit organizations under 26 U.S.C. § 3309(b) and (c). N.C. Gen. Stat. § 96-1(12)(b)(2). Excluded from the definition of “employment” under the Employment Security Law are services performed for a non-profit under 26 U.S.C. § 3309(c), which states that § 3309 does not apply to services performed during any calendar year unless for twenty (20) weeks during the preceding or current calendar year the total number of individuals employed by the non-profit was four (4) or more. See N.C. Gen. Stat. § 96-1(12)(b)(2), 26 U.S.C. §§ 3304(a)(6), 3306(c)(8), 3309(a)(1)(A), 3309(c).
In determining the meaning of a statute, the legislative intent is controlling. Midrex Technologies, Inc. v. N.C. Dep’t of Revenue, 369 N.C. 250, 258, 794 S.E.2d 785, 792 (2016) (citing Brown v. Flowe, 349 N.C. 520, 522, 507 S.E.2d 894, 895 (1998)). The intent of the General Assembly is found in the plain language of the statute, then its legislative history, and the spirit of the act and what it seeks to accomplish. Lenox, Inc. v. Tolson, 353 N.C. 659, 664, 548 S.E.2d 513, 517 (2001). Where the statute is clear, the “court must implement the statute according to the plain meaning of its terms as long as it is reasonable to do so.” Id. See In re Estate of Lunsford, 359 N.C. 382, 391-92, 610 S.E.2d 366, 372 (2005) (noting it is well settled law that where the “language of a statute is clear and unambiguous, there is no room for judicial construction and the courts must construe the statute using its plain meaning”). The court should not delete words or insert words not used in the relevant statutory language during the statutory construction process. Lunsford v. Mills, 367 N.C. 618, 623, 766 S.E.2d 297, 301 (2014). However, if the literal reading of the statute “yields absurd results . . . or contravenes clearly expressed legislative intent, ‘the reason and purpose of the law shall control and the strict letter thereof shall be disregarded.’” Kaminsky v. Sebile, 140 N.C. App. 71, 76, 535 S.E.2d 109, 112-13 (2000) (quoting State v. Barksdale, 181 N.C. 621, 625, 107 S.E. 505, 507 (1921)).
The terms “employer” and “employment” were previously defined under the Employment Security Law under N.C. Gen. Stat. § 96-8 (2013), which also included localization rules within the section. Effective July 1, 2013, Session Law 2013-2, s. 2.(a), repealed N.C. Gen. Stat. § 96-8 and redefined “employer” and “employment” under N.C. Gen. Stat. § 96-1. Session Law 2013-2, s. 1.(b). The General Assembly removed the localization language from the definitions and defined “employer” and “employment” as otherwise defined under federal law.
Since North Carolina’s law defines “employer” as being consistent with federal law, we review the relevant federal law under 26 U.S.C. § 3309(c) to determine whether a non-profit is an employer under the Employment Security Law. The federal law under 26 U.S.C. § 3309(c) is as follows:
This section [§ 3309: State law coverage of services performed for nonprofit organizations or governmental entities] shall not apply to service performed during any calendar year in the employ of any organization unless on each of some 20 days during such calendar year or the preceding calendar year, each day being in a different calendar week, the total number of individuals who were employed by such organization in employment (determined without regard to section 3306(c)(8) and by excluding service to which this section does not apply by reason of subsection (b)) for some portion of the day (whether or not at the same moment of time) was 4 or more.
The federal statute does not place a geographic limitation on where the individuals employed by a non-profit perform their service, although it does place a time limitation (twenty (20) weeks) and a number limitation (four (4) or more employees)
Under the principles of statutory construction, a localization limitation, which does not appear in the federal law, or in North Carolina’s statute, cannot be added or implied when the plain language of the statute is clear. If Congress or the North Carolina General Assembly intended to impose a geographic limitation, it would have done so, as other limitations were clearly enumerated.
Moreover, in removing the localization rules and redefining “employer” and “employment” to that of the federal law, where, again, there is no geographic limitation to where the four (4) or more employees can be located before the non-profit is a covered employer, it is clear the legislature intended that the Employment Security Law cover non-profits with four (4) or more employees over twenty (20) weeks in any location and not just North Carolina. To impose a localization limitation that is not specifically enumerated in the statute would mean “fewer non-profits would be covered [under the state law] than what is required by the federal minimum.” Phoenix v. Summer Institute of Linguistics, 568 S.W.3d 39, 44-45 (Mo. App. E.D. 2019); see 26 U.S.C. § 3309(c). See also Laub v. Industrial Claim Appeals Office of State of Colorado, 983 P.2d 815 (Colo. App. 1999) (holding that the provision for services performed by individuals for non-profit organizations simply imposed a minimum size requirement of four (4) or more individuals in employment regardless of the location of those employees or the place of their performance of those services). Interpreting “four (4) or more employees” to mean that the employees can be located anywhere within the United States does not produce absurd results – conversely, limiting the location of the employees to only North Carolina would not provide the minimum coverage required by the federal law, which could jeopardize federal certification and defeat the purpose for which the federal law was enacted.
Taxation
For the purpose of assessing contributions, an “employer” is required to make contributions in each calendar year pursuant to N.C. Gen. Stat. § 96-9.2. The federal law also requires that non-profits, and other such entities, be given the option to elect to reimburse the unemployment fund in lieu of paying contributions. See 26 U.S.C. § 3309(a)(2); N.C. Gen. Stat. § 96-9.6. Under N.C. Gen. Stat. § 96-9.6, non-profit organizations “required by section 3309 of the Code to have a reimbursement option . . . must finance benefits under the contributions method imposed by [N.C. Gen. Stat. §] 96-9.2 unless the employer elects to finance benefits by making reimbursable payments. . . .” N.C. Gen. Stat. § 96-9.6(a).
Claims for Benefits
In order for a claimant to receive temporary unemployment insurance benefits as required under federal law, the individual must be unemployed through no fault of their own, and must be able, available, and actively seeking work. N.C. Gen. Stat. § 96-14.1(a). Benefits are payable to a claimant on the basis of service performed for a governmental entity, a non-profit organization, and an Indian tribe to which 26 U.S.C. § 3309(a)(1) applies, in the same amount, on the same terms, and subject to the same conditions as compensation payable on the basis of other service. Id.; see also 26 U.S.C. § 3309.
In conclusion, where a non-profit employer has four (4) or more employees over twenty (20) weeks in such calendar year or the preceding calendar year, the four (4) or more employees can be located anywhere within the United States. However, the Division will still examine each non-profit employer’s status in accordance with applicable law and determine whether it is required to pay contributions and whether said employer elects to pay contributions or reimburse the unemployment fund, and each claim for benefits will be evaluated in accordance with applicable law and a determination made of whether non-profit wages will be used for purposes of paying benefits.
Adopted as an official Interpretation by the North Carolina Department of Commerce, Division of Employment Security on October 25, 2023, and is applicable to claims for benefits and tax calculations pending as of that date and claims for benefits and tax calculations filed on or after that date.
| NUMBER | SUBJECT |
|---|---|
| 3 | Interpretation of Section 19(f)(6) of the law. |
| 17 | Labor unions coverage under the North Carolina Law. |
| 18 | Commission Records shall show true status of employing unit. |
| 27 | Determination of suitable work when physical disability is in question. |
| 33 | Liability under mandatory provision of Law supersedes voluntary election – Termination of Coverage- Section 8(b) and (c) and Section 19(f) of the Unemployment Compensation Law. |
| 46 | Endorsement of checks Intended for Unemployment Compensation Commission but sent to Commission of Revenue. |
| 48 | Unemployment Compensation Act; Interpretation of the phrase “Left work voluntarily without good cause attributable to employer,” as same appears in Section (5(a) of the Unemployment Compensation Laws of North Carolina |
| 49 | Unemployment Compensation Law; Effect of docketing judgment for contributions; Refunds. |
| 55 | Unemployment Compensation Tax; Compromise of tax involving claims in litigation. |
| 69 | Unemployment Compensation Law; Section 96-14(a) of the General Statutes; Voluntary or involuntary separation from work; Married woman who leave their work to follow their husbands to new residences. |
| 79 | Interpretation of Section 96-8(g)(1) of the Employment Security Law of North Carolina since January 1, 2949 – Definition of Employment. |
| 87 | Employment Security Commission; Collection of contributions; Taxation; Docketing of summary judgment; Authority of Commission to accept chattel mortgages covering amount of contribution or taxes due; Statutes, directory and mandatory. |
| 88 | Interpretation of Section 96-11(c)(2) of the Employment Security Law of North Carolina – Voluntary coverage. |
| 92 | Employment Security Commission; Proviso of Section 96-15(b); Double Affirmance Clause; Extent of payment of benefits under Double Affirmance Clause. |
| 92-Supp-1 | |
| 98 | Interpretation of General Statute of North Carolina 1-47- 10 year statute of limitation of collection on judgments. |
| 101 | Earnings reportable and availability of claimant serving on jury, National Guard, United States Army Reverse Corps, or as election official. |
| 108 | Interpretation of Section 96-8(g)(1) of the Employment Security Law of North Carolina since January 1, 1949 – Definition “employment” – Whether home workers are in employment. |
| 113 | Interpretation of Section 96-9(b)(4)(A) of the Employment Security Law of North Carolina – Use of Payrolls in Computing Contribution Rates on Re-established Liability After Computation Date. |
| 114 | Interpretation of Sections 96-8(g)(2), (3), (4) and (5) of the Employment Security Law of North Carolina – Employment – Services performed within and without this State – Interstate employment. |
| 118 | Interpretation of Section 96-8(g)(7)(G) of the Employment Security Law of North Carolina – Employment of mother and father by administratrix of son’s estate or by a partnership composed of sons. |
| 119 | Interpretation of Section 96-9(c)(4) of the Employment Security Law of North Carolina of North Carolina – Total or partial transfer of experience rating account. |
| 121 | Employment Security Commission; Transfer of reserve accounts; Notice of Commission to successor employer; Refunds. |
| 122 | Priority of federal liens of personal property. |
| 122-supp-1 | Priority of federal liens. |
| 124 | Status of an individual who renders service as a preacher and in addition thereto works during the weekdays in covered employment and who becomes separated from his weekday employment. |
| 131 | Executors and administrators; Escheats; Disposition of unemployment compensation benefits where no administrator has qualified, and Section 28-68 does not apply. |
| 139 | Eligibility of individuals who are primarily self-employed and others who supplement regular earnings but are not engaged in self-employment. |
| 144 | Interpretation of Section 96-8(g)(7)(I) of the Employment Security Law of North Carolina – Status of insurance agents, solicitors, and securities salesman under the Employment Security Law. |
| 145 | Officers of corporations – Employment – Employees |
| 145- supp-a | Officer’s salaries |
| 146 | Interpretation of Section 96-8(g)(1) of the Employment Security Law of North Carolina – Status of bank directors required by statute to serve on committees. |
| 153 | Interpretation of the Employment Security Law of North Carolina, Section 96-8(6)(b) (formerly Section 96-9(c)(4(B)) Rate of Successor – Section 96-11(a) (No change) Effective date of liability. |
| 158 | Interpretation of Section 96-8(g)15 (formerly Section 96-8(g)(7)(O)) of the Employment Security Law of North Carolina, defining “casual labor.” |
| 163 | Interpretation of the Employment Security Law of North Carolina – Section 96-12(b), Wages used in computing weekly benefit amount; Section 96-8(18), Base period. Section 96-8(10)(a), Total unemployment; Section 96-8(13), Wages – Effect of payment of wages retroactively for base period purposes and effect of such payments upon the eligibility of a claimant for benefits with respect to the week for which such retroactive wages were paid. |
| 165 | Interpretation of Section 96-10(d) of the Employment Security Law of North Carolina – Liability of purchases or business for unpaid contributions of predecessor. |
| 167 | Supplement unemployment benefits. |
| 168 | Interpretation of Section 96-8(6) of the Employment Security Law of North Carolina – Employment, Employer and Employee – On-the-job Training under the Division of Vocational Rehabilitation of the North Carolina Department of Education. |
| 169 | Interpretation of the Employment Security Law of North Carolina – Covered employment. |
| 172 | Interpretation – General Statutes Chapter 59 – Partnerships. |
| 173 | Interpretation – General Statutes Section 148-33.1 – Prisoners employed under work release plan – In employment. |
| 174 | Interpretation – Decision which has become final may be amended to correct clerical errors or to make the decision express the intent of the deputy. |
| 177 | Interpretation of Section 96-8(6) of the Employment Security Law of North Carolina – Services performed under contract by one employment unit for another employing unit. |
| 184 | Interpretation of Section 96-8(6) g.7 of the Employment Security Law of North Carolina – Employment of stepson by stepfather. |
| 187 | Interpretation of Section 59-1 to 59-30 Inclusive – Limited partnerships. |
| 190 | Interpretation of the Employment Security Law of North Carolina Section 96-15(b)(1), Redetermination of an initial monetary determination. |
| 205 | Interpretation of Section 96-15(b)(2) of the Employment Security Law of North Carolina and Section 1-593 and 103-4 of the General Statutes – Effect of legal holidays upon appeal period. |
| 207 | Interpretation of the Employment Security Law of North Carolina (1) Section 96-13(3), Commission – approved training, and (2) Section 96-18(f), Larceny and embezzlement. |
| 220 | Interpretation of Section 96-9(5) k., and 96-8(6) g.17 of the Employment Security Law of North Carolina - Orphanages. |
| 221 | Interpretation of Section 96-8(5)k, 96-8(5)a, and 96-8(6) g.17(iv) of the Employment Security Law of North Carolina – Vocational workshop – Rehabilitation facility. |
| 231 | Interpretation of the Employment Security Law of North Carolina – Nonprofit organizations (1) Section 96-8(5)a, 96-8(5)k, and 96-11(c)(1) – Employer and (2) Section 96-9(d) – Method of financing |
| 231- partial-revocation | Partial Revocation of Interpretation of No. 231. |
| 232 | Interpretation of Section 96-8(5)k and 96-8(6) g.17(v) of the Employment Security Law of North Carolina – Nonprofit organizations and exempt employment. |
| 237 | Interpretation of Section 96-11(c )(1) and 96-10(i) of the Employment Security Law of North Carolina – Request by Employer X held liable under the Federal Unemployment Tax Act for eight years that he be allowed to volunteer coverage under the Employment Security Law of North Carolina for all eight years in order to get tax credit beyond the five-year state of limitations. |
| 239 | Interpretation of Section 96-10(b)(1) of the Employment Security Law of North Carolina – Collection of contributions where employer does not protest or request a hearing within apt time. |
| 248 | International Longshoremen Association (ILA), Guaranteed Annual Income Plan (GAI) – South Atlantic Labor Contract. |
| 251 | Interpretation of Section 96-1(13) b of the Employment Security Law of North Carolina – Annuity plan. |
| 252 | Interpretations. |
| 253 | Total and partial unemployment. |
| 254 | Disclosure of information |
| 255 | Payments made to claimants |
| UIPL-3582 | monies paid to members of the State National Guard or Air National Guard |
| 255-supp-1-v.1 | Claims reporting of National Guard pay |
| 255 – supp – 1-v.2 | National Guard and Reserve pay. |
| 255-supp-2 | Vacation payments |
| 256 | Unemployment of part-time claimants. |
| 256, Supp. 1 | Unemployment of part-time claimants. |
| 257 | Limited partnership agreements |
| 258 | Separation payments. |
| 259 | Voluntary contributions. |
| 260 | Referrals to the State Bureau of Investigation. |
| 261 | Leaves of absences; Revision of UI Procedural Letter 33(81). |
| 262-supp.-1-v.1 | Bona fide permanent employment. |
| 262-supp.-1-v.2 | Bona fide permanent employment. |
| 263 | Between terms denial for educational personnel. |
| 263-supp.-1 | Between terms denial. |
| 263-supp.2 | Public health nursing positions with schools. |
| 263-supp.-3 | Between terms denial – Reasonable Assurances. |
| 264 | N.C. Gen. Stat. § 96-8(10) – Applications of this Section in cases where an employer’s incentive pay plan results in an employee being paid for more hours than he actually worked. |
| 264-supp.-1 | Attached unemployment, N.C. Gen. Stat. § 96-8(10). |
| UIB-1187 | Eligibility for attached unemployment. |
| 265 | Seasonal pursuits, N.C. Gen. Stat. § 96-16. |
| 266 | Authority to reconsider State UI claim. |
| 267 | Disability pension offset requirements. |
| 268 | Extended benefits – Charging of benefits. |
| 269 | Who may appeal and/or protest an unemployment tax rate assignment, an Unemployment Tax Assessment and Demand for Payment, or an employer’s status and/or liability. |
| 270 | Job listings & fee charging – Temporary employment agencies. |
| 270-supp.-1 | Temporary held/services agencies – Fee charging restriction. |
| 271 v.1 | Language proficiency requirement of job orders. |
| 271-v.2 | Raising separation from employment issues; Reduction in force plan – Separation determined by employer. |
| 272 | Application of the provision under N.C. Gen. Stat. § 96-14(1), Relating to separations due to disability or other health reasons. |
| 273 | Whether Unemployment Insurance (UI) benefits will be paid when an employee refuses to comply with the employer’s policy mandating employees to have received a COVID-19 vaccine |
| 274 | Interpretation of “four (4) or more employees” under 26 U.S.C. § 3309(c) within the context of N.C. Gen. Stat. §§ 96-1(11) and 96-1(12) |