Standard Dredging Corp. v. Murphy

Background

New York, through its unemployment insurance law, sought to collect a payroll tax from employers of certain maritime workers. The two workers at issue were an assistant cook on a dredge and a grain worker on a floating elevator, and their vessels operated mainly in New York waters. The New York law levies a payroll tax on employers of four or more persons and pays into a general fund to help unemployed covered workers. Employers argued the tax was invalid because admiralty matters are exclusively federal and because the federal Social Security Act exempted some maritime employers from the federal tax. The New York Court of Appeals rejected those claims and the cases came to this Court.

Reasoning

The central question was whether a state may tax employers of maritime workers. The Court said that Article 3, § 2’s admiralty jurisdiction does not prevent states from imposing unemployment taxes and refused to extend prior decisions that required uniformity for state workers’ compensation laws. The Court also held that the federal Social Security Act’s exemption for certain maritime employers does not bar state taxation. The 90% federal credit device was designed to invite state participation, and the exemptions in the federal law reflected administrative concerns rather than an intent to forbid state action. The Court therefore affirmed the state court’s ruling allowing New York to collect the tax.

Real world impact

The decision allows states to include employers of dredges, floating elevators, and similar maritime operations in state unemployment programs. Employers in those industries may face state payroll levies and must comply with state unemployment contributions. Congress remains able to create a uniform federal system, but the ruling permits states to act now to expand unemployment coverage.