Employer social insurance contributions during National Guard service ruled unconstitutional under equality principle.

[*283] 1975 March 6

(TRIANTAFYLLIDES, P., STAVRINIDES, L. LOIZOU,

HADJIANASTASSIOU, A. LOIZOU, MALACHTOS,

JJ. )

APPELLATE JURISDICTION

Demetrakis Meletiou and Another,

Appellants,

v.

The District Labour Officer, Nicosia,

Respondent.

(Criminal Appeals Nos.3344, 3345).

Constitutional Law -

Constitutionality of legislation - Section 24(1) of the National Guard Law,

1964 (Law 20 of 1964) as amended “by Laws 5 of 1966 and 70 of 1967 - Its

provisions requiring an employer to pay his own social insurance contributions

while an employee of his is serving in the National Guard are not offending,

beyond reasonable doubt, against the principle of equality enshrined in Article

28.1 of the Constitution - But its provisions requiring the employer to pay the

contributions which would be payable by such employee if he was actually in his employer’s service, create, beyond any doubt,

an arbitrary and objectively unreasonable distinction as between employers -

They are unconstitutional as being contrary to the doctrine of equality

safeguarded by the said Article 28.1.

Equality - Article 28.1 of the

Constitution - Principle of equality of treatment - Violated if a distinction has no

objective and reasonable justification - Test for derermining reasonableness of a classification - See,

also, under “Constitutional Law”

National Guard Law, 1964 (Law 20 of

1964 as amended by Laws 5: of 1966 and 70 of 1967) - Constitutionality of section 24(1) of the Law -

See, also, under “Constitutional Law”.

S. Erotokritou, (Mrs.), for

the Appellant in Case 3344.

K. Michaelides, for the

Appellant in Case 3345.

L. Loucaides, Senior Counsel

of the Republic, for the Respondent.

JUDGMENT

The judgment of the Court was

delivered by:-

TRIANTAFYLLIDES. P.: These two appeals [*284] were heard together as they involve a

common basic issue, namely the constitutionality of section 24(1) of the National Guard Law, 1964

(Law 20/64), as amended by the

National Guard (Amendment) Law, 1966 (Law 5/66) and the National Guard (Amendment) (No. 2) Law, 1967 (Law. 70/67).

The said section reads as follows:-

"24(1) Οσάκις πρόσωπον

κληθέν δι' υπηρεσίαν εν ενεργώ υπηρεσία της Δυνάμεως δυνάμει των διατάξεων του

παρόντος Νόμου εργάζεται εις τακτικήν απασχόλησιν παρά τινι εργοδότη, ή

απασχόλησις αυτού ουδόλως διακόπτεται αλλ' απλώς αναστέλλεται διαρκούσης της

περιόδου καθ' ην το πρόσωπον τούτο τελεί εν τη υπηρεσία της Δυνάμεως, ο

εργοδότης όμως υποχρεούται όπως εξακολουθή να καταβάλλη, διαρκούσης της

τοιαύτης αναστολής, την εβδομαδιαίαν αυτού εισφοράν συμφώνως προς το άρθρον 5 του

περί Κοινωνικών Ασφαλίσεων Νόμου του 1964 και όπως καταβάλλη περαιτέρω την υπό

του μισθωτού πληρωτέαν εισφοράν συμφώνως προς το ρηθέν άρθρον ανεξαρτήτως του

ότι ο μισθωτός ουδεμίαν υπηρεσίαν παρέσχεν εις τον εργοδότην διαρκούσης της

περιόδου ταύτης.

Πως εργοδότης όστις παραλείπει

ή αμελεί να καταβάλη την υπό του παρόντος εδαφίου προνοουμένην εισφοράν

διαπράττει αδίκημα και υπόκειται εν περιπτώσει καταδίκης του εις τας υπό του[*285] άρθρου 73 του περί Κοινωνικών Ασφαλίσεων Νόμου του 1964 προνοουμένας ποινάς και υπόκειται περιπλέον εις τας λοιπάς

διατάξεις του άρθρου τούτου".

(“24(1) Where any person called

out to active service in the Force under the provisions of this Law is

regularly employed by an employer, his employment shall not be discontinued but

merely suspended for the duration of the period during which such person is in

the service of the Force, and the employer is obliged to continue paying,

pending such suspension, his weekly contribution in accordance with section 5

of the Social Insurance Law, 1964, and to pay further the contribution payable

by the employee in accordance with the said section, irrespective of the fact that the employee

has rendered no services to the employer during such period.”

“Any employer who fails or

neglects to pay a contribution provided under this section commits an offence

and is liable in case of conviction to the punishments provided under section

73 of the Social Insurance Law, 1964 and is, further, subject to the rest of

the provisions of such section”.)"

Each of the two appellants was

convicted of committing an offence contrary to section 24(1), by failing to pay

social insurance contributions in respect of employees [*286] of theirs during

the periods of service of such employees in the National Guard; they have both

appealed to this Court on the ground that section 24(1) is unconstitutional.

For the purposes of their appeals,

they have relied, inter alia, on Article 28 of the Constitution, paragraph (1)

of which reads as follows:-

"1. Πάντες είναι ίσοι ενώπιον του νόμου, της διοικήσεως και της δικαιοσύνης και δικαιούνται να τύχωσι ίσης προστασίας και

μεταχειρίσεως". (“1. All persons are equal before the law, the

administration and justice and are entitled to equal protection thereof and

treatment thereby” ).

In India the corresponding provision

is Article 14 of the Constitution which reads as follows:-

“The State shall not deny to

any person equality before the law or the equal protection of the laws within

the territory of India”. (See Basu’s Commentary on the Constitution of India, 5th ed., vol. 1,

p. 287).”

The above provision is quite similar

to the relevant part of section 1 of the 14th Amendment to the Constitution of

the United States (see Basu, supra, at pp. 440, 444).

It is pointed out by Basu, supra, (at

p. 447) that – “Mere production of inequality is

not enough to hold that [*287] equal protection has been denied. For, every

selection of persons for regulation produces inequality, in some degree”; and

the learned author adopts the view that the inequality produced, in order to

encounter the challenge of the Constitution, must be ‘actually and palpably

unreasonable and arbitrary’”.

In this respect reference is made by

Basu to the decision of the U.S.A. Supreme Court in Arkansas Natural Gas Co. v.

Arkansas Railroad Commission, 67 L. Ed. 705, at p. 710, which has been followed in Frost v. Corporation Commission of the State of Oklahoma, 73 L Ed. 483, at p. 488, and in Bayside

Fish Flour Company v. Gentry, 80 L. Ed.

722, at p. 777).

In the Bayside case Mr. Justice

Sutherland said (at p. 777):-

“It never has been found

possible to lay down any infallible or all-inclusive test by the application of

which it may be determined whether a given difference between the subjects of

legislation is enough to justify the subjection of one and not the other to a

particular form of disadvantage. A very large number of decisions have dealt

with the matter; and the nearest approach to a definite rule which can be

extracted from them is that, while the difference need not be great, the

classification must not be arbitrary or capricious, but must [*288] bear some

just and reasonable relation to the object of the legislation. A particular

classification is not invalidated by the Fourteenth Amendment merely because

inequality actually results. Every classification of persons or things for

regulation by law produces inequality in some degree; but the law is not

thereby rendered invalid (Atchison, T. & S.

F. R. Co. v. Matthews, 43 L. Ed. 909), unless the inequality produced be actually and

palpably unreasonable and arbitrary. Arkansas

Natural Gas Co. v. Arkansas R. Commission, 67 L. Ed. 705, 710 and cases cited)”.

In Basu, supra, (at p. 450) the

following tests are laid down for determining the reasonableness of a

classification:-

“I. When a law is challenged as

violative of Article 14, it is necessary for the Court first to ascertain the policy underlying the

statute and the object intended to be achieved by it.”

“II The purpose or object of

the Act is to be ascertained from an examination of its ‘title, preamble and provision’.”

“III. Having ascertained the

policy and the object of the Act, the Court should apply the dual test in

examining its validity:”

“(a) Is the classification

rational and based [*289] on an intelligible differentia which distinguishes

persons or things that are grouped together from others that are left out of

the group;”

“(b) Has the basis of

differentiation any rational nexus or relation with its avowed policy and

object?”

“IV. If both the tests just

mentioned are satisfied, the statute must be held to be valid.”

“In such a case, the

consideration as to whether the same result could not have been better achieved

by adopting a different classification would be foreign to the scope of the

judicial inquiry.”

“V. If either of the two tests

of intelligible differentia and nexus is not satisfied, the statute must be

struck down as violative of Article 14.”

“VI. (a) The reasonableness of

the classification is to be tested with reference to the circumstances existing

at the time of enactment of the impugned law.”

But -

“In the case of

pre-Constitution laws, the circumstances existing at the time of commencement

of the Constitution become material.” [*290]

“(b) A law which was

non-discriminatory at its inception may be rendered

discriminatory by reason of external circumstances which take away the

reasonable basis of classification.”

In Greece the doctrine of equality

before the law has been incorporated in all Greek Constitutions from 1844

onwards.

According to Sgouritsas on Constitutional

Law - (Σγουρίτσα Συνταγματικόν Δίκαιον) - Vol. B, Part b, (1966 ed.) at p. 185, the

following is the effect of the equal protection clause, as found in Article

3(1) of the 1952 Constitution:

" ...... έχει δε

υιοθετηθή παγίως από του 1947 υπό της

νομολογίας, των δικαστηρίων δεχομένων ότι 'η διάταξις του άρθρου 3 του Συντάγματος

επιβάλλει ισότητα δικαίου, ήτοι

απαγορεύει ου μόνον την άνισον εφαρμογήν των νόμων, αλλά και την υπό του

νομοθέτου ουσιαστικώς άνισον ρύθμισιν του δικαίου'. Δεν αποκλείονται και κατά

την άποψιν ταύτην παρεκκλίσεις εκ του γενικού κανόνος, αλλ' αύται, αφ' ενός μεν

δεν είναι δυνατόν να υπερβαίνουν ωρισμένα ακραία όρια εις εκάστην δεδομένην περίπτωσιν, αφ'

ετέρου δε επιτρέπονται μόνον εφ' όσον συντρέχουν επαρκείς λόγοι δικαιολογούντες

αυτάς εξ αντικειμένου".[*291]

(“……………………. has been adopted by

case-law constantly since 1947, the Courts having accepted that ‘the provision

of Article 3 of the Constitution requires equality of the law, in other words

it prohibits not only inequality in applying the laws, but also prohibits

substantial inequality in the course of laying down the law’. In accordance

with this view, too, there are not excluded deviations from a general rule, but

these cannot, on the one hand exceed/certain extreme limits in every particular

case, and, on the other hand, are permitted only so long as they can be

justified from the objective point of view on the basis of adequate grounds”.

In Cyprus, it was held in the Republic v. Arakian, (1972) 11 J.S.

C. 1539, at p. 1547, that it is up to the persons complaining of unequal

treatment (see, inter alia, Lindsley, 61 L. Ed. 369

and Morey, 1 L. Ed. 2d 1485), to show that the decision in question of

the Ministry of Finance did not rest upon any reasonable basis and that it was

essentially arbitrary”. In that case this Court adopted the view of the Court

of Human Rights, of the Council of Europe, in the case “Relating to certain

aspects of the laws on the use of languages in education in Belgium” (European Convention on

Human Rights Yearbook No. 11, part 2, p. 832) “that 2 the

principle of equality of treatment is violated if the distinction has no

objective and reasonable justification” [*292] (see, too, inter alia, Fekkas

v. The Electricity Authority of Cyprus, (1968) 1 C.L.R. 173).

With the foregoing principles in mind

we shall now proceed to examine the position in the present case:-

At all times material for the outcome

of these appeals the material parts of section 5 of the Social Insurance Law,

1964 (Law 2/64) - which is referred to in section 24(1) of the National

Guard legislation, supra, read as follows:-

"5.(1) Δι' εκάστην

εβδομάδα εισφορών καθ' ην, ή διά μέρος της οποίας μισθωτός τις απησχολείτο εις

εξηρτημένην εργασίαν καταβάλλονται υποχρεωτικώς συμφώνως ταις διατάξεσι του

παρόντος Νόμου τρεις ίσαι

εισφοραί, μία παρά του μισθωτού, ετέρα παρά του εργοδότου και τρίτη εκ του

Παγίου Ταμείου της Δημοκρατίας.

Νοείται ότι:

(α) ουδεμία εισφορά

καταβάλλεται αναφορικώς προς εβδομάδα καθ' ην ο μισθωτός ουδεμίαν υπηρεσίαν

παρέσχε και ούτω ουδεμία αντιμισθία τω κατεβλήθη·

(β) ......................................................................................................................

(2) ......................................................................................................................

(3) Ο εργοδότης ενέχεται κατ'

αρχήν εις την καταβολήν τόσον της υπ' αυτού πληρωτέας εισφοράς[*293] όσον και

της υπό του μισθωτού πληρωτέας τοιαύτης· αύτη καταβάλλεται διά λογαριασμόν του

μισθωτού, του

τελευταίου απαλασσομένου οιασδήποτε ενοχής προς

καταβολήν της εισφοράς· διά τους σκοπούς δε του παρόντος Νόμου

εισφοραί καταβληθείσαι υπό του εργοδότου διά λογαριασμόν του μισθωτού

λογίζονται εισφοραί καταβληθείσαι υπό του μισθωτού".

(“5. (1) For each contribution

week during the whole or any part which an employed person has been employed, three equal contributions shall be payable in accordance with the provisions of this Law, one by the employed person, one

by his employer and one out of the general revenue of the Republic:”

“Provided that -

“(a) where an employed person

has rendered no services during any week and received no

remuneration in respect of that week, no contribution shall be payable for that

week;

“(b) ……………………………………………………………

“(2) …………………………………………………………...

“(3)

The employer shall, in the first instance, be liable to pay both the

contribution payable [*294] by himself and also, on behalf of and to the

exclusion of the employed person, the contribution payable by that person, and

for the purposes of this Law contributions paid by an employer on behalf of an

employed person shall be deemed to be contributions paid by the employed

person”.)

Also, section 10 of Law 2/64, as

amended by the Social Insurance (Amendment) Law, 1968

(Law 28/68), reads as follows, in its material part: -

"10. Αι εισφοραί πιστούνται υπέρ του

ησφαλισμένου:

…………………………………………………………………………………………

(ε) διά πάσαν εβδομάδα εισφορών

καθ' εκάστην ημέραν της οποίας

ούτος, κληθείς δι' υπηρεσίαν εν τη Εθνική

Φρουρά δυνάμει των περί Εθνικής Φρουράς Νόμων του 1964 έως 1967, διατελεί εν ενεργώ υπηρεσία, εάν ουδείς εργοδότης ενέχηται εις την καταβολήν εισφορών ως προς αυτόν δυνάμει του εδαφίου (1) του

άρθρου 24 των προαναφερθέντων Νόμων".

(“10. Contributions shall be

credited to an insured person:

…………………………………………………………………………………………. [*295] (e) for any contribution week for

each day of which he, having been called for service in the National Guard

according to the National Guard Laws of 1964 to 1967, continues

in active service, if no employer is liable to pay contributions in respect of

him in accordance with sub-section (1) of section 24 of the

aforesaid Laws”.)

It is abundantly clear that section

10 of Law 2/64 was amended by the introduction of paragraph (e) - by means of’ Law 28/68 -

because of the corresponding amendments of section 24(1)

of Law 20/64

by means of Law 5/66

and Law 70/67.

It is to be noted, at this stage,

that Law 2/64 has been repealed and replaced by the Social Insurance Law, 1972

(Law 106/72) - which is not applicable to the

present appeals as it was enacted subsequently thereto - but section 10 of Law 106/72, which corresponds to section 10 of Law 2/64,

has remained substantially the same in so far as the provisions

applicable to persons serving in the National Guard are concerned.

From a study of the above-quoted

legislative provisions it is clear that the object of section 24(1) of

Law 2/64,

as amended, was not only to secure the payment of the relevant social insurance

contributions by an employer even though his employee while serving in the

National Guard was not rendering to him any services, but, furthermore, [*296]

to secure that the contributions otherwise payable by such employee himself

were, during his period of service in the National Guard, to be paid by his

employer.

In the light of the well-settled approach

to the matter of the constitutionality of legislative provisions introducing

differentiations .as between categories of persons - (as such

approach has been referred to earlier on in this judgment) - we have reached

the conclusion that the provision in section 24(1) requiring an

employer to pay his own contributions while an employee of his is serving in the National

Guard, has not been shown to our satisfaction to be a provision offending,

beyond reasonable doubt, against the principle of equality enshrined in Article

28(1) of our

Constitution; it may conceivably be said that, as during the period of such

service the master and servant relationship is merely suspended, the employer

affected can be reasonably differentiated from other employers, whose employees

are not serving in the National Guard.

Coming next to the further obligation

of the employer to pay, so long as an employee of his is serving in the

National Guard, the contributions which would be payable by such employee if he

was actually in his employers’ service, we are of the view, beyond any doubt,

that in this respect an arbitrary and objectively unreasonable distinction has

been made as between employers; because though employers whose employees are

not in the National Guard and are actually working for them are not bound to

pay such employees’ [*297] contributions, those whose employees are in

the National Guard and, therefore, are not rendering to them any services, are

put in a still more disadvantageous position by having to pay the contributions

of their employees who are national guardsmen.

The case of Loizou v. Poullis, (1969) 1 C.L.R.

17, is in our view clearly distinguishable from the present one; the Loizou ease relates to the

provision in section 24(2) of Law 20/64 which imposes on an employer of a demobilized national guardsman the obligation to offer to him the same, or similar, employment as before his enlistment.

It appears that the

appellants were charged and convicted on the basis of counts concerning the

failure to pay both their own contributions and those of their employees, during their service in the National

Guard. It follows that, as the convictions of the appellants were based only

partly on the statutory provision which we have found to be unconstitutional – as being

contrary to the doctrine of equality safeguarded by Article 28(1) - their appeals have to be allowed only to that extent; therefore,

their convictions stand with the particulars of the counts concerned being

modified in the light of this judgment. The sentences of fines which were

imposed on the appellants as a result of their convictions need not be

interfered with as in our view they could not be manifestly excessive even if

the appellants had

only failed to pay their own contributions as employers; [*298] but the amounts which the

appellants were ordered to pay, by the trial Court, as outstanding

contributions have to be adjusted according to the outcome of these appeals.

Appeals allowed in part.