News & Information

CCH® UNEMPLOYMENT INSURANCE — 05/26/17

Employment Security Act provided exclusive remedy for tax assessment challenges

The court reinstated the dismissal of both the federal section 1983 civil rights claim and the state common law claim for tortious interference that were filed by two trucking companies and their trade organization, and had asserted that they had been subject to biased, predetermined, and politically motivated audits. The companies alleged that the reclassification of owner/operators as employees was improper. The principal issue in the case was whether taxpayers may bring federal or state tort claims to challenge tax assessments, or instead must rely on the normal state tax appeals process. The court held that the comity principle bars state courts from awarding damages under section 1983 in state tax cases when there is an adequate state law remedy. The adequacy analysis was the same for purposes of the Tax Injunction Act and comity. Here, specifically, comity barred the federal claim because it could raise constitutional objections to the tax upon judicial review. Concerning the state law claim, the court concluded that it was precluded by Washington's Employment Security Act, which by its plain terms provided the exclusive remedy for challenges to the "justness or correctness" of an unemployment tax assessment (Washington Trucking Associations, et al. v. ESD, Wash. Sup. Ct., No. 93079-1, April 27, 2017).