Legum v. City of New York, 51 N.Y.2d 167 (1980)
A requirement in a city charter mandating non-resident employees to pay an amount equivalent to the city’s resident income tax as a condition of employment is a valid contractual obligation, not an unauthorized tax on non-residents.
Summary
The case concerns the validity of Section 822 of the New York City Charter, which requires non-resident city employees to pay the difference between what they would owe under the city’s resident income tax and the actual city earnings and income tax they pay. Steven Legum, a non-resident employee, challenged this provision, arguing it was an impermissible tax on non-residents. The Court of Appeals held that the requirement was a contractual condition of employment, not a tax, and therefore valid because Legum voluntarily agreed to it. The critical distinction lies in the voluntary nature of the agreement versus the involuntary imposition of a tax.
Facts
Steven Legum was employed by the Law Department of New York City from February 2, 1976, to August 1, 1980. He was a non-resident of the city throughout his employment. As a condition of employment, Legum signed a contract agreeing to pay the city an amount equivalent to the city’s resident income tax, as required by Section 822 of the City Charter. In December 1978, Legum was notified that the city intended to enforce this provision, prompting him to challenge its validity.
Procedural History
Legum initiated an Article 78 proceeding challenging the validity of Section 822 of the New York City Charter and the related contractual provision. The lower courts ruled in favor of the City, upholding the validity of the charter provision and the employment contract. Legum appealed to the New York Court of Appeals.
Issue(s)
Whether Section 822 of the New York City Charter, requiring non-resident employees to pay an amount equivalent to the city’s resident income tax as a condition of employment, constitutes an unauthorized tax on non-residents, or a valid contractual obligation.
Holding
No, because the requirement is a contractual condition of employment voluntarily agreed to by the employee, not a tax imposed by the city in its sovereign capacity. It operates through contract, not through the city’s taxing power.
Court’s Reasoning
The court distinguished between a tax, which is an enforced contribution levied by the government, and a contractual provision, which is agreed upon by two parties. Taxes are involuntary and based on the duty owed to the government, whereas contractual obligations are voluntary and based on mutual agreement. The court cited City of New York v McLean, 170 NY 374, 387, stating that taxes are “enforced contributions levied by the authority of the state for the support of its government.”
The court emphasized that Legum voluntarily agreed to the contractual provision as a condition of his employment. The court noted Legum did not allege fraud or duress in entering the agreement. Therefore, the obligation to pay the specified amount arose from the contract, not from the city’s exercise of its taxing authority. The court emphasized, “The test is not to whom the funds are paid, but whether the payment is imposed in invitum by the sovereign or is owed pursuant to a contractual agreement voluntarily entered into.”
Because the payment was owed as a result of a contract, not an exercise of taxing authority, the court found Section 822 and the contractual provision to be valid. This case clarifies that a municipality can require certain payments as a condition of employment without necessarily levying a tax, especially when the condition is clearly outlined and voluntarily accepted in an employment contract. The key is the voluntary agreement, which distinguishes the payment from a tax imposed under governmental authority.