02. Employer Liability, Tax Rate, Successorship

GLRS Leasing Services, LLC v. State of Michigan – 2.24

GLRS Leasing Services, LLC v. State of Michigan
Digest No. 2.24

Section 421.22

Cite as: GLRS Leasing Services, LLC v State of Michigan, unpublished opinion of the Oakland County Circuit Court, issued April 27, 2009 (Docket No. 2008-095740-AE).

Appeal pending: No
Claimant: State of Michigan
Respondent: GLRS Leasing Services, LLC
Docket no: 2008-095740-AE
Date of decision: April 27, 2009

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Holding: The Board’s decision that there was a transfer of business is contrary to law and not supported by the evidence on the record. The transfer of assets from LRS to GLRS is not deemed statutorily a transfer of business for purposes of assigning to the transferee the transferor’s rating account.

Facts: In 2004, there was a migration of 110 employees from LRS, a staffing leasing company, to GLRS, which was in the same business. There was no common ownership between the two companies but the owner of GLRS was still an employee of LRS as a commissioned salesperson. He had formed GLRS to provide PEO services, which LRS did not wish to provide. Some of these employees had told the Unemployment Insurance Agency examiner that the transfer was so that LRS could reduce its Worker’s Compensation costs and provide health insurance to those employees. LRS was also a client of GLRS, though GLRS also had contracts with other employers for its services.

Decision: The circuit court reversed the Board’s decision, and found that there was not a transfer of business under Section 22 of the MES Act.

Rationale: The migration of employees did not satisfy any of the four statutory ways that a transfer of business assets will be deemed a “transfer of business” under MCL 421.22. First, there was no evidence in this case that the transferee GLRS acquired the transferor LRS’ name or goodwill; GLRS merely used a similar name. Second, there was no evidence that GLRS continued all or part of LRS’ business, as GLRS was formed to provide a different type of service than LRS. Third, more than 75% of LRS’ assets were not transferred. Even assuming that employees were LRS’ only assets, 110 out of 191 transferred to GLRS, which is only 57%. Fourth, GLRS and LRS were not substantially owned or controlled by the same interests. There was no evidence that the owner of GLRS had any control over LRS, as he was a salesperson and not a manager, nor that LRS had any control over GLRS. Any work done for GLRS was done separately from LRS.  Therefore, the decision of the Board that there was a transfer of business was in error.

Digest Author: Alisa Hand, Michigan Law, Class of 2017
Digest Updated: 3/27/2016

02. Employer Liability, Tax Rate, Successorship

CTC Acquisition CO, LLC v. State of Michigan – 2.23

CTC Acquisition CO, LLC v. State of Michigan
Digest No. 2.23

Section 421.22, Section 421.41

Cite as: CTC Acquisition CO, LLC v State of Michigan, unpublished opinion of the Kent County Circuit Court, issued November 10, 2008 (Docket No. 2008-06293-AE).

Appeal pending: No
Claimant: N/A
Employer: CTC Acquisition Co., LLC
Docket no.: No. 2008-06293-AE
Date of decision: November 10, 2008

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HOLDING: CTC is a “new employer” under the statute and a 2.7% rate must be applied.

FACTS:  Case stems from CTC Acquisitions Co’s purchase of most of Grand Rapids Controls, Inc’s (GRC) assets. GRC was a spring and cable manufacturer solely owned by Linda Southwick. Sale occurred in April 2004. CTC stopped the spring manufacturing but continued the cable production line. Production staff was retained, management was not. CTC reported the acquisition to the UIA for the determination of the appropriate contribution rate. The company was renamed GRC, LLC. Under the statute (MCL 421.22), a “new employer” is assigned 2.7% contribution (2.7% of its payroll to the UIA). A new employer is an acquisition under 75%. When a business acquires more than 75% of another business, then it is considered a “transfer of business” and the former employer’s contribution rate is transferred. In August 2004 UIA determined GRC, LLC to be a new employer because it has acquired less than 75% of GRC, Inc’s assets. However in June 2005 the UIA reversed its determination because it found that more than 75% of the assets were purchased and assigned a 10.3% contribution rate. UIA determined that the leasehold improvements (valued at $1.3 million) were not GRC, Inc assets.

DECISION: Board of Review’s decision is reversed. The decision reversed was the decision of the agency to recalculate Appellant-Employer’s contribution rate and increase the rate from 2.7% to 10.3%.

RATIONALE: UIA is permitted to reconsider and redetermine an employer’s contribution rate. MCL 421.32(a). However, if the reconsideration occurs within 30 days of the original intent, the rate may only be reconsidered for good cause.As a matter of law, the leasehold improvements were GRC, Inc’s assets and should have been included in the calculation.

Question 1: Is remand required for a determination of whether the agency had good cause to reconsider CTC’s contribution rate because the rate was not reconsidered within 30 days of the original determination?

  • Based on this decision is it not necessary to remand for a determination of whether the agency has good cause to reconsider the rate determination more than 30 days after the original determination.

Question 2: Did the Board err in not considering GRC, Inc’s leasehold improvements in the asset calculation? The improvements were properly written off and they were assets.

  • Court believes that the focus must be on what the seller’s total assets were and what percentage of those assets was transferred to a particular acquiring business. Not the total percentage of what was transferred.
  • CTC is a new employer and must be assessed under the 2.7% rate.

Digest author: Katrien Wilmots, Michigan Law, Class of 2017
Digest updated: 3/27/2016