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Cite as: CTC Acquisition CO, LLC v State of Michigan, unpublished opinion of the Kent County Circuit Court, issued November 10, 2008 (Docket No. 2008-06293-AE).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

17. Employee Status

Coppens v Hayes – 17.22

Larry Coppens, d/b/a Strawberry Tree & Landscaping v. Matthew L. Hayes
Digest No. 17.22

Section 421.41; Section 421.42

Cite as: Coppens v Hayes, unpublished opinion of the Oakland County Circuit Court, issued October 12, 2005, (Docket No. 05-064176-AE).

Appeal pending: No
Claimant: Matthew L. Hayes
Employer: Larry Coppens, d/b/a Strawberry Tree & Landscaping
Date of decision: October 12, 2005

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HOLDING: The Board of Review’s decision is affirmed. The claimant is eligible for benefits.

FACTS: The claimant did yard work for employer until he was laid off when the employer’s machinery broke down. The UIA found the claimant was a covered employee under the Act. The ALJ agreed and the Board of Review affirmed.

DECISION: Employment relationship was reasonably found because the economic reality test and the definition of employer under MCL 421.41(1)(ii) were both satisfied.

RATIONALE: The Board’s decision was properly supported by evidence and was justified in setting the burden of proof on the claimant. Under the economic reality test’s eight factors, the Board was supported in its finding of an employment relationship because: (1) the employer didn’t incur contractual liability for terminating the claimant; (2) the claimant’s work formed an integral part of the employer’s business; (3) whether the claimant dependent of the job as a means of support was not in evidence and therefore did not factor into the analysis; (4) the employer supplied all the claimant’s work ; (5) there was no evidence the claimant held himself out to the public as ready to perform the relevant job duties; (6) there was not evidence whether the work was customarily performed by an independent contractor so this factor did not factor into the analysis; (7) the employer controlled the claimant’s work by telling him how he would be paid, when to report to work, and what to do; and (8) the purpose of the Act and deference to the agency supported the finding of the employment relationship.

The court also found an employment relationship was present under the definition of “employer” under MCL 421.41(1)(ii)  since the employer paid a total remuneration of $1000 or more per year.

Digest author: Austin L. Webbert, Michigan Law, Class of 2017
Digest updated: October 25, 2017