Tag: Transfer of rating account

02. Employer Liability, Tax Rate, Successorship

Hillman Pallet Co v MESC – 2.05

Post author By wrcdigest
Post date June 27, 1988

Hillman Pallet Co v MESC
Digest no. 2.05

Cite as: Hillman Pallet Co v MESC, unpublished opinion of the Appeals Court of Michigan, issued June 27, 1988 (Docket No. 98600).

Appeal pending: No
Claimant: N/A
Employer: Hillman Pallet Co., Inc.
Docket no.: L83 12948 1830
Date of decision: June 27, 1988

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COURT OF APPEALS HOLDING: 1) Employer’s protest of a determination which informed the employer it was a successor to a predecessor and therefore liable for all, or a share, of the predecessor’s rating account preserved the tax rate issue even though the determination did not specify a rate. 2) Amount of assets retained by seller must be considered in determination of percentage of assets transferred.

FACTS: Mr. and Mrs. Smith, d/b/a Hillman Pallet Company, owned two sawmills. Plaintiff, Hillman Pallet Co., Inc. purchased part of the Smith’s equipment. A second corporation purchased one sawmill and leased it to plaintiff. The Smiths retained other property, including a sawmill. The MESC issued a determination holding plaintiff a successor employer under Section 41(2) of the Act, liable under Section 15(g), and subject to a share of the Smith’s rating account under Section 22(a). Plaintiff protested, alleging it had not acquired all the assets and should be taxed at the lower “new business rate.”

DECISION: Remanded for further proceedings to determine percent of assets transferred.

RATIONALE: “Our review of the … notice clearly indicates that a challenge to the determination of successorship must be made promptly, because the issue would not be reopened on an appeal of the actual rate imposed. One receiving this notice could reasonable conclude that any appeal must be made now. Plaintiff consistently challenged the rate transfer throughout the proceedings. It is apparent that the Commission’s position throughout was that, once deemed a successor under Section 15(g), plaintiff’s liability under Section 22 was assured.”

“Under Section 22(b), if less than 75% of the assets were transferred, the rating account shall not be assigned without the approval of the transferror and transferee…. However, the referee erred as a matter of law in finding that the amount of retained property was not a consideration and in failing to make a finding on the percentage of assets transferred as required under Section 22(b).”

Digest Author: Board of Review (view original digest here)
Digest Updated: 6/91

Tags 22, Appeal, Liability, Transfer of rating account, Value of assets

02. Employer Liability, Tax Rate, Successorship

Baxter Decorating and Painting Co v MESC – 2.10

Post author By wrcdigest
Post date June 22, 1971

Baxter Decorating and Painting Co v MESC
Digest no. 2.10

Section 22

Cite as: Baxter Decorating & Painting Co v MESC, 34 Mich App 380 (1971).

Appeal pending: No
Plaintiff: Baxter Decorating and Painting Co.
Employer: Grand Rapids Industrial Painting Co. (GRIPCO)
Docket no.: L67-4414-1321
Date of decision: June 22, 1971

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COURT OF APPEALS HOLDING: Where various business elements were transferred including some physical assets, disclosure of customers, gain of business from several customers of transferor, there was substantial evidence of a business transfer although the computation of the percentage of the rating account to be transferred was arbitrary.

FACTS: Pursuant to a contract GRIPCO transferred physical assets (painting and office equipment) to Baxter and right to use its customer list. In addition, the former general manager of GRIPCO accepted employment with Baxter. His role was to solicit former GRIPCO clientele for Baxter. Baxter paid $17,000 to GRIPCO in addition to making a separate financial arrangement with Mr. Harris. GRIPCO continued in business. Issues are: 1. whether transferee (Baxter) continued or resumed all or part of the business of transferor (GRIPCO), and 2. whether it was proper to transfer 95.5% of GRIPCO’s rating account to Baxter.

DECISION: There was a transfer of a business within the meaning of Section 22(a). Remanded for purpose of determining what percentage of the assets were transferred.

RATIONALE: The test that must be met is whether there was a continuation or resumption of all or part of the transferor’s business. The transfer need not result in an increase in business for the transferee or for that matter, in a successful continuation or resumption. “[T]he test… is not whether the successor employer made a good bargain.”

Many factors besides physical assets must be evaluated to determine what percentage of the business was transferred. The physical assets and the business are not identical concepts. “A proper determination cannot be based solely on the value of the transferred physical assets, especially where the tranferor continues in business and retains most of its own employees and continues to be in competition with the tranferee.”

Digest Author: Board of Review (original digest here)
Digest Updated: 7/99

Tags 22, 22(a), Successorship, Transfer of business, Transfer of rating account

02. Employer Liability, Tax Rate, Successorship

MESC v Allied Supermarkets, Inc – 2.07

Post author By wrcdigest
Post date April 2, 1968

MESC v Allied Supermarkets, Inc
Digest no. 2.07

Section 22

Cite as: MESC v Allied Supermarkets, Inc, 10 Mich App 650 (1968).

Appeal pending: No
Claimant: NA
Employer: Allied Supermarkets, Inc.
Docket no.: L64 4148 1251
Date of decision: April 2, 1968

View/download the full decision here

COURT OF APPEALS HOLDING: When a chain store sells 3 of 126 stores and the purchaser continues to employ 90% of the seller’s former employees, there is a transfer of business, and that part of the seller’s rating account pertaining to the employees of the 3 stores must be transferred, pursuant to Section 22 of the Act, to the purchaser.

FACTS: Allied Supermarkets had a chain of 126 supermarkets. It sold 3, located in Bay City to Vay Foods. The sale included the furniture, fixtures, and equipment of all 3 stores. The beer, wine, and liquor licenses were also transferred together with merchandise. Allied retained 10% of the total merchandise. Allied assigned the leases on the stores to Vay. Allied closed the stores on Saturday. Vay opened them on Monday, manning them with former employees of Allied. The 3 former Allied managers continued in the same capacity with Vay. In the interim all identity of an Allied “Wrigley” store was removed and replaced with a Vay’s “Vescio Supermarket” designation.

DECISION: There was a transfer of the business of Allied to Vay in the sale of the stores and that part of the ratings account transferred to Vay pursuant to Section 22.

RATIONALE: “We cannot agree with the finding of the referee that the only ‘business’ of Allied is the entire operation of 126 supermarkets in the State of Michigan and that a local market in the chain must be considered to be an integral part of the whole and not a singular business for purposes of this act. The logical extension of such reasoning could permit Allied to dispose of practically all of its chain store operations without affecting any change in the computation of its employment rating accounts, although it is clear that the employment situation would be quite different….”

Digest Author: Board of Review (original digest here)
Digest Updated: 12/91

Tags 22, Liability, Successorship, Transfer of rating account

02. Employer Liability, Tax Rate, Successorship

Valley Metal Co v MESC – 2.02

Post author By wrcdigest
Post date December 28, 1961

Valley Metal Co v MESC
Digest no. 2.02

Section 22

Cite as: Valley Metal Co v MESC, 365 Mich 297 (1961).

Appeal pending: No
Claimant: N/A
Employer: Valley Metal Products Company
Docket no.: L57 2347 1040
Date of decision: December 28, 1961

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SUPREME COURT HOLDING: Transferred account means the rating account which the transferee has after the transferred account has been merged with its prior rating account.

FACTS: Valley Metal Products Company (Vampco) purchased assets from Industrial Machine Tool Company (Industrial). The Commission determined that a transfer of business within Section 22 had taken place. The rating account balance of the transferror, Industrial, was transferred to Vampco. Industrial had 2 divisions of operation – one was the manufacture of windows, the other, tools. Vampco bought all of the window business.

DECISION: The increased contributions which necessarily must be made in order to meet the benefit payments must of necessity fall upon the transferee.

RATIONALE: We believe the legislature had in mind devising a pro rata formula which would as between the parties, divide all the rate making factors involved on an identical basis. The unfavorable experience cannot be translated into increased contributions against Industrial since it has disposed of the business. Neither party could know at the time of the transfer the exact future experience. The party purchasing may protect itself by contract or by adjustment of the purchase price against such a contingency.

Digest Author: Board of Review (original digest here)
Digest Updated: 11/90

Tags 22, Due process, Liability, Transfer of rating account