(1) Definitions.
(a) "Successor" is the employing unit which
acquires the business or acquires substantially all of the assets of a
business.
(b) "Predecessor" is the
employing unit which last operated the business.
(c) "Acquired" means to come into possession
of, obtain control of, or obtain the right to use the assets of a business by
any legal means including a gift, lease, repossession or purchase. For purposes
of succession, a purchase through bankruptcy court proceedings where assets are
being liquidated is not considered an acquisition, if the court places
restrictions on the transfer of liabilities to the purchaser. It is not
necessary to purchase the assets in order to have acquired the right to their
use, nor is it necessary for the predecessor to have actually owned the assets
for the successor to have acquired them. The right to the use of the asset is
the determining factor.
(d)
"Assets" are commonly defined to include any property, tangible or intangible,
which has value. Therefore, acquiring use of assets is defined to mean that the
successor obtains the physical assets such as cash, inventories, equipment, or
buildings. Use of assets may also include the acquisition of the name of the
business, customers, accounts receivable, patent rights, goodwill, employees,
or an agreement by the predecessor not to compete.
(e) "Business" is an employing unit which
pursues an activity or enterprise for gain, benefit, advantage or
livelihood.
(f) "Substantially all"
means acquisition of 90 percent or more of all of the predecessor's
assets.
(g) "Discontinued
operations" means that immediately at the point of acquisition, the preceding
employer has no continuing business activity in this state. Liquidation of
accounts receivable or "wind-down payroll" is not considered to be a continued
business activity. In determining whether an employer is a successor, the
phrases 'substantially all" and "discontinued operations" are applied
conjunctively. If less than 90 percent of all the assets are acquired, then
there is no successorship and the "discontinued operations" test need not be
applied.
(h) "Like part or
character" will be defined by using the most current North American Industry
Classification System (NAICS) manual. There is no succession unless it is
determined that a like part or character of the business acquired is retained.
An example of such a situation occurs when a new owner acquires a business or
substantially all of its assets. The business formerly operated as an
automotive service station and the predecessor employer has ceased to operate.
If the new owner opens as an automotive repair shop and not a service station,
there is no successorship.
(2) If the acquired business was closed for
30 or more consecutive calendar days during its normal operating period
immediately prior to the acquisition, there is no successorship.
(3) Succession.
In the case of succession, effective on the first day of the
year following the year in which the business is acquired, a successor will pay
a contribution rate newly computed on the basis of the combined experience of
the predecessor and the successor unless the date of acquisition is January 1,
in which case the new rate takes effect immediately. The successor's rate
during the year of acquisition will be as follows:
(a) Successor Was a Qualified Employer.
If the successor was a "qualified employer" immediately
prior to the time of the acquisition, it shall continue to pay the rate
assigned prior to the acquisition.
(b) Successor Was Not a Qualified Employer.
If the successor was an employer but not a "qualified
employer" immediately prior to the time of the acquisition and acquires one or
more businesses simultaneously, it shall pay a new rate computed based on the
combined experience of the predecessor(s) and the successor. This rate shall be
effective on the first day of the next calendar quarter. The successor pays its
previously assigned rate for the balance of the quarter in which the
acquisition occurs unless the acquisition occurs on the first day of that
quarter, in which case the newly computed rate takes effect on that day.
(i) Simultaneously as used in this section
means the same day.
(ii) If the
predecessor(s) and successor are not qualified employers and have different
NAICS codes, and the successor continues to operate the acquired business(s),
the successor will retain their original NAICS code.
(c) Successor Was Not an Employer.
If the successor was not an employer immediately prior to
the time of the acquisition it shall pay the predecessor's rate for the current
calendar year. If the successor simultaneously acquires two or more businesses
it shall pay a rate newly computed based on the combined experience of the
predecessors. This new computed rate shall be effective on the day of
acquisition.
(4)
Effect of Contributions Owed by the Predecessor on the Successor's Rate.
A successor will be assigned a 1 percent surcharge in
addition to its overall contribution rate if unpaid contributions are owed by
the predecessor in the prior fiscal year. The one percent surcharge applies in
the years that the successor's rate is affected by the predecessor's payroll
and benefit costs.
(5)
Successorship Determination and Burden of Proof. The Department will determine
whether the predecessor's payroll and benefit costs will be transferred to the
successor. Either the predecessor or successor may appeal the determination
within 10 days of the date the determination is issued. Once the determination
has been made, the burden of proof is on the predecessor or the successor to
show that the determination was made in error.
