No. 27823 (New Rule): R994-304. Special Provisions Regarding Transfers of Unemployment Experience and Assigning Rates

DAR File No.: 27823
Filed: 04/15/2005, 01:49
Received by: NL

 

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this new rule is to assist and explain enforcement of H.B. 10 passed in the 2005 General Session of the Utah State Legislature. (DAR NOTE: H.B. 10 is found at UT L 2005 Ch 12, and was effective 03/01/2005.)

 

Summary of the rule or change:

H.B. 10 as passed in the 2005 General Session of the Utah State Legislature, prohibits employers from transferring ownership, management, and/or control of a company to another company to obtain a lower experience rate calculation. This rule defines terms used in the legislation for determining when a controlling interest is transferred which would trigger the prohibited conduct. The rule also describes the procedure used by the department in making the determination that an illegal transfer has occurred but giving notice to the suspect entity and allowing the business the opportunity to respond.

 

State statutory or constitutional authorization for this rule:

Section 35A-1-104 and Subsection 35A-4-502(1)(b)

 

Anticipated cost or savings to:

the state budget:

This is a federally-funded program and there will be no cost or savings to the state budget. Even though the state pays unemployment benefits, since the state has never been able to change "ownership" to achieve a lower experience rating, this rule change will not represent a cost or savings to the state.

 

local governments:

This is a federally-funded state-run program and there will be no cost or savings to any local governmental entity. Even though local governments pay unemployment benefits, since local governments have never been able to change "ownership" to avoid a higher experience rating, this rule change will represent no cost or savings to local governmental entities.

 

other persons:

There will be no cost or savings to other persons not anticipated by the legislation. Only those employers attempting to transfer interest in a company to another company in an effort to avoid unemployment liability will be affected. The legislation provides that the "higher" experience rating will "follow" the transfer to the new company.

 

Compliance costs for affected persons:

There are no compliance costs for any persons. An employer that transferred ownership in a business to avoid a higher experience rating prior to passage of H.B. 10 will be unable to illegally avoid that experience rating now but the change was made by the legislation, not this rule. This rule merely defines the procedure for effectuating the legislative change and carries no compliance costs independent of that legislation.

 

Comments by the department head on the fiscal impact the rule may have on businesses:

There will be no impact on businesses as a result of this rule. Employers will no longer be able to avoid an experience rating by transferring ownership to a new employer as a result of the legislation. This new rule simply follows the legislation. Tani Downing, Executive Director

 

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Workforce Services
Workforce Information and Payment Services
140 E 300 S
SALT LAKE CITY UT 84111-2333

 

Direct questions regarding this rule to:

Suzan Pixton at the above address, by phone at 801-526-9645, by FAX at 801-526-9211, or by Internet E-mail at [e-mail]

 

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

05/31/2005

 

This rule may become effective on:

06/01/2005

 

Authorized by:

Tani Downing, Executive Director

 

 

RULE TEXT

R994. Workforce Services, Workforce Information and Payment Services.

R994-304. Special Provisions Regarding Transfers of Unemployment Experience and Assigning Rates.

R994-304-101. Transfer of a Trade or Business, or Portion Thereof, with Common Ownership, Management, or Control.

(1) The term "person" includes an individual, trust, estate, partnership, association, limited liability company, corporation, government entity, or Indian tribe. The "predecessor employer" is the employer that transfers its trade or business, or a portion of its trade of business, to another employer. The "successor employer" is the employer that acquires the trade or business, or a portion of the trade or business.

(2) Common ownership exists if an employer transfers a trade or business, or a portion of a trade or business, to another employer and at the time of the transfer:

(a) the predecessor employer owns 50% or more of the of the trade or business of the successor employer. For entities that issue shares of stock ownership, 50% or more of the "voting shares" of stock interest must be common to both; or

(b) an individual with a controlling interest in the predecessor trade or business, transfers that controlling interest to an individual in the successor trade or business and the parties are related in one of the following ways:

(i) spouse;

(ii) parent;

(iii) step parent;

(iv) child;

(v) step child;

(vi) sibling; or

(vii) step sibling.

(3) The Department will determine common management or control using the best available evidence.

(a) Common management will be found if the predecessor and successor employers have the same or similar:

(i) managers, officers, board of directors;

(ii) personnel and human resource policies;

(iii) operating procedures;

(iv) sales and pricing policies;

(v) collection procedures;

(vi) financing policies;

(vii) accounting practices; or

(viii) purchasing practices.

(b) common control will be found where the predecessor and successor employers have the same or similar:

(i) control of the assets used to conduct the business enterprise;

(ii) financing and/or leasing arrangements;

(iii) contracts; or

(iv) business, professional, and regulatory licenses of the business enterprise.

(4) The factors listed in subsections 3(a) and (3)(b) of this section are not exclusive and are intended as aids for analyzing the facts of each case. The degree of importance of each factor in those subsections varies depending on the nature of the trade or business transferred. Some do not apply to certain trades or businesses and, therefore, should not be given any weight. The Department will scrutinize the facts in each case to assure that the form of the transfer does not obscure the substance of the transfer.

 

R994-304-102. Notification Requirements.

(1) All parties to a transfer described in Section 35A-4-304(3)(a) must provide the following information to the Department within 30 days of the transfer date:

(a) the effective date of the transfer.

(b) the percentage of the assets, trade or business, and workforce transferred.

(c) the reason for the transfer.

(d) the following information for both the predecessor and the successor employers:

(i) name;

(ii) street address;

(iii) Utah Unemployment Insurance Registration Numbers, if one has been assigned; and

(iv) Federal Employer Identification Numbers (FEIN), if one has been assigned.

(e) the name and Social Security number (SSN) or FEIN of any successor employer who was also a predecessor employer, or any individual who is related to the predecessor. Related means to have a family relationship as described in Section R994-304-101(2)(b).

(f) Common management and control practices that were retained from the predecessor employer.

(g) Any other information requested by the Department.

 

R994-304-103. Recalculation and Effective Date of Contribution Rates.

Any employer that is a party to a transfer of an employer's trade or business described in Section 35A-4-304(3)(a) shall have its contribution rate recalculated. The effective date of the recalculation shall be the first day of the calendar quarter following the actual date of the transfer, unless the actual transfer occurred on the first day of a calendar quarter, in which case the recalculation takes effect on that day.

 

R994-304-104. Identification of the Transfer or Acquisition of an Employer's Workforce.

The Department will develop and implement programs to aid in the detection and identification of employers that transfer or acquire all or a portion of another employer's workforce.

 

KEY: unemployment experience rating

2005

35-A-4-304