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, Oakland County Circuit Court, No. 2008 095740 AE (April 27, 2009).

Appeal pending: No
Claimant: State of Michigan
Respondent: GLRS Leasing Services, LLC
Docket no: 3012
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