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Cite as: CTC Acquisition CO, LLC v State of Michigan, unpublished opinion of the Kent County Circuit Court, issued November 10, 2008 (Docket No. 2008-06293-AE).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

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

C & L Leasing Co v State of Michigan, BW&UC – 20.08

C & L Leasing Co v State of Michigan, BW&UC
Digest no. 20.08

Section 41

Cite as: C & L Leasing Co v State of Michigan, BW&UC, unpublished opinion of the Macomb Circuit Court, issued March 11, 2003 (Docket No. 02-4341-AE).

Appeal pending: No
Claimant: N/A
Employer: C & L Leasing Company
Docket no.: L2001-00056-RO1-2795
Date of decision: March 11, 2003

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CIRCUIT COURT HOLDING: An employer will not be considered to be an “employee leasing company” unless the employer satisfiesall of the requirements of UA Rule 190.

FACTS: Employer’s (C & L) secretary/treasurer testified that employer performed payroll services and provided employees to two other companies, Michigan Awning and Panel Laminations. Ownership of the three companies was intertwined among various family members and in-laws. Employer’s business and Michigan Awning operated out of employer’s secretary/treasurer’s residence. Employer’s secretary/treasurer’s husband and his parents had supervisory control over the employees.

DECISION: Employer is not an employee leasing company. Payroll of workers at the “client” companies is reassigned to the individual companies.

RATIONALE: To be eligible for employee leasing company status, an employer must satisfy all of the requirements of Rule 190. Employer failed to show it met the requirements of Rule 190(2). Employer did not “in fact” hire, promote, reassign, discipline and terminate the leased employees, as required by Rule 190(2)(b). Employer did not hold itself out to the general public as available to provide leasing services, as required by Rule 190(2)(f). Employer’s solicitation letter represented employer as in the business of providing payroll and administrative services.

Digest Author:  Board of Review (original digest here)
Digest Updated: 11/04

Contemporary Life Services v MESC – 2.12

Contemporary Life Services v MESC
Digest no. 2.12

Sections 13a, 32a, 41

Cite asContemporary Life Services v MESC, unpublished per curiam Court of Appeals of Michigan, issued May 24, 1994 (Docket No. 151027).

Appeal pending: No
Claimant: N/A
Employer: Contemporary Life Services
Docket no.: L89-07129-2075
Date of decision: May 24, 1994.

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COURT OF APPEALS HOLDING: Where employer requested reclassification from contributing to reimbursing status more than one year after notice of determination of status was mailed, the one year limitation bars retroactive reconsideration of employer’s status.

FACTS: Employer was classified as a contributing employer for failure to answer question 7 on form MESC 1010 even though elsewhere on that form the employer attested it was a tax exempt entity under 26 USC 501(a). The instructions for question 7 specifically stated failure to answer would result in classification as a contributing employer. Determination of contributing employer status was mailed on January 31, 1986. Thereafter, employer failed to file quarterly reports and received notice of this lapse on March 8, 1989. Employer requested reclassification on March 16, 1989. Employer had accumulated arrearages of unpaid unemployment payroll taxes between 1985 and 1989. Employer argued one year time limit should be tolled until March 8, 1989, or that the time limit should be extended on equitable grounds.

DECISION: Employer’s request for redetermination time barred under Section 32a.

RATIONALE: The March 16, 1989 letter was not filed within a year of the January 31, 1986 determination. Also, the employer was not entitled to equitable relief since it set the chain of events in motion by failing to properly complete form MESC 1010. Employer should have known when it received quarterly report forms that something was amiss. Employer is presumed to know the law as it relates to the operation of its business.

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

Bruce & Roberts, Inc v MESC – 2.14

Bruce & Roberts, Inc v MESC
Digest no. 2.14

Section 41

Cite as: Bruce & Roberts, Inc v MESC, unpublished opinion of the Genesee County Circuit Court, issued April 21, 1993 (Docket No. 92-1202-AE).

Appeal pending: No
Claimant: N/A
Employer: Bruce & Roberts, Inc.
Docket no..: L91-15659-2150
Date of decision: April 21, 1993

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CIRCUIT COURT HOLDING: The Chapter 7 bankruptcy trustee was an employing unit pursuant to Section 40 and, therefore, by definition an “employer subject to this Act” under Section 41(2)(a). Therefore, employer Bruce & Roberts Inc. is a successor, having acquired 75% or more of Balderstone assets by means of bankruptcy.

FACTS: On October 18, 1985, employer sold the business (Sherman’s Lounge) to Balderstone for $160,000. On June 21, 1988, Balderstone filed for Chapter 11 Bankruptcy and for Chapter 7 on March 22, 1989. Employer re-acquired all the equipment and fixtures they sold in 1985 through foreclosure. Also, they purchased the liquor license and inventory from the Chapter 7 bankruptcy trustee. They reopened as Bruce & Robert’s, Inc. on January 2, 1990. They were assigned 10% rate as successor employer, having acquired more than 75% of Balderstone’s assets. Employer asserted it was not a successor and entitled to new employer tax rate of 2.7%.

DECISION: Employer is a successor to Balderstone and the 10% contribution rate was properly assessed.

RATIONALE: Employer acquired through foreclosure everything it had previously conveyed to Balderstone. Repossession after default has been found to be an acquisition even in the absence of a title transfer. The acquisition of assets from a debtor through bankruptcy proceedings also results in an acquisition for purposes of Section 41(2), based on the definitions in the Act of “employer” and “employing unit.”

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

Midway Stop-n-Shop, Inc v MESC – 2.19

Midway Stop-n-Shop, Inc v MESC
Digest no. 2.19

Sections 22, 41

Cite as: Midway Stop-n-Shop, Inc, v MESC, unpublished opinion of the Cass County Circuit Court, issued March 29, 1990 (Docket No. 86-12638AA).

Appeal pending: No
Claimant: N/A
Employer: Midway Stop-N-Shop, Inc.
Docket no.: L86-08390-RM1 (Bypassed Board of Review)
Date of decision: March 29, 1990

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CIRCUIT COURT HOLDING: Where successor took over an ongoing business, including the real estate via lease, and continued in business with essentially all the assets except for a large amount of cash, the cash was properly disregarded in determining the percentage of assets transferred.

FACTS: In June 1985, employer acquired an ongoing business (convenience store). Acquisition of $47,000 in inventory, equipment and goodwill was not in dispute. Issue was whether or not $59,000 in leasehold improvements on the realty and $80,000 in cash assets not transferred by the predecessor should be considered in determining whether or not more than 75 percent of assets were transferred. The referee found that out of a total of $126,000 in assets available for transfer, $106,000 was transferred, or 84 percent. He included the leasehold improvements in the transfer. He found that $20,000 of the $80,000 was available for transfer but should not be considered as a transferable asset.

DECISION: Employer is a successor under Sections 22 and 41, having acquired more than 75 percent of the predecessor’s assets.

RATIONALE: Transfer of a leasehold is the transfer of an asset for purposes of successorship because the transferee acquires an ownership interest in the property. With regard to cash assets, considering cash reserves (as opposed to receivables) as a transferable asset can lead to an absurd result of paying cash for cash. It could also lead to manipulation of the transaction for the purpose of, for example, reducing the amount of assets transferred as compared with the total assets.

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

Robinson v Young Men’s Christian Association – 11.03

Robinson v Young Men’s Christian Association
Digest no. 11.03

Sections 29(5), 40, 41

Cite as: Robinson v Young Men’s Christian Ass’n, 123 Mich App 442 (1983).

Appeal pending: No
Claimant: George Robinson
Employer: Young Men’s Christian Association
Docket no.: B76 18107 57053
Date of decision: February 24, 1983

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COURT OF APPEALS HOLDING: Section 29(5) does not apply if a claimant leaves to accept employment with an out of state employer not subject to the jurisdiction of the MESC.

FACTS: Claimant was employed at the YMCA, but resigned to accept permanent full time employment at the YMCA in Muncie, Indiana. He was discharged by the Indiana employer. Claimant returned to Michigan and applied for unemployment compensation.

DECISION: Claimant is disqualified from benefits.

RATIONALE: “In Merren v Employment Security Commission, 3 Mich App 383 (1966) a panel of this court held that the word ’employer’ in the phrase in question referred only to Michigan employers. This interpretation was affirmed by an equally divided Supreme Court, Merren v Employment Security Commission, 380 Mich 240 (1968).” “The term employer as used in the Act does not include out of state employers.

The Court of Appeals went on to say that Section 29(5) does not impinge upon Claimant’s right to interstate travel . . . and finds without merit Claimant’s argument that this construction of the statute renders it unconstitutional as a denial of equal protection of the laws.

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