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Cite as: Midway Stop-n-Shop, Inc, v MESC, unpublished opinion of the Cass County Circuit Court, issued March 29, 1990 (Docket No. 86-12638AA).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

Mr C’s Barber Shop v. Freiheit – 17.26

Mr C’s Barber Shop v. Freiheit
Digest No. 17.26

Section 421.42(1) and (5)

Cite as: Mr. C’s Barber Shop v Freiheit, unpublished opinion of the Genesee County Circuit Court, issued June 17, 1985 (Docket No. 84-700-AV).

Appeal pending: No
Claimant: Karen Freiheit
Employer: Mr. C’s Barber Shop
Date of decision: June 17, 1985

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HOLDING: Claimant is considered an employee under MCL 421.42 despite the fact that when she was hired, she signed a lease agreement renting out a chair in the barber shop.

FACTS:  Claimant was an apprentice at the employer’s barber shop from January 1980 until July 25, 1981. Claimant signed a lease with the employer to rent a chair at the barber shop for $95 per week. The employer determined what hours Claimant worked, when Claimant would take a lunch break, and when the shop would be open (it was closed for deer-hunting season). The employer also granted vacation requests and determined how much vacation could be taken. Claimant provided her own shears and tools, but the employer provided all lotions, shampoos, and other products. The employer became dissatisfied with Claimant’s work and tried to fire her. Claimant asked to be allowed to stay for two more weeks and finish her apprenticeship. The employer agreed.

Claimant filed for UI benefits and was denied because the Agency said her work at the barber shop was not employment. Claimant appealed and the ALJ found that Claimant was not an employee. The Board of Review affirmed the ALJ decision, but upon a request for rehearing put forth by the Claimant, the Board of Review reversed the ALJ decision and found Claimant to be an employee. The employer appealed.

DECISION: The Board of Review’s decision finding that Claimant was an employee was affirmed by the Circuit Court. Claimant is not disqualified from receiving benefits.

RATIONALE:  Upon reviewing the economic reality test that had been adopted by Michigan Courts, the Circuit Court found that the determination of whether a claimant is an employee or an independent contractor must be done on a case by case basis. The Circuit Court reviewed the fact of this case in light of the Michigan Employment Security Act’s purpose to lighten the burden caused by unemployment.

The Circuit Court believed that the Board of Review’s decision was consistent with the standards laid out in McKissic v Bodine, 42 Mich App 203 (1972). The Court pointed to the fact that the employer set vacations, furnished supplies, set hours, and could discharge Claimant at will. Based on the fact that the employer “fired” Claimant instead of terminating the lease means that, despite calling this a lease agreement, it was, in fact, an employment agreement.

Digest author: Andrea M. Frailey, Michigan Law, Class of 2017
Digest updated: 10/31/2017

MESC v Arrow Plating Co – 2.01

MESC v Arrow Plating Co
Digest no. 2.01

Section 22

Cite asMESC v Arrow Plating Co, 10 Mich App 323 (1968).

Appeal pending: No
Claimant: N/A
Employer: Arrow Plating Company, Inc.
Docket no.: L66 176 1277
Date of decision: March 27, 1968

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COURT OF APPEALS HOLDING: “If a vital integral part of the business is not transferred, regardless of how many people make up that integral part, so that the business could not continue, then there has not been a transfer of the `organization’ for the purposes of this Act.”

FACTS: The employer bought much of the assets of Wade Boring Works. The main asset of Wade Boring was the right of possession to a building leased by Wade Boriinng because special zoning allowing the flushing of waste chemicals into the public sewer system. Wade Boring Works retained its phone number, customers, and the right to compete. Arrow’s business was confined to plating operations, while Wade Boring had done both plating and sheet metal fabrication.

DECISION: The employer is not a successor employer under the Act.

RATIONALE: The critical wording of Sec. 41(2) is the phrase defining what must be acquired by a successor employer as “the organization; trade or business, or 75% or more of the assets.” As for “trade or business” it is clear that Arrow did not assume the trade or business, since the clientele were different and the type of work performed by the two companies would appeal to different markets.

In accordance with standard accounting principles, accounts receivable are assets to be considered when computing the percentage of assets transferred.

Arrow Plating’s right to use the building with favorable zoning was the primary concern, but such right was not assigned a value in the transfer. Poor accounting practices made it impossible for the Court to accurately determine the exact value of assets transferred and retained.

“`Organization’ means the vital, integral parts which are necessary for continued operation. In this case, there was not a transfer of the vital, integral parts required for continued operation of the Wade Boring Works. Mr. Frank Beck constituted the entire managerial component of Wade Boring Works, and it could not have continued as a going business without managerial talent.”

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