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Agency erred in adjusting experience account rates after merger

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The Indiana Court of Appeals has ordered the Department of Workforce Development to reinstate the original contribution rates for unemployment insurance experience accounts of a parent company and its subsidiaries. The DWD should not have combined the accounts and adjusted the rates following a merger.

Boulder Acquisition Corp., a subsidiary of Xerox Corp., merged with Affiliated Computer Services Inc. BAC acquired equity interests in various subsidiaries of ACS, 26 of which operate in Indiana, and those entities became subsidiaries of BAC. Those Indiana subsidiaries kept their own employees, had their own unemployment insurance accounts that were separate from ACS’s account, and each still operated as an individual legal entity.

After BAC reported the merger to the DWD, the agency determined BAC became the “successor employer” of the subsidiaries under state law and combined the experience accounts of all the subsidiaries with BAC. This resulted in a higher contribution rate of 3.7 percent and a higher combined unemployment insurance tax for the companies. The DWD also assessed a penalty against BAC for failure to timely pay the appropriate fees.

A liability administrative law judge within the DWD upheld the determination BAC was the successor employer to the subsidiaries, citing I.C. 22-4-10-6 and 22-4-11-7.

In Boulder Acquisition Corp. (n/k/a Affiliated Computer Services, LLC), et al. v. Unemployment Insurance Appeals of the Indiana Dept. of Workforce Development, 93A02-1202-EX-127, BAC argued that it did not acquire “the organization, trade or business, or substantially all the assets” of each of the subsidiaries, as defined in statute. The DWD claimed that I.C. 22-4-11.5-7 applies, so the experience accounts should have been recalculated and combined. The agency admitted that the relationship between the subsidiaries and its parent company didn’t change with the merger, but believed that the account setup prior to the merger was an error that it merely corrected once it learned of the merger.

This issue is one of first impression in Indiana. The Court of Appeals found guidance in Franklin Electric, although that decision doesn’t govern the COA’s interpretation of I.C. 22-4-10-6(a) because of Franklin Electric’s narrow holding.  

The judges concluded that BAC did not acquire the organization, trade or business, or substantially all the assets of any of the subsidiaries, nor did the subsidiaries transfer all or a portion of their trade or business to BAC. The subsidiaries remained separate legal entities and can be separate employers from their parent company.

The subsidiaries should be permitted to maintain their own employment experience accounts, Chief Judge Margret Robb wrote. She noted the court’s decision remains the same when interpreting I.C. 22-4-11.5-7.

The judges remanded for the DWD to adjust BAC’s and the subsidiaries respective experience accounts and refund any overpayment by BAC and/or the subsidiaries.

 

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  1. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

  2. As a lawyer who grew up in Fort Wayne (but went to a real law school), it is not that hard to find a mentor in the legal community without your school's assistance. One does not need to pay tens of thousands of dollars to go to an unaccredited legal diploma mill to get a mentor. Having a mentor means precisely nothing if you cannot get a job upon graduation, and considering that the legal job market is utterly terrible, these students from Indiana Tech are going to be adrift after graduation.

  3. 700,000 to 800,000 Americans are arrested for marijuana possession each year in the US. Do we need a new justice center if we decriminalize marijuana by having the City Council enact a $100 fine for marijuana possession and have the money go towards road repair?

  4. I am sorry to hear this.

  5. I tried a case in Judge Barker's court many years ago and I recall it vividly as a highlight of my career. I don't get in federal court very often but found myself back there again last Summer. We had both aged a bit but I must say she was just as I had remembered her. Authoritative, organized and yes, human ...with a good sense of humor. I also appreciated that even though we were dealing with difficult criminal cases, she treated my clients with dignity and understanding. My clients certainly respected her. Thanks for this nice article. Congratulations to Judge Barker for reaching another milestone in a remarkable career.

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