ILNews

Justices agree subsidiaries are not new employers

Back to TopCommentsE-mailPrintBookmark and Share

Emphasizing its ruling only deals with determining the proper merit rate for unemployment fund contributions, the Indiana Supreme Court ruled a manufacturer did not create employers through its new subsidiaries, so it wasn’t entitled to a lower rate.

In Franklin Electric Company, Inc. v. Unemployment Insurance Appeals of the Indiana Dept. of Workforce Development, No. 93S02-1102-EX-89, Franklin Electric Co., which makes pumps, decided in 2002 to split the company into two new subsidiaries – one for manufacturing and one for sales. Franklin Electric retained 100 percent ownership in both entities while serving as corporate headquarters for the two.

An accounting firm believed that the two new subsidiaries would be eligible for a new unemployment insurance experience account with the rate of 2.7 percent. Franklin Electric’s experience rating was near 5 percent. The Department of Workforce Development investigated the company and determined that Franklin Electric didn’t “dispose of a distinct and segregable portion of its organization, trade, or business” and recalculated Franklin Electric’s merit rate. It demanded back payments, interest and a 10 percent penalty.

The liability administrative law judge affirmed the determination that the three entities were a single employer, but declined to impose penalties. The Indiana Court of Appeals affirmed, and the justices also agreed with the LALJ’s determination.

The manufacturing and sales subsidiaries didn’t acquire a distinct and segregable portion of Franklin Electric’s business, so they didn’t qualify as “employers” under the laws governing unemployment compensation arrangements, wrote Chief Justice Randall T. Shepard. The two subsidiaries combined formed essentially the same business as before the change –  Franklin Electric still does the payroll and provides benefits to all the companies, in addition to paying the workers’ compensation coverage for the entities.

“Today’s holding is a narrow one,” he wrote. “It deals only with the language ‘distinct and segregable’ as used in the unemployment statutes and only concerns determining the proper merit rate for unemployment contribution. The instant ruling neither calls into question the validity of the wholly owned subsidiary arrangement, nor holds that the creation of a wholly owned subsidiary can never result in the new entity becoming a separate employer.”

The justices agreed that imposing a penalty against Franklin Electric would be inappropriate because the company filed its reports to determine status in good faith based on advice from the accounting firm.



 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Are you financially squeezed? Do you seek funds to pay off credits and debts Do you seek finance to set up your own business? Are you in need of private or business loans for various purposes? Do you seek loans to carry out large projects Do you seek funding for various other processes? If you have any of the above problems, we can be of assistance to you but I want you to understand that we give out our loans at an interest rate of 3% . Interested Persons should contact me with this below details . LOAN APPLICATION FORM First name: Date of birth (yyyy-mm-dd): Loan Amount Needed: Duration: Occupation: Phone: Country: My contact email :jasonwillfinanceloanss@hotmail.com Note:that all mail must be sent to: jasonwillfinanceloanss@hotmail.com Thanks and God Bless . Jason Will

  2. Can I get this form on line,if not where can I obtain one. I am eligible.

  3. What a fine example of the best of the Hoosier tradition! How sad that the AP has to include partisan snark in the obit for this great American patriot and adventurer.

  4. Why are all these lawyers yakking to the media about pending matters? Trial by media? What the devil happened to not making extrajudicial statements? The system is falling apart.

  5. It is a sad story indeed as this couple has been only in survival mode, NOT found guilty with Ponzi, shaken down for 5 years and pursued by prosecution that has been ignited by a civil suit with very deep pockets wrenched in their bitterness...It has been said that many of us are breaking an average of 300 federal laws a day without even knowing it. Structuring laws, & civilForfeiture laws are among the scariest that need to be restructured or repealed . These laws were initially created for drug Lords and laundering money and now reach over that line. Here you have a couple that took out their own money, not drug money, not laundering. Yes...Many upset that they lost money...but how much did they make before it all fell apart? No one ask that question? A civil suit against Williams was awarded because he has no more money to fight...they pushed for a break in order...they took all his belongings...even underwear, shoes and clothes? who does that? What allows that? Maybe if you had the picture of him purchasing a jacket at the Goodwill just to go to court the next day...his enemy may be satisfied? But not likely...bitterness is a master. For happy ending lovers, you will be happy to know they have a faith that has changed their world and a solid love that many of us can only dream about. They will spend their time in federal jail for taking their money from their account, but at the end of the day they have loyal friends, a true love and a hope of a new life in time...and none of that can be bought or taken That is the real story.

ADVERTISEMENT