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Justices agree subsidiaries are not new employers

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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.



 

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  1. My husband financed a car through Wells Fargo In dec 2007 and in Jan 2012 they took him to court to garnish his wages through a company called autovest llc . Do u think the statue of limitations apply from the day last payment was received or from what should have been the completion of the loan

  2. Andrew, you are a whistleblower against an ideologically corrupt system that is also an old boys network ... Including old gals .... You are a huge threat to them. Thieves, liars, miscreants they understand, identify with, coddle. But whistleblowers must go to the stake. Burn well my friend, burn brightly, tyger.

  3. VSB dismissed the reciprocal discipline based on what Indiana did to me. Here we have an attorney actually breaking ethical rules, dishonest behavior, and only getting a reprimand. I advocated that this supreme court stop discriminating against me and others based on disability, and I am SUSPENDED 180 days. Time to take out the checkbook and stop the arrogant cheating to hurt me and retaliate against my good faith efforts to stop the discrimination of this Court. www.andrewstraw.org www.andrewstraw.net

  4. http://www.andrewstraw.org http://www.andrewstraw.net If another state believes by "Clear and convincing evidence" standard that Indiana's discipline was not valid and dismissed it, it is time for Curtis Hill to advise his clients to get out the checkbook. Discrimination time is over.

  5. Congrats Andrew, your street cred just shot up. As for me ... I am now an administrative law judge in Kansas, commissioned by the Governor to enforce due process rights against overreaching government agents. That after being banished for life from the Indiana bar for attempting to do the same as a mere whistleblowing bar applicant. The myth of one lowly peasant with the constitution does not play well in the Hoosier state. As for what our experiences have in common, I have good reason to believe that the same ADA Coordinator who took you out was working my file since 2007, when the former chief justice hired the same, likely to "take out the politically incorrect trash" like me. My own dealings with that powerful bureaucrat and some rather astounding actions .. actions that would make most state courts blush ... actions blessed in full by the Ind.S.Ct ... here: https://www.scribd.com/doc/299040839/2016Petitionforcert-to-SCOTUS

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