12- 172 C.M.R. ch. 2, § 13

Current through 2024-51, December 18, 2024

Section 172-2-13 - Successorship

A. Under Section 1228 of the Employment Security Law, the Bureau may determine, in accordance with paragraph (B) of subsection 9 of Section 1043, that an individual or organization is liable as a successor for contributions and interest due and unpaid by a predecessor employer as of the date that the successor employer acquired the predecessor's business. This determination must be made in writing and is appealable. A copy of such determination with notice of appeal rights must be retained by the Bureau. The factors to be used in determining whether a successorship has occurred are as follows:

1. The extent to which the successor's enterprise retains its pre-transfer identity;

2. The successor's capacity to produce similar goods and services;

3. Continuity of management;

4. Similarity in methods of production and distribution;

5. Identity of the employment force; and

6. The amount of assets, particularly employment producing or income producing assets, transferred.

The Bureau will take into account the combination of factors to determine the extent to which the successor has the capacity to perpetuate the business of the predecessor; no single factor is determinative of the issue.

B. The successor is liable for contributions owed by the predecessor in an amount not to exceed the reasonable value of the business acquired. The Bureau will assess the full amount of contributions owed on the presumption that the value of the business exceeds the amount of the debt for contributions. The successor may rebut the presumption by presenting evidence to demonstrate a reasonable value of the business at the time of acquisition. The Bureau's determination of the value of the business may be appealed.

C. Assessments for contributions owed by the predecessor must be mailed to the successor employer in accordance with the time periods established by subsection 6 of Section 1225 of the Employment Security Law.

D. Prior to making an assessment against the successor for contributions and interest that were not paid by the predecessor, the Bureau shall make every effort to collect the amount owed from the predecessor, including but not limited to the following:

1. Documented attempts to contact the predecessor by telephone, by mail and in person;

2. Establishing responsible individual liability against the predecessor in accordance with Section 1225 (1-A) of the Employment Security Law;

3. Establishing liens against property owned by the predecessor; and

4. Disclosing the assets of the predecessor when appropriate.

E. Under Section 1228 of the Employment Security Law, interest on the amount of contributions owed and unpaid by the predecessor shall not continue to accrue against the successor after the date of acquisition of the predecessor's assets.

F. If the predecessor makes payments on its debt to the Bureau after the successor has also so paid the Bureau, the amounts so paid by the successor with respect to the successorship shall first be applied to delinquent amounts owed by the successor, if any, and any amount remaining shall be reimbursed to the successor in full.

G. If the successor pays the entire amount owed by the predecessor, the debt will be considered paid in full. No further interest or penalties may be assessed against the predecessor for nonpayment of the debt with respect to the successorship, and all existing liens against the predecessor's property, which relate only to that debt, must be removed. Filing fees for removal of the liens must be paid in advance by the predecessor. If the predecessor will not pay the fees, the successor must pay the filing fees.

H. For purposes of rate determination under paragraph A of subsection 5 of Section 1221 of the Employment Security Law, the assignment of or rates and transfers of experience in successor purchases when there is substantially no common ownership, management or control between the transferor and transferee, is as follows:

1. A new employer who acquires the business of the predecessor employer in toto may acquire the experience rate of the employer or may be assigned the state average contribution rate, whichever is lower. Upon notification of the transfer, the Bureau will determine whether there is substantially no common ownership, management or control, relying on the criteria set forth in paragraph K below. If the Bureau determines that there is no common ownership, the Bureau will notify the new employer of the option of acquiring the predecessor's experience rate, or being assigned the new employer rate. The new employer will have 30 days to notify the Bureau of its choice. Failure to notify the Bureau will result in the Bureau assigning the employer the lower of the two rates.

2. An existing employer with an established experience rate who acquires the business of the predecessor employer in toto may acquire the experience rate of that predecessor employer, which is then blended with the successor's established experience rate to form a new rate, or retain the established experience rate of the successor, whichever is lower. Upon notification of the transfer, the Bureau will notify the existing employer of the option of blending the rate or retaining its established rate. The existing employer will have 30 days to notify the Bureau of its choice. Failure to notify the Bureau will result in the Bureau assigning the employer the lower of the two rates.

I. The acquisition in toto of a business accrues to the ultimate successor. An ultimate successor is the entity which has the capacity to continue the predecessor's business even though such successor may have acquired the predecessor's business or assets through an intermediate party or by other than a purchase/sale transaction. Where the intermediary acts only as a straw party and does not operate the business as its own, or have the capacity to do so for all practical purposes, the predecessor's experience rating record shall be transferred to the ultimate successor.

J. Under subsection 5 of Section 1221 of the Employment Security Law, only a successor employer that acquires the business of a predecessor employer in toto will be entitled to the predecessor's experience rating record. A successor that acquires only a severable portion of the predecessor's business, in accordance with paragraph G of subsection 9 of Section 1043, will be assigned the rate of a new employer pursuant to paragraph A of subsection 4 of Section 1221 of the Employment Security Law. A severable portion means a part of a business that is separable from the preceding business but which is capable of maintaining a complete and independent existence. If the successor that is acquiring the severable portion of the predecessor's business is an existing employer, the successor will retain its own rate.

K.SUTA Dumping. Under Section 1221 (5-A), when an employer who transfers its trade or business, or a portion to its trade or business, to another employer with which there is substantially common ownership, the Bureau may determine that the parties have engaged in SUTA dumping, which is a transfer that has been entered into for the purpose of obtaining a lower unemployment rate. For purposes of identifying such a transfer, the Bureau will consider the following factors:

1. Substantially common ownership exists when the transferor and transferee have a relationship that pre-exists the date of the transfer. This can include but is not limited to a family relationship, employment relationship, investor relationship or other relationship that suggests the parties shared a common interest in the economic success of the transferred business.

2. Substantially common management or control exists when the transferor and transferee have an intertwined or dependent relationship such that both parties are involved in the day-to-day operation of the transferred business.

12- 172 C.M.R. ch. 2, § 13