Preproposal statement of inquiry was filed as WSR 97-16-012.
Title of Rule: Predecessor/successor relationship.
Purpose: Chapter 50.29 RCW does not address how the transfer of employees to an employee leasing firm is to be handled, nor does it specify how and when employers are to notify the department regarding partial transfers of employees. These regulations will provide clarification.
Statutory Authority for Adoption: RCW 50.12.010 and 50.12.040.
Statute Being Implemented: Chapter 50.29 RCW.
Summary: Chapter 50.29 RCW regulates employer experience rating and RCW 50.29.062 outlines contribution rates for predecessor and successor employers. The law does not specifically address the transfer of employees to an employee leasing company, or specify how and when employers are to notify the department regarding partial transfers of employees.
Reasons Supporting Proposal: The proposed regulations will clarify these situations for employers.
Name of Agency Personnel Responsible for Drafting: George Mante, 212 Maple Park, Olympia, WA 98507, (360) 902-9642; Implementation and Enforcement: Dale Ziegler, 212 Maple Park, Olympia, WA 98507, (360) 902-9303.
Name of Proponent: Employment Security Department, governmental.
Rule is not necessitated by federal law, federal or state court decision.
Explanation of Rule, its Purpose, and Anticipated Effects: Currently the definition of an operating asset does not address employees. Examples of situations where employees only transfer include: 1. Transfer of employees to a leasing company; 2. corporate mergers - when the payroll only transfers to a subsidiary; and 3. transfer of employees to a management company.
Under these types of situations, the department would not consider that a predecessor/successor relationship existed for purposes of chapter 50.29 RCW.
Currently, when a new employer indicates the purchase of a portion of another entity's assets, the Employment Security Department mails a letter to the employer requesting information as to the percentage of assets purchased. The department would like to include a time limit of thirty days to return this letter. Failure to return the letter in a timely manner would cause the successor's tax rate to be the industry average rate for the calendar year following the year of the transfer.
Proposal does not change existing rules.
No small business economic impact statement has been prepared under chapter 19.85 RCW. The proposed rules will not impact businesses in particular industries as defined in chapter 19.85 RCW, revised, but will impact all industries equally. In addition, chapter 19.85 RCW, revised (RCW 19.85.025(3)) applies as stated below.
Section 201, chapter 403, Laws of 1995, applies to this rule adoption. The proposed rules will meet the intent of RCW 34.05.310. Public access will be through hearings and solicitation of comments from any interested parties.
Hearing Location: Employment Security Department, Commissioner's Conference Room, 2nd Floor, 212 Maple Park, Olympia, WA, on March 23, 1999, at 10:00-12:00 a.m.
Assistance for Persons with Disabilities: Contact George Mante by March 17, 1999.
Submit Written Comments to: George Mante, UI Tax Regulatory Reform Coordinator, UI Tax Administration, P.O. Box 9046, Olympia, WA 98507-9046, fax (360) 902-9556, by March 19, 1999.
Date of Intended Adoption: March 29, 1999.
February 15, 1999
Registering for Unemployment Insurance Taxes
This section applies only to those individuals and organizations that meet the definition of an employer contained in RCW 50.04.080.
(1) Predecessor. You are a "predecessor" if, during any calendar year, you transfer any of the following to another individual or organization:
(a) All, or a portion, of your operating assets as defined in subsection (3) below; or
(b) A separate unit or branch of your trade or business.
(2) Successor. You are a "successor" if, during any calendar year, you acquire substantially all of a predecessor employer's operating assets. You are a "partial successor" if, during any calendar year, you acquire:
(a) A portion of a predecessor employer's operating assets, or
(b) A separate unit or branch of a predecessor employer's trade or business.
(3) Operating assets. "Operating assets" include the properties you use in the normal course of business operations to generate your operating income. They may include properties that are real or personal, and tangible or intangible. Examples include land, buildings, machinery, equipment, stock of goods, merchandise, fixtures, or goodwill. Employees are not operating assets.
(4) Transfer of assets. Transfers from a predecessor to a successor employer may occur by sale, lease, gift, or any legal process, except those listed in subsection (5) below.
(5) Exceptions. A predecessor-successor relationship will not exist:
(a) For the purposes of Chapter 50.24 RCW (payment of taxes). When the property is acquired through court proceedings, including bankruptcies, to enforce a lien, security interest, judgment, or repossession under a security agreement unless the court specifies otherwise;
(b) For the purposes of Chapter 50.29 RCW (experience rating), when any four consecutive quarters, one of which includes the acquisition date, pass without reportable employment by either the predecessor, successor, or a combination of both.
Experience Rating and Benefit Charging
(1) If you are a partial successor, you must return the partial transfer of experience letter provided to you by the department within thirty days of the mailing date. Your response must indicate the percentage of operating assets transferred to you as the partial successor.
(2) If you do not return the letter within thirty days, you will keep the tax rate class that was assigned to the predecessor employer for the remainder of the rate year. However, in the following calendar year you will receive the average industry rate. You will keep this rate until you qualify for a different rate in your own right.
The following section of the Washington Administrative Code is repealed:
|WAC 192-12-072||Predecessor-successor relationship defined.|