Effective Date of Rule: Thirty-one days after filing.
Purpose: The rules implement changes made by chapter 2, Laws of 2012 1st sp. sess. (SHB 2491). The amendments to WAC 192-350-010 define statutory terminology that is necessary to determine when a predecessor-successor relationship exists for the purpose of calculating unemployment insurance tax rates. The amendments to WAC 192-350-060 establish consequences for an employer's failure to respond to requests for information.
Citation of Existing Rules Affected by this Order: Amending WAC 192-350-010 and 192-350-060.
Statutory Authority for Adoption: RCW 50.12.010 and 50.12.040.
Adopted under notice filed as WSR 12-20-064 on October 2, 2012.
Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 2, Repealed 0.
Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.
Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 0, Repealed 0.
Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.
Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 2, Repealed 0.
Date Adopted: November 20, 2012.
AMENDATORY SECTION(Amending WSR 10-23-064, filed 11/12/10, effective 12/13/10)
WAC 192-350-010 What is a predecessor-successor relationship? (1) This section applies only to those individuals and organizations that meet the definition of an employer contained in RCW 50.04.080.
(2) A predecessor-successor relationship exists when a
transfer occurs and one business (successor) acquires all or
part of another business (predecessor). It may arise from the
transfer of operating assets((
,)) including, but not limited
to, the transfer of one or more employees from a predecessor
to a successor. It may also arise from an internal
reorganization of affiliated companies. A
predecessor-successor relationship also exists when an
employer transfers its business to another employer, and both
employers are at the time of transfer under substantially
common ownership, management or control. Whether or not a
predecessor-successor relationship (including a "partial
predecessor" or "partial successor" relationship) exists
depends on the totality of the circumstances.
(3) Predecessor. An employer may be a "predecessor," including a "full predecessor" or "partial predecessor," if, during any calendar year, it transfers any of the following to another individual or organization:
(a) All or part of its operating assets as defined in subsection (5) of this section; or
(b) A separate unit or branch of its trade or business.
(4) Successor. A "successor" may be either a "full successor" or a "partial successor." An employer may be a "full successor" if, during any calendar year, it acquires substantially all of a predecessor employer's operating assets. It may be a "partial successor" if, during any calendar year, it acquires:
(a) Part of a predecessor employer's operating assets; or
(b) A separate unit or branch of a predecessor employer's trade or business.
(5) Operating assets. "Operating assets" include the resources used in the normal course of business to produce operating income. They may include resources that are real or personal, and tangible or intangible. Examples include land, buildings, machinery, equipment, stock of goods, merchandise, fixtures, employees, or goodwill. "Goodwill" includes the value of a trade or business based on expected continued customer patronage due to its name, reputation, or any other factor.
(6) 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 ((
of this section.
(7) Simultaneous acquisition. For purposes of successor simultaneous acquisition, the term "simultaneous" means all transfers that resulted from acquiring or reorganizing the business, beginning when the acquisition started and ending when the primary unit is transferred.
(8) Common ownership, management and control. Common ownership, common management and common control must be established when the transfer of a business occurs. In determining whether common ownership, management and control exist, the department may consider:
(a) Ownership-legal owner for tax and liability purposes;
(b) Familial relationships;
(d) Organized structure;
(e) Day-to-day operations;
(f) Assets and liabilities;
(g) Stated business purposes; and
(h) Other information pertinent to the inquiry.
The employer must meet all three elements, common ownership, common management and common control, for the exemption to apply.
(9) Substantially common ownership, management or control. In determining whether substantially common ownership, management or control exists, the department may consider the extent of commonality and similarity between employers based on:
(a) Ownership-legal owner for tax and liability purposes;
(b) Familial relationships;
(d) Corporate officers;
(e) Organized structure;
(f) Day-to-day operations;
(g) Assets and liabilities;
(h) Stated business purposes; and
(i) Other information pertinent to the inquiry.
This standard is met when any common ownership, management or control exists between the employers.
(10) Substantially similar businesses. Substantially similar business are businesses:
(a) In which the products sold or services provided exhibit a high degree of likeness but may be less than identical; and
(b) Which could reasonably be in competition with one another to provide a substantially similar service or a substantially similar product.
(11) A significant purpose of the transfer of business must be more than an incidental purpose, but may be one of many purposes. Evidence of a significant purpose of the transfer of a business may be shown by:
(a) Business records, such as corporate minutes or other documents;
(b) Statements by owners or officers of the business, or by an outside party, such as an accounting firm or tax advisor, made contemporaneous with the transfer; or
(c) Other credible evidence of the employer's intent.
Employers must provide the department evidence of the purpose of the transfer no later than thirty days after the date of transfer.
(12) Factors. Factors should be weighed instead of merely adding up the number of individual factors. No single factor is necessarily conclusive. Some of the factors which the department may consider as favoring establishment of a predecessor-successor (including a "full successor" or "partial successor") relationship are:
(a) Whether the employers are in the same or a like business (e.g., providing similar or comparable goods or services or serving the same market);
(b) Whether the asset(s) transferred constitute a substantial or key portion of similar assets for either the predecessor or successor;
(c) Whether the assets were transferred directly and not through an independent third party;
(d) Whether multiple types of assets (e.g., employees, real property, equipment, goodwill) transferred;
(e) Whether a significant number or significant group of employees transferred between employers;
(f) Whether the assets transferred at the same time or in a connected sequence, as opposed to several independent transfers;
(g) Whether the business name of the first employer continued or was used in some way by the second employer;
(h) Whether the second employer retained or attempted to retain customers of the first employer;
(i) Whether there was relative continuity and not a significant lapse in time between the operations of the first and second employers;
(j) Whether there was continuity of management between employers;
(k) Whether the employers shared one or more of the same or related owners;
(l) Whether documents, such as a contract or corporate minutes, show the sale or transfer of a business or a portion of a business; and
(m) Whether other factors indicate that a predecessor-successor relationship exists.
(9))) (13) 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
(i) When any four consecutive quarters, one of which includes the acquisition date, pass without reportable employment by the predecessor, successor, or a combination of both; or
(ii) When a significant purpose of the transfer of a business or its operating assets is for the employer to move or expand an existing business, or for an employer to establish a substantially similar business under common ownership, management and control.
(10))) (14) Burden of proof. The department has the
burden to prove by a preponderance of the evidence that a
business is the successor or partial successor to a
predecessor business. However, if a business fails to respond
to requests for information necessary to determine a
predecessor-successor relationship, the department may meet
its burden by applying RCW 50.12.080 to determine the
[Statutory Authority: RCW 50.12.010, 50.12.040. 10-23-064, § 192-350-010, filed 11/12/10, effective 12/13/10. Statutory Authority: RCW 50.12.010, 50.12.040, and 50.29.064. 07-23-131, § 192-350-010, filed 11/21/07, effective 1/1/08.]
AMENDATORY SECTION(Amending WSR 07-23-131, filed 11/21/07, effective 1/1/08)
WAC 192-350-060 What are the consequences if ((
predecessor or successor)) an employer fails to respond to
requests for information related to a predecessor-successor
(1) Thirty days after mailing a request for
information to an employer regarding a predecessor-successor
relationship, the department may determine if a
predecessor-successor relationship exists based on the
information available at that time.
(2) The department may send a letter to a predecessor or successor employer to determine a partial transfer of experience. A partial successor or predecessor employer must respond to the letter within thirty days of the mailing date. The response must show the percentage of operating assets transferred to the partial successor. Operating assets include the employees of the business.
(2))) (3) If the employer does not respond, the
department may apply RCW 50.12.080 to determine necessary
facts. In addition, for subsequent rate years the
commissioner may estimate the percentage of operating assets
transferred based on the best available information, which may
include employment reports filed. That percentage will
transfer to the successor until it provides compelling
evidence to change the estimate. Any change in the estimate
will be prospective only.
[Statutory Authority: RCW 50.12.010, 50.12.040, and 50.29.064. 07-23-131, § 192-350-060, filed 11/21/07, effective 1/1/08.]