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H.71

Introduced by   Representatives Young of Orwell and Keenan of St. Albans City

Referred to Committee on

Date:

Subject:  Labor; unemployment compensation; contribution rating; deception

Statement of purpose:  This bill proposes to create penalties for employers who acquire businesses for the purpose of avoiding a high unemployment compensation contribution rate.

AN ACT RELATING TO UNEMPLOYMENT COMPENSATION CONTRIBUTION RATE MANIPULATION

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1.  21 V.S.A. § 1325 is amended to read:

§ 1325.  EMPLOYERS’ EXPERIENCE-RATING RECORDS

(a)  The commissioner shall maintain an experience-rating record for each employer.  Benefits paid to an eligible individual with a benefit year beginning prior to January 3, 1988, shall be charged against the experience-rating record of his then most recent subject employer from whom he has received $695.00 or more in employment, provided that no employer’s record will be charged with benefits paid to any eligible individual not having received $695.00 in employment with any one employer. Benefits paid to an eligible individual after serving a disqualification under subdivisions (a)(1) or (a)(2) of section 1344 of this title shall not be charged against the experience-rating record of his most recent employer as aforesaid, but shall be charged against the fund. The experience-rating record of an employer shall not be charged with benefits paid to an individual if:

(1)  His last employment with that employer was terminated under disqualifying circumstances; or

(2)  His employment or right to reemployment with that employer was terminated by the retirement of the individual pursuant to a retirement or

lump-sum retirement pay plan under which the age of mandatory retirement has been agreed upon by the employer and his employees or by the bargaining agent representing such employees.  Any benefits paid to such individuals shall be charged against the fund and not against the account of the employer Benefits paid shall be charged against the experience-rating record of each subject employer who provided base-period wages to the eligible individual.  Each subject employer's experience-rating charge shall bear the same ratio to total benefits paid as the total base-period wages paid by that employer bear to the total base-period wages paid to the individual by all base-period employers.  The experience-rating record of an individual subject base-period employer shall not be charged for benefits paid to an individual under any of the following conditions:

(1)  The individual's employment with that employer was terminated under disqualifying circumstances.

(2)  The individual's employment or right to reemployment with that employer was terminated by retirement of the individual pursuant to a retirement or lump-sum retirement pay plan under which the age of mandatory retirement was agreed upon by the employer and its employees or by the bargaining agent representing those employees.

(3)  As of the date on which the individual filed an initial claim for benefits, the individual's employment with that employer had not been terminated or reduced in hours.

(4)  The individual was employed by that employer as a result of another employee taking leave under subchapter 4A of chapter 5 of this title, and the individual's employment was terminated as a result of the reinstatement of the other employee under subchapter 4A of chapter 5 of this title.

(b)(1)  Any individual or employing unit who in any manner succeeds to or acquires the organization, trade, or business or substantially all of the assets of any employer who has been operating his or her business within two weeks prior to the acquisition, except any assets retained by the employer incident to the liquidation of his or her obligations, and who thereafter continues the acquired business shall be considered to be a successor to the predecessor from whom the business was acquired and, if not already an employer before the acquisition, shall become an employer on the date of the acquisition.  The commissioner shall transfer the experience-rating record of the predecessor employer to the successor employer.  If the successor was not an employer before the date of acquisition, his or her rate of contribution for the remainder of the rate year shall be the rate applicable to the predecessor employers with respect to the period immediately preceding the date of acquisition if there was only one predecessor or there were only predecessors with identical rates.  If the predecessors’ rates were not identical, the commissioner shall determine a rate based on the combined experience of all the predecessor employers.  If the successor was an employer before the date of acquisition, the contribution rate which was assigned to the successor for the rate year in which the acquisition occurred will remain assigned to the successor for the remainder of the rate year, after which the experience-rating record of the predecessor shall be combined with the experience rating of the successor to form the single employer experience-rating record of the successor.

(2)  Notwithstanding the provisions of subdivision (1) of this subsection, an individual or employing unit who in any manner succeeds to or acquires the organization, trade, or business or substantially all of the assets of any employing unit who was an employer before the date of acquisition and whose currently assigned contribution rate is higher than that currently assigned to the acquiring individual or employing unit shall not be treated as a successor.

(c)  Nothing in this section shall be construed to grant to any employer or to individuals performing services for him prior claims or rights to the amounts paid by the employer into the fund.

(d)  Notwithstanding any other provision of law, the following shall apply to assignment of rates and transfers of experience:

(1)  If an employer transfers its trade or business, or a portion thereof, to another employer and, at the time of the transfer, there is substantially common ownership management or control of the two employers, the employment experience attributable to the transferred trade or business shall be transferred to the employer to whom such business is so transferred.  The rates of both employers shall be recalculated and made effective immediately upon the date of the transfer of trade or business.

(2)  Whenever a person who is not an employer under this chapter at the time it acquires the trade or business of an employer, the unemployment experience of the acquired business shall not be transferred to such person if the commissioner finds that such person acquired the business solely or primarily for the purpose of obtaining a lower rate of contributions.  Instead, that person shall be assigned the highest rate assignable under this chapter until being subject to this chapter for a sufficient period of time to have his or her rate computed under section 1326 of this title.  In determining whether the business was acquired solely or primarily for the purpose of obtaining a lower rate of contribution, the commissioner shall use objective factors that may include:

(A)  The cost of acquiring the business.

(B)  Whether the person continued the business enterprise of the acquired business.

(C)  How long that business enterprise was continued.

(D)  Whether a substantial number of new employees was hired to perform duties unrelated to the business activity conducted prior to acquisition of the new business.

(3)  If a person knowingly violates or attempts to violate subdivision (1) or (2) of this subsection or any other provision of this chapter related to determining the assignment of a contribution rate, or if a person knowingly advises another person in a way that results in a violation of those provisions, the person shall be subject to the following penalties:

(A)  If the person is an employer, the person shall be assigned the highest rate assignable under this chapter for the rate year during which the violation or attempted violation occurred and the three rate years immediately following this rate year.  If the person’s business is already at the highest rate for any year, or if the amount of increase in the person’s rate would be less than two percent for that year, a penalty rate of contributions of two percent of taxable wages shall be imposed for that year.

(B)  If the person is not an employer, that person shall be subject to a civil penalty of not more than $5,000.00.  A fine under this subdivision shall be deposited in the contingent fund established under section 1365 of this title.

(C)  In addition to other penalties under this subdivision, a person who violates this section may be imprisoned not more than three years or fined not more than $5,000.00, or both.  

(4)  For the purposes of this section:

(A)  “Attempt to violate” means the intent to evade, misrepresentation, or willful nondisclosure.

(B)  “Knowingly” means having actual knowledge of or acting with deliberate ignorance or reckless disregard of the prohibition.

(C)  “Person” has the same meaning as in Section 7701(a)(1) of the Internal Revenue Code of 1986.

(D)  “Trade or business” includes the employer’s workforce.

(5)  The commissioner shall establish procedures, by rule, to identify the transfer or acquisition of a business for the purposes of this section.

(e)  [repealed].

(f)  For benefit years beginning on January 3, 1988 and subsequent thereto, benefits paid shall be charged against the experience-rating record of each subject employer who provided base-period wages to the eligible individual. Each subject employer's experience-rating charge shall bear the same ratio to total benefits paid as the total base-period wages paid by such employer bear to the total base-period wages paid to the individual by all base-period employers. The experience-rating record of an individual subject base-period employer shall not be charged for benefits paid to an individual if:

(1)  the individual's employment with that employer was terminated under disqualifying circumstances;

(2)  the individual's employment or right to reemployment with that employer was terminated by retirement of the individual pursuant to a retirement or lump-sum retirement pay plan under which the age of mandatory retirement has been agreed upon by the employer and its employees or by the bargaining agent representing such employees;

(3)  as of the date on which the individual filed an initial claim for benefits, the individual's employment with that employer had not been terminated or reduced in hours; or

(4)  the individual was employed by that employer as a result of another employee taking leave under subchapter 4A of chapter 5 of this title and the individual's employment was terminated as a result of the reinstatement of such other employee under subchapter 4A of chapter 5 of this title.



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us