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Continental Hydraulics Inc. v. Department of Employment and Economic Development

Court of Appeals of Minnesota

June 10, 2013

Continental Hydraulics Incorporation, Relator,
v.
Department of Employment and Economic Development, Respondent.

Department of Employment and Economic Development File No. 29149386-5

Gary Van Cleve, Michael Mergens, Timothy A. Rye, Larkin Hoffman Daly & Lindgren, Ltd., Bloomington, Minnesota (for relator)

Lee B. Nelson, Amy R. Lawler, Minnesota Department of Employment and Economic Development, St. Paul, Minnesota (for respondent Department of Employment and Economic Development)

Considered and decided by Bjorkman, Presiding Judge; Connolly, Judge; and Stauber, Judge.

SYLLABUS

A portion of a predecessor employer's experience-rating history is transferred to a successor employer if (1) the successor employer acquires a portion, but not all, of the predecessor employer's organization, business, or workforce and (2) there is, at the time of the acquisition, substantially common management or control between the employers.

OPINION

BJORKMAN, Judge.

Relator challenges the unemployment-law judge's (ULJ) calculation of its unemployment-insurance (UI) tax rate, arguing that the ULJ erred by transferring a portion of the predecessor employer's experience-rating history to relator after determining there is substantially common management or control between the employers. We reverse and remand to DEED for recalculation of relator's UI tax rate.

FACTS

Continental Machines Inc. (CMI) is a Minnesota corporation. In 2011, CMI agreed to sell its hydraulics division to Duplomatic Oleodinamica, an Italian company. Duplomatic formed relator Continental Hydraulics Inc. to complete the acquisition. Duplomatic is Continental Hydraulics' sole shareholder; CMI has no ownership interest in or control over Continental Hydraulics or Duplomatic. CMI continues to operate its machine-tool division.

Mike Wilkie and his sister own 100% of CMI, and Wilkie has final authority for all significant investment and strategic decisions. Mike Johnson is CMI's president. Prior to the 2011 sale, Gary Heist was CMI's vice president and treasurer. Dale Horihan was the general manager of CMI's hydraulics division. Sheryl Marshal directed CMI's materials group, and Vonn Bonemma was a salesperson in CMI's hydraulics division.

In connection with the sale, CMI terminated 81 of its 165 employees, including management-level employees, who were then offered employment at Continental Hydraulics. Roberto Maddalon is Duplomatic's CEO and Continental Hydraulics' chairman and president. Four former CMI employees hold management positions at Continental Hydraulics: Horihan is the CEO and has total local responsibility of the company, Heist is the CFO, Marshal is the director of operations, and Bonemma is the sales manager.

On July 5, 2011, Continental Hydraulics registered as a business entity with respondent Minnesota Department of Employment and Economic Development (DEED). On August 5, DEED notified Continental Hydraulics that it had 30 days to provide additional information about its acquisition of CMI's hydraulics division. Heist received the notification, attempted to provide the requested information online, and contacted DEED by telephone. DEED did not receive the information.

On November 10, DEED informed Continental Hydraulics that it was reporting wages of former CMI employees, that DEED planned to transfer a portion of CMI's experience-rating history to the company, and that Continental Hydraulics had 30 days to provide information about its acquisition of CMI's hydraulics division. Continental Hydraulics claims that it did not receive the November 10 notification. On December 19, Continental Hydraulics submitted the requested information to DEED.[1] The next day, DEED issued a determination of succession, finding that Continental Hydraulics and CMI share common ownership, management, or control; transferring 49.09% of CMI's experience-rating history to Continental Hydraulics; and ...


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