79R8160 KSD-F
By: Ritter H.B. No. 3250
A BILL TO BE ENTITLED
AN ACT
relating to the acquisition of unemployment compensation
experience after the transfer of an employing unit; providing
penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 201.022, Labor Code, is amended to read
as follows:
Sec. 201.022. EFFECT OF BUSINESS ACQUISITION. In this
subtitle, "employer" also means an individual or employing unit
that acquires or otherwise receives, through any means, all or part
of the organization, trade, [or] business, or workforce [of
another, or substantially all of the assets thereof,] of another
that was an employer subject to this subtitle at the time of the
acquisition.
SECTION 2. Section 204.081, Labor Code, is amended to read
as follows:
Sec. 204.081. DEFINITIONS [DEFINITION]. In this
subchapter:
(1) "Compensation [, "compensation] experience"
includes the period that benefit wage credits or benefits have been
chargeable and any other factor under Subchapter A, B, C, or D
necessary to the computation of experience rating under those
subchapters.
(2) "Person" means an individual, trust, estate,
partnership, association, company, or corporation.
(3) "Substantially common management or control"
exists if, after the acquisition of the organization, trade, or
business of an employing unit, the predecessor employing unit
continues to:
(A) own or manage the organization that conducts
the organization, trade, or business;
(B) own or manage the assets necessary to conduct
the organization, trade, or business;
(C) control through security or lease
arrangements the assets necessary to conduct the organization,
trade, or business; or
(D) direct the internal affairs or conduct of the
organization, trade, or business.
(4) "Substantially common ownership" exists if, on the
date of an acquisition of the organization, trade, or business of an
employing unit, a shareholder, officer, or other owner of a legal or
equitable interest in the predecessor employing unit, or the spouse
or a person within the first degree of consanguinity or affinity, as
determined under Chapter 573, Government Code, of the shareholder,
officer, or other owner:
(A) is a shareholder, officer, or other owner of
a legal or equitable interest in the successor employing unit; or
(B) holds an option to purchase a legal or
equitable interest in the successor employing unit.
(5) "Transfer of trade or business" includes the
transfer of part or all of an employer's workforce to another
employer if, as the result of the transfer, the transferring
employer no longer performs trade or business with respect to the
transferred workforce and the employer to whom the workforce is
transferred performs trade or business with respect to the
workforce.
SECTION 3. Section 204.083, Labor Code, is amended to read
as follows:
Sec. 204.083. ACQUISITION OF ALL OR PART OF
EXPERIENCE-RATED ORGANIZATION, TRADE, OR BUSINESS; TRANSFER OF
COMPENSATION EXPERIENCE. (a) Except as provided by Subsection
(b), the transfer of the predecessor employer's compensation
experience to the successor employer is required if the predecessor
employing unit transfers, through any means, all or part of the
organization, trade, or business, to the successor employer and
there is substantially common management or control or
substantially common ownership of the entities.
(b) Notwithstanding Subsection (a) or any other provision
of this subchapter, the commission shall deny a transfer of
compensation experience to a successor employing unit if the
commission determines that the acquisition of the predecessor
employing unit was accomplished solely or primarily for the purpose
of obtaining a lower contribution rate. [An employing unit that
acquires all of the organization, trade, or business of an employer
and that continues operation of the organization, trade, or
business acquires the compensation experience of the predecessor
employer if on the date of the acquisition, a shareholder, officer,
or other owner of a legal or equitable interest in the predecessor
employer, or the spouse or a person within the first degree of
consanguinity or affinity, as determined under Chapter 573,
Government Code, of the shareholder, officer, or other owner:
[(1) is a shareholder, officer, or other owner of a
legal or equitable interest in the successor employing unit; or
[(2) holds an option to purchase a legal or equitable
interest in the successor employing unit.]
SECTION 4. The heading to Section 204.084, Labor Code, is
amended to read as follows:
Sec. 204.084. ACQUISITION OF PART OF EXPERIENCE-RATED
ORGANIZATION, TRADE, OR BUSINESS: APPROVAL OF TRANSFER OF
COMPENSATION EXPERIENCE WITHOUT SUBSTANTIALLY COMMON MANAGEMENT OR
CONTROL OR SUBSTANTIALLY COMMON OWNERSHIP; CONTRIBUTION RATE.
SECTION 5. Section 204.084, Labor Code, is amended by
amending Subsections (a) and (d) and adding Subsections (e) and (f)
to read as follows:
(a) If an employing unit acquires or otherwise receives,
through any means, [a] part of the organization, trade, or business
of an employer, and transfer of compensation experience is not
required by Section 204.083(a), the successor employing unit and
the predecessor employer may jointly make a written application to
the commission to transfer the compensation experience of the
predecessor employer that is attributable to the part of the
organization, trade, or business acquired to the successor
employing unit.
(d) The commission shall [may] deny a transfer of
compensation experience under this section if the commission
determines [based on credible evidence] that the transfer
[acquisition] was done primarily to qualify for a reduced
compensation experience rating [unemployment insurance tax rate]
by either:
(1) circumventing the experience rating system; or
(2) manipulating the experience rating system by
minimizing the impact of chargebacks to the predecessor's or
successor's [predecessor employer's] tax account.
(e) A successor employing unit that acquires compensation
experience under this section and that is an experience-rated
employer on the date of and during the period preceding the
acquisition shall pay contributions from the date of the
acquisition until the end of the calendar year in which the
acquisition occurred at the rate applicable to the successor
employing unit on the date of acquisition.
(f) A successor employing unit that acquires compensation
experience under this section and that is not an experience-rated
employer on the date of the acquisition shall pay contributions
from the date of the acquisition until the next contribution rate
computation date at the highest rate applicable at the time of the
acquisition to any predecessor employing unit that is a party to the
acquisition. If the commission determines that the transfer was
accomplished solely or primarily for the purpose of obtaining a
lower contribution rate, the successor employing unit's
contribution rate must be determined under Section 204.006.
SECTION 6. Section 204.085, Labor Code, is amended to read
as follows:
Sec. 204.085. CONTRIBUTION RATE FOR SUCCESSOR EMPLOYERS
WHEN SUBSTANTIALLY COMMON MANAGEMENT OR CONTROL OR SUBSTANTIALLY
COMMON OWNERSHIP EXISTS; CERTAIN PARTIAL ACQUISITIONS
[EMPLOYER]. (a) Except as provided by Subsection (d), in the case
of a partial acquisition for which the transfer of compensation
experience is required under Section 204.083(a), if the commission
determines that the part of the organization, trade, or business
transferred is definitely identifiable and segregable and that
compensation experience can be specifically attributed to that part
of the organization, trade, or business, the contribution rate of
the successor must be computed:
(1) based on the successor employing unit's experience
for the part of the organization, trade, or business that was not
acquired by the transfer; and
(2) as provided by this section for the part of the
organization, trade, or business acquired through the transfer.
(b) A successor employing unit that acquires compensation
experience under [is subject to] Section 204.083 [or 204.084] and
is an experience-rated employer on the date of the acquisition
shall pay contributions from the date of the acquisition until the
end of the calendar year in which the acquisition occurred at a
[the] rate computed by using the compensation experience
transferred from the predecessor employer and that of the
[applicable to the] successor employing unit [on the date of the
acquisition].
(c) [(b)] A successor employing unit that acquires
compensation experience under [is subject to] Section 204.083 [or
204.084] and is not an experience-rated employer on the date of the
acquisition shall pay contributions from the date of the
acquisition until the end of the calendar year [next tax rate
computation date] at the highest rate applicable at the time of the
acquisition to any predecessor employer who is a party to the
acquisition.
(d) If the commission determines that the transfer was
accomplished solely or primarily for the purpose of obtaining a
lower contribution rate, the successor's contribution rate must be
determined under Section 204.006.
SECTION 7. Subchapter E, Chapter 204, Labor Code, is
amended by adding Sections 204.0851, 204.087, 204.088, and 204.089
to read as follows:
Sec. 204.0851. CONTRIBUTION RATE FOR SUCCESSOR EMPLOYERS
WHEN SUBSTANTIALLY COMMON MANAGEMENT OR CONTROL OR SUBSTANTIALLY
COMMON OWNERSHIP EXISTS; OTHER ACQUISITIONS. (a) For a transfer of
compensation experience required by Section 204.083 other than a
transfer described by Section 204.085(a), the contribution rate
shall be computed as provided by this section.
(b) A successor employing unit that acquires compensation
experience under Section 204.083 and is an experience-rated
employer on the date of the acquisition shall pay contributions
from the date of the acquisition until the end of the calendar year
in which the acquisition occurred at the rate computed by using the
prior 36-month combined compensation experience of the predecessor
employing unit and the successor employing unit on the date of the
acquisition.
(c) A successor employing unit that acquires compensation
experience under Section 204.083 and is not an experience-rated
employer on the date of the acquisition shall pay contributions
from the date of the acquisition until the end of the calendar year
at the highest rate applicable at the time of the acquisition to any
predecessor employing unit that is a party to the acquisition.
(d) The contribution rate for experience-rated and
nonexperience-rated successor employing units shall, for the years
following the year of acquisition, be computed as follows:
(1) for the first year following acquisition, the
successor employing unit's compensation experience plus the
predecessor employing unit's 24-month compensation experience
ending on September 30 preceding the year of acquisition, combined
with the predecessor employing unit's compensation experience from
that date to the date of the acquisition;
(2) for the second year following acquisition, the
successor employing unit's compensation experience plus the
predecessor employing unit's 12-month compensation experience
ending on September 30 preceding the year of acquisition, combined
with the predecessor employing unit's compensation experience from
that date to the date of the acquisition;
(3) for the third year following acquisition,
compensation experience available to the successor employing unit
plus the predecessor employing unit's compensation experience from
September 30 preceding the year of acquisition to the date of the
acquisition; and
(4) for years subsequent to the acquisition and to the
transfer of compensation experience required under Section
204.083, the predecessor employing unit's contribution rate is
computed without regard to any transfer of compensation experience
required by that section.
Sec. 204.087. OFFENSE; CRIMINAL AND CIVIL PENALTIES. (a) A
person commits an offense if the person recklessly, knowingly, or
intentionally defeats, evades, or circumvents a provision of this
subchapter or if the person recklessly, knowingly, or intentionally
attempts, aids and abets an attempt, or advises another to defeat,
evade, or circumvent a provision of this subchapter.
(b) An employer who commits an offense under this section
may be assessed a civil penalty in an amount equal to a surcharge of
two percent of the prescribed contribution rate that would
otherwise be assigned to the employer under Section 204.042 or
204.006 for the rate year during which the violation occurred and
for the three rate years following that year.
(c) A person, other than an employer, who commits an offense
under this section may be assessed a civil penalty of not more than
$5,000 for a first offense and not more than $5,000 for each
subsequent offense.
(d) A civil penalty assessed under Subsection (b) or (c)
shall be deposited in the special administration fund established
under Section 203.201.
(e) An offense under this section is a Class A misdemeanor.
Sec. 204.088. PROCEDURES TO IDENTIFY EXPERIENCE-RATING
TRANSFERS. The commission by rule shall establish procedures to
identify the transfer or acquisition of a business for the purposes
of this subchapter.
Sec. 204.089. CONFORMITY WITH FEDERAL REGULATIONS. The
commission shall administer this subchapter in conformity with any
regulations prescribed by the United States Secretary of Labor
relating to experience-rating transfers.
SECTION 8. The changes in law made by this Act apply only to
an acquisition of an organization, trade, business, or workforce
that occurs on or after the effective date of this Act. An
acquisition of an organization, trade, business, or workforce that
occurs before the effective date of this Act is governed by the law
in effect on the date the acquisition occurred, and the former law
is continued in effect for that purpose.
SECTION 9. This Act takes effect September 1, 2005.
COMMITTEE AMENDMENT NO. 1
Amend HB 3250 as follows:
On page 3, line 6, add the following definition.
(6) "Knowingly" means having actual knowledge of or acting with
deliberate ignorance of or reckless disregard for the prohibition
involved.
On page 3, lines 10 and 11, strike the words "(a) Except as provided
by Subsection (b)," and begin the sentence by striking "t" and
replacing it with "T".
On page 3, strike lines 17 through 22.
On page 9, strike lines 11-16 and replace with the following:
(b) An employer who commits an offense under this section may be
assessed a civil penalty in an amount equal to two percent of wages
as defined in Subchapter F, Chapter 201, Labor Code for the year
during which the violation occurred and for the three years
following that year.
On page 9, line 17, strike "an" and replace with "the".
Ritter