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