2014 -- S 3117

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LC005996

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

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A N   A C T

RELATING TO LABOR AND LABOR RELATIONS -- EMPLOYMENT SECURITY--

CONTRIBUTIONS

     

     Introduced By: Senator Frank S.Lombardi

     Date Introduced: June 17, 2014

     Referred To: Placed on Senate Calendar

     It is enacted by the General Assembly as follows:

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     SECTION 1. Section 28-43-35 of the General Laws in Chapter 28-43 entitled

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"Employment Security - Contributions" is hereby amended to read as follows:

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     28-43-35. Special rules regarding transfers of experience and assignment of rates. --

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Notwithstanding any other provisions of chapters 42 -- 44 of this title, the following shall apply

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regarding assignment of rates and transfers of experience:

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      (a) If an employer transfers its trade or business, or a portion thereof, to another

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employer and, at the time of the transfer, there is any common ownership, management, or

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control of the two (2) employers, then the unemployment experience attributable to the

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transferred trade or business shall be transferred to the employer to whom such business is so

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transferred. In determining whether there is any common ownership, management, or control, the

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department may consider the following factors, which include, but are not limited to: any familial

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relationships, principals or corporate officers, organizational structure, day-to-day operations,

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assets and liabilities, and stated business purposes. The rates of both employers shall be

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recalculated in the following manner:

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      (1) The total payroll of the employees on the predecessor's payroll during the last,

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completed calendar quarter prior to the date of the transfer, who are also on the payroll of the

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successor when the transfer takes effect shall be divided by the predecessor's total payroll during

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the last, completed calendar quarter prior to the date of the transfer, and that percentage shall be

 

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applied to the experience rating balances and payroll of the predecessor as of the end of the

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experience year used to determine the contribution rate for the tax year in effect at the date of

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transfer. The resulting amounts shall be subtracted from the experience-rating balances and

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payroll of the predecessor. The predecessor's remaining experience-rating balances and payroll

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shall be used to determine its contribution rate for the new tax year or for the remainder of the

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current tax year, whichever is applicable, effective on the first day of the calendar quarter

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following the date of the transfer; provided, that if the date of the transfer is the first day of the

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calendar quarter, then the new contribution rate shall take effect on the date of the transfer.

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      (2) The balances subtracted from the predecessor's account in subdivision (a)(1) of this

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section, shall be combined with the experience rating balances and payroll of the successors as of

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the end of the experience year used to determine the contribution rate for the tax year in effect at

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the date of transfer. Those combined balances shall be used to determine the contribution rate for

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the successor for the new tax year, or for the remainder of the current tax year, whichever is

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applicable, effective on the first day of the calendar quarter following the date of the transfer;

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provided, that if the date of the transfer is the first day of the calendar quarter, then the new

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contribution rate shall take effect on the date of the transfer. For successors in business for less

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than one experience year, their contribution rate for the new tax year, or for the remainder of the

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current tax year, whichever is applicable, shall be computed based on the transferred experience

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rating balances and payroll of the predecessor and shall take effect on the first day of the calendar

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quarter following the date of the transfer; provided, that if the date of the transfer is the first day

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of the calendar quarter, then the new contribution rate shall take effect on the date of the transfer.

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      (3) A successor shall be deemed to be an eligible employer if its experience combined

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with that of its predecessors meets the requirements of subdivision §28-43-1(3). As used in this

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section, "successor" means the employing unit to whom a transfer as provided in this section is

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made, and "predecessor" means the employer making the transfer and may, if the context so

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requires, be construed as referring only to the separate establishment transferred in case of the

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transfer of a separate establishment.

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      (b) If, following a transfer of experience under subsection (a) of this section, the director

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determines that a substantial purpose of the transfer of the trade or business was to obtain a

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reduced liability for contributions, then the experience rating accounts of the employers involved

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shall be combined and the combined rate assigned to each employer account.

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      (c) Whenever a person who is not an employer under this chapter at the time that person

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acquires the trade or business of an employer, the unemployment experience of the acquired

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business shall not be transferred to such person if the director finds that such person acquired the

 

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business solely, or primarily, for the purposes of obtaining a lower rate of contributions. Instead,

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such person shall be assigned the new employer rate under section §28-43-8.3. In determining

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whether the business was acquired solely or primarily for the purpose of obtaining a lower rate of

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contributions, the director shall use objective factors which that may include the cost of acquiring

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the business, whether the person continued the business enterprise of the acquired business, how

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long such business enterprise was continued, or whether a substantial number of new employees

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were hired for performance of duties unrelated to the business activity conducted prior to the

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acquisition.

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     (d) Subject to the provisions herein, whenever a person who is not an employer under this

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chapter at the time that person acquires the trade or business, or a portion thereof, of an employer

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in insolvency proceedings including federal bankruptcy courts, state receiverships, masterships or

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other insolvency proceedings, the unemployment experience of the acquired business shall not be

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transferred to such person. Instead, such person shall be assigned the new employer rate under §

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28-43-8.3 unless the director finds that, at the time of the acquisition, there is common ownership,

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management or control of the two (2) employers, and in such case all of the experience will be

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transferred.

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     (e) Subject to the provisions herein, whenever a person who is an eligible employer prior

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to the time that person acquires the trade or business, or a portion thereof, of an employer in

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solvency proceeding including federal bankruptcy courts, state receiverships, mastership or other

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insolvency proceedings, the unemployment experience of the acquired business shall not be

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transferred to such person. Instead, such person shall continue to pay employer contributions at

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the rate applicable to it prior to the date it made such acquisition unless the director finds that, at

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the time of the acquisition, there is common ownership, management or control of the two (2)

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employers, and in such case all of the experience will be transferred and a new rate computed.

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     (f)(d)(1) If a person knowingly violates or attempts to violate subsections (a), (b) or (c),

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or any other provision of this chapter related to determining the assignment of a contribution rate,

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or if a person knowingly advises another person in a way that results in a violation of such

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provision, the person shall be subject to the following penalties:

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      (i) If the person is an employer, then such employer shall be assigned the highest rate

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assignable under this chapter for the rate year during which such violation or attempted violation

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occurred and the three (3) rate years immediately following this rate year. However, if the

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person's business is already at such highest rate for any year, or if the amount of increase in the

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person's rate would be less than two percent (2%) for such year, then a penalty rate of

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contributions of two percent (2%) of taxable wages shall be imposed for such year.

 

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      (ii) If the person is not an employer, such person shall be guilty of a misdemeanor and

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subject to a civil money penalty of not more than five thousand dollars ($5,000). Any such fine

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shall be deposited in the Rhode Island Ggeneral Ffund.

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      (2) For purposes of this section, the term "knowingly" means having actual knowledge

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of, or acting with deliberate ignorance, or reckless disregard for, the prohibition involved.

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      (3) For purposes of this section, the term "violates or attempts to violate" includes, but is

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not limited to, intent to evade, misrepresentation, or willful nondisclosure.

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      (4) In addition to the penalty imposed by subparagraph (1), any violation of this section

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may also be prosecuted as a misdemeanor, and for each offense, the person may be subject to

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imprisonment for a period not exceeding one year.

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      (e)(g) The director shall establish procedures to identify the transfer or acquisition of a

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business for purposes of this section.

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      (f)(h) For purposes of this chapter:

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      (1) "Person" shall include an individual, a trust, estate, partnership, association, company

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or corporation; and

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      (2) "Trade or business" shall include the employer's workforce.

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      (g)(i) This section shall be interpreted and applied in such a manner as to meet the

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minimum requirements contained in any guidance or regulations issued by the United States

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Department of Labor.

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      (h)(j) Any determination of the director under this section shall be final unless an appeal

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from it is filed by the aggrieved party within fifteen (15) days from the date that notice is mailed

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to the last known address of that party. All appeals shall follow the provisions of section §28-43-

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13.

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     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO LABOR AND LABOR RELATIONS -- EMPLOYMENT SECURITY--

CONTRIBUTIONS

***

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     This act would allow new employers to receive the new employer rate with respect to the

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employment security fund when taking over an existing business in insolvency proceedings if

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there is no common ownership, management or control of the two (2) employers and would allow

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existing employers to maintain their current tax rate when taking over an existing business in

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insolvency proceedings if there is no common ownership, management or control of the two (2)

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employers.

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     This act would take effect upon passage.

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