Opinion
C.A. No. 06A-02-006 JRS.
Date Submitted: September 4, 2007.
Date Decided: November 19, 2007.
Upon Appeal from the Division of Unemployment Appeals.
AFFIRMED.
ORDER
This 19th day of November 2007, upon consideration of the appeal of Pearce Moretto, Inc. ("PMI"), from the decision of the Division of Unemployment Appeals (the "Division") assigning PMI an unemployment compensation assessment at a new employer rate, it appears to the Court that:
Docket Item ("D.I.") 7, Division of Unemployment Insurance Appeals decision (the "Division"), at 14 (Jan. 24, 2007).
1. Shure-Line Construction, Inc. ("SLC") began its operations in September 1991 and was owned by Messrs. Stoneberger, Wright, Pryor, and Everett, in equal 25% shares. The Department of Labor ("the Department") assigned SLC a new employer experience rate of 4.2, meaning that the Department required SLC to pay 4.2% of its taxable wages to the State Unemployment Compensation Fund. The number of years the employer has maintained employment provides the basis for the rate — a new employer is required to pay a higher percentage than an employer who has established a consistent employment record.
See 19 Del. C. § 3302(1).
See 19 Del. C. § 3349(c)("After July1, 1986, no employer's rate shall be reduced below the new employer rate for any calendar year unless and until the employer has had employment in each of the two consecutive experience years immediately preceding the computation date.")
2. Shure-Line Excavating ("SLX") began its operations in March 2000. At the time of its formation, SLX was owned by Messrs. Stoneberger, Wright, Pryor, Everett, and Pearce. Messrs. Stoneberger, Wright, Pryor, and Everett each owned 18.75% of the company (an aggregate of 75%) and Mr. Pearce was the majority shareholder, owning 25% of company. Mr. Pearce also managed the day to day operations of SLX.
3. By statute, SLX would have been assigned a new employer rate of 6.3%. In the hopes of obtaining a lower employer rater, SLC and SLX filed an application requesting that the Department create a joint account for the two companies for the purpose of establishing the employer rate pursuant to 65 Del. Admin. C. § 600-38 ("Section 600-38"), a regulation promulgated under 19 Del. C. § 3352 ("Section 3352"). According to the regulation, two or more employers who share "substantially the same ownership involving common or majority control of equity" may combine in a joint account for the purposes of employer experience rating. Once a joint account is established, it cannot be dissolved while "the individual employing units remain under substantially the same ownership." A dissolution will occur, however, whenever any employing unit within the joint account is "purchased or otherwise acquired by outside interests." If this occurs, the affected unit will be given a new employer account number. The Department approved the application and authorized SLC and SLX to form a joint account in 2000.
The statute authorizes the Department to prescribe rules governing the establishment, maintenance, and dissolution of joint accounts specifically.
65 Del. Admin. C. § 600-38(3).
65 Del. Admin. C. § 600-38(3).
4. On June 14, 2004, SLX sent the Department a letter announcing the acquisition of SLX by Messrs. Pearce and Morreto, effective July 1, 2004. Thereafter, SLX was to be known as Pearce and Moretto, Inc. ("PMI"). According to the terms of the transaction, Messrs. Pearce and Moretto would purchase the 75% interest held by Messrs. Stoneberger, Wright, Pryor and Everett, leaving Pearce and Moretto each with a 50% interest in the company.
5. On July 30, 2004, the Department sent PMI a letter seeking additional information regarding the transaction and enclosed a UC-1 application and a UC-411 form to be completed and returned to the Department. These forms were necessary to request a voluntary experience rating transfer pursuant to 19 Del. C. § 3353(b), which states, "Transfers of employment and benefit wage experience from a predecessor to a successor employer may be approved by the Department, upon request of the successor employer, if there is a continuation of essentially the same business activity as the predecessor employer by the successor employer." Section 3353(a) also provides for a mandatory transfer of employment experience if "there is substantial continuity of ownership and management by the successor of the business of the predecessor." PMI never completed the forms necessary to request a voluntary transfer, but did respond in a letter, dated September 20, 2004, stating that PMI's acquisition of SLX constituted only a change in the corporation's name.
As of January 1, 2006, the voluntary transfer option was removed from the code and no longer exists under Delaware law. 19 Del. C. § 3353(1). References to 19 Del. C. § 3353, or sections therein, shall be to "Section 3353."
6. On October 7, 2005, the Department received a letter from the president of SLC, Mr. Stoneberger, informing the Department that SLC was no longer affiliated with SLX or PMI. As a result, the Department dissolved the joint account and assigned PMI a new employer rate of 6.0%. SLC's employer experience rate was also recalculated.
The foregoing facts are not in dispute.
7. PMI challenged the Department's decision to assign a new employer rating and a hearing was held on that challenge on December 19, 2006. The appeals referee determined that, pursuant to 65 Section § 600-38, PMI was correctly assigned a new employer rating because, after the sale of SLX to PMI, SLC and PMI no longer had substantially the same ownership. According to the referee, once Mr. Pearce and Mr. Moretto purchased the 75% ownership interest of SLX from the four other owners, common ownership no longer existed as between SLC and PMI. Absent common ownership, the statutory prerequisite for initially creating the joint account was gone. The referee acknowledged that Mr. Pearce was a common owner of both SLX and PMI. Nevertheless, the referee concluded that the affiliation of Mr. Pearce with both entities was insufficient to establish that "substantially the same ownership" had remained in tact because there was no longer any common ownership between SLC and PMI, the two members of the joint account. The referee also pointed out that Mr. Moretto was never an owner of SLC or SLX, but now owned 50% of PMI. Based on these facts, the referee concluded that PMI should be assessed at a new employer rating.
The Division's decision to assess P M at the new employer rate was previously appealed to this Court, however, the parties signed a stipulation to remand the case back to the Department of Labor for further proceedings on March 25, 2006. Current appeal results from the additional proceeding conducted below by the Division on December 19, 2006.
8. On appeal to this Court, PMI challenges the referee's interpretation of the applicable law that lead to the conclusion that PMI should be assessed at a new employer rate. Specifically, PMI argues that there is an apparent conflict between the applicable statute (Section 3353) and the applicable regulation (Section 600-38) and, therefore, the statute should govern here. The State responds that the decision of the appeals referee was free from legal error because there is no conflict between the statute and the regulation. According to the State, the statute regulates transfers of experience from predecessor to successor employers while the regulation governs the creation and dissolution joint accounts specifically. The State further contends that the referee's decision is supported by substantial evidence.
9. This Court repeatedly has emphasized the limited extent of its appellate review of administrative determinations. The Court's review is confined to ensuring that the appeals referee made no errors of law and determining whether "substantial evidence" supports the referee's factual findings. Questions of law that arise from the referee's decision are subject to de novo review, pursuant to Superior Court Civil Rule 3(c), which requires the Court to determine whether the Division erred in formulating or applying legal precepts. Substantial evidence means "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." It is "more than a scintilla but less than a preponderance of the evidence." The "substantial evidence" standard of review contemplates a significant degree of deference to the referee's factual conclusions and its application of those conclusions to the appropriate legal standards. In its review, the Court will consider the record in the light most favorable to the prevailing party below.
Canyon Const. v. Williams, 2003 WL 1387137, at *1 (Del.Super.Ct. Mar. 5, 2003); Hall v. Rollins Leasing, 1996 WL 659476, at *2-3 (Del.Super.Ct. Oct. 4, 1996).
See Anchor Motor Freight v. Ciabattoni, 716 A.2d 154, 156 (Del. 1998); Hudson v. State Farm Mut. Ins. Co., 569 A.2d 1168, 1170 (Del. 1990).
Breeding v. Contractors-One, Inc., 549 A.2d 1102, 1104 (Del. 1998).
Id.
Hall, 1996 WL 659476, at *2 (citing DEL. CODE ANN. tit. 29, § 10142(d)).
General Motors Corp. v. Guy, 1991 WL 190491, at *3 (Del.Super.Ct. Aug. 16, 1991).
A. The Governing Statute And Regulation Are Not In Conflict.
10. In reviewing the decision below, the Court must first determine if the referee's construction and interpretation of the applicable law was free from legal error. An agency's interpretation of the law and application of that law to undisputed facts is given plenary review. At issue in this appeal is the interpretation of Section 600-38 in conjunction with Section 3353.
Stoltz Management Co., Inc. v. Consumer Affairs Board, 616 A.2d 1205, 1208 (Del. 1992).
11. The Court finds that the Department's regulation and the statute are not in conflict and govern separate and distinct situations. Each part of a statute passed by the General Assembly must be read "in light of every other part or section to produce a harmonious whole." Section 3352 grants the Department sole authority to "prescribe regulations for the establishment, maintenance, and dissolution of joint accounts," while Section 3353 governs the transfer of employment ratings between predecessor and successor employers. The existence of two separate statutes within the statutory scheme governing these distinct transactions is indicative of the General Assembly's intent to treat the situations differently. Section 3352, and the regulations it authorizes the Department to promulgate, address joint accounts which are created by the application of two or more employers and, upon approval by the Department, share one employer experience rating. Section 3353, however, deals with a transfer of employment ratings from one employer to another. Under these circumstances, the two employers never share an employment rating simultaneously but rather pass it from one to another. When these two statutory provisions are read together, the General Assembly's intent to treat joint accounts differently than predecessor and successor accounts is clear.
Coastal Barge Corp. v. Coastal Zone Industrial Control Board, 492 A.2d 1242, 1245 (Del. 1985).
64 Del. Admin. C. § 600-38.
B. The Referee's Decision Correctly Applied The Law To The Undisputed Facts.
12. The Department of Labor's regulation governs the analysis of these facts, not Section 3353. The evidence presented below indicates that one employer unit of a joint account was purchased by an outside interest, ending any common ownership between the two employers joined in the account. This event triggers the application of the Section 600-38, not Section 3353.
13. The appeals referee correctly applied Section 600-38 to the undisputed facts before her. The plain language of the regulation explains the necessary steps for the creation and dissolution of joint accounts. It calls for the dissolution of a joint account when one member of the employing unit "is purchased or otherwise acquired by outside interests." The regulation further explains that in this event, the affected employing unit will be assigned a new employer account number. The referee followed these directions in dissolving the joint account between SLC and SLX after SLX was acquired by outside interests, Messrs. Pearce and Moretto. After dissolving the account, the referee then assigned PMI a new employer account number, a process also prescribed by the regulation. There was no error in the referee's application of the regulation to the facts presented below.
65 Del. Admin. C. § 600-38.
C. The Referee's Decision Was Supported By Substantial Evidence.
14. The referee's decision to dissolve the joint account created between SLC and SLX was supported by substantial evidence. The evidence presented below indicated that once PMI acquired SLX, the joint account was no longer appropriate. After that transaction occurred, SLC was owned by Messrs. Stoneberger, Wright, Pryor, and Everett, and PMI was owned by Messrs. Pearce and Moretto. SLC and PMI could not maintain the joint account because there was no longer common ownership as among the two employers. Further, PMI was not entitled to SLX's employer rating as a successor employer because SLX never established an employer rating of its own. SLX shared an employer rating with SLC during the entire life of its business and was never assigned an individual rating.
15. Based on the foregoing, the decision of the Division to assign PMI a new employer rating is AFFIRMED.
IT IS SO ORDERED.