KRS § 341.540 — KY Code / Title XXVII / Chapter 341 / Section 341.540
341.540 Reserve accounts of successive employing units -- Resources and liabilities -- Contribution rate -- Penalties
Status: in_force

341.540 Reserve accounts of successive employing units -- Resources and

liabilities -- Contribution rate -- Penalties.

(1) As used in this section, unless the context clearly requires otherwise:

(a) "Substantially common" or "substantially the same" means that there is

identifiable or demonstrative commonality or similarity of ownership,

familial relationships, principals or corporate officers, day-to-day

operations, assets and liabilities, and stated business;

(b) "Trade" or "business" includes but is not limited to a commercial

enterprise or establishment; any entity engaged in the supplying,

production, or manufacturing of goods, commodities, or services; any

entity engaged in commerce, sale for profit, or the providing of goods,

personnel, or services;

(c) "Knowingly" means having actual knowledge of, or acting with deliberate

ignorance or disregard for, the prohibition involved;

(d) "Violates" or "attempts to violate" includes, but is not limited to, intended

evasion, misrepresentation, or willful nondisclosure; and

(e) "Person" has the same meaning as in Section 7701(a)(1) of the Internal

Revenue Code.

(2) (a) For the purpose of this chapter, if a subject employer transfers all or part

of its trade or business, the acquiring employing unit shall be deemed a

successor if the transfer is in accordance with administrative regulations

promulgated by the secretary, or if there is substantially common

ownership, management, or control of the subject employer and

employing unit. If an employing unit is deemed a successor, the

transferring employing unit shall be deemed a predecessor.

(b) For the purpose of this chapter, if a nonsubject employer acquires all or

part of the trade or business of a subject employer, the nonsubject

employer shall file an application with the Office of Unemployment

Insurance to establish an unemployment reserve account within forty-five

(45) days of employing personnel. The application will be considered and

processed in accordance with administrative regulations promulgated by

the secretary and shall require information necessary to determine

whether the nonsubject employer is a successor of the subject employer

and to establish an initial unemployment contribution rate for the

employer. Factors to be considered in the determination of successorship

and the fixing of the initial rate shall include but not be limited to the

nonsubject employer's prior unemployment claims history, benefit

charges, historical rate charges, and payment penalties assessed in the

previous five (5) years, in addition to the factors set forth in subsection

(6)(b) of this section. After consideration of these factors, and others that

the applicant may submit in justification of an initial rate determination, the

secretary shall set an appropriate contribution rate. Any determinations of

initial unemployment contribution rates made pursuant to this subsection

shall not be effective prior to January 1, 2018.

(3) (a) Notwithstanding subsection (2)(b) of this section, any successor to the

trade or business of a subject employer shall assume the resources and

liabilities of the predecessor's reserve account, including interest, and

shall continue the payment of all contributions and interest due under this

chapter, except that the successor shall not be required to assume the

liability of any delinquent contributions and interest of a predecessor or

predecessors unless the cabinet notifies the successor of the delinquency

within six (6) months after the department has notice of the succession;

and

(b) Any nonsubject employer that is deemed a successor in whole or part

shall be allowed to make a one (1) time voluntary payment to pay off or

reduce the negative reserve assumed from the predecessor. This

payment shall be made within sixty (60) days of receipt of the first notice

of a negative predecessor reserve account. This one (1) time voluntary

payment cannot exceed the amount of negative reserve assumed by the

successor.

(4) The liability for delinquent contributions and interest imposed upon the

successor by subsection (3) of this section shall be secondary to the liability of

the predecessor or predecessors, and if the delinquency has been reduced to

judgment, the order of execution on the judgment shall be as follows:

(a) Against the assets, both real and personal, of the predecessor or

predecessors;

(b) Against the assets, both real and personal, of the business acquired; and

(c) Against the assets, both real and personal, of the successor or acquirer.

(5) (a) Notwithstanding the provisions of subsection (3) of this section, any

successor to a portion of the trade or business of a subject employer, who

is, or by reason of the transfer becomes, a subject employer, shall

assume the resources and liabilities of the predecessor's reserve account

in proportion to the percentage of the payroll or employees assignable to

the transferred portion. In calculating the transferred portion, the secretary

shall utilize the last four (4) calendar quarters preceding the date of

transfer for workers employed by the successor subsequent to that date.

The taxable payroll, benefit charges and the potential benefit charges

shall be assumed by the successors in a like proportion.

(b) Notwithstanding the provisions of paragraph (a) of this subsection, if any

employing unit succeeds to a portion of the trade or business of another

employing unit; becomes, by reason of that succession, a subject

employer with substantially the same ownership, management, or control

as the predecessor employing unit; and lays off or terminates more than

one-half (1/2) of the original employees transferred within six (6) months

of the date of transfer; then the succession and creation of the new

employing unit shall be voided, and the benefits attributable to the lay-offs

or terminations shall be charged to the reserve account of the original

employing unit.

(6) (a) The contribution rate of a successor in whole or in part, which was a

subject employer prior to succession, shall not be affected by the transfer

of the reserve account for the remainder of the rate year in which

succession occurred; except that the rate of the successor shall be

recalculated and made effective upon the first day of the calendar quarter

immediately following the date of the transfer if there is substantially

common ownership, management, or control of the predecessor and

successor.

(b) The contribution rate of a successor in whole or in part, which was not a

subject employer prior to succession, shall be determined by a review of

the application required by subsection (2)(b) of this section, except if the

secretary finds, after a thorough investigation based on the use of

objective factors, including but not limited to:

1. The cost of acquiring the business;

2. How long the original business enterprise was continued; and

3. Whether a substantial number of new employees were hired for

performance of duties unrelated to the business activity prior to

acquisition;

that the succession was solely for the purpose of obtaining a rate lower

than that prescribed in KRS 341.270(1) and 341.272 for a new employing

unit, then the unemployment experience of the predecessor shall not be

transferred, the rate for a new employing unit shall be assigned, and the

employing unit shall be otherwise deemed a successor for the purpose of

KRS 341.070(7) and subsection (3) of this section.

(c) The contribution rate for a successor which becomes a subject employer

through the simultaneous transfer, either in whole or in part, of two (2) or

more predecessor reserve accounts shall be the rate determined in

accordance with the provisions of KRS 341.270, by combining the reserve

accounts succeeded to as of the computation date for determining rates

for the calendar year in which succession occurred.

(d) The contribution rate of a successor which succeeds, either in whole or in

part, to a predecessor's reserve account after a computation date, but

prior to the beginning of the calendar year immediately following that

computation date, shall be the rate determined in accordance with KRS

341.270, by effecting the transfer of the reserve account as of the

computation date immediately preceding the date of succession.

(7) Notwithstanding KRS 341.270, the contribution rate for an employing unit that

knowingly violates or attempts to violate the provisions of this section or any

other provision of the chapter related to determining the assignment of a

contribution rate shall be the highest rate assignable under this chapter for the

calendar year during which the violation or attempted violation occurred and

the three (3) calendar years immediately following that year. If that employer's

rate is already at the highest assignable rate, or if the amount of increase in the

employer's rate would be less than an additional two percent (2) for that year,

then a penalty rate of contributions of an additional two percent (2) of taxable

wages shall be imposed for each year.

(8) In addition to the penalties prescribed in subsection (7) of this section and KRS

341.990(9), any person who knowingly violates this section shall be subject to

the penalties stipulated under KRS 341.990.

(9) (a) The secretary shall establish procedures to identify the transfer of a

business for purposes of this section.

(b) The secretary shall have the authority and discretion to set an initial

contribution rate upon the providing of justification by a subject employer

and consideration of relevant factors, including but not limited to the

factors set forth in subsections (2) and (6)(a) of this section.