Title: Delphi Automotive System, LLC v. Ohio Department of Job & Family Services

State: ohio

Issuer: Ohio Supreme Court

Document:

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 
Delphi Automotive Sys., L.L.C. v. Ohio Dept. of Job & Family Servs., Slip Opinion No. 2020-
Ohio-2793.] 
 
 
 
NOTICE 
This slip opinion is subject to formal revision before it is published in an 
advance sheet of the Ohio Official Reports.  Readers are requested to 
promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65 
South Front Street, Columbus, Ohio 43215, of any typographical or other 
formal errors in the opinion, in order that corrections may be made before 
the opinion is published. 
 
 
SLIP OPINION NO. 2020-OHIO-2793 
DELPHI AUTOMOTIVE SYSTEMS, L.L.C., APPELLANT, v. DIR., OHIO 
DEPARTMENT OF JOB AND FAMILY SERVICES, APPELLEE. 
[Until this opinion appears in the Ohio Official Reports advance sheets, it 
may be cited as Delphi Automotive Sys., L.L.C. v. Ohio Dept. of Job & Family 
Servs., Slip Opinion No. 2020-Ohio-2793.] 
Unemployment-contribution rate—The language in R.C. 4141.24(G)(1) requires 
concurrent ownership, management, or control of both employers at the 
time that the business or trade is transferred—Court of appeals’ judgment 
reversed and trial court’s judgment reinstated. 
(No. 2017-0553—Submitted January 29, 2020—Decided May 7, 2020.) 
APPEAL from the Court of Appeals for Franklin County, 
No. 14AP-971, 2017-Ohio-809. 
________________ 
 
DEWINE, J. 
{¶ 1} This case deals with the transfer of a business and the manner in which 
the new business’s “unemployment tax” will be calculated.  Ohio employers pay 
SUPREME COURT OF OHIO 
 
 
 
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an “unemployment tax” to support the state’s workers’ compensation system; this 
tax is partly based upon an employer’s “experience rating,” which is derived from 
the amount of unemployment benefits that have been paid to the employer’s former 
employees.  The question in this case is whether the new business will receive the 
prior business’s “experience rating.” 
{¶ 2} For the answer, we look to a statute that mandates that a new employer 
will receive the prior employer’s experience rating if “at the time of the transfer, 
both employers are under substantially common ownership, management, or 
control.”  R.C. 4141.24(G)(1).  Here, the new employer did not share common 
ownership, management, or control with the old employer on the date of the 
transfer, but it did hire the old employer’s management team not long thereafter.  
The court of appeals concluded that the new employer would receive the prior 
employer’s experience rating.  It reached this result by construing the phrase “at the 
time of the transfer” broadly to include a multiweek-transition period during which 
various aspects of the business were shifted from the old employer to the new 
employer. 
{¶ 3} We disagree.  Under a plain reading of the statute, “at the time of the 
transfer” refers to the discrete point in time at which the legal transfer or acquisition 
occurs.  Because both employers were not under substantially the same ownership, 
management, or control at the point in time at which the transfer occurred, the new 
employer is not subject to the prior employer’s experience rating.  We reverse the 
judgment of the court of appeals. 
The statutory scheme 
{¶ 4} Ohio employers are required to pay into the state’s unemployment-
compensation fund.  See R.C. 4141.09; see also R.C. 4141.23 and 4141.01(L).  The 
director of job and family services maintains a separate account for each employer’s 
contributions and determines the rate at which the employer must make payments 
into that account.  R.C. 4141.24 and 4141.25.  The employer receives a credit 
January Term, 2020 
 
 
 
3
against its federal unemployment-tax liability for its state payments.  
26 U.S.C. 3302(a). 
{¶ 5} An employer’s annual unemployment-contribution rate is based in 
part on the amount of unemployment-compensation benefits paid to its former 
employees; this is referred to as an experience rating.  R.C. 4141.25(A).  Employers 
who lay off high numbers of employees will therefore typically have a higher 
experience rating and pay higher taxes into the unemployment fund.  See Kearns, 
State Implementation of the SUTA Dumping Prevention Act of 2004, 11 The State 
and Local Tax Lawyer, 105, 109 (2006).  Employers who do not have sufficient 
experience on which to base their tax rate are assigned a standard new-employer 
rate.  R.C. 4141.25(A). 
{¶ 6} In the past, a tax-evasion practice emerged in which some employers 
artificially reduced their experience rating by shifting their employees to a new or 
different corporate entity.  This practice became known as State Unemployment 
Tax Act (“SUTA”) dumping.  These dumping schemes typically involved 
transferring payroll to a newly formed corporation subject to the new-employer tax 
rate or to a shell company that had earned a more favorable experience rating.  See 
Kearns, State Implementation of the SUTA Dumping Prevention Act of 2004 at 111.  
For instance, an employer might escape its poor experience rating and the resulting 
higher tax rate by setting up a shell company, operating the shell company for 
several years with low turnover so that it can earn a good experience rating, and 
then transferring payroll to the shell company to take advantage of the lower tax 
rate.  SUTA Dumping Prevention Act of 2004: Hearing Before the Subcommittee 
on Human Resources of the House Committee on Ways and Means, 109th Cong. 
1st Sess. (2005) (testimony of Mason Bishop, United States Dept. of Labor). 
{¶ 7} In 2004, Congress passed legislation in an attempt to curb the 
problem.  SUTA Dumping Prevention Act of 2004, Pub.L. No. 108-295, 118 Stat. 
1090 (2004).  Specifically, the SUTA Dumping Prevention Act required states to 
SUPREME COURT OF OHIO 
 
 
 
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ensure that when an employer transfers a portion of its trade or business to another 
employer and both employers are under the same ownership and management, the 
acquiring employer inherits the business’s experience rating along with its assets.  
See 42 U.S.C. 503(k)(1). 
{¶ 8} The 
General 
Assembly 
amended 
Ohio’s 
unemployment-
compensation statutes to bring them into compliance with the new federal SUTA-
dumping law.  2005 Am.S.B. No. 81, 151 Ohio Laws Part I, 171, 198-199.  In so 
doing, it enacted the statute that is at issue in this case, R.C. 4141.24(G)(1) (“the 
mandatory-transfer provision”).  That provision provides that an entity that 
qualifies as an “employer” under the statute will take a prior employer’s experience 
rating if “at the time of the transfer, both employers are under substantially common 
ownership, management, or control.” 
The transfer of assets from Old Delphi to New Delphi 
{¶ 9} The business transfer here arose from the 2005 bankruptcy of the 
Delphi Corporation, a multinational automotive-parts manufacturer.  As part of the 
reorganization plan, two hedge funds, Elliot Associates, L.P., and Silver Point 
Capital, L.P. (“the hedge funds”), worked out a deal to acquire certain assets of 
Delphi Corporation from one of Delphi Corporation’s subsidiaries, Delphi 
Automotive Systems Services, L.L.C. (“Old Delphi”), which had operations in 
Ohio. The hedge funds set up a new entity, Delphi Automotive Systems, L.L.C. 
(“New Delphi”), to facilitate the transaction.  On October 6, 2009, a portion of Old 
Delphi’s Ohio assets were transferred to New Delphi. 
{¶ 10} In June 2011, the Ohio Department of Job and Family Services (“the 
state”), notified New Delphi that it would be assigned Old Delphi’s experience 
rating for the years 2009 through 2011 under the mandatory-transfer provision.  
After unsuccessfully asking the state to reconsider its decision, New Delphi 
requested a hearing before the Ohio Unemployment Compensation Review 
January Term, 2020 
 
 
 
5
Commission (“the commission”).  Mark Rozycki, New Delphi’s director of tax 
administration, was the only witness at the hearing. 
{¶ 11} Rozycki testified that prior to the October 6, 2009 asset transfer, 
New Delphi did not have any employees in Ohio, and Old Delphi and New Delphi 
did not share any common ownership, management, or control.  Old Delphi was 
still a wholly owned subsidiary of Delphi Corporation, while New Delphi was 
owned, managed, and controlled entirely by the hedge funds.  As of October 6, no 
one in charge of New Delphi had ever had any management authority at Old Delphi, 
and vice versa. 
{¶ 12} From the date of the transfer on October 6 until October 23, New 
Delphi was under the control of representatives of the two hedge funds.  New 
Delphi named a board of directors that did not include any former directors of Old 
Delphi.  On the date of the transfer, New Delphi had issued a press release 
declaring, “[Old Delphi’s] President and CEO and the current leadership will 
continue to manage the company’s global operations.”  New Delphi did not, 
however, hire Old Delphi’s leadership team at that time.  Rather, New Delphi made 
offers of employment for the executives to accept or reject.  During this transition 
period, these executives assumed some responsibilities at New Delphi and were 
paid for their services, but all operational decisions had to be approved by the 
hedge-fund representatives.  On October 23, New Delphi’s board officially hired 
Old Delphi’s president and chief-executive officer, treasurer, general counsel, and 
secretary to positions similar to those they had at Old Delphi.  At that point, the 
hedge-fund representatives relinquished control of New Delphi.  In all, New Delphi 
hired roughly two-thirds of Old Delphi’s Ohio employees. 
{¶ 13} New Delphi contended that it was not subject to Old Delphi’s 
experience rating because, at the time of the transfer, it was neither an “employer” 
as defined by the statute nor did it share “substantially common ownership, 
SUPREME COURT OF OHIO 
 
 
 
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management, or control” with Old Delphi.  The commission disagreed and upheld 
the decision to assign Old Delphi’s experience rating to New Delphi. 
{¶ 14} New Delphi appealed to the Franklin County Court of Common 
Pleas.  The state defended the commission’s decision, asserting that although Old 
Delphi’s management executives were not formally hired by New Delphi until 17 
days after the transfer of the assets, they began working for New Delphi in 
substantially the same roles immediately following the transfer.  The state further 
argued that even if there was “technically a break in ownership, management, or 
control” during that interim period, the mandatory-transfer provision applied 
because Old Delphi’s executives took control of New Delphi as of October 23, 
2009. 
{¶ 15} The common pleas court reversed the commission.  The court 
determined that although New Delphi ultimately took on the same management 
structure as Old Delphi, there was no evidence showing that the companies were 
under substantially the same ownership, management, or control at the time of the 
transfer on October 6.  The court explained that the statutory phrase “at the time of 
the transfer” meant “at the time of the actual transfer,” not pretransfer or post-
transfer.  The court further concluded that New Delphi did not succeed to Old 
Delphi’s experience rating for an additional reason: New Delphi did not have any 
Ohio employees until after the asset transfer had occurred and thus could not have 
met the statute’s definition of “employer” at the time of the transfer.  See R.C. 
4141.01(A)(1)(a). 
{¶ 16} This time the state appealed, and the Tenth District reversed, 
concluding that the common pleas court improperly constricted the meaning of “at 
the time of the transfer” to the “exact legal instant of transfer.”  2017-Ohio-809, 
¶ 19.  The court of appeals reasoned, “The appropriate understanding of the phrase 
‘at the time of the transfer’ is the ‘period’ of the transfer * * *, not just an arbitrarily 
determined singular date that is perhaps set forth as a legal effective date in 
January Term, 2020 
 
 
 
7
company or asset transfer documents.”  Id. at ¶ 18.  “Applying this legal principle 
to a common sense and perhaps more easily understandable situation,” it 
elaborated, “ ‘the time of the American Revolution’ encompasses all the events of 
the American Revolution, not only the moment the last signature dried on the 
Declaration of Independence.”  Id.  On this basis, the court of appeals held that the 
trial court erroneously construed the statute to require simultaneous “ownership, 
management, or control” of both companies at the time of the legal asset transfer.  
The court also concluded that the common pleas court improperly found that at the 
time of the transfer, New Delphi was not an employer under the statute. 
{¶ 17} New Delphi appealed, and we accepted jurisdiction on two 
propositions of law.  151 Ohio St.3d 1452, 2017-Ohio-8842, 87 N.E.3d 221.  The 
first proposition challenges the trial court’s construction of the term employer under 
R.C.  4141.01(A)(1)(a).  The second asserts that “the time of the transfer” under 
R.C. 4141.24(G)(1) “means the point at which the trade or business transfers to the 
transferee, not an indefinite period of undefined length subsequent thereto.” 
{¶ 18} We first take up New Delphi’s second proposition of law.  Because 
our resolution of that proposition in New Delphi’s favor resolves the case, we do 
not reach New Delphi’s first proposition of law. 
“At the time of the transfer” 
{¶ 19} This case turns on the statutory meaning of the phrase “at the time 
of the transfer.”  Because context is critical, we return to the language of the statute:   
 
If an employer transfers its trade or business, or a portion 
thereof, to another employer and, at the time of the transfer, both 
employers 
are 
under 
substantially 
common 
ownership, 
management, or control, then the unemployment experience 
attributable to the transferred trade or business, or portion thereof, 
shall be transferred to the employer to whom the business is so 
SUPREME COURT OF OHIO 
 
 
 
8
transferred.  The director shall recalculate the rates of both 
employers and those rates shall be effective immediately upon the 
date of the transfer of the trade or business. 
 
(Emphasis added.)  R.C. 4141.24(G)(1). 
{¶ 20} The state asserts that the “time of the transfer” encompasses the 
entire time frame necessary to complete all phases of the contemplated business 
conversion, which could be a weeks- or months-long process.  In this view, because 
the management group that controlled Old Delphi at the beginning of the transition 
period ended up controlling New Delphi at the end of the transition period, the two 
entities were under the same management “at the time of the transfer.”  New Delphi, 
on the other hand, contends that the provision contemplates concurrent, shared 
control of both employers when the legal transfer of assets is effectuated.  We have 
little difficulty concluding that the plain language of the statute supports New 
Delphi’s reading. 
{¶ 21} In reaching a contrary conclusion, the court of appeals relied upon a 
dictionary definition of “time” as “ ‘[a] particular period indicated or characterized 
in some way, either explicitly (usu. with of) or by anaphoric reference (as at the 
time, etc.).’ ” (Boldface added in Delphi.)  2017-Ohio-809 at ¶ 17, citing Oxford 
English Dictionary (online Ed.Sept. 2016).  But the same dictionary relied upon by 
the court of appeals offers numerous other definitions, including “the moment or 
point of time at which something happens.”  Oxford English Dictionary, 
https://www.oed.com/viewdictionaryentry/Entry/202100 (accessed Apr. 9, 2020) 
[https://perma.cc/GY2M-73LR].  Similarly, Webster’s Third New International 
Dictionary offers multiple definitions of “time,” including “a period during which 
something * * * exists,” “a point or period when something occurs : the moment of 
an event,” and “a definite moment, hour, day or year as indicated or fixed by a clock 
or calendar.”  Webster’s Third New International Dictionary 2394 (2002).  The 
January Term, 2020 
 
 
 
9
point is, each side can point to dictionary definitions to support its preferred 
reading.  To decide which reading is correct, we need to look at how the word is 
used within the context of the statutory text.  Great Lakes Bar Control, Inc. v. Testa, 
156 Ohio St.3d 199, 2018-Ohio-5207, 124 N.E.3d 803, ¶ 8-9; Scalia & Garner, 
Reading Law: The Interpretation of Legal Texts 56 (2012) (“words are given 
meaning by their context”). 
{¶ 22} In adopting an expansive understanding of the statutory phrase, the 
court of appeals found it significant that when we use phrases like “at the time of 
the American Revolution,” we are referring to a period—or span—of time.  But in 
that context, that makes sense.  We don’t think of the American Revolution as a 
discrete event that happened at one moment in time; rather, most people think about 
the American Revolution as encompassing a multiyear stretch roughly from the 
signing of the Declaration of Independence to the signing of the Treaty of Paris. 
{¶ 23} In other contexts, however, when we use the phrase “at the time of,” 
it is clear that we are speaking of a discrete moment in time.  For example, one 
might say, “At the time of my scheduled court appearance, I was stuck in traffic.”  
In that context, no one would think that the speaker was referring to a span of hours 
or days or weeks but rather to the exact moment that he was supposed to be in court.  
“At the time of the American Revolution” may mean a period of time spanning a 
number of years, but if we were to say, “Thomas Jefferson was napping at the time 
of John Hancock’s signing of the Declaration of Independence,” we would almost 
certainly be referring to a precise point in time on August 2, 1776.  Thus, to 
understand the meaning of the phrase “at the time of,” we need to understand the 
surrounding words and the purpose for which the phrase is used. 
{¶ 24} At issue here is “at the time of the transfer.”  Importantly, we are 
dealing with a phrase from a statute, a legal text.  And in the legal context, there is 
a precise time at which the transfer of a business occurs.  This is made clear by the 
second sentence in the mandatory-transfer provision, which states that the 
SUPREME COURT OF OHIO 
 
 
 
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applicable tax rate shall be effective “immediately upon the date of the transfer of 
the trade or business.”  R.C. 4141.24(G)(1).  By mandating that the tax rate be 
applied “immediately upon the date of the transfer,” id., the legislature plainly 
indicated that it understood transfers of business ownership to occur at a precise 
time, rather than over a period of weeks.  Were we to conclude otherwise and adopt 
the court of appeals’ conclusion that the business was transferred over a multiday 
period, it would be impossible to apply the statute’s requirement that the tax be 
effective “upon the date of transfer,” id. 
{¶ 25} The state’s own administrative rules reflect the idea that there is a 
definite date of transfer.  See, e.g., Ohio Adm.Code 4141-17-05(D) (providing that 
the transferee is liable for unemployment-compensation benefits paid “after the 
effective date of the transfer”); Ohio Adm.Code 4141-17-05(E) (stating that the 
contribution rates for the transferor and transferee “shall be effective the date of the 
transfer”).  Indeed, without such an understanding, the scheme would be almost 
impossible to administer: who could know what tax is owed when and by whom 
and who is responsible for other legal obligations, without some clear demarcation 
of when the transfer of the business occurred? 
{¶ 26} Further support for New Delphi’s reading of the statute is found in 
the statute’s mandate that the prior owner’s tax rate be imposed if “at the time of 
the transfer, both employers are under substantially common ownership, 
management, or control.”  (Emphasis added.)  R.C. 4141.24(G)(1).  The use of the 
present tense indicates that the common ownership, management, or control must 
be concurrent—in other words, that both employers simultaneously are under the 
same ownership, management, or control.  See, e.g., Continental Hydraulics, Inc. 
v. Dept. of Emp. & Economic Dev., 832 N.W.2d 298, 301 (C.A.Minn.2013) (“Use 
of the present tense suggests a temporal requirement—that the common 
management or control must be concurrent”). 
January Term, 2020 
 
 
 
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{¶ 27} The evidence is undisputed that at the time of the transfer (October 
6, 2009), Old Delphi was a wholly owned subsidiary of Delphi Corporation, while 
New Delphi was owned, managed, and controlled entirely by the hedge funds.  
When the transfer occurred, the two entities did not share any common ownership, 
management, or control.  Thus, by its plain terms, the mandatory-transfer provision 
of R.C. 4141.24(G)(1) does not apply.  The court of appeals erred in concluding 
otherwise. 
Conclusion 
{¶ 28} We adopt New Delphi’s second proposition of law and hold that the 
language in R.C. 4141.24(G)(1) requires concurrent ownership, management, or 
control of both employers at the time that the business or trade is transferred.  As 
our resolution of New Delphi’s second proposition of law resolves the case, we 
decline to address its first proposition of law.  We reverse the decision of the Tenth 
District Court of Appeals and reinstate the judgment of the Franklin County Court 
of Common Pleas. 
Judgment reversed  
and trial court’s judgment reinstated. 
O’CONNOR, C.J., and KENNEDY, CARR, FISCHER, DONNELLY, and 
STEWART, JJ., concur. 
FISCHER, J., concurs, with an opinion. 
DONNA J. CARR, J., of the Ninth District Court of Appeals, sitting for 
FRENCH, J. 
_________________ 
FISCHER, J., concurring. 
{¶ 29} I fully and respectfully agree with the opinion of the court.  I write 
separately, however, to point out what I see as another basis for the court’s 
conclusion today: common sense.  After all, “[t]he rules of legal interpretation are 
SUPREME COURT OF OHIO 
 
 
 
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rules of common sense, adopted by the courts in the construction of laws.”  
(Emphasis sic.)  The Federalist No. 83 at 496 (Rossiter Ed.1961). 
{¶ 30} The law before us, R.C. 4141.24(G)(1), says that it applies only 
when “at the time of the transfer, both employers are under substantially common 
ownership, management, or control.” 
{¶ 31} Appellee, the Ohio Department of Job and Family Services, argues 
that this law applies to appellant, Delphi Automotive Systems, L.L.C. (“New 
Delphi”), based on New Delphi’s acquisition of certain assets from Old Delphi.  
However, New Delphi acquired the assets that allegedly triggered the application 
of R.C. 4141.24(G)(1) via the bankruptcy process.  Given that fact and the record 
in this case, common sense tells us that R.C. 4141.24(G)(1) does not apply here. 
{¶ 32} As a part of Old Delphi’s trip through the bankruptcy system, Old 
Delphi reached an agreement with its creditors, including New Delphi, under which 
the creditors would take the distressed company’s assets free and clear.  That 
agreement was memorialized in the form of a document titled “Master Disposition 
Agreement.”  Importantly, that agreement tells us that the transfer took place at a 
discrete moment in time—the closing—and that New Delphi and Old Delphi were 
not under “common ownership, management, or control,” R.C. 4141.24(G)(1), at 
that time. 
{¶ 33} If there were any lingering doubts, the United States Bankruptcy 
Court for the Southern District of New York confirmed these realities when it 
reviewed the Master Disposition Agreement and approved the sale of Old Delphi’s 
assets.  In re Delphi Corp., Bankr.S.D.N.Y. No. 05-4481, 2009-WL-2482146 (July 
30, 2009).  In doing so, the bankruptcy court specifically found that the deal took 
place at an arm’s length, meaning that none of the entities involved were affiliated 
with each other in any way or controlled by the same directors, officers, or 
managers.  Id. at *7.  That court also acknowledged that New Delphi was not “a 
mere continuation” of Old Delphi, id. at *9, and that there was “no continuity of 
January Term, 2020 
 
 
 
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ownership or enterprise between any of the Purchasing Entities and the Debtors.”  
(Emphasis added).  Id. 
{¶ 34} The record in this case makes it abundantly clear then that at the 
discrete moment in time when the transfer at issue occurred, New Delphi and Old 
Delphi were not under “common ownership, management, or control,” R.C. 
4141.24(G)(1). 
{¶ 35} Thus, in addition to the reasons stated in the majority opinion, 
common sense dictates the conclusion that R.C. 4141.24(G)(1) is inapplicable here.  
Therefore, I respectfully concur. 
_________________ 
Vorys, Sater, Seymour & Pease, L.L.P., Michael J. Ball, Daniel E. Shuey, 
and Jonathan R. Vaughn, for appellant. 
Dave Yost, Attorney General, Michael J. Hendershot, Chief Deputy 
Solicitor, Benjamin M. Flowers, Diane Richards Brey, and Stephen P. Carney, 
Deputy Solicitors, and Eric A. Baum Jr., Assistant Attorney General, for appellee. 
_________________