Court Opinion

ID: 4141850
Source: CourtListenerOpinion
Date Created: 2017-02-18 03:15:19.613918+00
Date Added: 2024-06-11T14:29:32.878112
License: Public Domain

OFFICE OF THE Al-l-ORNEYGENERAL      OF TEXAS
                                AUSl’tN

    jionorableClaude A. Williams
    chaIrman and Executive Director
    Texas TJnemploymentCompeneatlonCommission
    Austin, Texas

             We have your requeat
    aga;i;lied to’Article 5221b,

                                                 recited with the
        Sacta to be So

        and he act
                                             e88 for aore than a
                                          in business Fndivlduallg
                                         insss to the oorporatlon,
                                          Individualbualness vae
                                         in vhlch Walker was orl-
                                         nor was It the same kind
                                        oratlon was engaged.
                                 a never terminatedhie coverage
                             the terma of section 8 (c)~un.leae  the
                             low amounts to such application far
                             r is nov operatinghis individual
                            e controllingInterest in the corpo-
                            oh la likevise operating. All proce-
                         ore the Conmlaslonhave been properly
         taken.
              ‘Query; Who is entitled to the employment exper-
         ience establlehedby Walker MlvldualLy prFor to the
         acqulsltlonof his business bg the corporation? ff the
         corporationis antitLed  to the experience,vhat tax
         rate Is applicable to Walker lndivlduallJo

I
Honorable Claude A. Williams, Page 2

         "on tune 30, 1938, this Commlssicn received
    the letter s copy of vhlch is attached as Erhlblt B.
    ms   InformatIonIs Included for the reason that  the
    taxpayer feels that the letter amounts to an ap llca-
    tion for terminationof covera e under Section 8 (a)
    of the Act, Article 5221b-6 (ck , Vernon’s. If it Is
    your opinion that the letter in Itself oatually does
    amount to an applicationfor termInatIonof coverage,
    we still request your cpInIcn on the main queatlon
    asked. In this connectiona letter dated January 22,
    1942, from Hr. Rice M. Tllley, attorney for the em-
    ployers, is attached 88 Exhibit C."
         Article 5221b, Section 5 (c) (g), Vernon's Revlsed Civil
Statutes, reads:
         “For the purposes of this section, two or more
    employing units vhloh are parties to or the subjeat of
    8 merger, consolidation,or other form of reorganlea-
    tlon effecting a change in legal identity or form, shall
    be deemed to be a single 6mployIngunit if the CcmmIa-
    slon finds that (I) Immediatelyafter such change the
    employing enterprisesof the predecessor employingunit
    or uqlts are continuedsolely thro h a single employ-
    ing unit as successor thereto; andY II) immediately
    after such change such successor Is owned or controlled
    by subatfintlallythe uame lntemsta au the predecessor
    employing unit or units; and .(XIT)the succemrorhao
    assumed liability for all contributionsrequired of the
    predecessor employingunit or units; snd (iv) the oon-
    sideration of such tvc or more employing units as a
    single employingunit for the purposes of this section
    vould not be inequitable.
          "Ho rate of less thar,tvo and seven tenths (2-T/10$)
     per centum will be permitted an employ&g unit succeeding
     to the experience of another employingunit pursuant to
     this section for any period subsequent to such sucoeaslcn
     execpt In accordanoevlth regulationsprescribedby the
     CommlnsLon,vhich regulationsvi11 be oonslstentvlth~
     Federal requirementsfor additional credit allowance in
     Section 1602 of the Internal Revenue Code, and consistent
     vlth the provisions of this Act, except that such regula-
     tions may establish a computationdate for any such period
     different from the computationdate generally prescribed
     by this Act, and may define the words 'calendaryear' as
gonoBableClaude A. Wllllss~s,Page 3

    a~~anlnga twelve (12) oonaeeutlvemonth period end-
    ing on the same day of the year as that onwhIch
    such ccmputatlcndate occurs."
         At the tire of the inccryoratlcnof Walkers business
~&ion 5 (c) (9) vas not a part of Artlclo 5221-b, It having
been enacted by the Forty-seventhLegislature In 1941. There-
SON, the CommIasionhad nc regulation on the transfer of em-
ploymentrecords in 1938. We are lnfomedthat ycuncwhave a
rsgulaticnprovldlng for a valver of the employmentreaord by an
employertransferringhis business to another.
         We are unvllllng to say that Walkerr letter of Juno
28, 1938, Is a literal compliancevlth Seatlcn 6c providing for
a termInatIonof his oovenge.   But, the Informationsupplied
mfleatrt that Walker has since waived his right to the employ-
wt. reoord made ae an lndloldualprior to July 1, 1938. We
rntertainno doubt that he vould have valved that record In July,
1938, if the Commlmslonhad provided for suoh an act at that time.
This aoncluslcn la based upon the letter to the ComaIssIonof
June 28. 1938; the fact that there vas no oessatlon of the busl-
nesr; there vatsno loss of tfme by any employee! the same busl-
aess Inerery detail vas oontlnued eave the change In logal lden-
tity.
          The employer aeked if the oorpcratlonwould retain
the same Identiflcatlonnumber Indicatingthat he considered
the change only one of legal identity. We are also lnf+crmed
that the corporationaseumed and pnld the unemploymenttaxes
for June of 1938 after they became due on Augnet 1, 1938.

          The facts recited In your letter and the attached ex-
hibits shcw that after the change in the legal ldentlty of the
businese In question from that of an Indlvldualto a corporation
the lndlvldualoriginsllyownfng the basinese owned approxMtely
gh$ of the stock of the newly cnated corporation. That same ln-
dividual that operated the originalbusiness wae the managIng
officer and In control of the business of the ocrporaticn. The
buslnese carried on b7 the corporationwas at the aame~addrear,
used the same personnel, engaged ln the same type of business,
the only change being In ths legal identity of the business be-
tween the clcme of buslnesa on June 30, 1938, and the opening
on July 1, 1938.
gonorableClaude A. Willlaw, page 4

          AA examlnatlonof Se&Ian 5 (c) (9), suprs, dlsalosea
that this fact sltuatlonfalls within the requirementof the four
provlsl~s outlined in thin Section. Ue can 1100no robeon for
denyingthe corporationthe benefit of the emplOJment record of
tb Individual. There can be no oontention  that It would bs in-
equitable,for the aucce88or is the same busi~esa with the same
per~~~el but a different legal entity. The beneflta acorui~g to
the employeea of the lndlvldualvould be preserved to them after
the change IA the 1egciLldentlty
                               of the buelnera.
          lit have no decfelona on this statute by the oOurto of
Texas and YB are unsblt to find a deoislon from any of the other
#tata courta upon thin subject; therefore,ve are required to COA-
rider the 8tetutt and give it the construotloniAt9nded by the
Legislature. We believe that it vaa clearly the intention of the
Lsglslaturethat an lndlvldualchanging the legal Identity of hla
bualnese,but continuingthe operation of the name Qpe of burl-
me@ with the BBPLBpersonnel snd with the mm bustiem poliolea,
rhouldbe entitled to the elt@lOpeAt record created by the Ml-
vldual if the provialonsof Seotlon 5 [a) (9) are hot violated.
                 We have found l.Athe ~AtBQlO~At Compen8atioA IAter-
pretatlonService - Reneflt Series - Volume 5, lo. 1, at page 131,
a quotation        frOi!Ia rulimg by the Soolal SeaurltJ Board lpsdeOA
December22, 1939, adopting the followlAg oanatructlonof Se&Ion
1609 Of the Federal UaemploymeAtfu Act with re8peat to transfers
of aooounts for expsrlsnce for purposes of computing v8rlabloAe
in oontrl.b?ltion       ratea.
           "Reduoedrates ba8ed upan tranrforr of scoountn
     or experiencedo ooniorm vlth Federal rtandarda,  If
     aoniined to canes in vhioh an entire employs enter-
     prlse and all Its inO1deAts for all purpoaee o? the
     lYAmuploymentCompeneatlonLaw are tramferred to a
     aingle legal pertson,who may or map-not be a ctovered
     employing eAterpriaewhose aaooupt or experience Is
     combined, after the tmmafer, with that of the tmne-
     ftrop.'
          In our oplnlon the corporationcreated by the individual,
Walker, would be entitled to the elgployment
                                           experlenoe eetabllahod
by Walker doing business lAdlvldusl~~.
          You have then asked vhat tax rate la applloable to Walker,
indlvldually,after having remmed or opening a now buslnaas 8onm
tvo years after the iaoorporationof the ortgglnal bueineara.
HonorableClaude A. William, peg8 5

         Artiole 5221b, Section 6 (d), r8adal
         'Any employing unit which ia or becomes an em-
    ployer subject to thla Aot, and which under the provl-
    sions of this sub$eotlonceases to be an employer sub-
    ject to this Aot nnd subriequentto such tlnm again
    becomes sn employer subject to this Act by rteaon of
    any of the provialonahereof, shall upon agoln beoom-
    lng an employer subject to this dot be oonsidareda
    nev employervlthout regard to any rights acquired by
    It durlngnth8time that it had theretoforebeen an
    employer.
         Article 522lb, Section 5 (0) (7) raads~
         "Eaoh employer'8rate shall be tvo and atven-
    tenths (2-7/l*) per oentum exoeyt aa otherwireprovld-
    8d iA this 88CtiOA. go yloyr     s rate shall be leas than
    two and s#ven-tenths(2-7 10% per oentum for any year,
    unless and until hid aooount has bem ohargeeblevlth
    b8neflt.sthroughoutthe thirty-six (36) consecutiveoal-
    8nQar montha lmmedlattlypreosdlng the begfnnlng  of the
    calendar year for which rates are deten@ntd."
          Since Wlllkerwas not operating individuallyiOr mom
than two year8, v8 oannot b8llevo that It vaa intended that the
neord bs held for the indlvldualfor an lnU8flnlt8perfod of
time. Walker might have valted floe pars to b8gln th8 mm bual-
nrcrs. Would It not be more lnequltabl8to refuse the tranaf8r
of the tmploymuntrecord beoaucie80~ day Walker might Op8rbtt
bgbin Individually. This vould, ln our opinion, defeat the pur-
p0rm of the atatute.  We, thmefore,    believe that when Walker
rseumed business In 1940 in another and different type of burl-
~088 that the ~~SS~OA    should allow him the tax rate of 2.7$
an provided in Section 5 (c) (7).

                                      Yours very truly
                                 ATTORNRY GESERAL OF   TEXAS