Court Opinion

ID: 9350783
Source: CourtListenerOpinion
Date Created: 2022-12-28 16:07:07.646211+00
Date Added: 2024-06-11T16:57:45.061295
License: Public Domain

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Youth Services Agency,             :
                                   :
                        Petitioner :
                                   :
                v.                 : No. 423 C.D. 2021
                                   : Argued: September 12, 2022
Department of Labor and Industry, :
Office of Unemployment             :
Compensation Tax Services,         :
                                   :
                        Respondent :

BEFORE:     HONORABLE MICHAEL H. WOJCIK, Judge
            HONORABLE LORI A. DUMAS, Judge
            HONORABLE MARY HANNAH LEAVITT, Senior Judge

OPINION NOT REPORTED

MEMORANDUM OPINION
BY JUDGE WOJCIK                         FILED: December 28, 2022

              Youth Services Agency (YSA) petitions for review of the order of the
Executive Deputy Secretary of Labor and Industry of the Department of Labor and
Industry (Department) that denied the petition for reassessment filed by YSA. YSA
objected to the notice of assessment filed by the Office of Unemployment
Compensation Tax Services (Office) against YSA for unpaid unemployment
compensation (UC) employer and/or employee contributions, interest, and penalties
in the amount of $299,333.47, owed by Youth Services Agency of Pennsylvania
(YSA-PA) under the Unemployment Compensation Law (Law)1 on the basis of
successor liability. The Office assessment notice stated that “[t]he reason for
successor liability is that: [YSA] is merely a continuation of [YSA-PA]; and/or the
transfer of [YSA-PA’s] assets, including its work[]force, management,
organization[,] and business to [YSA] was without adequate consideration and no
provisions were made for [YSA-PA’s] creditors.” Reproduced Record (R.R.) at 5a.
YSA argues that the Department erred in concluding that YSA was a successor to
YSA-PA, and thus, liable for YSA-PA’s unpaid UC contributions, which the Office
disputes. After review of the record and applicable law, we affirm.
             The procedural background of this matter may be summarized as
follows. A hearing before the Department’s hearing officer was held on February
26, 2020, during which YSA and the Office presented testimony, documents, and
argument on the question of YSA’s successor liability. The Office presented
testimony from Christian Edwards, a Department employment security specialist
who worked with the Department for 14 years. YSA presented testimony from Jay
Deppeler, Executive Vice President of Inperium, a non-profit organization affiliated
with YSA. After the hearing and consideration of the parties’ post-hearing briefs,
the Department denied YSA’s petition for reassessment because YSA was a
successor business to YSA-PA such that successor liability applied. R.R. at 492a-
507a.
             The relevant facts as found by the Department are as follows. YSA is
a Pennsylvania non-profit organization that provides services to at-risk youth
through residential treatment, treatment, education, vocational skills, and adventure.
R.R. at 495a. YSA was created in 1975, and was then known as Youth Services of

        1
        Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S.
§§751-919.10.
                                           2
Bucks County. Id. Youth Services of Bucks County requested to elect reimbursable
financing for UC purposes2 in 2000, on a form signed by Executive Director Roger
Dawson. Id. Youth Services of Bucks County changed its name to YSA in 2002.
Id. at 495a-96a.       YSA registered as an employer for UC taxes and elected
reimbursable financing in 2003, on forms signed by Controller William Pitcavage.
Id. at 496a.
               Another non-profit entity, Youth Services Alternatives, requested to
elect reimbursable UC financing in 2004, and again in 2005, on forms signed by
Comptroller William Pitcavage, the same individual who filed forms for YSA. R.R.
at 496a-97a.      Attached to its request was a plan of division and articles of
incorporation for Youth Services Alternatives, whereby YSA intended to divide
itself into two separate corporations, with the existing corporation to retain the name
of YSA, and the new corporation to be named Youth Services Alternatives. Id. Both
YSA and Youth Services Alternatives would continue to provide services to at-risk
youth, and the proposed division was designed to provide more effective program
administration. Id. at 61a. Roger Dawson, Executive Director of YSA, was listed
as president and CEO of Youth Services Alternatives. Id. at 497a. Youth Services

       2
          In general, and relevant here, employers are required to contribute UC taxes in one of two
ways. A contributing employer must pay contributions at a rate determined by a formula under
the Law, that is based on the number of employees, payroll, and employer’s experience rating,
among other factors. A contributing employer’s UC taxes are held in a reserve account over the
life of the employer, from which its employee UC benefits are subtracted. Sections 301, 301.1,
301.2, 302, and 304 of the Law, 43 P.S. §§781, 781.1, 781.2, 782, and 784. A non-profit employer
may elect to pay its UC contributions on a reimbursement basis, referred to as a reimbursable
employer, based on the actual amount of UC benefits paid to its employees, and billed on a
quarterly basis by the Department. Sections 1101-1110 of the Law, 43 P.S. §§901-910. A
reimbursable employer is required to provide and file with the Department a security bond in the
amount of one per centum of its taxable wages for the most recent four calendar quarters preceding
its election, or it may provide a security deposit of equal value to the Department. Section 1106
of the Law, 43 P.S. §906.
                                                 3
Alternatives filed its registration form in 2005 and listed YSA as its owner and
responsible party. Id. In 2011, YSA-PA registered as an employer for UC purposes,
with a trade name of Youth Services Alternatives. Id. at 498a. YSA-PA requested
to elect reimbursable financing in 2012 and provided a bond to the Department in
2013, which was signed by Mr. Dawson as principal. Id. at 499a. Various filings
for YSA and Youth Services Alternatives in the Department’s files bear the same
Department account number (1306818), as filled in by the submitters, where the
primary signatories are Mr. Dawson or Mr. Pitcavage. Id.
             In 2015, the Office received information from YSA-PA’s bonding
company cancelling bonding services for “[YSA-PA] (previously Youth Services
Alternatives).” R.R. at 498a. The last date on which YSA-PA reported wages to the
Department was December 31, 2014. Id. The Department inquired about YSA-
PA’s status and received information from Rebecca Dawson, Human Resources
Director of YSA and the wife of Roger Dawson, that YSA-PA “had closed.” Id. at
440a, 498a. To determine what happened to YSA-PA’s workforce, the Department
generated an employee movement report, which showed the movement of a number
of employees from YSA-PA to YSA in the first quarter of 2015. Id. at 498a. As of
January 1, 2015, the Department’s UC maintenance system indicated that YSA-PA,
with account number 1306818-6, was inactive with a delinquency amount of
$325,179.81. Id. at 499a-500a.
             The Department reviewed and summarized YSA-PA’s United States
(U.S.) tax form 990, (annual tax return for non-profit organizations) for the tax years
ending June 30, 2014, June 30, 2015, and June 30, 2016. YSA-PA’s return for the
year ending June 30, 2014, showed that YSA-PA had net assets of $725,715; for the
year ending June 30, 2015, it had net assets of $633,570; and for the year ending

                                          4
June 30, 2016, it had net assets of negative $3,910. R.R. at 500a. The preparer of
YSA-PA’s 990 forms for these years answered “no” to the question whether YSA-
PA ceased conducting business or made significant changes to how it conducts its
program. Id. However, on YSA-PA’s 990 form for the tax year ending June 30,
2016, YSA-PA was listed as “inactive in current fiscal year.” Id.
             YSA became affiliated with Inperium in 2017, with Executive Vice
President of Inperium, Jay Deppeler, overseeing the affiliation and the affiliation
agreement. R.R. at 500a. Mr. Deppeler testified that Inperium is a non-profit
organization, with a mission to affiliate with other non-profit agencies to leverage
economies of scale in back-office and administrative services to better serve clients.
Id. at 364a-65a. Per the affiliation agreement with YSA, Mr. Deppeler of Inperium
became the sole member of YSA’s Board. Id. at 364. YSA’s mission did not change
after it affiliated with Inperium. Id. At the time of the affiliation, Inperium was
aware of YSA-PA’s UC tax liabilities, but the affiliation agreement showed YSA’s
only liability as a loan owed to Mr. Dawson. Id. at 500. The affiliation was between
Inperium and YSA, not with YSA-PA, which Mr. Dawson wanted to keep separate.
Id. at 501a. The Office argued that its various exhibits, when read together, show a
commonality of management between YSA and YSA-PA.                   Id.   The Office
determined that YSA-PA’s workforce was transferred to YSA in the first quarter of
2015. Id. Based on its commonality of management determination and the transfer
of workforce determination, the Office initiated the successor liability assessment
against YSA, as a continuation of YSA-PA, or as a transfer of YSA-PA’s assets to
YSA without adequate consideration and no provisions for YSA-PA’s creditors. Id.
             The Department focused on YSA’s sole ground for reassessment raised
in its petition, namely, whether YSA is a successor business to YSA-PA, such that

                                          5
YSA is liable for YSA-PA’s unpaid UC contributions.             R.R. at 502a.     The
Department explained the general rule regarding successor liability in Pennsylvania,
from Continental Insurance Company v. Schneider, Inc., 873 A.2d 1286, 1291 (Pa.
2005) (Schneider), as follows: “[W]hen one company sells or transfers its assets to
another company, the purchasing or receiving company is not responsible for the
debts and liabilities of the selling company simply because it acquired the seller’s
property.” R.R. at 502a. The Department further explained that under Schneider
this general rule of non-liability may be overcome if any one of the following five
conditions is met: (1) the purchaser expressly or implicitly agreed to assume
liability; (2) the transaction amounted to a consolidation or merger; (3) the
purchasing corporation was merely a continuation of the selling corporation; (4) the
transaction was fraudulently entered into to escape liability; or (5) the transfer was
without adequate consideration and no provisions were made for the creditors of the
selling corporation. Id. at 502a-03a.
             As to the first prong, the Department concluded that no express or
implicit agreement by YSA to assume liability for YSA-PA’s debts was clear on the
record. R.R. at 503a. If anything, the evidence presented was to the contrary. Id.
As to the fourth prong, the Department concluded there was no direct evidence of
fraud. Id. at 505a. As to the fifth prong, the Department found no evidence
regarding whether the transfer was made without adequate consideration or
provisions for YSA-PA’s creditors. Id. The Department therefore analyzed whether
substantial evidence existed to satisfy the second or third prong of Schneider.
             As to the second prong, the Department concluded there was substantial
evidence that the relationship between YSA-PA and YSA amounted to a
consolidation or merger. R.R. at 503a. This conclusion was supported by an email

                                          6
from Rebecca Dawson, wife of Roger Dawson, that YSA-PA had closed, YSA-PA’s
990 form for the period ending June 30, 2016, showing that YSA-PA was inactive
during the 2015-16 fiscal year and it had a negative balance. Id.; see also id. at 503a,
440a-41a, 442a-43a. The Department found it “telling” that the Office movement
report showed that many of YSA-PA’s employees were last reported as employed
by YSA-PA in the fourth quarter of 2014, and were next reported as employed by
YSA in the first quarter of 2015. Id.; see also id. at 22a-24a. Based on this
information, the Department found that YSA-PA transferred its workforce to YSA
in the beginning of 2015, and that the two entities shared a commonality of
management, through Mr. Dawson and Mr. Pitcavage. Id. at 503a.
             As to the third prong, the Department considered whether YSA was a
continuation of YSA-PA, or stated another way, whether the transaction amounted
to a de facto merger as opposed to an ordinary purchase and sale of assets, using the
factors set forth in Glynwed, Inc. v. Plastimatic, Inc., 762 F.Supp. 265, 275-76
(D.N.J. 1994) (quoting Philadelphia Electric Company v. Hercules, Inc., 762 F.2d
303, 310 (3d Cir. 1985)) (PECO) (applying Pennsylvania law). R.R. at 503-04a.
These four factors are: (1) whether there is a continuation of the enterprise of the
seller corporation through a continuity of management, personnel, physical location,
assets, and general business operations; (2) whether the seller corporation ceases its
ordinary business operations, liquidates, and dissolves as soon as legally and
practically possible; (3) whether the purchasing corporation assumes those
obligations of the seller corporation necessary for uninterrupted continuation of
normal business operations of the seller; and (4) whether there is a continuity of
ownership/shareholders. PECO, 762 F.2d at 310.

                                           7
             As to the first factor, the Department concluded that there was a
continuation of YSA-PA’s personnel to YSA, as discussed above and as evidenced
by the employee movement, as well as the shared management of the two entities,
through Mr. Dawson and Mr. Pitcavage. R.R. at 504a. The Department found no
evidence or direct testimony as to the physical location, assets, or general business
operations of the two entities. Id. The Department found evidence of the second
factor, a cessation of YSA-PA’s ordinary business, as discussed above, through Ms.
Dawson’s October 29, 2015 email chain with the Office that YSA-PA was closed
and that its bond was cancelled. Id.; see also id. at 440a-41a. The Department found
that YSA-PA had not actually dissolved, because YSA-PA was memorialized, and
lease rights to a nature center were reserved to it, in the affiliation agreement between
YSA and Inperium. Id. at 504a. The Department found no evidence of the third
factor, as the affiliation agreement between Inperium and YSA was silent regarding
any YSA-PA liabilities. Id. As to the fourth factor, the Department found that
continuity of ownership was clearly present to the extent that Roger Dawson is the
CEO for both YSA and YSA-PA. Id. at 505a. Based on its analysis of the PECO
factors, the Department concluded that, on balance, the evidence supported a finding
that YSA was a continuation of YSA-PA for purposes of successor liability.
             The Department reviewed the overall record and concluded that the
Office established that the relationship between YSA and YSA-PA amounted to a
consolidation or merger under the second prong of Schneider. R.R. at 505a. The
Department also concluded that the Office established that YSA was a continuation
of YSA-PA because the evidence supported some of the elements under the third
prong of Schneider. Id. The Department relied on the U.S. Supreme Court opinion
in Frank Lyon Company v. U.S., 435 U.S. 561, 572-73 (1978), to apply substance

                                           8
over form in these kinds of cases, looking to “‘the objective economic realities of a
transaction rather than to the particular form the parties employed’” to determine
where a tax burden should rest, “particularly where the predecessor party continues
to retain significant control over the property that has been transferred.” R.R. at
505a. The Department concluded that the “objective economic reality” is that YSA
was a mere continuation of YSA-PA, and under the principle of successor liability,
YSA should be responsible for YSA-PA’s unpaid UC taxes, interest, and penalties.
Id. at 506a. YSA then petitioned the Court for review.3
               YSA presents three arguments as to why it should not be held liable as
YSA-PA’s successor.          A review of the relevant provisions of the Law and
Department regulations will assist in our analysis.
               “Contributions” is defined in Section 4(g) of the Law, 43 P.S. §753(g),
as follows:

               “Contributions” means the money payments required to be
               paid into the [UC] Fund by employers with respect to
               employment, which payments shall be used for the
               creation of financial reserves for the payment of
               compensation provided in this act. This meaning includes,
               where appropriate in the enforcement provisions of this
               [Law], payments in lieu of contributions required to be
               paid by employers operating on a reimbursement basis as
               provided in Articles X, XI and XII of this act.[]
               “Contributions” also means, where appropriate in this
               [Law], money payments required to be paid into the [UC]
               Fund by employees as provided in this [Law].

       3
         This Court’s standard of review is limited to determining whether constitutional rights
were violated, whether an error of law occurred, or whether necessary findings of fact were
supported by substantial evidence. Section 704 of the Administrative Agency Law, 2 Pa. C.S.
§704. As to questions of law, our scope of review is plenary and our standard of review is de novo.
Hospitality Management Corporation v. Department of Labor and Industry, Office of
Unemployment Compensation Tax Services, 171 A.3d 936, 938 n.5 (Pa. Cmwlth. 2017).
                                                9
Relevant here, Article XI of the Law, 43 P.S. §§901-910, governs non-profit
employers such as YSA and YSA-PA, and permits such employers to elect
reimbursable financing.
             The UC Fund is governed by Section 601 of the Law, 43 P.S. §841, and
creates a fund separate from general Commonwealth funds, into which all employer
and employee contributions are to be paid (with some exceptions not relevant here)
to fund UC benefits. Section 63.100 of the Department’s regulations, 34 Pa. Code.
§63.100, specifically provides that “payments in lieu of contributions collected
under the [L]aw” shall supplement the list of payments made into the UC fund under
[S]ection 601 of the Law.
             Section 301 of the Law, 43 P.S. §781, generally governs employer
contribution rates, successors-in-interest, and appeals. Section 301(d)(1)(A) of the
Law, 43 P.S. §781(d)(1)(A), permits an employer that transfers its business or
workforce, in whole or in part, to a “successor-in-interest” that continues “essentially
the same business activity” to request that its experience record and reserve account
be transferred to its successor-in-interest. Section 301(d)(1)(B) of the Law, 43 P.S.
§781(d)(1)(B), provides that the Department shall transfer the employer’s
experience record and reserve account to its successor, notwithstanding the
provisions of paragraph (A), when “an employer subject to the contribution
provisions” of the Law, transfers its business or workforce to another employer,
whether the transfer was by “merger, consolidation, sale[,] or transfer” when the
employer controlled, owned, or managed its successor, or when both entities were
managed by the same interest. Section 301(e) of the Law, 43 P.S. §781(e), permits
an employer to protest the clerical accuracy of its reserve account, or to appeal its
contribution rate to the Department.

                                          10
             Section 304 of the Law, 43 P.S. §784, governs employer reports used
by the Department to assess employer contributions, and provides employers the
right to appeal their assessments to the Department. Relevant here, Section 304(b)
of the Law, 43 P.S. §784(b), provides that “[a]ny employer against whom an
assessment is made” may petition the Department for a reassessment within 15 days
after its assessment notice, which petition “shall set forth therein specifically and in
detail the grounds and reasons” that the reassessment is erroneous. The Department
shall provide notice and hold hearings, as determined by Department regulations.
Section 63.26 of the Department’s regulations, 34 Pa. Code §63.26, echoes Section
304 of the Law, and sets forth appeal procedures. These provisions govern YSA’s
petition for reassessment and hearing in this matter.
             The following provisions of Article XI of the Law governing non-profit
organizations are also relevant here. Section 1101 of the Law, 43 P.S. §901, defines
a non-profit organization as a religious, charitable, educational, or other organization
described in Section 501(c)(3) of the Federal Internal Revenue Code of 1954, 26
U.S.C. §501(c)(3), which is exempt from federal income tax. Section 1103 of the
Law, 43 P.S. §903, provides that a non-profit employer that makes payments as a
contributing employer is subject to the provisions governing contributions in the
Law. If a non-profit organization fails to file the required reports, the Department
may choose the method of financing, either contributory or reimbursement. Section
1104(a) of the Law, 43 P.S. §904(a), provides that any non-profit organization which
becomes

             liable to the contribution provisions of [the Law] may, in
             lieu of payment of such contributions, elect to pay to the
             [D]epartment for the [UC] Fund an amount equal to the
             amount of regular benefits and one-half of the extended

                                          11
             benefits paid, that is attributable to service in the employ
             of such non[-]profit organization.
Both YSA and YSA-PA are employers liable to pay UC contributions, and both
elected to pay by reimbursement under this Section.
             Section 1105 of the Law, 43 P.S. §905, provides that a non-profit
organization that disagrees with the Department’s determination as to its status as a
reimbursable employer, or the termination of its status, may appeal to the
Department as provided in Section 301 of the Law.
             Section 1106 of the Law, 43 P.S. §906, governs payments in lieu of
contributions made by reimbursable employers. Section 1106(a) of the Law, 43 P.S.
§906(a), provides that the Department shall bill non-profit reimbursable employers
quarterly (or it may choose another period) for “the amount of benefits charged to
its account” for the relevant period. Payment is due within 30 days unless the
employer sought “review and redetermination under Section 301 of [the Law].” Past
due payments of amounts in lieu of contributions are subject to interest and penalties
under Section 1106(c) of the Law, 43 P.S. §906(c). Under Section 1106(d) of the
Law, 43 P.S. §906(d), reimbursable employers must provide a surety bond or
security deposit of equal value to the Department in the amount of one per cent of
its taxable wages for the most recent four calendar quarters. Notably, Section
1106(d) of the Law does not address how or if the Department may utilize the bond
or security deposit of a reimbursable employer to recover any UC taxes owed.
Instead, Section 304 of the Law addresses the Department’s enforcement options,
through an assessment of taxes owed, and an employer’s appeal rights through
reassessment.
             Section 1107(b) of the Law, 43 P.S. §907(b), provides that if a
reimbursable non-profit employer is delinquent in its payments, the Department may

                                         12
terminate its election to make reimbursement payments, and change its status to a
contributory employer for the next two tax years.
              Section 1108 of the Law, 43 P.S. §908, provides that if “benefits paid
to an individual are based on wages paid by more than one employer” and one or
more of such employers are reimbursable employers, the amount payable to the UC
fund by each employer shall be determined by a defined formula. This Section
applies to UC taxes owed for employees shared by more than one employer. YSA
argues that this Section should apply here, which the Department rejects as not
applicable.
              YSA first argues that successor liability should not apply to
reimbursable employers because the Law treats contributing and reimbursable
employers differently. YSA contends that, because Article XI of the Law, governing
non-profit organizations that are reimbursable employers, fails to discuss successor
liability, the principle should not apply to YSA. YSA argues that although Section
301(d)(1) of the Law includes and defines “successor-in-interest” liability, that
Section applies to the transfer of the experience record and reserve account balance
to a successor-in-interest contributory employer, and does not apply to a
reimbursable employer such as YSA. The Office first responds that YSA waived
this argument by not raising it before the Department. In the alternative, if not
waived, the Office responds that the plain language of Section 4(g) of the Law makes
enforcement through successor liability applicable to all employers, regardless of
the employer’s method of paying its UC taxes. The Office responds that Section
4(g) of the Law defines contributions to include reimbursement payments, and
Section 304(b) of the Law governs reassessment petitions before the Department,
regardless of the employer’s payment method.

                                         13
             The crux of YSA’s appeal is that the Department’s factual findings on
successor liability are not supported by substantial evidence, which the Office
rejects. YSA does not dispute that YSA-PA transferred employees to YSA in 2015,
or that YSA and YSA-PA shared management and ownership. YSA questions the
accuracy of YSA’s registration form, in which YSA-PA is listed as a predecessor to
YSA, because that information was entered by the Office and not by YSA. R.R. at
16a-21a, 350a-51a. YSA argues that YSA-PA and YSA did not merge because no
formal articles of merger were filed. YSA further argues that YSA-PA continues to
be active, as demonstrated by the affiliation agreement between YSA and Inperium,
which required YSA to use its best efforts to transfer the lease of a nature center to
YSA-PA. R.R. 108a. The agreement between YSA and Inperium specifies that,
effective as of the closing date of YSA’s affiliation with Inperium, “YSA will enter
into an agreement with [YSA-PA] pursuant to which YSA will license from [YSA-
PA] the right to continue to operate the Nature Center Program.” Id. The license
agreement for YSA to continue to operate the program will terminate in the event
“Ms. Dawson’s employment with Inperium terminates for any reason.” Id. YSA
argues that these factors weigh against a de facto merger of YSA and YSA-PA, and
that the Department erred in concluding that YSA was YSA-PA’s successor.
             The Office responds that the record as a whole contains substantial
evidence to support successor liability, especially the findings of employee
movement, common management and ownership, and the communication from Ms.
Dawson that YSA-PA had closed. See R.R. at 22a-24a, 46a-53a, 60a-79a, 440a-41a.
The Office further responds that the Department did not rely on the information in
the form questioned by YSA, and that the Department acknowledged YSA-PA’s
reservation of rights in the affiliation agreement.

                                          14
             YSA next argues that the Office should be barred from pursuing YSA
through successor liability when it failed to timely pursue YSA-PA, and that the tax
burden should be allocated between YSA and YSA-PA under Section 1108(a) of the
Law. YSA also argues that the Office’s assessment of UC taxes owed should be
limited to the amount of YSA’s bond. In support of this argument, YSA cites Section
1504 of the Statutory Construction Act of 1972, 1 Pa. C.S. §1504, Lilian v.
Commonwealth, 354 A.2d 250 (Pa. 1976), and Pittsburgh Coal Company v. School
District of Forward Township, 78 A.2d 253 (Pa. 1951), for the proposition that when
a statutory remedy is provided, it must be strictly pursued. YSA argues that the
Department erred by applying the common law doctrine of successor liability to
YSA as a reimbursable employer, when successor liability is not defined in the Law.
Under this theory, YSA seeks to limit the Office’s remedy for taxes owed to the
amount of YSA’s bond, as described in Section 1106(d) of the Law.
             The Office responds that the Law provides no grounds to bar an action
against YSA. The Office argues that YSA waived its Section 1108(a) argument by
failing to raise it below. If not waived, the Office responds that Section 1108(a) of
the Law is not applicable because YSA and YSA-PA did not share employees. The
Office also rejects YSA’s theory that the Office’s remedy for UC taxes owed is
limited to the amount of the bond or security deposit, based on the absence of such
a limitation in the Law, and the Office’s authority to assess unpaid taxes in Section
304 of the Law.
             YSA next argues that the assessment violates its property rights
protected by several provisions of the Pennsylvania and U.S. Constitutions, which
the Office rejects. YSA argues in its brief to this Court that taking YSA’s property
to satisfy the liability of another would violate YSA’s property rights under Article

                                         15
1, Section 1 of the Pennsylvania Constitution.4 YSA argues that making YSA liable
for YSA-PA’s liability would be discriminatory in violation of Article 1, Section 26
of the Pennsylvania Constitution.5 YSA argues that holding it liable for YSA-PA’s
tax liability would violate the uniformity clause in Article 8, Section 1 of the
Pennsylvania Constitution.6 YSA further argues that taking YSA’s property without
just compensation violates the Fifth Amendment to the U.S. Constitution.7 YSA
also argues that making YSA liable for another’s liability would deprive YSA of its
property without due process of law, and would discriminate against it in violation
of the Fourteenth Amendment to the U.S. Constitution.8 The Office agrees that a
constitutional violation is within the scope of appellate review, but denies that the
imposition of successor liability violates any of YSA’s constitutional rights.
               We discern no legal error and affirm the Department’s decision to hold
YSA liable for YSA-PA’s UC payments based on successor liability, which is

       4
         Pa. Const. art. I, §1. Article I, section 1 states: “All men are born equally free and
independent, and have certain inherent and indefeasible rights, among which are those of enjoying
and defending life and liberty, of acquiring, possessing and protecting property and reputation, and
of pursuing their own happiness.”

       5
          Pa. Const. art. I, §26. Article I, section 26 states: “Neither the Commonwealth nor any
political subdivision thereof shall deny to any person the enjoyment of any civil right, nor
discriminate against any person in the exercise of any civil right.”

       6
         Pa. Const. art. VIII, §1. Article VIII, section 1 states: “All taxes shall be uniform, upon
the same class of subjects, within the territorial limits of the authority levying the tax, and shall be
levied and collected under general laws.”

       7
          U.S. Const. amend. V. The takings clause of the Fifth Amendment provides: “[N]or
shall private property be taken for public use, without just compensation.”

       8
         U.S. Const. amend. XIV, §1. The Fourteenth Amendment provides, in relevant part:
“[N]or shall any State deprive any person of life, liberty, or property without due process of law;
nor deny to any person within its jurisdiction the equal protection of the laws.”
                                                  16
supported by the applicable law as applied to substantial evidence in the record.
YSA did not waive its legal argument that successor liability does not apply to
reimbursable employers under the Law, because it raised the issue before the
Department in its petition for reassessment by stating that the “asserted successor
liability is not applicable.” R.R. at 4a. YSA argued the issue before the hearing
officer and in its post-hearing brief. See id. at 300a, 467a. Although YSA did not
address this issue in a detailed way below, it sufficiently raised the issue to comply
with Section 304(b) of the Law and Department regulation.                In Wing v.
Unemployment Compensation Board of Review, 436 A.2d 179 (Pa. 1981), the
Supreme Court held that Pa. R.A.P. 1551 governed waiver before the UC Board, and
that issues “not raised by the employer before lower tribunals are waived.” Because
YSA raised this issue before the Department, we conclude that it is not waived.
             Although sufficiently raised, we are not persuaded by YSA’s argument
that successor liability does not apply to reimbursable employers, based on our
review of the applicable provisions of the Law, and not simply a review of Article
XI of the Law addressing non-profit employers. Importantly, the definition of
“contributions” in Section 4(g) of the Law includes not only payments made by
contributing employers but “includes, where appropriate in the enforcement
provisions of [the Law], payments in lieu of contributions to be paid by employers
operating on a reimbursement basis” as provided in Article XI of the Law. Section
304(b) of the Law is one such enforcement provision, which provides “any employer
against whom an assessment is made” the right to petition the Department for
reassessment, and to participate in a hearing, which is what YSA did here. The Law
does not provide that liability for unpaid UC taxes, whether in the first instance or

                                         17
through successor liability, is dependent upon the payment method chosen by the
employer.
             We also reject YSA’s argument that the Department’s finding of
successor liability is not supported by substantial evidence. In Stage Road Poultry
Catchers v. Department of Labor and Industry, Office of Unemployment
Compensation Tax Services, 34 A.3d 876, 885-86 (Pa. Cmwlth. 2011), our Court
provided the following guidance on how to determine whether substantial evidence
supports a finding in an appeal before the Office.

             Substantial evidence is defined as relevant evidence upon
             which a reasonable mind could base a conclusion. In
             determining whether there is substantial evidence to
             support the Board’s findings, this Court must examine the
             testimony in the light most favorable to the prevailing
             party, giving that party the benefit of any inferences that
             can logically and reasonably be drawn from the evidence.
             A determination as to whether substantial evidence exists
             to support a finding of fact can only be made upon
             examination of the record as a whole. The Board’s
             findings of fact are conclusive on appeal only so long as
             the record, taken as a whole, contains substantial evidence
             to support them. “The fact that [a party] may have
             produced witnesses who gave a different version of the
             events, or that [the party] might view the testimony
             differently than the Board is not grounds for reversal if
             substantial evidence supports the Board’s findings.”
             Tapco, Inc. v. Unemployment Compensation Board of
             Review, [] 650 A.2d 1106 ([Pa. Cmwlth.] 1994).
             Similarly, even if the evidence exists in the record that
             could support a contrary conclusion, it does not follow that
             the findings of fact are not supported by substantial
             evidence. [(Citations omitted).]
             In Fizzano Brothers Concrete Products, Inc. v. XLN, Inc., 42 A.3d 951
(Pa. 2012), the Supreme Court considered a question of corporate successor liability
under the de facto merger doctrine, in which it approved the test for successor

                                         18
liability in Schneider, and the test for de facto merger in PECO. The Court reviewed
the substance of the underlying transaction to determine whether “under the facts
established, for all intents and purposes, a merger has or has not occurred between
two or more corporations, although not accomplished under the statutory
procedure.” Fizzano Brothers, 42 A.3d at 969. “[W]ith a focus on substance over
form where corporate transactions are concerned” the Court rejected a narrow,
mechanical application of continuity of ownership, which was at issue there, holding
that “the manner by which it [continuity of ownership] may be shown is more
extensive and attuned to the transactional realities.” Id. at 970.
             Under the applicable standard and scope of review, and following the
Supreme Court’s guidance to focus on substance over form where corporate
transactions are concerned, we discern no error in the Department’s finding on
successor liability based on substantial evidence in the entire record. Clearly, no
formal merger between YSA and YSA-PA occurred here. However, the undisputed
record evidence shows that YSA-PA’s employees were transferred to YSA in the
first quarter of 2015, and that YSA continues to provide various treatment services
to at-risk youth, as did YSA-PA when it was active. Mr. Dawson and Mr. Pitcavage
filed various registration and election forms with the Department on behalf of both
YSA-PA and YSA, supporting a finding of commonality of management and
ownership of the two entities. A YSA employee, Ms. Dawson, informed the Office
that YSA-PA was closed, YSA-PA’s bond was cancelled, and the 990 form prepared
by YSA-PA for the year ending June 30, 2016, showed a negative balance and
described YSA-PA as inactive for the current fiscal year. Under these facts, we
conclude that the Department’s finding of successor liability is supported by
substantial evidence.

                                          19
               We reject YSA’s argument that the Office should be barred from
collecting tax from YSA when it failed to pursue YSA-PA, because that argument
has no support in the record or under the Law. YSA did not waive its Section
1108(a) argument because it raised it in its post-hearing brief. See R.R. at 473a.
However, we reject YSA’s argument that Section 1108(a) requires apportioning
liability between YSA and YSA-PA, because the record contains no evidence that
UC benefits were paid to any individual “based on wages paid by more than one
employer.” The record shows that employees moved from YSA-PA to YSA in the
first quarter of 2015, but it does not show that any employees received wages from
both YSA-PA and YSA for any period.
               We are also unpersuaded by YSA’s attempt to limit the Office’s
authority to collect UC taxes owed to the amount of YSA’s bond when the Law
contains no such limitation. The Office’s authority to assess an employer for UC
taxes owed is outlined in Section 304 of the Law. Section 304 does not distinguish
between contributory or reimbursable employers.
               We further conclude that YSA waived its constitutional arguments
because it failed to develop their arguments or cite to any authority in its brief to this
Court.9 YSA simply asserted that the imposition of UC tax through successor
liability violated its property rights, named the constitutional provisions, did not
include the language of the cited constitutional provisions, and did not cite to any

       9
          See Pa. R.A.P. 2119(a) (“The argument shall be divided into as many parts as there are
questions to be argued; and shall have at the head of each part . . . the particular point treated
therein, followed by such discussion and citation of authorities as are deemed pertinent.”);
Commonwealth v. Spotz, 716 A.2d 580, 585 n.5 (Pa. 1998), cert. denied, 526 U.S. 1070 (1999)
(holding that the failure to develop issue in appellate brief results in waiver); Browne v.
Department of Transportation, 843 A.2d 429, 435 (Pa. Cmwlth. 2004) (“At the appellate level, a
party’s failure to include analysis and relevant authority results in waiver.”).
                                               20
authority for this argument. Because it failed to develop its constitutional arguments
in any meaningful way, YSA waived that issue.
               Accordingly, and for the foregoing reasons, the Department’s decision
is affirmed.

                                        MICHAEL H. WOJCIK, Judge

Judge Wallace did not participate in the decision of this case.

                                          21
         IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Youth Services Agency,             :
                                   :
                        Petitioner :
                                   :
                v.                 : No. 423 C.D. 2021
                                   :
Department of Labor and Industry, :
Office of Unemployment             :
Compensation Tax Services,         :
                                   :
                        Respondent :

                                  ORDER

            AND NOW, this 28th day of December, 2022, the Order of the
Executive Deputy Secretary of Labor and Industry of the Department of Labor and
Industry dated March 19, 2021, is AFFIRMED.

                                    __________________________________
                                    MICHAEL H. WOJCIK, Judge