February 3, 2005, Introduced by Senator ALLEN and referred to the Committee on Commerce and Labor.
A bill to amend 1936 (Ex Sess) PA 1, entitled
"Michigan employment security act,"
(MCL 421.1 to 421.75) by adding section 22b.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 22b. (1) A person shall not do either of the following:
(a) Transfer the person's trade or business or a portion of
the trade or business to another employer for the sole or primary
purpose of reducing the contribution rate or reimbursement payments
in lieu of contributions required under this act.
(b) Acquire a trade or business or a part of a trade or
business for the sole or primary purpose of obtaining a lower
contribution rate than would otherwise apply under this act.
(2) The following provisions apply to assignment of rates and
transfer of the unemployment experience of a trade or business to
prevent or remedy transfers of trade or business in violation of
subsection (1):
(a) If an employer transfers its trade or business or a
portion of its trade or business to another employer and there is
substantially common ownership, management, or control of the 2
employers at the time of the transfer, the unemployment experience
attributable to the transferred trade or business shall be
transferred to the transferee employer. The agency shall
recalculate the contribution rates of both employers under section
19 and apply the new rates in the same manner as for a transfer of
business under section 22(c)(1) and (d)(1). However, if, after a
transfer of experience under this subdivision the agency determines
that a substantial purpose of the transfer of trade or business was
to obtain reduced liability for contributions, then the experience
rating accounts of the employers involved shall be combined into a
single account and a single rate assigned to the account.
(b) If the unemployment insurance agency determines that a
person who is not an employer under this act at the time of a
transfer acquires a trade or business, or a portion of a trade or
business, solely or primarily for the purpose of obtaining a lower
contribution rate, the unemployment insurance agency shall assign
that employer the applicable new employer rate under section 19.
(c) If a person knowingly violates or attempts to violate
subsection (1), or if a person knowingly advises another person so
as to cause a violation of subsection (1), the person is subject to
the following:
(i) If the person is a transferring or acquiring employer, the
employer shall be assigned the higher of the following contribution
rates:
(A) The highest contribution rate assignable under this act
for the rate year during which the violation or attempted violation
occurs and for the 3 rate years immediately following that rate
year.
(B) If the employer's business is already at the highest rate
assignable for a year in which the violation occurs, an additional
penalty rate of 2% of taxable wages for that year.
(ii) If the person is not an employer, the person is subject to
a civil fine of not more than $5,000.00.
(iii) In addition to the remedies under subparagraph (i) or (ii),
a person who knowingly violates or attempts to violate subsection
(1), or who knowingly advises another person so as to cause a
violation of subsection (1), is subject to prosecution by the
prosecuting attorney in the county in which the alleged violation
occurs under section 54(b).
(d) Notwithstanding the restrictions in section 26(a), the
money recovered under this section as contributions, reimbursements
in lieu of contributions, civil fines, civil penalties, or interest
shall be credited to the unemployment compensation fund.
(e) The unemployment insurance agency shall establish
procedures to identify the transfer or acquisition of a trade or
business, or part of a trade or business, for purposes of this
section. This subdivision does not grant authority to promulgate
rules to define SUTA dumping.
(f) Beginning January 1, 2006, the unemployment insurance
agency shall provide an annual written report to the chairpersons
of the appropriations subcommittees of the house and senate having
jurisdiction over legislation pertaining to unemployment
compensation. The report shall include all of the following
information in a form that does not identify individual employers:
(i) The procedures the agency has adopted to prevent SUTA
dumping.
(ii) The number of SUTA dumping investigations opened during
the year.
(iii) The average length of time to resolve a SUTA dumping
investigation and the number of investigations pending for more
than 6 months and for more than 1 year.
(iv) The number of cases brought before an administrative law
judge or the board of review and the agency's success rate in those
cases.
(v) The amount of money recovered as a result of implementing
the provisions of this section.
(vi) The amount of the balance or deficit in the unemployment
compensation fund.
(vii) The estimated fiscal impact of SUTA dumping on the
unemployment compensation fund balance and the factual basis for
the estimate.
(viii) The number of full-time employees assigned to, and the
number of employee hours devoted to, SUTA dumping prevention,
investigation, and remediation.
(3) For purposes of this section, the unemployment insurance
agency shall determine whether a transfer is made for the sole or
primary purpose of obtaining a lower contribution rate using
objective factors, such as the cost of acquiring the business,
continuity in operating the business enterprise of the acquired
business, the length of time the business enterprise continues to
operate, and the number of new employees hired to perform duties
unrelated to the business activity or trade conducted before the
acquisition.
(4) As used in this section:
(a) "Knowingly" means having actual knowledge of, or acting
with deliberate ignorance or reckless disregard for, the
prohibition involved.
(b) "Person" means that term as defined in section 7701 of the
internal revenue code of 1986, 26 USC 7701.
(c) "SUTA" means state unemployment tax act.
(d) "SUTA dumping" means transferring a trade or business, or
a part of a trade or business, solely or primarily for the purpose
of reducing the contribution rate or reimbursement payments in lieu
of contributions required under this act.
(e) "Trade or business" includes the employer's employees, but
the transfer of some or all of an employer's employees to another
employer shall be considered a transfer of trade or business for
purposes of this section if, as a result of the transfer, the
transferring employer no longer performs trade or business with
respect to the transferred employees and that trade or business is
performed by the transferee employer.
(5) This section is intended to be interpreted and applied in
a manner so as to meet the minimum requirements of the SUTA dumping
prevention act of 2004, Public Law 108-295, and implementing
federal regulations.
Enacting section 1. This amendatory act takes effect July 1,
2005.
Enacting section 2. This amendatory act does not take effect
unless all of the following bills of the 93rd Legislature are
enacted into law:
(a) Senate Bill No. 173.
(b) Senate Bill No. 174.
(c) Senate Bill No. 172.