2019 Ohio 4994
Ohio Ct. App.2019Background
- Employer's Choice Plus, Inc. (parent) and several subsidiary corporations (Alzey, Employers Risk, and various J Ross entities) disputed ODJFS determinations that Employer's Choice was the liable employer and the subsidiaries' unemployment accounts were closed effective July 1, 2004.
- Cacaro (president and sole shareholder of all entities) testified the subsidiaries were incorporated in Ohio, each employed at least one person, and each had at least one employee earning $1,500+ in a quarter during the relevant years.
- Cacaro also testified the entities used a common payroll bank account and that he filed IRS forms electing qualified subchapter S subsidiary (QSub) status for the subsidiaries.
- ODJFS audited, applied experience rates under R.C. 4141.24(F)/(G)(1), and treated the QSub elections as a deemed liquidation for federal tax purposes, concluding the parent was successor-in-interest.
- The Unemployment Compensation Commission affirmed the director; the Franklin County Common Pleas Court affirmed the commission. Appellants appealed to the Tenth District Court of Appeals.
- The appellate court reversed, holding the subsidiaries met R.C. 4141.01(A)(1)’s employer definition and that a QSub election does not, by itself, transfer a trade or business for successor-in-interest liability under R.C. 4141.24(F)/(G)(1).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Alzey, Employers Risk, and the J Ross companies were "employers" under R.C. 4141.01(A)(1) | Subsidiaries each had employees and paid $1,500+ in a quarter, satisfying the statute | The parent is the only employer because the QSub election effectively liquidated the subsidiaries into Employer's Choice | Subsidiaries qualify as employers under R.C. 4141.01(A)(1); common pleas' contrary conclusion was an abuse of discretion; reversed |
| Whether the QSub election effected a transfer of trade/business making Employer's Choice successor-in-interest under R.C. 4141.24(F) or (G)(1) | QSub election does not convey possession or control of a trade or business; no statutory transfer occurred; subsidiaries remain separate for unemployment purposes | QSub deemed liquidation under federal tax law transferred assets/trade to the parent, so parent is successor-in-interest | QSub election alone does not constitute a transfer of trade/business for R.C. 4141.24(F)/(G)(1); no successor-in-interest liability based on QSub election; reversed |
Key Cases Cited
- Bernard v. Unemp. Comp. Rev. Comm., 136 Ohio St.3d 264 (Ohio 2013) (courts may defer to agency interpretations when reasonable and the agency has delegated implementation authority)
- Lang v. Dir., Ohio Dept. of Job & Family Servs., 134 Ohio St.3d 296 (Ohio 2012) (upholding agency interpretation of federal statute when ambiguous)
- State ex rel. Clay v. Cuyahoga Cty. Med. Examiner's Office, 152 Ohio St.3d 163 (Ohio 2017) (primary rule: give effect to unambiguous statutory language)
- Chevron U.S.A., Inc. v. Natural Resources Def. Council, Inc., 467 U.S. 837 (U.S. 1984) (if statute's intent is clear, agency deference under Chevron is not warranted)
- Marbury v. Madison, 5 U.S. 137 (U.S. 1803) (judiciary's duty to interpret the law)