Franklin Electric Co. v. Unemployment Insurance Appeals of the Indiana Department of Workforce Development
953 N.E.2d 1066
| Ind. | 2011Background
- Franklin Electric formed two wholly owned subsidiaries, Franklin Electric Manufacturing, Inc. and Franklin Electric Sales, Inc., to handle manufacturing and sales respectively.
- Franklin Electric transferred assets, real property, and approximately 470 employees to Manufacturing and about ten employees to Sales; about 170 employees remained with the parent.
- Franklin Electric anticipated a new unemployment insurance experience account with a 2.7% rate for the new subsidiaries based on advice from an accounting firm.
- The Department of Workforce Development initially acknowledged a possible distinct and segregable portion but later determined the subsidiaries were not separate employers and canceled their experience accounts.
- The Department recalculated Franklin Electric’s merit rate for 2005–2008, demanded back payments, interest, and penalties; the LALJ waived penalties, and the Court of Appeals affirmed.
- Indiana Supreme Court granted transfer and affirmed the LALJ’s determination that the subsidiaries were not distinct and segregable from Franklin Electric.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the subsidiaries acquired a distinct and segregable portion of the business | Franklin Electric Sales and Manufacturing acquired a distinct portion | Department found no distinct and segregable portion | Subsidiaries not distinct or segregable; not new employers |
| Whether the subsidiaries could be successor employers with a 2.7% rate | Subsidiaries qualify as successors under 2.7% rate | They must first be employers with distinct/segregable portion | Not reached because subsidiaries aren’t employers; no successor status granted |
| Whether penalties were appropriate for late contributions | Penalty should be waived due to lack of fraud/negligence | Penalty applies for negligence/disregard | Penalty not appropriate; upheld LALJ’s waiver |
| What is the correct starting date for recalculating the merit rate | Date should be November 26, 2004 | Date governed by four-year reassessment limit | Beginning date set November 26, 2004, within the statutory limit |
Key Cases Cited
- Ashlin Transportation Services, Inc. v. Indiana Unemployment Insurance Board, 637 N.E.2d 162 (Ind.Ct.App.1994) (defined distinct and segregable for purposes of employer status)
- Indianapolis Concrete, Inc. v. Unemployment Ins. Appeals of the Ind. Dep't of Workforce Dev., 900 N.E.2d 48 (Ind.Ct.App.2009) (discussed employer contributions and experience rating)
- Indiana Department of Environmental Management v. West, 838 N.E.2d 408 (Ind.2005) (standard of review for legal conclusions by LALJ)