1. Definitions. In this section:

a. "Business entity" means any form of business organization, including proprietorships, partnerships, limited partnerships, cooperatives, limited liability companies, and corporations.

b. "Constituent business" means a business entity or entities of which a surviving entity is composed. The constituent business may also be referred to as the "predecessor entity" or "seller".

c. "Surviving entity" means the business entity resulting from a merger, transfer, or sale of business assets from one or more constituent businesses. The surviving entity may also be referred to as "successor entity" or "buyer".

2. Experience rating. The surviving entity resulting from a merger, transfer, or sale of business assets must be assigned an experience rating derived from the combined premium, payroll, and loss history of all the employer accounts involved in the merger, transfer, or sale. The employer accounts of the constituent businesses shall merge or transfer into the surviving entity. The organization may change the experience rating of the surviving entity.

If the organization determines a business entity is a continuation or extension of an already existing business entity and not a surviving entity composed of one or more constituent businesses, and the existing business entity is already experience-rated, the experience rate of the existing business entity must transfer to its continuation or extension. Future experience rates must be calculated using the combined premium, payroll and loss history from the existing business entity and its continuations or extensions.

3. Compensation coverage.

a. The organization may transfer compensation coverage of any constituent business to the surviving entity. The organization may require the surviving entity to provide information

on the constituent businesses of which it is comprised and its owners, officers, directors, partners, and managers. If the organization determines a surviving entity is merely a continuation of the constituent business or businesses, the organization may transfer any liability to the surviving entity or decline coverage until any delinquency is resolved.

b. Factors the organization may consider in determining if a surviving entity is a mere continuation of a constituent business include:

(1) Whether there is continuity of the constituent business in the surviving entity as shown by retention of key personnel, assets, liabilities, customers, contracts, and general business operations.

(2) Whether the surviving entity continues to use the same business location.

(3) Whether employees transferred from the constituent business to the surviving entity.

(4) Whether the surviving entity holds itself out as the effective continuation of the constituent business.

c. The organization shall calculate premium based on actual payroll, subject to the payroll cap, for the relevant period of time. The organization may prorate the payroll cap based on one-twelfth of the statutory payroll cap per month per employee at the beginning of the relevant period of time.

History: Effective June 1, 1990; amended effective January 1, 1992; April 1, 1997; May 1, 2002; July 1, 2004; July 1, 2010; January 1, 2026.

Law Implemented: NDCC 65-04-01