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Collateral Estoppel 

Collateral estoppel has become a hot topic in the past few years as many states take measures to address this legal concept in their unemployment rules and regulations. CCC has taken the time to review the state unemployment rules & regulations, and when that has been unclear, we reviewed the administrative precedent decisions that are guiding the decisions coming from state unemployment agencies.

What is collateral estoppel? Collateral estoppel is a legal term which bars the relitigation of a claim. The term is more commonly referred to as “issue preclusion”. In layman’s term, collateral estoppel simply means that if a party pursues a case, and then acts to pursue an additional case of similar nature; then the findings of the prior case apply to the 2nd case.

Click here to view our April 2018 Guideline, which covered this topic.

When a separation occurs and the former employee files an unemployment claim, often employers must consider what other types of litigation may be occurring (or have occurred) with that individual.  These other legal matters may be reviewed as a condition determining whether the employer chooses to protest an unemployment claim. As a client of CCC, we provide information on regarding the unemployment claim itself and advise that if there are other legal considerations, we highly recommend that the employer speak with their legal counsel.  This is because the concept of collateral estoppel is a very sticky process and is in the middle of an upheaval nationally.     

For example, in the Commonwealth of Pennsylvania, there are both legislative language and a precedent unemployment decision which provide conflicting information.

When talking about collateral estoppel, the necessity of attending and being fully prepared for unemployment hearings a critical issue. If this information has a possibility of being used in another legal forum, your best information should not just be provided at the hearing level, but to insure compliance with UI Integrity Legislation, must be provided with the initial claim response. In a growing number of states, only if a timely and complete response is provided at the initial claim level can the employer proceed to the unemployment hearing.

Our Collateral Estoppel Study provides an overview of the issue in each state, along with the statutes and decisions we’ve found guiding the issue.

CCC works in all 50 states to manage the unemployment programs for organizations both large and small. This includes:

Contact CCC to learn how we can assist your organization at 800.207.6926 or contact@corporatecostcontrol.com.

 


Unemployment Tax Update

Corporate Structure Changes and their Impact on UI Rates 

For many corporations, divestitures and acquisitions of subsidiaries are common place.  Sometimes this is the result of a change in focus the organization makes, while other times it is the result of downsizing or growth.  Whatever the reason, corporate changes can be very complex for many reasons, not the least of which is as it relates to taxes.  Corporate taxes and payroll taxes can be a high-risk factor in corporate changes which is why they are closely monitored by a finance team.   

Unemployment tax is considered a payroll tax but isn’t always the highest priority for review during a corporate structure change.  In certain instances, the tax risk is quite substantial so it makes sense to do the necessary due diligence.   Whether an entire subsidiary or just a portion is purchased or divested, state unemployment tax regulations are very strict and come with substantial penalties if deadlines are not met.   

In each state in which an employer has operations under a given subsidiary, an account number and tax rate are assigned.  Tax rates are calculated annually by the state unemployment agency and once the initial requirements are met, a tax rate based on several factors is generated.  The factors differ from state to state but most states calculate rates based on a ratio of taxable payroll to the reserve account balance or a ratio of the taxable payroll to the unemployment claim benefits paid.  The tax rate is sensitive to fluctuations in employer payroll as well as unemployment benefits paid from the account.   

If a corporate change occurs this also has an impact on the tax rate.  When an entire subsidiary is involved, if common management, ownership or control is present between the successor and predecessor, the agencies statutorily require the tax rate to transfer to the successor.  If there is not common management, ownership or control, some states give the successor the option to take the tax rate or not.  If the tax rate is high, it may benefit the successor to leave that tax rate behind.   

If only a portion of a subsidiary is involved in the transaction, there are more complicated and stringent state guidelines and deadlines.  However, more options for tax savings exist when a portion rather than an entire subsidiary is involved when common management, ownership or control is not present.  As a result, determining the tax implication can be difficult.  As mentioned above, state agencies treat successorship in different ways.  Therefore, it is easy to overlook a required reporting and run the risk of a penalty tax rate being assigned.     

The Tax Analysts at Corporate Cost Control are skilled in auditing these types of transactions and providing employers with the necessary analytics to make sound financial decisions.  If you have historical or upcoming transactions and would like a review of your unemployment tax options, please contact our Tax Director, Wayne Rottger at 800-207-6926  extension 418 or by email at wrottger@corporatecostcontrol.com.         


Guideline

Tell Us How We’re Doing! We REALLY Want to Know!

Recently, CCC updated our email signature to provide anyone the opportunity to provide feedback regarding their interactions with CCC.  At CCC we are constantly striving to ensure our clients receive the best service, with the best people and the best technology.

This opportunity allows anyone who receives an email from any CCC team member to provide feedback with their contact information or if they are more comfortable, anonymously.

Please take the opportunity to let us know how we are doing, we appreciate your time. Click here to try it now!

 


Contact CCC to see how we can save your organization time and money.
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(800) 207-6926

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