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Inc. v. Ohio Department of Job and Family Services

Court of Appeals of Ohio, Tenth District

December 5, 2019

Employer's Choice Plus, Inc. et al., Appellants-Appellants,
v.
Ohio Department of Job and Family Services et al., Appellees-Appellees.

          APPEAL from the Franklin County Court of Common Pleas (C.P.C. No. 17CV-664)

         On brief:

          Graydon Head & Ritchey LLP, Steven P. Goodin, Anthony R. Robertson, and Matthew B. Lake, for appellants.

          Dave Yost, Attorney General, and Eric A. Baum, for appellee Ohio Department of Job and Family Services.

          DECISION

          DORRIAN, J.

         {¶ 1} Appellants Employer's Choice Plus, Inc. ("Employer's Choice"), Alzey Enterprises I, Inc. ("Alzey"), Employers Risk Management Company, Inc. ("Employers Risk"), J Ross, Inc., J Ross III Management Company, Inc., J Ross IV Management Company, Inc., J Ross V Management Company, Inc., J Ross VI Management Company, Inc., J Ross VII Management, Inc., J Ross VIII, Inc., J Ross XI Corporation, J Ross XII Corporation, and J Ross XIV Corporation (collectively, the "J Ross Companies"), appeal from a judgment of the Franklin County Court of Common Pleas affirming a decision of appellee, Ohio Unemployment Compensation Commission ("commission"). For the reasons that follow, we reverse.

         I. Facts and Procedural History

         {¶ 2} In August 2008, appellee, Ohio Department of Job and Family Services ("ODJFS"), issued a letter advising Employer's Choice that pursuant to an investigation it had determined Alzey, Employers Risk, and the J Ross Companies did not meet the definition of employer set forth in R.C. 4141.01(A)(1). ODJFS issued a determination of liability finding Employer's Choice was a liable employer effective January 1, 2002, and a contribution rate determination, setting Employer's Choice's unemployment compensation contribution rate for 2004 through 2008. ODJFS advised Alzey, Employers Risk, and the J Ross Companies that their unemployment compensation accounts had been closed effective July 1, 2004. Appellants requested review and reconsideration of the determination

         {¶ 3} The director of ODJFS issued a reconsidered decision in August 2016, modifying the determination of liability and contribution rate determination by finding R.C. 4141.24(F) or (G)(1) applied and applying the appropriate experience rates for Employer's Choice for the years 2004 through 2016 pursuant to those statutory provisions. Appellants appealed the director's reconsidered decision to the commission. In December 2016, a commission hearing officer conducted a hearing on the appeal. Appellants presented testimony from John Cacaro who testified he was the president and sole shareholder of all the appellants. Cacaro testified that Employer's Choice was the parent entity and the other entities were subsidiaries of Employer's Choice, and that he had filed forms with the Internal Revenue Service electing qualified subchapter S subsidiary status for Alzey, Employers Risk, and the J Ross Companies. Cacaro further testified all of the entities used one common bank account for payroll purposes. ODJFS presented testimony from Melanie Heck, an unemployment compensation compliance supervisor who reviewed the audit that led to the liability and compensation rate determination. Heck testified ODJFS considered the election of qualified subchapter S subsidiary status to result in a deemed liquidation of the subsidiary entity into the parent entity.

         {¶ 4} Following the hearing, the commission issued a decision affirming the director's reconsidered decision. The commission held that Employer's Choice was a liable employer effective January 1, 2002, and that Alzey, Employers Risk, and the J Ross Companies did not meet the statutory definition of employer contained in R.C. 4141.01(A)(1). The commission reasoned that Employer's Choice was the successor-in- interest to Alzey, Employers Risk, and the J Ross Companies because the designation of those entities as qualified subchapter S subsidiaries of Employer's Choice resulted in a transfer of all the trade or business of the subsidiaries to Employer's Choice. Appellants appealed the commission's decision to the Franklin County Court of Common Pleas.

         {¶ 5} The common pleas court issued a decision affirming the commission's decision. The court held the commission's conclusion that Employer's Choice was the only entity that met the statutory definition of employer was supported by reliable, probative evidence because the other entities were liquidated into Employer's Choice when the qualified subchapter S subsidiary election was made. The court further held the commission's conclusion that Employer's Choice was the successor-in-interest to the other entities was supported by reliable, probative evidence because the same individual was the sole owner, shareholder, and president of all the entities, and each one of them had the same physical address and used the same bank account for payroll purposes.

         II.Assignments of Error

         {¶ 6} Appellants appeal and assign the following two assignments of error for our review:

I. THE TRIAL COURT MISINTERPRETED OHIO LAW IN CONCLUDING THAT EMPLOYER'S CHOICE PLUS, INC. WAS THE ONLY APPELLANT-EMPLOYER UNDER R.C. 4141.01(A)(1).
II. THE TRIAL COURT MISCONSTRUED OHIO LAW IN CONCLUDING THAT EMPLOYER'S CHOICE PLUS, INC. WAS A SUCCESSOR-IN-INTEREST TO EVERY OTHER ...

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