This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
STATE OF MINNESOTA
IN COURT OF APPEALS
Spherion Pacific Workforce, LLC,
Commissioner of Employment and
Filed May 30, 2006
Department of Employment and Economic Development
File No. 8892 04
Walter A. Pickhardt, Lisa R. Pugh, 2200 Wells Fargo Center, 90 South Seventh Street, Minneapolis, MN 55402 (for relator)
Linda A. Holmes, Department of Employment and Economic Development, E200 First National Bank Building, 332 Minnesota Street, St. Paul, MN 55101 (for respondent Commissioner)
Considered and decided by Hudson, Presiding Judge, Klaphake, Judge, and Crippen, Judge.
In 2004, the Department of Employment and Economic Development transferred to relator Spherion Pacific Workforce, LLC (Workforce), a subsidiary of Spherion Corporation, an experience rating premised on the prior rating of Spherion Pacific Enterprises, LLC (Enterprises), a predecessor affiliate of Spherion Corporation. An unemployment law judge approved a partial transfer of Enterprises’ experience rating to Workforce, and a senior unemployment review judge affirmed the transfer but modified it from a partial to a full transfer. Relator argues that the 2004 department determination improperly altered a final successorship determination issued by the department in 2003. Because the 2004 determination is permitted by the statute authorizing an experience-rating transfer upon a finding “that a transaction was done, in whole or in part, to avoid . . . the transfer of an experience rating,” we affirm.
On September 30, 2002, Spherion Corporation began a nationwide reorganization of its temporary staffing business. As part of the reorganization, Spherion created two new subsidiaries, Workforce and Spherion Pacific Resources, LLC (Resources). Until January 2, 2003, two affiliates of Spherion Corporation, Enterprises and Spherion Pacific Operations LLC (Operations), conducted its temporary staffing business in Minnesota. Operations assets and staff were acquired by Resources, and Enterprises assets and staff were acquired partly by Workforce and partly by Resources – in proportions that are differently stated in subsequent Workforce reports and agency decisions.
2003 Successorship Determinations
On January 8, 2003, Workforce submitted to the Minnesota Department of Employment and Economic Development two MDES-13 forms, which are reports used by the department to determine whether a new corporation is a successor corporation for purposes of assigning an unemployment tax experience rating. One form related to the acquisitions from Operations and showed that Workforce acquired all of Operations’ assets and continued all of Operations’ employment positions, and Workforce and Operations were 100% commonly owned by Spherion Corporation. The other related to acquisitions from Enterprises’ and showed that Workforce acquired 81.1% of Enterprises’ assets and continued all of Enterprises’ employment positions, and Workforce and Enterprises were 100% commonly owned by Spherion Corporation.
Based on these forms, on February 24, 2003, the department sent a notice to Workforce determining that Workforce was a successor to Enterprises and assigning Workforce an unemployment tax rate of 1.59% for 2003. This determination was made under Minn. Stat. § 268.051, subd. 4(a) (2002), which requires the transfer of an experience rating when an employer acquires the business or “substantially all the assets” of another employer and there is at least 25% common ownership between the predecessor and successor.
Upon receiving the notice, Workforce employee Susan Wolfe, who had prepared the MDES-13 forms, contacted Darla Abraham of the department’s tax liability unit to ask about the tax rate. In talking to Abraham, Wolfe realized that she had misunderstood a question on the MDES-13 forms. On March 11, 2003, Wolfe sent a fax to Abraham stating that Workforce had acquired only 81.1% of Enterprises’ employees—the same percentage reported regarding Enterprises’ assets—and that the MDES-13 form had incorrectly stated that Workforce had continued all of Enterprises’ employment positions. Wolfe requested that the department update its records to indicate that the succession was partial and remove Enterprises’ experience rating from Workforce’s account.
On March 20, 2003, the department sent a notice to Workforce correcting the February 24, 2003 notice. The March 20 notice determined that Workforce was a partial successor to Enterprises, a classification whereby Workforce had the option to apply for Enterprises’ experience rating. This determination was made under Minn. Stat. § 268.051, subd. 4(b) (2002), which permits a successor to apply for the transfer of a predecessor’s experience rating when a successor acquires a part of a business that is less than substantially all of the predecessor’s employing activities and there is at least 25% common ownership between the predecessor and successor. The March 20 notice assigned Workforce a 1.51% tax rate for 2003, the rate assigned to all new employers in Minnesota. Workforce did not respond to the assignment of the 1.51% tax rate.
On March 25, 2003, the department sent Workforce a third notice, this one relating to the acquisition of Operations. The March 25 notice determined that Workforce was a successor to Operations and assigned Workforce a .47% tax rate for 2003. This determination was made under Minn. Stat. § 268.051, subd. 4(a).
2004 Avoidance Determination
On March 18, 2004, the department sent Workforce a notice correcting the 1.51% experience-rate setting on March 20, 2003. The notice stated, “A review of your account indicates that [Workforce] acquired substantially all the assets of [Enterprises] as of 01/02/2003. The Report to Determine Liability for Unemployment Tax (form MDES-13) states that you acquired 81.1% of the predecessor’s assets.” The department determined that Workforce had acquired substantially all of Enterprises—employing the “substantially all the assets” standard of subdivision 4(a)—and was a full successor to it and recomputed Workforce’s tax rates to be 1.59% for 2003 and 2.30% for 2004.
Workforce appealed the March 18, 2004 determination. Following a hearing, an unemployment law judge made a threshold finding that Workforce, although it acquired 81.1% of Enterprises staff, did not in fact acquire Enterprises assets, which actually were transferred to Resources. This corrects the report of Workforce in its January 2003 MDES-13 form and its March 2003 correction, and the factual basis for the department’s “successor” determinations under Minn. Stat. § 268.051, subd. 4(a), first made on February 24, 2003, and last on March 18, 2004. And because of finality for “successor” decisions announced by Minn. Stat. § 268.051, subd. 4(f) (2002), the judge determined that the department lacked jurisdiction to modify the March 20, 2003 successorship determination. But the unemployment law judge concluded that the commissioner had authority to “transfer all or part of the experience rating” of Enterprises to Workforce under Minn. Stat. § 268.051, subd. 4(i) (2002), which permits this transfer “regardless of the requirements or limitations of paragraph (a),” upon a finding “that a transaction was done, in whole or in part, to avoid an experience rating or the transfer of an experience rating.” The unemployment law judge found that a factor considered in Spherion Corporation’s business reorganization and transfer of employees from Enterprises to Workforce was the favorable impact it would have with respect to unemployment tax experience rating and that the transaction was done, in part, to avoid Enterprises’ higher experience rating or the transfer of that experience rating to Workforce. Because 81.1% of Enterprises’ employees were transferred to Workforce, the unemployment law judge ordered that 81.1% of Enterprises’ experience rating be transferred to Workforce.
Workforce appealed the unemployment law judge’s decision to a senior unemployment review judge. The review judge agreed with the unemployment law judge’s interpretation of Minn. Stat. § 268.051, subd. 4(f) and (i). The review judge also agreed that Spherion Corporation’s business reorganization and transfer of employees from Enterprises to Workforce was “designed in part to avoid Enterprises’ experience rating; and all of Enterprises’ unemployment experience rating has ‘disappeared’ from the tax roles as a result of the January 2003 transactions between Spherion’s subsidiaries.” But the review judge concluded that all of Enterprises’ experience rating should be transferred to Workforce and, accordingly, modified the unemployment law judge’s decision. This certiorari appeal followed.
senior unemployment review judge’s fact findings are reviewed in the light most
favorable to the decision and must be affirmed if there is any reasonable
evidence to sustain them. Lolling v. Midwest Patrol, 545 N.W.2d
372, 377 (Minn. 1996). This court
exercises independent judgment on issues of law. Ress v.
Abbott Nw. Hosp., Inc., 448 N.W.2d 519, 523 (
Workforce argues that Minn. Stat. § 268.051, subd. 4(f) (2002), should be construed to determine finality for successorship determinations under Minn. Stat. § 268.051, subd. 4(a), (b) (2002), and for determinations under Minn. Stat. § 268.051, subd. 4(i) (2002), as well. The construction of a statute is a question of law subject to de novo review. Lolling, 545 N.W.2d at 375. The object of statutory interpretation is to ascertain and effectuate legislative intent. Minn. Stat. § 645.16 (2004); see also In re Conservatorship of Nelsen, 587 N.W.2d 649, 651 (Minn. App. 1999) (listing factors that may be considered in determining legislative intent when a statute is ambiguous).
Minn. Stat. § 268.051, subd. 4(f), states that the commissioner “shall determine if an employer is a successor within the meaning of this subdivision” and that the “determination shall be final unless a protest is filed by the employer within 30 calendar days after sending the determination.” Minn. Stat. § 268.051, subd. 4(i), empowers the “transfer [of] all or part of the experience rating” without requiring a determination of successorship and regardless of provisions of paragraph (a):
If the commissioner finds that a transaction was done, in whole or in part, to avoid an experience rating or the transfer of an experience rating, the commissioner may transfer all or part of the experience rating regardless of the requirements or limitations of paragraph (a).
We reject the statutory construction urged by Workforce for several reasons. First, although there is merit in Workforce’s assertion that the finality provision in Minn. Stat. § 268.051, subd. 4(f), applies to successorship determinations under subdivisions 4(a) and (b), it is equally as evident that a determination under subdivision 4(i) is not a successorship determination. Rather, subdivision 4(i) defines an additional method for transferring an experience rating based on avoidance conduct by an employer.
Second, weight must be given to the policy consideration underlying subdivision 4(i). It is evident on the face of the statute, as the commissioner asserts, that this is a vital provision aimed at serious manipulation of ownership arrangements to avoid experience-rating transfers and, as a result, to pass on the earned burden of one business to all other employers.
Finally, subdivision 4(i) expressly authorizes the commissioner to transfer an experience rating “regardless of the requirements or limitations of paragraph (a).” Id. Workforce asserts that the March 20, 2003 determination was made under subdivision 4(b). But the March 25 determination was made under subdivision 4(a), and Workforce views the March 25 determination as final and as stating a calculation premised on successorship both to Enterprises and to Operations. Moreover, the March 20 determination, however generous to Workforce in permitting it an election under subdivision 4(b), occurred in circumstances in which there was an undisputed record showing that Workforce had acquired at least 81.1% of Enterprises’ assets. These circumstances are exactly those that the “regardless” clause in subdivision 4(i) is designed to address.
Workforce also argues that unless a determination under subdivision 4(i) is construed to be a successorship determination, the commissioner has no authority to recompute a tax rate based on a determination under subdivision 4(i). But under Minn. Stat. § 268.051, subd. 4(g) (2002), which governs the recomputation of tax rates, the commissioner must decide whether or not an employer is a successor but then is empowered to recompute the tax rate after any decision of succession “or nonsuccession.”
Workforce argues that the review judge erred in finding that Workforce acted, in part, to avoid Enterprises’ experience rating. Workforce argues the phrase “in part” in subdivision 4(i) should be construed to mean with a principal or substantial purpose. The argument adds language that does not appear in the statute. The canons of statutory construction prohibit this court from adding words to a statute to “supply that which the legislature purposefully omits or inadvertently overlooks.” Goplen v. Olmsted County Support & Recovery Unit, 610 N.W.2d 686, 689 (Minn. App. 2000) (citation omitted). Contrary to Workforce’s assertion that construing “in part” according to its plain and ordinary meaning would authorize the commissioner to act under subdivision 4(i) whenever an employer gives “any thought at all” to employment tax consequences, the question posed by subdivision 4(i) is whether the avoidance of an experience rating was a motivating factor for a transaction.
Spherion Corporation’s tax director testified that its billable employees carry significantly different legal liabilities from its salaried employees. The tax director also testified that, in reorganizing, consideration was given to the effect on unemployment tax rates. The record shows that Enterprises had a significantly higher unemployment tax rate than did Resources. A permissible inference from this evidence sustains the review judge’s finding that avoidance of unemployment cost was “part of the purpose” of the transactions among Spherion subsidiaries in January 2003.
finally, argues that the commissioner should be estopped from changing its
experience rating. A wronged party may
plead equitable estoppel against the government where he or she has relied in
good faith on government representations, to his or her detriment. State
v. Ramirez, 597 N.W.2d 575, 577 (
* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.
 Minn. R. 3315.3210, subp. 5 (2003) defines “substantially all of the assets” as at least 70% of the market value of the assets.
 Spherion Corporation’s tax director testified at the hearing before the unemployment law judge that most of Enterprises’ assets were transferred to Resources.
 Effective July 1, 2005, the language “and (b)” was added to the “regardless” clause in subdivision 4(i). 2004 Minn. Laws ch. 183, § 27, at 273. For that reason, our decision at this time is premised on either clear or amended language of subdivision 4(i).