The Ohio Supreme Court recently issued a decision holding that, following the purchase and transfer of a company’s assets, clients, or employees, the new company must offer evidence verifying that only a portion of the original business transferred in order to avoid being treated as a successor employer for workers’ compensation purposes.
In State ex rel. RFFG LLC v. Ohio Bureau of Workers’ Compensation, a parent corporation purchased Ameritemps, Inc., and then transferred the business’s assets to its wholly-owned subsidiary, RFFG. RFFG not only continued to operate Ameritemps under its original name and in the same location, but also retained a significant number of the same clients and employees. These factors led the Bureau to conclude that Ameritemps had transferred in whole to RFFG.
RFFG argued that only a portion of the business had transferred, and thus, the Bureau abused its discretion in determining that RFFG was a successor employer and, thus, subject to . Notably, however, RFFG failed to provide the Bureau with any documents that substantiated this claim. Because the available evidence—the purchase agreement—did not contain language from which the Bureau could conclude that a full transfer had not occurred, the Supreme Court found that the Bureau acted within its discretion.
When transferring company assets, customers, and/or employees, the company must maintain and provide the Bureau with evidence verifying that only a portion, and not the entirety, of the original business transferred. Otherwise, that Bureau may legitimately calculate the new company’s workers’ compensation premium rates based on the original company’s experience rating. If you are considering acquiring another company’s assets, clients, or employees, you run the risk of acquiring their experience rating as well if proper documentation is not in place.