The Ohio Supreme Court recently held that a company that entered into an asset purchase agreement to purchase a temporary employment agency was, in fact, a successor-employer for workers’ compensation purposes. Therefore, the purchasing company’s workers’ compensation premiums would include the temporary agency’s claims experience rating, which the Ohio Bureau of Workers’ Compensation would consider when calculating the new company’s premiums. Where the workers’ compensation claims experience of the company whose assets are being acquired is high, this can equate to higher workers’ compensation premiums for the acquiring company.
In State ex. rel.,RFFG, L.L.C. v. Ohio Bureau of Workers’ Compensation (2014), 141 Ohio St. 3d 331, WTS Acquisition Corporation executed an asset purchase agreement with Ameritemps, Inc. WTS then transferred the assets to RFFG, a wholly owned subsidiary. In a form submitted to the BWC, RFFG stated that it purchased only selected vehicles, personal property, office leases, office locations and the right to contract with certain Ameritemps clients. The BWC found that RFFG was a full successor in interest pursuant to Ohio Administrative Code § 4123-17-02. RFFG protested the finding, arguing that it did not succeed Ameritemps in the operation of its business. Alternatively, RFFG argued that it should be considered only a partial, not a full, successor-employer. The BWC denied the protest, finding RFFG to be a full successor in interest.
RFFG filed a complaint in mandamus in the Tenth District Court of Appeals, arguing that it should not be found to be a full successor in interest as it purchased “only a fraction of Ameritemps’ offices, leases, former employees, and clients in less risky industries and merely used the Ameritemps name for marketing purposes,” and therefore, only part of Ameritemps’ business was transferred. The court denied the writ, relying upon the BWC’s decision stating that “a significant number of both clients and employees were retained by the successor. The business name remained the same, the business locations remained the same, the clients significantly remained the same and the employees significantly remained the same.” The Supreme Court affirmed the Court of Appeals’ decision.
Caution and due diligence should be exercised with every business transfer or reorganization with regard to the workers’ compensation claims experience of the selling entity. Under Ohio BWC rules, a purchasing company can inherit the seller’s claims experience even if the transaction is only an “asset purchase agreement,” which can create higher workers’ compensation premiums for the purchasing company. Many other states have similar rules. How unemployment experience and related taxes might transfer should also be considered during business or asset transfers between companies.