Feb. 9, 2022 - The Wisconsin Supreme Court has ruled that an Illinois company’s failure to timely file a form with the Department of Workforce Development (DWD) after purchasing a Wisconsin company prevented the Illinois company from succeeding the unemployment insurance account of the Wisconsin company.

In Friendly Village Nursing and Rehab, LLC v. Department of Workforce Development, 2020AP520 (Jan. 26, 2022), the supreme court held that the Illinois company did not demonstrate that its failure to file the form on time was due to a mistake that a reasonably prudent person would have made under the same circumstances.  

The decision came on a 4-3 vote. Justice Rebecca Dallet wrote the majority opinion, joined by Justice Ann Walsh Bradley, Justice Brian Hagedorn, and Justice Jill Karofsky. Justice Patience Roggensack dissented, joined by Chief Justice Annette Ziegler and Justice Rebecca Grassl Bradley.

Sale Triggered Reporting

Eden Senior Care (Eden) purchased Friendly Village Nursing and Rehab, LLC from Rhinelander Healthcare Operator 150, LLC (Rhinelander) on Sept. 1, 2017.

The purchase triggered Eden’s obligation to register and report a business transfer, an obligation Eden could satisfy by filing two forms with the DWD: an employer registration report and a business transfer report.

By filing an employer registration report, a purchasing company notifies the DWD that it is taking over an existing company – a fact that may allow the purchasing company to succeed the purchased company’s unemployment account experience.

Succeeding a company’s unemployment insurance account often entails significant savings for a purchasing company; the more unemployment account experience the purchased company has, the less the purchasing company must contribute to the unemployment insurance fund.

In order to succeed a company’s unemployment insurance account, a purchasing company must make a written application to the DWD. Filing a business transfer report satisfies that requirement.

Usually, when a company indicates on the employer registration report that it acquired the business activity from a previous employer, the DWD contacts the company to alert it to the requirement to file a business transfer report. However, there is not legal requirement that the DWD do so.

Inexperienced Employee

Eden tasked its senior business analyst with completing the employer registration report in August 2017. The senior business analyst was 22 years old, and had bachelor’s degrees in communications and biology.

When completing the employer registration report, the analyst answered “No” to the question “Did you acquire this activity from a previous employer.” Consequently, the DWD did not contact Eden and alert it to the requirement to file a business transfer report.

Eden filed a business transfer report, on which it indicated it was applying to succeed Rhinelander’s unemployment account experience, on March 13, 2018, about six weeks late.

It filed the report late, Eden claimed, becuase 1) the analyst didn’t understand the question on the employer registration report about acquiring the activity of a previous employer and 2) the DWD didn’t contact the company to notify it that it had to file a business transfer report.

The DWD found that the late filing was not due to excusable neglect, and rejected the company’s application to succeed Rhinelander’s unemployment account experience. Eden appealed to an administrative law judge (ALJ), who reversed the department’s decision citing “the interests of justice.”

The DWD appealed to the Labor and Industry Review Commission (Commission), which reversed the ALJ. Both the Oneida County Circuit Court and the court of appeals affirmed the Commission’s decision.

‘Interest of Justice’ Factors Don’t Apply

Justice Dallet rejected Eden’s claim that the Commission erred by not considering the “interests-of-justice factors” established by the supreme court in Casper v. American International Southern Insurance Co.

That case wasn’t on point, Justice Dallet explained, because it involved a statute that governs the extension of certain filing deadlines in civil court actions.

“Nowhere in Casper did we hold that the interests of justice are part of the excusable-neglect analysis,” Justice Dallet wrote. “Rather, we reiterated that they guide part one of the two-part analysis required by the explicit language of section 801.15(2)(a).”

The statute at issue in Eden’s case, section 108.16(8)(b)4., Justice Dallet explained, contains no wording that requires the DWD to consider “just terms, equity, or ‘other reasons’ for relief. Rather, ‘excusable neglect’ is the only justification for the Department’s accepting a late successorship application.”

Lack of Concrete Evidence

Eden failed to show that its failure to file the business transfer report on time was the result of excusable neglect, Dallet explained, because it failed to show that the late filing was one that a reasonably prudent person would have made under the same circumstances.

For one thing, Dallet wrote, Eden failed to show by “concrete, non-speculative evidence” why the late filing occurred.

“The record, however, contains no evidence that the employee who completed the form misunderstood the question. That employee did not testify, and the record contains no other evidence explaining why he answered the question ‘no.’”

Eden claimed that the age and inexperience of the senior business analyst was evidence of why the mistake occurred. But all that showed, Dallet explained, was that a reasonably prudent person in the position of the senior business analyst would have asked for help before submitting the form or researched the form.

Furthermore, Dallet wrote, Eden was obligated to notify the DWD in writing that it wanted to succeed Rhinelander’s unemployment account experience, regardless of how the senior business analyst filled out the form and regardless of whether the DWD notified it of that obligation.

‘Ineffective Communications’

In her dissent, Justice Roggensack explained that the Commission erred by treating the question of excusable neglect as a question of fact instead of a question of law – a treatment that in effect rendered dispositive the fact that the senior business analyst didn’t testify.

Instead, Justice Roggensack focused on the totality of the circumstances to reason that Eden had shown excusable neglect.

An online report completed by Eden asked “Did you acquire this activity from a previous employer?” but didn’t define “activity,” Justice Roggensack wrote. Additionally, the online form contained no reference to section 108.16(8) that might possibly link “activity” to the purchase of the business.

Other circumstances, Roggensack explained, were the fact that 1) Rhinelander didn’t inform the DWD that it had sold to Eden; 2) Eden promptly filed corrected information with the DWD; and 3) the DWD didn’t contact Eden after the purchase, as it usually did with new employers.

“Therefore, ineffective communications from the DWD due to the DWD’s programming of the online report and the seller, who did not comply with section 108.16(8)k, were contributing causes of [Eden’s] late filing because both resulted in limiting the DWD’s communication of necessary information to [Eden],” Justice Roggensack wrote.

It was unreasonable to expect Eden to know how the DWD’s programming would affect communication between the agency and the company, Justice Roggensack explained.