Kentucky Statutes 341.540 – Reserve accounts of successive employing units — Resources and liabilities — Contribution rate — Penalties
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(1) As used in this section, unless the context clearly requires otherwise:
(a) “Substantially common” or “substantially the same” means that there is identifiable or demonstrative commonality or similarity of ownership, familial relationships, principals or corporate officers, day-to-day operations, assets and liabilities, and stated business;
(b) “Trade” or “business” includes but is not limited to a commercial enterprise or establishment; any entity engaged in the supplying, production, or manufacturing of goods, commodities, or services; any entity engaged in commerce, sale for profit, or the providing of goods, personnel, or services;
(c) “Knowingly” means having actual knowledge of, or acting with deliberate ignorance or disregard for, the prohibition involved;
(d) “Violates” or “attempts to violate” includes, but is not limited to, intended evasion, misrepresentation, or willful nondisclosure; and
(e) “Person” has the same meaning as in Section 7701(a)(1) of the Internal
Revenue Code.
(2) (a) For the purpose of this chapter, if a subject employer transfers all or part of its trade or business, the acquiring employing unit shall be deemed a successor if the transfer is in accordance with administrative regulations promulgated by the secretary, or if there is substantially common ownership, management, or control of the subject employer and employing unit. If an employing unit is deemed a successor, the transferring employing unit shall be deemed a predecessor.
(b) For the purpose of this chapter, if a nonsubject employer acquires all or part of the trade or business of a subject employer, the nonsubject employer shall file an application with the Office of Unemployment Insurance to establish an unemployment reserve account within forty-five (45) days of employing personnel. The application will be considered and processed in accordance with administrative regulations promulgated by the secretary and shall require information necessary to determine whether the nonsubject employer is a successor of the subject employer and to establish an initial unemployment contribution rate for the employer. Factors to be considered in the determination of successorship and the fixing of the initial rate shall include but not be limited to the nonsubject employer’s prior unemployment claims history, benefit charges, historical rate charges, and payment penalties assessed in the previous five (5) years, in addition to the factors set forth in subsection (6)(b) of this section. After consideration of these factors, and others that the applicant may submit in justification of an initial rate determination, the secretary shall set an appropriate contribution rate. Any determinations of initial unemployment contribution rates made pursuant to this subsection shall not be effective prior to January 1, 2018.
(3) (a) Notwithstanding subsection (2)(b) of this section, any successor to the trade or business of a subject employer shall assume the resources and
liabilities of the predecessor’s reserve account, including interest, and shall continue the payment of all contributions and interest due under this chapter, except that the successor shall not be required to assume the liability of any delinquent contributions and interest of a predecessor or predecessors unless the cabinet notifies the successor of the delinquency within six (6) months after the department has notice of the succession; and
(b) Any nonsubject employer that is deemed a successor in whole or part shall be allowed to make a one (1) time voluntary payment to pay off or reduce the negative reserve assumed from the predecessor. This payment shall be made within sixty (60) days of receipt of the first notice of a negative predecessor reserve account. This one (1) time voluntary payment cannot exceed the amount of negative reserve assumed by the successor.
(4) The liability for delinquent contributions and interest imposed upon the successor by subsection (3) of this section shall be secondary to the liability of the predecessor or predecessors, and if the delinquency has been reduced to judgment, the order of execution on the judgment shall be as follows:
(a) Against the assets, both real and personal, of the predecessor or predecessors;
(b) Against the assets, both real and personal, of the business acquired; and
(c) Against the assets, both real and personal, of the successor or acquirer. (5) (a) Notwithstanding the provisions of subsection (3) of this section, any
successor to a portion of the trade or business of a subject employer, who
is, or by reason of the transfer becomes, a subject employer, shall assume the resources and liabilities of the predecessor’s reserve account in proportion to the percentage of the payroll or employees assignable to the transferred portion. In calculating the transferred portion, the secretary shall utilize the last four (4) calendar quarters preceding the date of transfer for workers employed by the successor subsequent to that date. The taxable payroll, benefit charges and the potential benefit charges shall be assumed by the successors in a like proportion.
(b) Notwithstanding the provisions of paragraph (a) of this subsection, if any employing unit succeeds to a portion of the trade or business of another employing unit; becomes, by reason of that succession, a subject employer with substantially the same ownership, management, or control as the predecessor employing unit; and lays off or terminates more than one-half (1/2) of the original employees transferred within six (6) months of the date of transfer; then the succession and creation of the new employing unit shall be voided, and the benefits attributable to the lay-offs or terminations shall be charged to the reserve account of the original employing unit.
(6) (a) The contribution rate of a successor in whole or in part, which was a subject employer prior to succession, shall not be affected by the transfer of the reserve account for the remainder of the rate year in which succession occurred; except that the rate of the successor shall be recalculated and made effective upon the first day of the calendar quarter
immediately following the date of the transfer if there is substantially common ownership, management, or control of the predecessor and successor.
(b) The contribution rate of a successor in whole or in part, which was not a subject employer prior to succession, shall be determined by a review of the application required by subsection (2)(b) of this section, except if the secretary finds, after a thorough investigation based on the use of objective factors, including but not limited to:
1. The cost of acquiring the business;
2. How long the original business enterprise was continued; and
3. Whether a substantial number of new employees were hired for performance of duties unrelated to the business activity prior to acquisition;
that the succession was solely for the purpose of obtaining a rate lower than that prescribed in KRS § 341.270(1) and 341.272 for a new employing unit, then the unemployment experience of the predecessor shall not be transferred, the rate for a new employing unit shall be assigned, and the employing unit shall be otherwise deemed a successor for the purpose of KRS § 341.070(7) and subsection (3) of this section.
(c) The contribution rate for a successor which becomes a subject employer through the simultaneous transfer, either in whole or in part, of two (2) or more predecessor reserve accounts shall be the rate determined in accordance with the provisions of KRS § 341.270, by combining the reserve accounts succeeded to as of the computation date for determining rates for the calendar year in which succession occurred.
(d) The contribution rate of a successor which succeeds, either in whole or in part, to a predecessor’s reserve account after a computation date, but prior to the beginning of the calendar year immediately following that computation date, shall be the rate determined in accordance with KRS
341.270, by effecting the transfer of the reserve account as of the computation date immediately preceding the date of succession.
(7) Notwithstanding KRS § 341.270, the contribution rate for an employing unit that knowingly violates or attempts to violate the provisions of this section or any other provision of the chapter related to determining the assignment of a contribution rate shall be the highest rate assignable under this chapter for the calendar year during which the violation or attempted violation occurred and the three (3) calendar years immediately following that year. If that employer’s rate is already at the highest assignable rate, or if the amount of increase in the employer’s rate would be less than an additional two percent (2) for that year, then a penalty rate of contributions of an additional two percent (2) of taxable wages shall be imposed for each year.
(8) In addition to the penalties prescribed in subsection (7) of this section and KRS
341.990(9), any person who knowingly violates this section shall be subject to the penalties stipulated under KRS § 341.990.
(9) (a) The secretary shall establish procedures to identify the transfer of a business for purposes of this section.
(b) The secretary shall have the authority and discretion to set an initial contribution rate upon the providing of justification by a subject employer and consideration of relevant factors, including but not limited to the factors set forth in subsections (2) and (6)(a) of this section.
Effective:July 1, 2022
History: Amended 2022 Ky. Acts ch. 236, sec. 149, effective July 1, 2022. — Amended 2019 Ky. Acts ch. 146, sec. 68, effective June 27, 2019. — Amended
2018 Ky. Acts ch. 134, sec. 5, effective July 14, 2018. — Amended 2017 Ky. Acts ch. 133, sec. 3, effective June 29, 2017. — Amended 2005 Ky. Acts ch. 12, sec. 1, effective June 20, 2005. — Amended 2000 Ky. Acts ch. 32, sec. 1, effective July 14, 2000. — Amended 1998 Ky. Acts ch. 167, sec. 10, effective July 15, 1998. — Amended 1988 Ky. Acts ch. 106, sec. 11, effective July 15,
1988. –Amended 1978 Ky. Acts ch. 389, sec. 30, effective July 1, 1978. — Amended 1974 Ky. Acts ch. 74, Art. VI, sec. 107(23), (31). — Amended 1972 Ky. Acts ch. 21, sec. 32. — Amended 1964 Ky. Acts ch. 168, sec. 5. — Amended
1952 Ky. Acts ch. 154, sec. 17. — Amended 1950 Ky. Acts ch. 206, sec. 1. — Amended 1942 Ky. Acts ch. 19, secs. 7 and 16. — Recodified 1942 Ky. Acts ch.
208, sec. 1, effective October 1, 1942, from Ky. Stat. sec. 4748g-15.
(a) “Substantially common” or “substantially the same” means that there is identifiable or demonstrative commonality or similarity of ownership, familial relationships, principals or corporate officers, day-to-day operations, assets and liabilities, and stated business;
Terms Used In Kentucky Statutes 341.540
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Benefits: means the money payments payable to a worker under this chapter and under any previous unemployment compensation law of this state with respect to his unemployment. See Kentucky Statutes 341.020
- Cabinet: means the Education and Labor Cabinet. See Kentucky Statutes 341.005
- Calendar year: means a year beginning on January 1. See Kentucky Statutes 341.080
- Contributions: means the money payments, exclusive of interest and penalties, to the unemployment insurance fund required by this chapter and by any previous unemployment compensation law of this state. See Kentucky Statutes 341.020
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Remainder: An interest in property that takes effect in the future at a specified time or after the occurrence of some event, such as the death of a life tenant.
- Reserve account: means a separate book account maintained by the cabinet for each subject contributing employer under KRS §. See Kentucky Statutes 341.040
- Secretary: means the secretary of the Education and Labor Cabinet or his or her duly authorized representative. See Kentucky Statutes 341.005
- subject employer: means :
(1) Any employing unit which in any calendar quarter in either the current or preceding calendar year paid for service in covered employment wages of fifteen hundred dollars ($1,500) or more. See Kentucky Statutes 341.070 - Violate: includes failure to comply with. See Kentucky Statutes 446.010
- wages: includes tips which are: (a) Received while performing services which constitute employment. See Kentucky Statutes 341.030
- Year: means calendar year. See Kentucky Statutes 446.010
(b) “Trade” or “business” includes but is not limited to a commercial enterprise or establishment; any entity engaged in the supplying, production, or manufacturing of goods, commodities, or services; any entity engaged in commerce, sale for profit, or the providing of goods, personnel, or services;
(c) “Knowingly” means having actual knowledge of, or acting with deliberate ignorance or disregard for, the prohibition involved;
(d) “Violates” or “attempts to violate” includes, but is not limited to, intended evasion, misrepresentation, or willful nondisclosure; and
(e) “Person” has the same meaning as in Section 7701(a)(1) of the Internal
Revenue Code.
(2) (a) For the purpose of this chapter, if a subject employer transfers all or part of its trade or business, the acquiring employing unit shall be deemed a successor if the transfer is in accordance with administrative regulations promulgated by the secretary, or if there is substantially common ownership, management, or control of the subject employer and employing unit. If an employing unit is deemed a successor, the transferring employing unit shall be deemed a predecessor.
(b) For the purpose of this chapter, if a nonsubject employer acquires all or part of the trade or business of a subject employer, the nonsubject employer shall file an application with the Office of Unemployment Insurance to establish an unemployment reserve account within forty-five (45) days of employing personnel. The application will be considered and processed in accordance with administrative regulations promulgated by the secretary and shall require information necessary to determine whether the nonsubject employer is a successor of the subject employer and to establish an initial unemployment contribution rate for the employer. Factors to be considered in the determination of successorship and the fixing of the initial rate shall include but not be limited to the nonsubject employer’s prior unemployment claims history, benefit charges, historical rate charges, and payment penalties assessed in the previous five (5) years, in addition to the factors set forth in subsection (6)(b) of this section. After consideration of these factors, and others that the applicant may submit in justification of an initial rate determination, the secretary shall set an appropriate contribution rate. Any determinations of initial unemployment contribution rates made pursuant to this subsection shall not be effective prior to January 1, 2018.
(3) (a) Notwithstanding subsection (2)(b) of this section, any successor to the trade or business of a subject employer shall assume the resources and
liabilities of the predecessor’s reserve account, including interest, and shall continue the payment of all contributions and interest due under this chapter, except that the successor shall not be required to assume the liability of any delinquent contributions and interest of a predecessor or predecessors unless the cabinet notifies the successor of the delinquency within six (6) months after the department has notice of the succession; and
(b) Any nonsubject employer that is deemed a successor in whole or part shall be allowed to make a one (1) time voluntary payment to pay off or reduce the negative reserve assumed from the predecessor. This payment shall be made within sixty (60) days of receipt of the first notice of a negative predecessor reserve account. This one (1) time voluntary payment cannot exceed the amount of negative reserve assumed by the successor.
(4) The liability for delinquent contributions and interest imposed upon the successor by subsection (3) of this section shall be secondary to the liability of the predecessor or predecessors, and if the delinquency has been reduced to judgment, the order of execution on the judgment shall be as follows:
(a) Against the assets, both real and personal, of the predecessor or predecessors;
(b) Against the assets, both real and personal, of the business acquired; and
(c) Against the assets, both real and personal, of the successor or acquirer. (5) (a) Notwithstanding the provisions of subsection (3) of this section, any
successor to a portion of the trade or business of a subject employer, who
is, or by reason of the transfer becomes, a subject employer, shall assume the resources and liabilities of the predecessor’s reserve account in proportion to the percentage of the payroll or employees assignable to the transferred portion. In calculating the transferred portion, the secretary shall utilize the last four (4) calendar quarters preceding the date of transfer for workers employed by the successor subsequent to that date. The taxable payroll, benefit charges and the potential benefit charges shall be assumed by the successors in a like proportion.
(b) Notwithstanding the provisions of paragraph (a) of this subsection, if any employing unit succeeds to a portion of the trade or business of another employing unit; becomes, by reason of that succession, a subject employer with substantially the same ownership, management, or control as the predecessor employing unit; and lays off or terminates more than one-half (1/2) of the original employees transferred within six (6) months of the date of transfer; then the succession and creation of the new employing unit shall be voided, and the benefits attributable to the lay-offs or terminations shall be charged to the reserve account of the original employing unit.
(6) (a) The contribution rate of a successor in whole or in part, which was a subject employer prior to succession, shall not be affected by the transfer of the reserve account for the remainder of the rate year in which succession occurred; except that the rate of the successor shall be recalculated and made effective upon the first day of the calendar quarter
immediately following the date of the transfer if there is substantially common ownership, management, or control of the predecessor and successor.
(b) The contribution rate of a successor in whole or in part, which was not a subject employer prior to succession, shall be determined by a review of the application required by subsection (2)(b) of this section, except if the secretary finds, after a thorough investigation based on the use of objective factors, including but not limited to:
1. The cost of acquiring the business;
2. How long the original business enterprise was continued; and
3. Whether a substantial number of new employees were hired for performance of duties unrelated to the business activity prior to acquisition;
that the succession was solely for the purpose of obtaining a rate lower than that prescribed in KRS § 341.270(1) and 341.272 for a new employing unit, then the unemployment experience of the predecessor shall not be transferred, the rate for a new employing unit shall be assigned, and the employing unit shall be otherwise deemed a successor for the purpose of KRS § 341.070(7) and subsection (3) of this section.
(c) The contribution rate for a successor which becomes a subject employer through the simultaneous transfer, either in whole or in part, of two (2) or more predecessor reserve accounts shall be the rate determined in accordance with the provisions of KRS § 341.270, by combining the reserve accounts succeeded to as of the computation date for determining rates for the calendar year in which succession occurred.
(d) The contribution rate of a successor which succeeds, either in whole or in part, to a predecessor’s reserve account after a computation date, but prior to the beginning of the calendar year immediately following that computation date, shall be the rate determined in accordance with KRS
341.270, by effecting the transfer of the reserve account as of the computation date immediately preceding the date of succession.
(7) Notwithstanding KRS § 341.270, the contribution rate for an employing unit that knowingly violates or attempts to violate the provisions of this section or any other provision of the chapter related to determining the assignment of a contribution rate shall be the highest rate assignable under this chapter for the calendar year during which the violation or attempted violation occurred and the three (3) calendar years immediately following that year. If that employer’s rate is already at the highest assignable rate, or if the amount of increase in the employer’s rate would be less than an additional two percent (2) for that year, then a penalty rate of contributions of an additional two percent (2) of taxable wages shall be imposed for each year.
(8) In addition to the penalties prescribed in subsection (7) of this section and KRS
341.990(9), any person who knowingly violates this section shall be subject to the penalties stipulated under KRS § 341.990.
(9) (a) The secretary shall establish procedures to identify the transfer of a business for purposes of this section.
(b) The secretary shall have the authority and discretion to set an initial contribution rate upon the providing of justification by a subject employer and consideration of relevant factors, including but not limited to the factors set forth in subsections (2) and (6)(a) of this section.
Effective:July 1, 2022
History: Amended 2022 Ky. Acts ch. 236, sec. 149, effective July 1, 2022. — Amended 2019 Ky. Acts ch. 146, sec. 68, effective June 27, 2019. — Amended
2018 Ky. Acts ch. 134, sec. 5, effective July 14, 2018. — Amended 2017 Ky. Acts ch. 133, sec. 3, effective June 29, 2017. — Amended 2005 Ky. Acts ch. 12, sec. 1, effective June 20, 2005. — Amended 2000 Ky. Acts ch. 32, sec. 1, effective July 14, 2000. — Amended 1998 Ky. Acts ch. 167, sec. 10, effective July 15, 1998. — Amended 1988 Ky. Acts ch. 106, sec. 11, effective July 15,
1988. –Amended 1978 Ky. Acts ch. 389, sec. 30, effective July 1, 1978. — Amended 1974 Ky. Acts ch. 74, Art. VI, sec. 107(23), (31). — Amended 1972 Ky. Acts ch. 21, sec. 32. — Amended 1964 Ky. Acts ch. 168, sec. 5. — Amended
1952 Ky. Acts ch. 154, sec. 17. — Amended 1950 Ky. Acts ch. 206, sec. 1. — Amended 1942 Ky. Acts ch. 19, secs. 7 and 16. — Recodified 1942 Ky. Acts ch.
208, sec. 1, effective October 1, 1942, from Ky. Stat. sec. 4748g-15.