§ 1325. Employers’ experience-rating records; disclosure to successor entity

(a)(1) The Commissioner shall maintain an experience-rating record for each employer. Benefits paid shall be charged against the experience-rating record of each subject employer who provided base-period wages to the eligible individual. Each subject employer’s experience-rating charge shall bear the same ratio to total benefits paid as the total base-period wages paid by that employer bear to the total base-period wages paid to the individual by all base-period employers. The experience-rating record of an individual subject base-period employer shall not be charged for benefits paid to an individual under any of the following conditions:

(A) The individual’s employment with that employer was terminated under disqualifying circumstances.

(B) The individual’s employment or right to reemployment with that employer was terminated by retirement of the individual pursuant to a retirement or lump-sum retirement pay plan under which the age of mandatory retirement was agreed upon by the employer and its employees or by the bargaining agent representing those employees.

(C) As of the date on which the individual filed an initial claim for benefits, the individual’s employment with that employer had not been terminated or reduced in hours.

(D) The individual was employed by that employer as a result of another employee taking leave under chapter 5, subchapter 4 of this title, and the individual’s employment was terminated as a result of the reinstatement of the other employee under chapter 5, subchapter 4 of this title.

(E) [Repealed.]

(F) The individual voluntarily separated from that employer to accompany a spouse who is on active duty with the U.S. Armed Forces or who holds a commission in the U.S. Foreign Service and is assigned overseas as provided by subdivision 1344(a)(2)(A) of this chapter.

(G) [Repealed.]

(H) [Repealed.]

(2) If an individual’s unemployment is directly caused by a major disaster declared by the President of the United States pursuant to 42 U.S.C. § 5122 and the individual would have been eligible for federal disaster unemployment assistance benefits but for the receipt of regular benefits, an employer shall be relieved of charges for benefits paid to the individual with respect to any week of unemployment occurring due to the natural disaster up to a maximum amount of four weeks.

(3) [Repealed.]

(b)(1) Disclosure of contribution rate to successor entity. Any individual or employing unit who in any manner succeeds to or acquires the organization, trade, or business or substantially all of the assets of any employer who has been operating the business within two weeks prior to the acquisition, except any assets retained by the employer incident to the liquidation of the employer’s obligations, and who thereafter continues the acquired business shall be considered to be a successor to the predecessor from whom the business was acquired and, if not already an employer before the acquisition, shall become an employer on the date of the acquisition. The Commissioner shall transfer the experience-rating record of the predecessor employer to the successor employer. If the successor was not an employer before the date of acquisition, the successor’s rate of contribution for the remainder of the rate year shall be the rate applicable to the predecessor employers with respect to the period immediately preceding the date of acquisition if there was only one predecessor or there were only predecessors with identical rates. If the predecessors’ rates were not identical, the Commissioner shall determine a rate based on the combined experience of all the predecessor employers. If the successor was an employer before the date of acquisition, the contribution rate that was assigned to the successor for the rate year in which the acquisition occurred will remain assigned to the successor for the remainder of the rate year, after which the experience-rating record of the predecessor shall be combined with the experience rating of the successor to form the single employer experience-rating record of the successor. At any time prior to the issuance of the certificate required by subsection 1322(b) of this chapter, an employing unit shall, upon request of a potential successor, disclose to the potential successor its current experience-rating record.

(2) Notwithstanding the provisions of subdivision (1) of this subsection, an individual or employing unit who in any manner succeeds to or acquires the organization, trade, or business or substantially all of the assets of any employing unit who was an employer before the date of acquisition and whose currently assigned contribution rate is higher than that currently assigned to the acquiring individual or employing unit shall not be treated as a successor.

(c) Nothing in this section shall be construed to grant to any employer or to individuals performing services for the employer prior claims or rights to the amounts paid by the employer into the Fund.

(d) Notwithstanding any other provision of law, the following shall apply to assignment of rates and transfers of experience:

(1) If an employer transfers its trade or business, or a portion thereof, to another employer and, at the time of the transfer, there is substantially common ownership, management, or control of the two employers, the employment experience attributable to the transferred trade or business shall be transferred to the employer to whom such business is so transferred. The rates of both employers shall be recalculated and made effective immediately upon the date of the transfer of trade or business.

(2) Whenever a person who is not an employer under this chapter at the time it acquires the trade or business of an employer, the unemployment experience of the acquired business shall not be transferred to such person if the Commissioner finds that such person acquired the business solely or primarily for the purpose of obtaining a lower rate of contributions. Instead, that person shall be assigned the highest rate assignable under this chapter until being subject to this chapter for a sufficient period of time to have his or her rate computed under section 1326 of this title. In determining whether the business was acquired solely or primarily for the purpose of obtaining a lower rate of contribution, the Commissioner shall use objective factors that may include:

(A) the cost of acquiring the business;

(B) whether the person continued the business enterprise of the acquired business;

(C) how long that business enterprise was continued; and

(D) whether a substantial number of new employees was hired to perform duties unrelated to the business activity conducted prior to acquisition of the new business.

(3) If a person knowingly violates or attempts to violate subdivision (1) or (2) of this subsection or any other provision of this chapter related to determining the assignment of a contribution rate, or if a person knowingly advises another person in a way that results in a violation of those provisions, the person shall be subject to the following penalties:

(A) If the person is an employer, the person shall be assigned the highest rate assignable under this chapter for the rate year during which the violation or attempted violation occurred and the three rate years immediately following this rate year. If the person’s business is already at the highest rate for any year, or if the amount of increase in the person’s rate would be less than two percent for that year, a penalty rate of contributions of two percent of taxable wages shall be imposed for that year.

(B) If the person is not an employer, that person shall be subject to a civil penalty of not more than $5,000.00. A fine under this subdivision shall be deposited in the Contingent Fund established under section 1365 of this title.

(C) In addition to other penalties under this subdivision, a person who violates this section may be imprisoned not more than three years or fined not more than $5,000.00, or both.

(4) As used in this section:

(A) “Attempt to violate” means the intent to evade, misrepresentation, or willful nondisclosure.

(B) “Knowingly” means having actual knowledge of or acting with deliberate ignorance or reckless disregard of the prohibition.

(C) “Person” has the same meaning as in Section 7701(a)(1) of the Internal Revenue Code of 1986.

(D) “Trade or business” includes the employer’s workforce.

(5) The Commissioner shall establish procedures, by rule, to identify the transfer or acquisition of a business for the purposes of this section.

(e)-(g) [Repealed.] (Amended 1959, No. 329 (Adj. Sess.), § 22, eff. March 1, 1961; 1961, No. 132, eff. May 19, 1961; 1961, No. 210, § 15, eff. July 11, 1961; 1963, No. 98; 1967, No. 262 (Adj. Sess.), § 1, eff. Feb. 28, 1968; 1969, No. 42, § 1; 1977, No. 64, § 13; 1981, No. 86, § 10, eff. May 10, 1981; 1985, No. 50, § 8; 1985, No. 146 (Adj. Sess.), § 1; 1987, No. 100, § 1; 1989, No. 17, eff. April 13, 1989; 1989, No. 47, §§ 1, 2, eff. May 18, 1989; 1989, No. 83, § 2; 1997, No. 101 (Adj. Sess.), §§ 7, 9; 2005, No. 41, § 1; 2009, No. 118 (Adj. Sess.), § 1; 2011, No. 50, § 9c, eff. July 1, 2011; 2013, No. 82, § 1, eff. June 10, 2013; 2013, No. 173 (Adj. Sess.), § 9; 2017, No. 74, § 49; 2019, No. 91 (Adj. Sess.), § 30, eff. March 30, 2020; 2019, No. 91 (Adj. Sess.), § 32, eff. Oct. 1, 2021; 2021, No. 51, § 6, eff. June 1, 2021.)