STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)
RICE HEALTH CARE FACILITIES OF WIS, INC, Appellant
UNIVERSAL HEALTH CORPORATION, Respondent
UNEMPLOYMENT INSURANCE CONTRIBUTION LIABILITY DECISION
Account No. 490494-6 (RHCF), Account No. 425023-8 (UHC), Hearing No. S9700277MW
An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed.
The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission makes the following:
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Rice Health Care Facilities of Wisconsin, Inc. (hereinafter "RHCF"), the appellant, is a Wisconsin business (for-profit) corporation. RHCF is owned by Larry Rice and Otis Rice, father and son. The Rices also own another Wisconsin business corporation, Rice Management (hereinafter "RM"), and they also have a partnership, Rice Enterprises.
Since prior to the time of the events with which this case is concerned, the Rices have been involved, through Rice Enterprises, RM and RHCF, in the operation of nursing homes in Lancaster, Mineral Point, and Milwaukee.
This case concerns a nursing home located in Ripon, Wisconsin, the Parkview Care Center (hereinafter "Parkview"). Prior to January 1, 1997, Parkview was owned and operated by Universal Health Corporation (hereinafter, "UHC"), a Wisconsin business corporation. In early 1996, negotiations began between the Rices and UHC concerning the possible sale of Parkview. Subsequently, St. Francis Home of Fond du Lac, Inc. (hereinafter "SFH"), a Wisconsin non-stock, not-for-profit corporation which operates a nursing home in Fond du Lac, also became involved in the negotiations. These negotiations culminated in the execution of a number of contracts on December 24, 1996, which provided, inter alia, for the sale of Parkview, to take effect at 11:59 p.m. on December 31, 1996.
One of these contracts (Ex. 1), "Purchase And Sale Agreement (Parkview)", was between UHC and SFH. It provided for sale, by UHC to SFH, of all land, buildings, equipment, personal property, software licenses and databases, books and records, operational licenses, and goodwill, of Parkview. The only things excluded from the sale were accounts receivable and cash. The agreement also provided that SFH agreed "to hire or cause to be hired", a sufficient number of UHC's employes to avoid the effect of Wisconsin's statutes concerning notification of mass layoff. (Ex. 1).
Another one of the contracts (Ex. 4), entitled "Parkview Care Center Management Contract", was between SFH and RM. This contract contained a preliminary recital that SFH desired to contract with RM "to provide significant management and administrative services necessary for the operation of" Parkview. It provided that RM would "provide or cause to be provided" all personnel for the operation of, and all services for the administration and management of, day-to-day operations of Parkview. The contract indicated that RM had provided a personnel, staffing and services plan for operation of the nursing home, and it stated that pursuant to that plan RM was required to provide or cause to be provided certain personnel, and certain services. The personnel were an administrator, a physician medical director, a director of nursing services, a charge nurse and other nurses as necessary, a medical records supervisor, and staff necessary to perform the functions and services of a skilled nursing facility. The services which RM undertook to provide were specialized rehabilitative services, social work services, dietary services, pharmaceutical services, dental services, medical record storage, an activities program, purchasing services, reimbursement, billing, collection, accounting, financial statement preparation, bill paying (pursuant to specifically identified check writing authority) and other financial services, and maintenance, laundry and housekeeping personnel and services.
RM was also obligated by this contract to "[maintain] the Nursing Home as a skilled nursing facility properly licensed pursuant to all Federal, State and Local Laws", and to "[maintain] the Nursing Home's participation in the Medicare and Medicaid reimbursement programs", and to "manage and direct the collection, as agent for Owner, of all receipts for services provided by the Nursing Home and manage and direct the payments, as agent for Owner, of all expenses and obligations of the Nursing Home to third parties."
This contract expressly made RM subject to the direction and control of SFH and its
Board of Directors, and it provided that the "personnel, staffing and services
plan" could be unilaterally changed by SFH if necessary to comply with licensure or
reimbursement requirements. The contract was for a term of 5 years, automatically renewing
for like terms, terminable upon material breach of its terms or upon mutual agreement. It
was also subject to unilateral termination by SFH after 3 years, upon one year's notice.
The third contract (Ex. 3), entitled "Personnel Services Agreement", was between SFH and RHCF, the petitioner herein. This contract recited, inter alia, that
SFH is contracting with Rice Management, Inc. to provide management and administrative services necessary for the operation of the Nursing Home, under a management contract dated _____ ("Management Contract");
Rice has agreed to provide professional staff and other management and administrative personnel, as identified herein, to the Nursing Home, as employees leased through Rice Health Care Facilities, Inc.
From context, it can be inferred that the reference intended by the use of the shorthand term "Rice" in the second quoted paragraph above, was to RM. (1) The "Personnel Services Agreement" continues at this point by stating that its purpose was for RHCF "to provide qualified individuals to SFH for operation of the Nursing Home", and that RHCF's responsibilities under the contract were, inter alia, to "provide professional and support personnel on a full-time or part-time basis, as appropriate, for the efficient operation of the Nursing Home".
The contract between SFH and RHCF further provided that the "personnel needs" of SFH would be determined by considering "the services and personnel to be provided by Rice under the Management Contract between it and SFH". Again, from the context (i.e., the reference in to the "Management Contract"), it appears that the reference to "Rice" in this sentence was to RM. Thus, the contract between SFH and RHCF provided that the "personnel needs" which RHCF was contracting to satisfy would be determined by looking to the contract between SFH and RM.
This contract was also for a term of 5 years, automatically renewing for like terms, terminable upon material breach of its terms or upon mutual agreement. It was also subject to termination if SFH elected to unilaterally terminate its Management Agreement with RM, or if SFH sold the nursing home.
The following graphic summarizes the entities involved in this case and the contractual connections between them:
As called for by the "Purchase And Sale Agreement" between UHC and SFH, UHC terminated all of its employes at Parkview as of the closing of the transfer of the business to SFH.
Parkview's operations continued uninterrupted as of January 1, 1997, the effective date of the sale of Parkview from UHC to SFH. 141 out of the 146 employes who had previously worked at Parkview continuing to work there, providing the same services to the same customers as they had before the sale. These former employes of UHC were technically employes of RHCF, having all been hired as employes of RHCF effective at the same time as the effective date of the sale.
The former employes of UHC who continued working at Parkview as employes of RHCF, as well as the several other employes of RHCF who began working at Parkview after the sale, performed services at Parkview by virtue of the fact that RHCF contracted with SFH to supply those individuals to perform services for it. Matters such as time, place, type of work, working conditions, quality, and price of the services were negotiated between RHCF and SFH, both in the negotiations which led to the execution of the "Personnel Services Agreement" between RHCF and SFH, and subsequent thereto under the terms of that agreement, which expressly provided that RHCF and SFH would "consult" or "mutually agree" or "from time to time review" on such matters as the need for and scheduling of employes, whether employes were fulfilling job requirements, and what compensation would be paid to RHCF. RHCF determined assignments of its employes to work for SFH at Parkview, it set the rate of pay of those employes and paid them from its own accounts, and it was responsible hiring and terminating persons who performed services for SFH at Parkview. The commission concludes that with respect to the relationship between RHCF and Parkview, RHCF is most appropriately characterized as being an employe service company within the meaning of Wis. Stat. 108.02(12m), which leased employes to perform services in the operation of Parkview.
Discussion - The Unemployment Compensation Act provides that in certain cases a business may be deemed to have been "transferred". Wis. Stat. § 108.16(8)(a). It further provides that where there has been such a transfer, the transferee may be deemed a "successor" to the Unemployment account of the transferor. In some cases, such successorship is mandatory, with the result that the transferee must take over the Unemployment account of transferor whether they want to or not; Wis. Stat. § 108.16(8)(c), (d), (e). In other cases, commonly referred to as involving "optional" successorship, one of the conditions of the successorship is that the transferee file an application for the successorship; this effectively means that the transferee will not be determined to be a successor unless they want to. Wis. Stat. § 108.16(8)(b). (2) The issue in this case is whether RHCF is an "optional successor" to the Wisconsin unemployment reserve account of UHC. RHCF contends that the conditions necessary to establish optional successorship have all been met; the department disagrees.
The threshold question in any case involving successorship, is whether there has been a transfer of a business. Wis. Stat. § 108.16(8)(a) provides that a business is deemed transferred if any asset or any activity of an employer, whether organized or carried on for profit, nonprofit or governmental purposes, is transferred in whole or in part by any means, other than in the ordinary course of business. This provision has also been interpreted and expanded upon by rule; Wis. Admin. Code DWD 115.01(4) provides that "[a]n asset is transferred if ownership, possession or use changes from the transferor to the transferee", and DWD 115.01(5) provides a list of tests for determining if a business activity has been transferred.
It is clear that there was a transfer of a business from UHC in this case. However, that does not resolve the important question of whether there was a transfer to Rice Health Care Facilities of Wisconsin, Inc.
RHCF concedes that there was no transfer of "ownership" of the Parkview assets from UHC to RHCF, but it asserts that "possession" and "use" of those assets was transferred to RHCF. It also argues that the business activity, of operating a nursing home on the premises of and with the assets of Parkview, was transferred from UHC to RHCF.
Transfer of "possession" and "use" of assets - The commission disagrees with the argument that RHCF obtained "possession" and "use" of assets of UHC, for several reasons.
First, the argument ignore the fact that the question is, whether RHCF acquired possession and use of assets. RHCF bases its argument on the claim that persons who are its employes have possession and use of assets of Parkview. (3) RHCF reasons that because its employees have possession and use of the assets, it therefore has possession and use of those assets. The commission rejects this "vicarious possession and use" theory. RHCF is a corporation, and is sui juris. Of course, a corporation can only act through individuals. However, a corporation does not acquire whatever rights it may have to the use and possession of assets, by acquiring those rights from its employes. If the corporation has those rights, it has them because it, as a separate legal entity, has acquired them by contract from whoever has the power to contract them away. However, RHCF did not acquire any such rights by way of the "Personnel Services Agreement" between SFH and RHCF. That agreement is simply one for RHCF to lease its employes so that they may be assigned to work at Parkview. As is discussed at more length in the Memorandum Opinion which is attached hereto, under the contractual agreements that define the roles to be played by RM and RHCF in respect to Parkview, RM is the entity with the role of operating the nursing home.
Second, this argument ignores the part of the statutory test which looks to whether a transfer of assets has been "other than in the ordinary course of business". This is significant because what RHCF is relying on is a supposed transfer to its employes of possession and use of the assets of Parkview. This reliance is misplaced, because any such transfer is precisely "in the ordinary course of business". For example, every business which has employes must give those employes the possession and use of the assets of the business which they use to do their jobs. That does not mean that every morning, when the factory doors open and the employes go in and take their places at their machines and begin operating them, that there has been a "transfer" of the business to the employes in the sense contemplated by the statute. It is in the ordinary course of a business, that it must give its employes use and possession of access. In this case, in which RHCF provides leased employes to work at Parkview, those employes take temporary possession, and temporarily have the use of, assets of Parkview, in the ordinary course of business. Thus, even if RHCF's vicarious use and possession theory could be accepted, it would not establish a transfer under Wis. Stat. § 108.16(8)(a) because it is merely a vicarious transfer of use and possession in the ordinary course of business.
Transfer of "business activity" -- The commission also disagrees with the argument that there was a transfer of a "business activity" from UHC to RHCF, for several reasons.
What is critical to evaluating this argument, is determining what activity or activities RHCF engages in. Here again, RHCF seeks to acquire a particular status vicariously, deriving its rights from its employes (rather than vice versa): it points to the activities its employes engage in, asserting that because they are engaged in the activity of operating a nursing home, it is engaged in the activity of operating a nursing home. The commission concludes that this "vicarious activity" theory is just as invalid as the theory that RHCF has vicarious possession and use of the assets of Parkview through its employes.
The activity in which RHCF is engaged with respect to Parkview must be determined by looking at its contract with SFH and at the other contractual documents that define the roles various actors play concerning Parkview. As is discussed at more length in the Memorandum Opinion which is attached hereto, RM is the entity with the role of operating the nursing home. The contracts make it clear that RHCF is not given the right or obligation to engage in the activity of operating Parkview; its activity is to provide employes. To the extent that SFH has contracted away any right or obligation to engage in the activity of operating Parkview, it has done so to RM. It is RM which undertakes the right and obligation to manage, administer and operate Parkview. While persons who are employes of RHCF may de facto be operating the nursing home on a day-to-day basis, that is only because they are being leased so that RM may fulfill its obligation to SFH to operate the nursing home.
Besides the fact that RHCF is not engaged in the activity which UHC engaged in -- operating the Parkview nursing home -- the activity in which RHCF does engage relative to Parkview (leasing employes) is not one that UHC engaged in. Thus, that activity could not have been transferred to RHCF from UHC.
Even if it is assumed for the sake of argument, that there was a transfer of a very small part of the activity of operating a nursing home -- that being the staffing/payroll functions -a finding of successorship would not be appropriate. Under Wis. Admin. Code Ch. DWD 115.01(3), "the transfer of payroll function only" is expressly declared not to be a business transfer.
Beyond this, however, there is a problem of the extent of such a "transfer". To satisfy the standards for optional successorship, a transfer must include at least 25% of the transferor's total business as measured by comparing the payroll experience assignable to the portion of the business transferred with the transferor's total payroll experience. Wis. Stat. § 108.16(8)(b)2. Even if it is assumed (unrealistically) that all of the "Administrative Service Salaries" noted on Exhibits 5 and 6 were devoted to the personnel and payroll functions which are what RHCF assumes under the "Personnel Services Agreement", this still comes nowhere near to the 25% of total payroll of which is required.
Licensure -- In addition to the above, the commission also agrees with the department, that the matter of licensure is critical to the conclusion that the business activity of operating the Parkview nursing home cannot be considered to have been transferred to RHCF.
Pursuant to Wis. Stat. § 50.03(1), no person may conduct, maintain, operate or permit to be maintained or operated a community-based residential facility or nursing home unless it is licensed by the Department of Health and Family Services. Pursuant to Wis. Stat. 50.03(3)(b), an application for such a license must contain information including the name and extent of interest of all managing employes and, if any, the director of nursing of the facility, as well as any person who, directly or indirectly, owns any interest in the partnership, corporation or other entity which operates the facility. Pursuant to Wis. Stat. 50.03(4)(e), such a license shall be issued only for the premises and persons named in the application and is not transferable or assignable. (4) Finally, pursuant to Wis. Stat. § 50.03(13), whenever ownership of a facility is transferred from the person or persons named in the license to any other person or persons, the transferee must obtain a new license; an application for such a license (i.e., upon transfer of ownership of the facility) must be filed at least 30 days prior to the final transfer, and the transferor remains responsible for the operation of the nursing home until the application is approved.
The simple fact is that unless RHCF obtained the license required under Chapter 50, it could not "conduct, maintain or operate" the Parkview nursing home within the meaning of Wis. Stat. § 50.03(1). However, RHCF did not obtain that license; the testimony of RHCF's witness established that the licensee is SFH. (5) It would be anomalous for the UI Division, or LIRC, to decide this case in a way that purports to recognize a transfer of a type that plainly could not occur under these other laws.
Conclusion -- For the reasons stated above, the commission concludes that any transfer of use or possession of assets of Parkview or of the activity of operating Parkview, to employes of RHCF, was not a transfer to RHCF, within the meaning of Wis. Stat. § 108.16(8)(a), and was in any event also a transfer in the ordinary course of business, within the meaning of that section.
The commission therefore concludes that neither ownership, use, or possession of any of the assets of Parkview changed from UHC to RHCF, within the meaning of Wis. Admin. Code Ch. DWD 115.01(4), and that no assets or business activities of UHC were transferred to RHCF, within the meaning of Wis. Stat. § 108.16(8)(a).
The commission further concludes that, assuming arguendo an activity of administering personnel and payroll functions was transferred from UHC to RHCF, pursuant to Wis. Admin. Code Ch. DWD 115.01(3), this was not a business transfer. Further assuming, arguendo, that an activity of administering personnel and payroll functions was transferred to RHCF and that it was a partial business transfer involving more than "payroll functions" within the meaning of DWD 115.01(3), the amount of payroll assignable to the engaging in of that activity was not shown to have been at least 25% of the transferor's payroll, within the meaning of Wis. Stat. § 108.16(8)(b)2.
The initial determination is affirmed. Accordingly, appellant Rice Health Care Facilities of Wisconsin, Inc., Account No. 490494-6, is not a successor to the unemployment reserve account of respondent Universal Health Corporation, Account No. 425023-8.
Dated and mailed November 24, 1999
rhcsucc.srr : 110 : ER 470.01 ER 470.02 ER 470.05 ER 470.12
/s/ David B. Falstad, Chairman
/s/ Pamela I. Anderson, Commissioner
James A. Rutkowski, Commissioner
Clearly, the ownership, use and possession of the Parkview nursing home, and the activity of operating that business, was transferred from UHC. It is also clear, that the initial, direct transfer was to SFH. In order to determine whether any significant elements of the Parkview nursing home business may have been transferred through SFH, it is necessary to rely on a close analysis of the contracts which SFH entered into concurrently with its contract to buy the business from UHC. These are Ex. 3, "Personnel Services Agreement", a contract between SFH RHCF, and Ex. 4, "Parkview Care Center Management Contract", a contract between SFH and RM. The commission is satisfied that under these contracts, the significant attributes of the business are, to the extent they are transferred "through" SFH at all, transferred to RM, and that RHCF is only involved as an employer of and lessor of employes to staff the nursing home.
The distinction between the roles assumed by Rice Management and Rice Health Care Facilities is evident even in the titles of the contracts. RM's contract is a "Management Contract"; RHCF's is a "Personnel Services Agreement" (emphasis added). It is also evident in the Recitals which preface the "Personnel Services Agreement" with RHCF, which explain how SFH is contracting with Rice Management (under the "Management Contract") for it to "provide management and administrative services necessary for the operation of the Nursing Home" -- with employes who will be "leased through Rice Health Care Facilities of Wisconsin, Inc." This is a direct confirmation that the role of RHCF is to be, in effect, an employe leasing service.
The limited nature of the role of RHCF is reflected in statement in the "Personnel Services Agreement" as to the purpose of the Agreement. Significantly, it does not provide that the intent is that RHCF will "operat[e] the Nursing Home" - rather, the intent is that RHCF will merely "provide qualified individuals . . . for operation of the Nursing Home". This is recapitulated in the description of the "Responsibilities" of RHCF under the agreement, which are to "provide professional and support personnel . . . for the efficient operation of the Nursing Home". The overall tenor of the entire agreement relates to exactly what its title describes: the provision of personnel.
Responsibilities for engaging in the business activity of operating Parkview, and rights or responsibilities connected with possession and use of the assets of Parkview, are not given to RHCF under the "Personnel Services Agreement". These things are instead assigned to RM, under the separate "Management Contract". The nature of the rights and obligations undertaken by RM under the "Management Contract" are qualitatively different from those undertaken by RHCF in the "Personnel Services Agreement". The "Management Contract" recites that it arises from SFH's desire to contract with RM for "significant management and administrative services for the operation of [the] nursing home". While RHCF undertakes only to provide personnel in its "Personnel Services Agreement", RM directly undertakes to manage, administer and operate the nursing home. Thus, RM is required to provide or cause to be provided both certain personnel and certain services. The services which RM undertakes to provide - rehabilitative, social work, dietary, pharmaceutical, dental, medical record storage, activities, purchasing, financial, maintenance, laundry and housekeeping - constitute the entire range of services necessary for the operation of the business. The fact that RM is directly contracted with to provide these services, establishes that it is precisely RM - not RHCF -- which has the use and possession of the assets of Parkview and which has the right and responsibility to operate the business. The overall tenor of the entire "Management Contract" clearly contemplates that RM will operate the business.
The commission acknowledges, that RHCF and RM are related in a practical sense, in that they are owned by the same interests and that their activities in connection with the operation of nursing homes are carried out in concert. It is evident from a number of sources in the record - not the least of which are the many ambiguities in the contracts in which the identities of RHCF and RM are confused, and the confusion in the testimony as to which entity is being referred to - that the Rices (and their accountant) frequently ignore the distinction between the two corporations and think of them as if they were one entity. However, the commission cannot ignore the fact, that Rice Management, Inc. and Rice Health Care Facilities of Wisconsin, Inc. are separate corporations. It was Rice Health Care Facilities of Wisconsin, Inc. which filed the application seeking to be treated as a successor to the Unemployment reserve account of UHC; therefore, the issue which has to be addressed is whether Rice Health Care Facilities of Wisconsin, Inc. is a transferee and a successor of UHC. The evidence shows that the Rice Health Care Facilities of Wisconsin, Inc., as a corporate entity, does not have use or possession of the assets of Parkview and does not have the right or the obligation to engage in the business activity of operating Parkview. Therefore, it is not a transferee of UHC, through SFH or otherwise.
Rocky Rococo Payroll Clearing Corporation decision -- The department and the Petitioner disagree about the applicability and relevance of a 1989 decision of the commission, Rocky Rococo Payroll Clearing Corporation (LIRC, May 12, 1989). In that case, Rocky Rococo Corporation and Quality Pizza Corporation moved all of their payroll functions to a new corporation, Rocky Rococo Payroll Clearing Corporation, which then sought a determination that it was the employer of the persons who provided services in the pizza restaurants involved in that case and that it was a successor to the Unemployment accounts of the corporations which had moved their payroll functions to it. In its decision in that case, the commission held that there had not in fact been a transfer of any significant part of the business of the transferor corporations to Rocky Rococo Payroll Clearing Corporation, because the "business" of the transferors was making and selling pizzas, whereas the only business activity engaged in by Rocky Rococo Payroll Clearing Corporation, the putative transferee, was doing payroll functions for employes of pizza restaurants. The commission noted that the pizza restaurant workers involved were not actually performing services for Rocky Rococo Payroll Clearing Corporation, since what they were doing was making and selling pizzas, and that was not the business in which Rocky Rococo Payroll Clearing Corporation was involved.
The commission agrees that the Rocky Rococo decision is relevant and instructive in this case. The differences pointed out by RHCF - including the fact that there was nothing analogous to the "through-transfer" involved here from UHC to SFH to Rice corporations - are less significant than the similarities, which involve the fact that in both cases there is a separate corporation the only function of which was to handle personnel functions relating to persons who are then made available to be used by other corporations in their businesses. (6)
RHCF's arguments, including its attempt to distinguish Rocky Rococo, rest in significant part on describing the facts of this case in ways which the commission finds not to be accurate. Thus, RHCF asserts that
"Rice Health Care is not a payroll service which simply carries out the directives of St. Francis Home; instead, Rice Health Care determines the rate of pay for employes and makes all of the administrative and operational decisions concerning Parkview."
(RHCF Brief to LIRC, p. 11) (emphasis added). The emphasized language here is critical to RHCF's argument - but it is inaccurate. RHCF does not make of the administrative and operational decisions concerning Parkview. Nothing in the "Personnel Services Agreement" gives RHCF any right to make such decisions. Rather, what RHCF does under that agreement is to provide personnel. While the administrative and operational decisions concerning Parkview may be being made by RHCF's employes, that is because they are being leased out to the business which does run Parkview so that they may perform, for it, the services necessary to the operation of the nursing home. Rice Health Care Facilities of Wisconsin, Inc. is no more making those decisions, than Rocky Rococo Payroll Clearing Corporation was making and selling pizzas.
RHCF also argues, that SFH "contracted with Rice Health Care for the operation of the facility", citing Ex. 3 (the "Personnel Services Agreement"). (Petitioner's Response Brief, p. 2). The commission does not so read Exhibit 3. SFH contracted with Rice Health Care for personnel to staff the facility, through an employe leasing arrangement with Rice Management. SFH's contract "for the operation of the facility" was with Rice Management.
RHCF argues, that Rice Health Care "is in the business of running nursing homes, not leasing employes". Id. That may be true with respect to the other nursing homes owned by the partnership, Rice Enterprises, but it is not true with respect to Parkview. For whatever reason, the contractual arrangements entered into with respect to Parkview allocated responsibilities between RHCF and RM, in a fashion different from that which evidently applies where these other nursing homes are involved. (7)
RHCF argues that "Rice Health Care and its management employes are charged with the entire administration and operation of Parkview." (emphasis added). (Petitioner's Response Brief, p. 3). Again, that is simply not true. It is only the individual employes, and not the corporate entity (RHCF), that are charged with the entire administration and operation of Parkview. The contracts in evidence here make it clear that the corporate entity which is charged with "the entire administration and operation of Parkview", is Rice Management. A correct description of the situation would therefore be, that "the management employes who are charged with the entire administration and operation of Parkview are employes of RHCF". However, that does not mean that RHCF is charged with the entire administration and operation of Parkview.
Transfer through an intermediary -- RHCF relies in part on the theory that transfers may occur by successive transfers of a business through other parties, citing several administrative decision summary entries from the UC Digest. The department, while conceding that transfers may occur through an intermediary in certain cases, argues that the decisions relied on by RHCF are distinguishable and that the facts here do not establish such a transfer.
The commission does not find it necessary to address the circumstances under which a transfer may take place through intermediary entity. Even assuming for the sake of argument that some elements of the business of Parkview were transferred "through" SFH, the commission finds and concludes that there was no transfer to RHCF within the meaning of the applicable statutory standards.
For this reason, the commission has not reached an issue which would be presented here if there had been a transfer of ownership, use or possession of assets or business activities from UHC through SFH to RHCF. That issue concerns the differences in financing provisions applicable to different entities in this case. Successorship is never possible when different financing provisions apply to transferor and transferee. Wis. Stat. § 108.16(8)(b)3., (c)3., (e)3. In this case, SFH could not have succeeded to the account of UHC, because UHC was a business corporation subject to tax financing and SFH, a non-profit, was subject to reimbursement financing. Similarly, RHCF could not have succeeded to an account held by SFH, because RHCF was also a business corporation subject to tax financing. A question could arise as to whether an account which could not be transferred from "A" to "B", or from "B" to "C", could be transferred from "A" to "C" through "B". The commission specifically notes, that it does not here decide that question.
NOTE: The commission had no disagreement with the material findings or conclusions of the administrative law judge. It has issued its own decision merely in order to be able to set forth more fully the reasons that it arrived at the same result as the administrative law judge.
Attorney Robin L. Van Harpen
Attorney Jorge L. Fuentes
Appealed to Circuit Court. Affirmed November 1, 2000. [Circuit Court decision summary]
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(1)( Back ) The "Personnel Services Agreement" between SFH and RHCF contained an initial parenthetical definition indicating that, in that agreement, the term "Rice" would refer to Rice Health Care Facilities of Wisconsin, Inc. Notwithstanding this, there are places in which the term "Rice" is used in a context which makes it clear that the intended reference is in fact to the other Rice corporation. One is this occurrence, in the third paragraph of the "Recitals. Another occurs in paragraph 2.a., "Rice's Responsibilities", where there is a reference to "Rice", which from the reference to "the Management Contract between it and SFH" is clearly a reference to Rice Management, Inc. Another occurs in paragraph 5.b.ii., where a reference to the Management Contract makes it clear that the term "Rice" is used to refer to RM, not to RHCF.
To the extent that these ambiguities make it difficult to determine exactly what rights and obligations RHCF (as opposed to RM) acquired to use and possession of the assets and to the business activity of operating Parkview, the consequences of that difficulty must fall on RHCF. An entity seeking a determination that they are an optional successor bears the burden of proving the facts necessary to satisfy the applicable tests.
(2)( Back ) Successorship is usually sought under the "optional successorship" provisions when the Unemployment account is positive and has a correspondingly low tax rate; conversely, transferees usually elect not to take optional successorship, or try to avoid mandatory successorship, when the account at issue carries a high tax rate with it.
(3)( Back ) Thus, in his testimony, RHCF's witness repeatedly answered questions about the role RHCF played in the operation of Parkview, by talking about the role the employes of RHCF played -- describing how the employes of RHCF have operated Parkview, and how the medical equipment and supplies of Parkview are used by the employees of RHCF, how the employees of RHCF use and possess the office equipment and supplies, and how the employees of RCH possess and use the records and books of Parkview.
(4)( Back ) It is clear from this, that the purported inclusion of the license to operate Parkview among the "Assets" transferred in the "Purchase And Sale Agreement", was ineffectual. Thus, it is not merely true, as the department asserts, that UHC's license to operate Parkview was not transferred to RHCF - in fact, it was not transferred at all.
(5)( Back ) The fact that SFH would obtain the license was clearly contemplated in the "Purchase And Sale Agreement" between UHC and SFH which stated, in part 5.18, "Seller agrees to cooperate with Buyer, if necessary, so that Buyer can obtain all certificates, licenses and permits necessary for the operation of the business." (emphasis added).
(6)( Back ) The holding in the Rocky Rococo decision implicated the issue which had led to the enactment of the "employe service company" provision, Wis. Stat. §§ 108.02(12m), 108.065. That issue arose from the fact that the general rule was, that an employe was a person who performed services for an employing unit. In the case of persons employed by one entity but leased to another to provide services for that second entity, application of this general rule would require a finding that the persons were employes of the second entity. This would limit the ability of businesses which engaged in the leasing of employes, to offer a complete set of employment services to their clients. The response was to acknowledge the existence of "employe service companies" and to provide that, when certain conditions were met, they would be considered the employer of the persons who they leased to other employers. In the Rocky Rococo decision, the commission opined that Rocky Rococo Payroll Clearing Corporation did not even meet the statutory requirements to be an employe service company, and thus could not even be considered the employer of the pizza restaurant workers involved. The fact that the commission opines that RHCF could be considered an employe leasing company leasing its employes for the operation of Parkview, is a factual distinction between this case and Rocky Rococo which has no relevance to the determinative legal question. In both cases, the significant factor precluding successorship was that there was no transfer of the business activity involved. In Rocky Rococo, the Rocky Rococo Payroll Clearing Corporation was not engaged in the business of operating pizza restaurants, but only in the business of handling personnel- and payroll- related functions for individuals who worked in the operation of pizza restaurants. In this case, Rice Health Care Facilities of Wisconsin, Inc. is not engaged in the business of operating a nursing home, but only in the business of handling personnel- and payroll-related functions for individuals who work in the operation of a nursing home.
(7)( Back ) Some evidence suggests that at the other homes operated by the Rice Partnership and its associated corporations, RHCF and RM, it is RHCF which actually has the legal right and responsibility to manage, administer and operate the homes, while RM simply provides accounting services. However, the contracts which are in the record in this case, and which form the most persuasive evidence as to the nature of the arrangements involved in the operation of Parkview, show that it is Rice Management which actually has the legal right and responsibility to manage, administer and operate Parkview, and that the role played by Rice Health Care Facilities is to employ persons who can be used by Rice Management to staff the facility so that Rice Management can fulfill the terms of its Management contract with SFH.