Workers’ Compensation: The Supreme Court of Ohio Addresses “Successors in Interest”
By Chad A. Fine The Supreme Court of Ohio in the Valley Roofing decision recently addressed the question of what liabilities a successor in interest assumes when purchasing an entity from a financial institution. Specifically, the Court held that a successor in interest does not assume the purchased entity’s workers’ compensation experience rating when the entity is purchased from a bank. The workers’ compensation experience rating of a purchased entity is only transferred to a successor in interest when the other entity is purchased directly.
By way of background, the Supreme Court of Ohio has defined the term “successor in interest” as a transferee of another employer, “in whole or in part.” Simply put, a successor in interest is a company that purchases another company. The Ohio Revised Code applies the term “successor in interest” to the Ohio Workers’ Compensation System. The statute states that a successor in interest is an entity that assumes “in proportion to the extent of the transfer . . . the [prior] employer’s account and shall continue the payment of all contributions due under this chapter.” One element of the worker’s compensation account is the prior employer’s experience rating. Therefore, a successor in interest normally assumes the workers’ compensation experience rating of the purchased employer. However, in the Valley Roofing decision, the Supreme Court of Ohio held that a company that purchases another company from a bank does not assume the purchased company’s workers compensation experience rating.
In this specific case, PNC Bank foreclosed on the assets of Tech Valley Contracting (Valley Contracting). Valley Roofing Company (Valley Roofing) bought those assets from PNC Bank and continued the business operation. The Bureau of Workers’ Compensation subsequently transferred Valley Contracting’s experience rating to Valley Roofing as a successor in interest. Valley Roofing objected, and the Court of Appeals held that a transferee-company does not become a successor in interest to the BWC experience of a transferred company if the transferred company was purchased from a bank. The transferee-company does become the successor in interest if it purchases the transferred company directly.
The Supreme Court of Ohio affirmed the Court of Appeal’s decision. The Supreme Court held that the purchase of the experience must be a voluntary act of the purchasing employer and not the involuntary transfer of the employer’s business through an intermediary bank. Consequently, an entity that purchases the assets of another entity from a bank is not the successor in interest of the purchased entity’s workers compensation experience rating.
Feel free to contact Chad Fine or any of the workers’ compensation attorneys at RBS with any further questions or concerns regarding The Supreme Court of Ohio’s decision in Valley Roofing and “successors in interest.”
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