Autumn Ridge Landscaping, Inc., Relator v. Department of Employment and Economic Development

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2014).

STATE OF MINNESOTA
IN COURT OF APPEALS
A15-1305
A15-1308

Autumn Ridge Landscaping, Inc.,
Relator,

vs.

Department of Employment and Economic Development,
Respondent

Filed May 2, 2016
Affirmed
Peterson, Judge

Department of Employment and Economic Development
File No. 33403525-2

Gregory M. Erickson, Mohrman, Kaardal & Erickson, P.A., Minneapolis, Minnesota (for
relator)

Lee B. Nelson, Department of Employment and Economic Development, St. Paul,
Minnesota (for respondent)

Considered and decided by Kirk, Presiding Judge; Peterson, Judge; and Jesson,

Judge.

UNPUBLISHED OPINION

PETERSON, Judge

Relator-employer challenges the decision by an unemployment-law judge (ULJ)

that respondent Minnesota Department of Employment and Economic Development
(DEED) correctly calculated relator’s unemployment-insurance (UI) tax rates for 2013,

2014, and 2015. We affirm.

FACTS

Karen Grygelko owned and operated Greenworks Landscape Contracting, Inc.

(GLC), a landscaping business, and she and Tom Grygelko owned and operated

Greenworks Management, Inc. (GM), a holding company. Both corporations stopped

doing business in 2012 and were dissolved in bankruptcy in 2014. In 2012, Tom and Karen

Grygelko’s son, Joseph Grygelko, began operating relator Autumn Ridge Landscaping,

Inc. (ARL), a commercial landscaping business. ARL hired six of GLC’s 11 employees

and one of GM’s two employees in 2012.

DEED issued determinations that ARL is a successor business to GLC and GM. A

ULJ determined:

Partial succession occurred in this case. Common
ownership exists between [A]RL, GLC, and GM because
Joseph Grygelko is the son of Tom and Karen Grygelko. An
acquisition also occurred because a portion of the workforce
for GLC and GM was transferred to [A]RL. The
documentation and testimony in the record show that 54.5
percent (6 of 11) of GLC’s workforce was acquired by [A]RL.
In addition, 50 percent (1 of 2) of GM’s workforce was
acquired by [A]RL. Therefore, 54.5 percent of the experience
rating of GLC and 50 percent of the experience rating of GM
will be transferred to [A]RL because succession occurred
under Minnesota Statutes, section 268.051, subdivision 4.

See Minn. Stat. § 268.051, subd. 4(d), (i) (2014) (defining “common ownership” to include

ownership by parent or child and “acquisition” to include obtaining a portion of the

predecessor employer’s workforce). ARL did not request reconsideration or otherwise

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challenge the determination that partial succession occurred. Due to the partial succession,

the ULJ directed DEED to recalculate ARL’s UI tax rate.

DEED applied a two-step formula to calculate ARL’s UI tax rate. First it

determined ARL’s experience rating as follows:

UI benefits paid during previous four years × 1.25
= Experience Rating
Taxable wages paid during previous four years

Then, it used the experience rating to determine the tax rate as follows:

Experience Rating + Base Tax Rate = UI Tax Rate Before Additional Assessments

ARL appealed the tax-rate determinations relating to both successorships, arguing

that the formula used by DEED to calculate ARL’s UI tax rates was contrary to Minn. Stat.

§ 268.051, subd. 4. The ULJ concluded that DEED properly calculated ARL’s UI tax rates.

The ULJ issued separate but identical orders for the two successorships. Both orders

contain the tax rates for the ARL successorship. The ULJ affirmed the initial decisions on

reconsideration.

ARL filed certiorari appeals from both orders. This court consolidated the appeals.

DECISION

When reviewing a ULJ’s decision, we may affirm or remand the case for further

proceedings; or we may reverse or modify the decision if relator’s substantial rights may

have been prejudiced because the conclusion, decision, findings, or inferences are affected

by an error of law. Minn. Stat. § 268.105, subd. 7(d)(4) (Supp. 2015).

Statutory interpretation presents a question of law, which we review de novo.

Halvorson v. Cty. of Anoka, 780 N.W.2d 385, 389 (Minn. App. 2010).

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 [T]he goal of all statutory interpretation is to ascertain and
effectuate the intention of the legislature. The first step in
statutory interpretation is to determine whether the statute’s
language, on its face, is ambiguous. In determining whether a
statute is ambiguous, we will construe the statute’s words and
phrases according to their plain and ordinary meaning. A
statute is only ambiguous if its language is subject to more than
one reasonable interpretation. Multiple parts of a statute may
be read together so as to ascertain whether the statute is
ambiguous. When we conclude that a statute is unambiguous,
our role is to enforce the language of the statute and not explore
the spirit or purpose of the law. Alternatively, if we conclude
that the language in a statute is ambiguous, then we may
consider the factors set forth by the Legislature for interpreting
a statute.

Christianson v. Henke, 831 N.W.2d 532, 536-37 (Minn. 2013) (quotations and citations

omitted).

The UI statute requires each employer to pay taxes on the taxable wages paid to

each employee. Minn. Stat. § 268.051, subd. 1(a) (2014). The amount of taxes is based

on the employer’s assigned tax rate. Id. For each calendar year, the commissioner of

DEED computes “the tax rate of each taxpaying employer that qualifies for an experience

rating by adding the base tax rate to the employer’s experience rating along with assigning

any appropriate additional assessment.” Minn. Stat. § 268.051, subd. 2(a) (2014). There

is no dispute in this case about the base tax rate or any appropriate additional assessment;

the issue is whether relator’s experience rating was correctly calculated.

Each year, the commissioner is required to compute an experience rating for each

taxpaying employer, and the experience rating applies to the employer for the following

calendar year. Minn. Stat. § 268.051, subd. 3(a) (2014).

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 The experience rating is the ratio obtained by dividing
125 percent of the total unemployment benefits required under
section 268.047 to be used in computing the employer’s tax
rate during the 48 calendar months ending on the prior June 30,
by the employer’s total taxable payroll for that same period.

Minn. Stat. § 268.051, subd. 3(a). Thus, to determine ARL’s experience rating, it is

necessary to know the amount of unemployment benefits paid to applicants that is

attributable to ARL and the amount of ARL’s total taxable payroll for the relevant 48-

month period. Also, because ARL is a successor employer, it is necessary to know the

amount of unemployment benefits paid to applicants that is attributable to the predecessor

employers, GLC and GM, and the total taxable payrolls of GLC and GM for the relevant

48-month period.

The UI statute provides:

A portion of the experience rating history of the
predecessor employer is transferred to the successor employer
when:
(1) a taxpaying employer acquires a portion, but less
than all, of the organization, trade or business, or workforce of
another taxpaying employer; and
(2) there is 25 percent or more common ownership or
there is substantially common management or control between
the predecessor and successor.
The successor employer acquires, as of the date of
acquisition, that percentage of the predecessor employer’s
experience rating history equal to that percentage of the
employment positions it has obtained, and the predecessor
employer retains that percentage of the experience rating
history equal to the percentage of the employment positions it
has retained.

Minn. Stat. § 268.051, subd. 4(b) (emphasis added). Thus, as a successor employer that

obtained 54.5 percent of GLC’s employees and 50 percent of GM’s employees, ARL

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acquired 54.5 percent of GLC’s experience rating history and 50 percent of GM’s

experience rating history.

“The ‘experience rating history’ . . . means the amount of unemployment benefits

paid and the taxable wages that are being used and would be used in computing the current

and any future experience rating.” Minn. Stat. § 268.051, subd. 4(i). This means that 54.5

percent of the unemployment benefits paid and 54.5 percent of the taxable wages that

would be used to compute GLC’s experience rating and 50 percent of the unemployment

benefits paid and 50 percent of the taxable wages that would be used to compute GM’s

experience rating were acquired by ARL.1

It is essential to recognize that “experience rating history” and “experience rating”

are distinct, separately defined terms. “Experience rating history” refers to specific

amounts of unemployment benefits paid and taxable wages paid. Id. “Experience rating”

is a ratio that is obtained by applying these amounts in the mathematical formula described

in Minn. Stat. § 268.051, subd. 3(a).

“The commissioner [of DEED] must notify each employer at least quarterly by mail

or electronic transmission of the unemployment benefits paid each applicant that will be

used in computing the future tax rate of a taxpaying employer.” Minn. Stat. § 268.047,

subd. 5. ARL does not dispute the amounts of unemployment benefits paid or the amounts

of taxable wages paid that the commissioner used to calculate its experience rating. ARL

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The ULJ who determined that a partial succession occurred incorrectly stated in the order
that “54.5 percent of the experience rating of GLC and 50 percent of the experience rating
of GM will be transferred to ARL.” Under Minn. Stat. § 268.051, subd. 4(b), a portion of
each predecessor employer’s experience rating history was transferred.

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argues that, to determine its experience rating, DEED was required to multiply “the

percentage of partial succession by its predecessors’ experience rating history, meaning

multiplication of the percentage of partial succession by the quotient of the predecessor

employers’ unemployment benefits paid divided by their taxable wages and assign the

resulting experience rating to ARL.” (Emphasis added.)

But nothing in the UI statute suggests that, when determining the experience rating

for a successor employer, the percentage of succession should be multiplied by the quotient

of the predecessor employers’ unemployment benefits paid divided by their taxable wages.

Under Minn. Stat. § 268.051, subd. 4(b), a successor employer acquires a percentage of a

predecessor employer’s experience rating history. Unlike an employer’s experience

rating, which is the quotient produced by dividing 125 percent of the amount of

unemployment benefits paid by the total amount of taxable wages paid, an employer’s

experience rating history is the actual amounts of unemployment benefits paid and taxable

wages paid that are used or would be used in computing the employer’s experience rating.

Under the unambiguous language of Minn. Stat. § 268.051, subd. 4(b), ARL

acquired a percentage of the actual amounts of unemployment benefits paid to applicants

and the taxable wages paid by GLC and GM during the relevant 48-month period. And

under the unambiguous experience-rating formula in Minn. Stat. § 268.051, subd. 3(a), the

amounts acquired by ARL from GLC and GM must be added to the actual amounts of

unemployment benefits paid to applicants and taxable wages paid by ARL during the

relevant 48-month period to determine ARL’s experience rating. This is exactly what

resulted from the formula that DEED used.

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 UI benefits paid during previous four years × 1.25
= Experience Rating
Taxable wages paid during previous four years

To determine the amount of UI benefits paid during the previous four years, DEED

added together the amount of unemployment benefits paid to applicants who were ARL’s

employees, 54.5 percent of the amount of unemployment benefits paid to applicants who

were GLC’s employees, and 50 percent of the amount of unemployment benefits paid to

applicants who were GM’s employees. Then, DEED multiplied this sum by 1.25 to

determine the amount that was 125 percent of the total unemployment benefits paid. This

amount was the numerator in the equation. To determine the amount of taxable wages paid

during the previous four years, DEED added together the taxable wages paid by ARL, 54.5

percent of the taxable wages paid by GLC, and 50 percent of the taxable wages paid by

GM. This sum was the denominator in the equation. DEED then divided the numerator

by the denominator, and this quotient was ARL’s experience rating.

The UI statute does not require DEED to multiply ARL’s percentage of succession

by the quotient of its predecessor employers’ unemployment benefits paid divided by their

taxable wages, as ARL contends. Under the unambiguous language of Minn. Stat.

§ 268.051, subd. 4(b) and (i), ARL’s experience rating as a successor employer is based on

the actual amounts of unemployment benefits and taxable wages paid by ARL and any

predecessor employers during the relevant 48-month period. Because we have concluded

that the relevant parts of the UI statute are not ambiguous, we will not address ARL’s

arguments regarding the factors set forth by the legislature for interpreting statutes.

Affirmed.

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