Employment Security Board v. Maryland Deliveries, Inc.

Henderson, J., delivered the opinion of the Court. This appeal is from an order of the Superior Court of Baltimore City reversing a decision of the Employment Security Board of Maryland in connection with a claim of the appellee that it was entitled to an experience rating of .9% as a successor employer under the Unemployment Compensation Law. The facts are undisputed and may be briefly stated. For reasons of economy and simplicity, Maryland Deliveries, Inc. was incorporated and began operations early in 1952, taking over the parcel delivery services of both The Hecht Company and the May Company.

These companies operate large department stores in Baltimore, and each had an integrated service of this character. The new corporation took over the entire personnel and equipment of both companies, and purchased additional equipment from outside sources. The Hecht Company and The May Company own all of the stock of the new corporation, and control its operation by interlocking directors and executives. The more favorable pension plan of the two companies, and various other employees benefits, were extended to employees of the new corporation.

Prior to the transfer each parent company had kept separate accounts covering the parcel delivery branch of its business. The Board held that the parcel delivery departments of the parent companies which were transferred to the new corporation were not “readily definable” units, as required by the statute. Prior to 1947, the statute ⁵³⁶ required that for an employer to retain the experience rating of a predecessor, it was necessary that there be a transfer of the “entire business”, but the present statute provides that it may be retained if an employer “shall transfer his entire business, or a department, section, division or any other substantial portion of the business, which is readily definable, by sale or otherwise, to another employing unit”. The rate retained continues “from the date the transfer occurred through the next June 30.” Code (1951), Art. 95A, Sec. 7(c) (5).

It is conceded that the rate here applicable is .9%, whereas the full rate in the absence of experience is 2.7%. The appellant does not seriously contend that the portions of the business that were transferred were not separable, or were not in fact treated for accounting purposes as separate departments by the parent companies, and it is difficult to see how such an argument could be made on the undisputed facts. Instead, the argument is now advanced that the departments were not in fact “a substantial portion” of the business of the parent companies, and that the Board’s finding of fact is not reviewable. It is also suggested that if the Maryland statute is construed in such a way as to allow a reduction in the tax rate without relation to the unemployment risk, it may jeopardize the tax set-off allowed to Maryland employers against the Federal tax.

On the first point, it is clear that the language of the Maryland statute, as amended, is broader than that adopted in many states as to transfers of “substantially all the assets” or “substantially all the employing units”. See note 22 A. L. R. 2d 673. The cases of Auclair Transp. v. Riley, 69 A. 2d 861 (N. H.) ; Winakor v. Annunzio, 99 N. E. 2d 191 (Ill.), and Harris v. Egan, 60 A. 2d 922 (Conn.), relied on by the appellant, are distinguishable on this ground. The Indiana statute, referring to “a part of the organization, trade or