TPUSA, Inc. v. Unemployment Insurance Appeals of the Indiana Department of Workforce Development , 2013 Ind. App. LEXIS 175 ( 2013 )

FOR PUBLICATION
ATTORNEYS FOR APPELLANT: ATTORNEYS FOR APPELLEE:
THOMAS DEER GREGORY F. ZOELLER
TODD KAISER Attorney General of Indiana
Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
Indianapolis, Indiana ELIZABETH ROGERS
Deputy Attorney General
Indianapolis, Indiana
Apr 18 2013, 8:52 am
IN THE
COURT OF APPEALS OF INDIANA
TPUSA, INC., )
)
Appellant-Defendant, )
)
vs. ) No. 93A02-1207-EX-605
)
UNEMPLOYMENT INSURANCE APPEALS )
OF THE INDIANA DEPARTMENT OF )
WORKFORCE DEVELOPMENT, )
)
Appellee-Plaintiff. )
APPEAL FROM THE DEPARTMENT OF WORKFORCE DEVELOPMENT
UNEMPLOYMENT INSURANCE APPEALS
The Honorable Joanne T. Green, Liability Administrative Law Judge
Cause No. 12-04717
April 18, 2013
OPINION - FOR PUBLICATION
BARTEAU, Senior Judge
STATEMENT OF THE CASE
TPUSA Inc. appeals the liability administrative law judge’s (“LALJ”)
determination that TPUSA owes $125,666.33 to the Indiana Department of Workforce
Development (“Department”).
We reverse and remand.
ISSUE
TPUSA presents five issues, which we consolidate into a single dispositive issue:
whether the LALJ erred by determining that TPUSA owes $125,666.33 in unemployment
insurance contributions, interest, and penalties for 2010 when TPUSA had no employees
in Indiana in 2010 and paid no wages in Indiana in 2010.
FACTS AND PROCEDURAL HISTORY
TPUSA owns and manages call centers around the country. It is owned by
Teleperformance Group Inc., a Florida holding company. In 2009, TPUSA operated a
call center in Fishers, Indiana. After September 30, 2009, TPUSA no longer had
employees in Indiana, and the Fishers facility officially closed on October 31, 2009.
TPUSA made contributions to the Department for unemployment insurance for its
employees until the facility closed. TPUSA submitted its 2009 fourth quarter wage
report showing that it had no employees and had paid no wages. Having no operations or
employees in the State of Indiana in 2010, TPUSA did not file any quarterly payroll
reports with the Department for that year.
2
The Department sent a notice (“Penalty Letter”) to TPUSA on March 21, 2011,
informing TPUSA that it had failed to submit payroll reports for 2010 and instructing that
it file all reports or have its account subject to estimation of its overdue unemployment
insurance contributions. Receiving no response to the Penalty Letter, the Department
sent another notice (“Notice and Demand Letter”) to TPUSA on April 26, 2011, notifying
TPUSA of the estimation amount that had been placed on its account. The Department’s
estimation of TPUSA’s overdue unemployment insurance contributions, plus interest and
penalties, totaled $125,666.33. TPUSA protested this assessment on November 18, 2011.
On June 11, 2012, a liability hearing was held before the LALJ. The first issue
upon which the parties presented evidence was the timeliness of TPUSA’s protest. On
this issue, the LALJ found:
With regard to an issue of the timeliness of the filing of a protest, the
burden of proof lies with the Department. The Liability Administrative
Law Judge finds that the Department has failed to conclusively establish,
by introduction of a copy of the four Notice and Demands, the date on the
face of the Notice and Demands, or that appeal rights were communicated
to the employer. Therefore, Liability Administrative Law Judge finds the
employer’s protest to be timely under the circumstances.
Appellant’s App. p. 8. Although the LALJ determined that TPUSA’s protest was timely
filed, it denied the protest and found the Department’s estimation of contributions and
assessment of interest and penalties to be proper. It is from this decision that TPUSA
appeals.
DISCUSSION AND DECISION
3
TPUSA contends that the LALJ erred in its determination that, although TPUSA
had no Indiana employees and paid no Indiana wages for 2010, it owes unemployment
insurance contributions for 2010, plus interest and penalties totaling $125,666.33. The
Indiana Unemployment Compensation Act provides that any decision of the LALJ shall
be conclusive and binding as to all questions of fact. See Ind. Code § 22-4-32-9(a)
(1995). When the LALJ’s decision is challenged as contrary to law, we are limited to a
two-part inquiry into the sufficiency of the facts found to sustain the decision and the
sufficiency of the evidence to sustain the findings of fact. UTLX Mfg., Inc. v.
Unemployment Ins. Appeals of Ind. Dep’t. of Workforce Dev., 906 N.E.2d 889, 891-92
(Ind. Ct. App. 2009); see Ind. Code § 22-4-32-12 (1990). Pursuant to this standard, basic
facts are reviewed for substantial evidence, conclusions of law are reviewed for their
correctness, and ultimate facts are reviewed to determine whether the LALJ’s finding is a
reasonable one. UTLX Mfg., 906 N.E.2d at 892. Ultimate facts are conclusions or
inferences from the basic facts. Id.Indiana’s unemployment compensation system is in place to protect against
economic insecurity due to unemployment. Ind. Code § 22-4-1-1 (1995). This system is
administered by the Department, see Ind. Code § 22-4-18-1(b)(1) (2007), and is funded
by imposing a tax, referred to as a “contribution,” on employers of this state. Ind. Code
§§ 22-4-10-1 (2009), 22-4-2-4 (1987). Contributions are determined based upon a
percentage of wages paid in a calendar year. Ind. Code §§ 22-4-10-3 (2009), -1.
4
Every employer that is subject to Indiana Code article 22-4 must file quarterly
contribution reports and wage reports. 646 Ind. Admin. Code 3-1-1 (1994). Where the
status of an employer is changed by cessation, the employer shall immediately notify the
Department and immediately file the necessary contribution and wage reports. 646 Ind.
Admin. Code 3-1-6(a) (1994). Reports dealing with the quarter in which the employer’s
change of status occurred shall be marked “final report.” Id.In the present case, TPUSA did not mark its fourth quarter 2009 report as “final
report,” and it did not file any reports with the Department in 2010. It also did not notify
the Department that it had ceased operations in Indiana. Thus, the Department, unaware
that TPUSA had ceased doing business and paying wages in Indiana, expected to
continue to receive quarterly contribution and wage reports from TPUSA. Therefore,
when the Department did not receive the required reports, it followed the course of action
as outlined in the applicable statutes.
First, Indiana Code section 22-4-19-9 (2001) mandates that a written notice
(Penalty Letter) be mailed to the employer if it fails to submit any payroll report required
under the unemployment compensation system statutes. The Penalty Letter informs the
employer that it must file all reports within ten days or have its account subject to
estimation. If, after ten days, the employer fails to file a report, an estimation is made of
the amount of the contribution due from the employer, and this amount is considered
prima facie correct. Id.5
Once an estimation is placed on an employer’s account, the Department must
notify the employer via a Notice and Demand Letter. Ind. Code § 22-4-11-4(a) (2002).
The employer then has fifteen days in which to file a report in order to establish the
correct amount it owes to the Department. Id. If the employer does not file a report
within this time period, the Department uses its estimation amount, and this amount
generally may not be reduced even upon subsequently ascertained information. Id.Further, the estimation amount is considered prima facie correct. Id. In addition to the
estimation amount, Indiana Code section 22-4-29-1 (1995) permits the calculation of
penalties and interest upon delinquent contributions. If certain criteria are met, however,
subsection (b) of Indiana Code section 22-4-11-4 does allow for a reduction of the
estimated amount of contribution based upon subsequently ascertained information.
These criteria are: (1) the employer makes an affirmative showing of “reasonable cause”
for the failure to timely file any payroll report, and (2) the employer submits accurate and
reliable payroll reports. Id.Here, the Department sent a Penalty Letter to TPUSA on March 21, 2011. The
Department nevertheless received no reports from TPUSA, so the Department placed an
estimation on TPUSA’s account. Subsequently, on April 26, 2011, the Department sent
Notice and Demand Letters to TPUSA, to which TPUSA did not respond. The
Department then used its estimation of contributions owed, plus interest and penalties, to
arrive at $125,666.33.
6
At the hearing, TPUSA introduced Exhibit 4, which shows that for the fourth
quarter of 2009, TPUSA paid no wages in Indiana and had no employees in the state.
Appellant’s App. pp. 85, 86. In addition, Christina Miller, Reporting Manager at
TPUSA, testified at the hearing on behalf of her employer. She stated that in 2009,
TPUSA’s finance and payroll department was split into two departments with one
department located on the East Coast and one department located on the West Coast.
Miller testified that the East Coast operation was handling payroll notifications at the
time, and by the time the two departments were consolidated into the West Coast
operation, the Indiana site had been officially closed, and she had no reason to believe
that everything had not been taken care of. Miller was not aware that TPUSA’s
unemployment insurance tax account in Indiana was still active until September 2011
when she received a notice from the Department. She further testified that until she
received this notice, she had not been made aware of any delinquency or any Notice and
Demand Letters. After receiving the notice, TPUSA protested the $125,666.33
assessment.
When questioned about the certified mail return receipts from the Notice and
Demand Letters mailed by the Department on April 26, 2011, Miller testified that she had
since researched the signature on the receipts and had discovered that they were signed
for by a receptionist in Columbus, Indiana on April 29, 2011. However, Miller never
received any letters. Further investigation showed the letters were sent to the human
resources department in Columbus which sent them on to another department, but no one
7
could verify where the letters were sent or to whom, and no one had any record or copies
of the letters.
Jennifer Chappel, Director of Unemployment Insurance Tax Administration with
the Department, testified that reasonable cause, as provided for in Indiana Code section
22-4-11-4(b), is defined as acts of God, nature, war or terrorism, death or incapacitation
of an owner/preparer, or theft or embezzlement by a fiduciary of the company.
In finding for the Department, the LALJ determined:
Ind. Code § 22-4-11-4 (2011) [sic] requires an estimate of contributions if
the employer fails to file a quarterly report. The estimate is considered
prima facie correct in the absence of an affirmative showing of “reasonable
cause” for failure to file a timely payroll report and provide accurate
records. The Department interprets “reasonable cause” as extreme
circumstances. Merely failing to notify the Department that the employer is
out of business does not fall within the Department’s interpretation.
Although the Department’s interpretation appears harsh concerning
employers who no longer do business in the state and have to pay
contributions, interest and penalties when there was no payroll, the statute
requires the Department to take certain actions when an employer stops
paying contributions without explanation. The Department has the
authority to make estimations and charge interest and penalt[ies] and there
is no requirement that the Department take a “soft” approach in defining
“reasonable cause.”
Appellant’s App. pp. 8-9.
In the present case, it is uncontested that TPUSA timely filed accurate reports with
the Department showing that it had paid no wages and that it had no employees for the
fourth quarter of 2009. In addition, the Department does not contest that TPUSA’s
Fishers facility ceased operations in 2009 and had no employees and paid no wages in
2010. It is undisputed then, given these facts, that although TPUSA failed to mark its
8
fourth quarter 2009 reports “final report,” it had no continuing obligation to pay further
unemployment insurance contributions to the Department.
Therefore, we hold that where an employer has ceased business operations in
Indiana, no longer pays wages or has any employees in the state, and files accurate
reports with the Department indicating such, this may be considered “reasonable cause,”
as required by Indiana Code section 22-4-11-4(b), so as to allow for an adjustment (i.e.,
reduction) in the amount of the estimated contribution.
Based upon the facts of this case, we find that the evidence shows that TPUSA
demonstrated reasonable cause and that the Department erroneously assessed past due
unemployment insurance contributions, together with interest and penalties. To hold
otherwise under these facts would produce an absurdity whereby a business would be
required to pay more than $125,000.00 on an account upon which it owed nothing.
Moreover, we are mindful of the possible far-reaching effect of such a holding in
thwarting businesses from opening new or maintaining existing operations within our
state.
More appropriate action in these circumstances is provided for in Indiana Code
section 22-4-19-10 (1995), which provides that an employer that negligently or willfully
fails to submit any report required for proper administration of Indiana Code article 22-4
shall be assessed a penalty of $25.00. As we previously stated, because TPUSA failed to
mark “final report” on its fourth quarter 2009 reports, the Department was unaware of its
cessation of business in Indiana. Thus, quarterly reports were required to be filed with
9
the Department by TPUSA for each quarter of 2010 until the Department was notified of
TPUSA’s cessation of business in the state. See 646 Ind. Admin. Code 3-1-1, -6. Two
reports are required each quarter. See 646 Ind. Admin. Code 3-1-1. A calculation of
TPUSA’s fines for failing to file quarterly reports in 2010 is $200. Pursuant to our
finding of reasonable cause under Indiana Code section 22-4-11-4(b), the Department’s
assessment against TPUSA for overdue estimated contributions, interest, and penalties in
the amount of $125,666.33 is reduced to $200 in fines.
CONCLUSION
For the reasons stated, we conclude that the LALJ erred by determining that
TPUSA owes $125,666.33 in unemployment insurance contributions, interest, and
penalties for 2010 when TPUSA had no employees in Indiana in 2010 and paid no wages
in Indiana in 2010.
Reversed and remanded.
BAKER, J., and PYLE, J., concur.
10