Ashlin Transp. Services, Inc. v. Indiana Unemployment Ins. Bd.

• Decision Date: 29 June 1994
• Docket Number: No. 93A02-9310-EX-538,93A02-9310-EX-538
• Citation: 637 N.E.2d 162
• Parties: ASHLIN TRANSPORTATION SERVICES, INC., Appellant-Petitioner, v. The INDIANA UNEMPLOYMENT INSURANCE BOARD (by its members Edward Yates, Jamie Andree, W. Ken Massengill, Larry Meeks, Jerry Payne, Larry Tebault and Edmund Thais), The Indiana Department of Employment and Training Services, and Liability Administrative Law Judge Alan R. Diodore, Appellees-Respondents.
• Court: Indiana Appellate Court

Page 162

637 N.E.2d 162

ASHLIN TRANSPORTATION SERVICES, INC., Appellant-Petitioner, v. The INDIANA UNEMPLOYMENT INSURANCE BOARD (by its members

Edward Yates, Jamie Andree, W. Ken Massengill, Larry Meeks,

Jerry Payne, Larry Tebault and Edmund Thais), The Indiana

Department of Employment and Training Services, and

Liability Administrative Law Judge Alan R. Diodore,

Appellees-Respondents.

No. 93A02-9310-EX-538.

Court of Appeals of Indiana,

First District.

June 29, 1994.

Norman R. Garvin, Lynne D. Lidke, Steven A. Pletcher, Scopelitis, Garvin, Light & Hanson, Indianapolis, for appellant.

Pamela Carter, Atty. Gen., Robert K. Robisch, Deputy Atty. Gen., Indianapolis, for appellees.

NAJAM, Judge.

STATEMENT OF THE CASE

Ashlin Transportation Services, Inc. appeals from a decision of the Liability Administrative Law Judge ("LALJ") of the Indiana Department of Employment and Training Services ("IDETS") who found that Ashlin is not a "successor employer" within the meaning of Indiana Code § 22-4-10-6(b) of the Indiana Employment and Training Services Act ("the Act"). ¹ Ashlin, an employee leasing company in the trucking industry, requested that IDETS make a determination of Ashlin's successorship status after Ashlin acquired the truck drivers of two trucking companies and then leased back the same employees to their former employers. IDETS denied Ashlin's initial request and, after a subsequent denial upon reconsideration, Ashlin sought and was granted a hearing before an LALJ. The LALJ heard evidence and affirmed IDETS' determination denying successor employer status to Ashlin under the Act. Ashlin appeals from that adverse decision.

We reverse and remand.

ISSUE

The sole question presented for our review is whether the LALJ erred in concluding, as a matter of law, that Ashlin is not a "successor employer" within the meaning of Indiana Code § 22-4-10-6(b). ²

FACTS

The following facts are undisputed according to the parties' Agreed Statement of the Evidence. See Record at 74-81. Ashlin is an employee leasing company whose primary business is leasing truck drivers to trucking companies. In addition, Ashlin leases to its clients some clerical and administrative employees utilized in the trucking industry. Ashlin is one of about 1200 employee leasing companies in the United States today. Since 1986, when Ashlin was established, it has grown from less than 100 to over 1600 employees, most of whom are truck drivers, by acquiring the employees of approximately 50 companies.

Ashlin offers two types of employee leasing services to its trucking clients. First, Ashlin advertises for, recruits, and hires truck drivers who are then placed in positions with Ashlin's clients. Second, as was the case here, Ashlin assumes all of the employment responsibilities of a client and then leases back the client's former employees, primarily truck drivers, to the company. In other In this case, Ashlin performs the second type of leasing service by which, after acquiring its clients' employees, it also assumes all the responsibilities of employment. Ashlin pays the employees' wages, is responsible for taxes, insurance coverage and other benefits, maintains worker's compensation and unemployment compensation plans, establishes safety programs, and offers bonus programs for the employees. After acquiring a company's employees, Ashlin executes a new employment contract with each employee which contains essentially the same terms as the contract with the employee's previous employer. Moreover, there is no lapse in the employee's actual employment during the transfer of responsibilities from a client to Ashlin.

words, Ashlin acquires the truck driving force of a trucking company and becomes responsible for those drivers as Ashlin's own employees.

On June 1, 1992, Ashlin acquired all of the truck drivers of Wabash Valley Transportation, Inc. ("Wabash") and Atlantic Inland Carriers, Inc. ("Atlantic"), two of Ashlin's trucking company clients. Ashlin then leased back those employees to Wabash and Atlantic on the same day without a lapse in employment. Each of Ashlin's newly acquired employees executed an employment contract with Ashlin consisting of terms equivalent to the terms of their contracts with Wabash or Atlantic. As trucking companies, Wabash and Atlantic each retained assets and management necessary to continue their businesses. Those assets included Wabash's and Atlantic's rolling stock, terminals, motor carrier operating authority, and other necessary components of a trucking company, including financial assets. Ashlin acquired none of those assets and, in fact, Wabash and Atlantic continued to operate their trucking businesses as they had before Ashlin acquired their employees. Ashlin did not operate trucks or serve truck routes itself.

At the time Ashlin acquired Wabash's and Atlantic's truck drivers, all three companies were considered "employers" under the Act. However, the LALJ denied Ashlin successor employer status under the Act because Ashlin is an employee leasing company which only acquires the employees of a company and because the LALJ found that there was no transfer between the companies of financial assets or other assets such as rolling stock or terminals. After issuing these findings, the LALJ stated the following:

I find that by merely hiring the employees and by acquiring none of the actual operation, Ashlin did not acquire a distinct and segregable portion of the organization, trade or business, as contemplated by IC 22-4-10-6(b), of Wabash Valley and Atlantic Inland.

The Agency determination finding no successorship is affirmed.

Record at 38. Ashlin appeals the LALJ's decision to deny Ashlin status as a successor employer under the Act. We will state additional facts where necessary.

DISCUSSION AND DECISION

Standard of Review

" 'Judicial review of an administrative decision is limited to whether the agency possessed the jurisdiction over the subject matter, and whether the agency's decision was made pursuant to proper procedure, was based upon substantial evidence, was not arbitrary and capricious, and was not in violation of any constitutional, statutory, or legal principle.' " County Department of Public Welfare v. Deaconess Hospital, Inc. (1992), Ind.App., 588 N.E.2d 1322, 1327, trans. denied (quoting State Bd. of Tax Comm'rs v. Jewell Grain Co. (1990), Ind., 556 N.E.2d 920, 921). On judicial review, courts defer to an agency's factfinding, provided the findings are supported by substantial evidence. Id. However, a court owes no deference to an agency's conclusions of law. Id. When the facts are undisputed, and the question is whether those facts lead to a certain conclusion, the case presents a question of law and the courts need not defer to agency decision making. Id.

"On the other hand, an administrative agency's interpretation of a statute that the agency is charged with enforcing is entitled to great weight; however, an agency's incorrect interpretation of a statute is entitled to Here, the parties dispute whether the question before us is a pure question of law or a mixed question of law and fact and, thus, whether we are required to afford either minimal or substantial deference to the LALJ's decision under the Act. IDETS asserts that the provision of the Act at issue "cannot be strictly interpreted standing alone but can only be construed in light of its application to a particular factual scenario." Brief of Appellee at 12. However, Ashlin contends that the LALJ's determination that it is not a successor employer was based on an "improper interpretation" of the Act. Reply Brief of Appellant at 6. Because the facts here are undisputed, we are not asked to decide a question of fact; rather, we are asked to apply a statutory provision to undisputed facts. Therefore, the question before us is a pure question of law and the agency interpretation of the Act is not entitled to deference.

                no weight."  Peabody Coal Co. v. Department of Natural Resources (1992), Ind.App., 606 N.E.2d 1306, 1308.   If an agency misconstrues a statute, there is no reasonable basis for the agency's ultimate action and we are required to reverse the agency's decision as being arbitrary and capricious.  Id.  Thus, although the agency interprets its own statute, we are not bound by the agency interpretation.  Id.; Hamilton County Department of Public Welfare v. Smith (1991), Ind.App., 567 N.E.2d 165, 168
                

Ashlin's Successor Employer Status

We are presented with a question of first impression in Indiana. This case involves Ashlin's partial acquisition of Wabash and Atlantic, specifically Ashlin's acquisition of both companies' truck drivers who were then leased back to those companies, and Ashlin's subsequent request for successor employer status under the Indiana Employment and Training Services Act. Ashlin's status as an "employer" is not in dispute. See IND.CODE § 22-4-7-1. Yet, as did the LALJ, we must look to the language of the Act in Indiana Code § 22-4-10-6(b) ("Section 6(b)") to determine whether Ashlin is a successor employer of Wabash and Atlantic.

Under Section 6(b), an employer becomes a successor employer when it:

acquires a distinct and segregable portion of the organization, trade, or business within this state of another employer, [and, under such circumstances,] the successor employer shall, upon application and agreement by and between the disposing and acquiring employers, assume the position of the predecessor employer with respect to the portion of the resources and liabilities of the predecessor's experience account as pertains to the distinct and segregable portion of the predecessor's organization, trade, or business acquired by the successor.

(Emphasis added). The Act and the applicable regulations do not provide a definition of the phrase "distinct and segregable portion of the organization, trade, or business" or any of the terms used in that phrase. Thus, the dispositive question we must...