Prentiss Mfg. Co., Inc. v. Mississippi Employment Sec. Com'n, 07-CA-59124

• Decision Date: 21 March 1990
• Docket Number: No. 07-CA-59124,07-CA-59124
• Citation: 558 So.2d 866
• Parties: PRENTISS MANUFACTURING COMPANY, INC. v. MISSISSIPPI EMPLOYMENT SECURITY COMMISSION.
• Court: Mississippi Supreme Court

Page 866

558 So.2d 866

PRENTISS MANUFACTURING COMPANY, INC. v. MISSISSIPPI EMPLOYMENT SECURITY COMMISSION.

No. 07-CA-59124.

Supreme Court of Mississippi.

March 21, 1990.

Orma R. Smith, Jr., Smith Ross & Trapp, Corinth, for appellant.

Fred J. Lotterhos, Jackson, for appellee.

Before HAWKINS, P.J., and ANDERSON and BLASS, JJ.

HAWKINS, Presiding Justice, for the Court:

Prentiss Manufacturing Company, Inc. (Prentiss Manufacturing), appeals from a judgment of the circuit court of the First Judicial District of Hinds County affirming a Mississippi Employment Security Commission (the Commission) assessment of another corporation's unemployment rate of contributions on the ground Prentiss Manufacturing was a "successor corporation" under Miss.Code Ann. Sec. 71-5-355(2)(b)(v). Finding the circuit court and the Commission erred as a matter of law, we reverse and render.

FACTS

Prior to 1986 Iuka Shirt operated a plant in Iuka, employing approximately 300 people in the manufacture of military shirts under government contract. The company also imported shirts. It leased the building housing its operations from a local corporation.

Iuka Shirt cut down its work force in 1986 and notified the city that it was going to cease operations in Iuka that year. Thereafter, it closed its plant and moved its operations to Savannah, Tennessee.

The community leaders approached Prentiss Manufacturing Company, Inc., another shirt manufacturing industry, with five plants in Northeast Mississippi, to locate a plant in Iuka in the building being vacated by Iuka Shirt. Prentiss Manufacturing manufactured knit shirts, an entirely different product from Iuka Shirt.

The city loaned Prentiss Manufacturing $305,000 under a community development block grant, and in return the company committed itself to employ 250 employees, and to spend $430,000 of its own funds for equipment, site improvements and such expenditures needed for the Iuka plant. It leased the building Iuka Shirt vacated, and got a ten-year ad valorem tax exemption as a new industry from the county. Prentiss Manufacturing initially employed 140 of the personnel who had worked at Iuka Shirt, but most of these either proved unsatisfactory or moved to other jobs.

Prentiss Manufacturing purchased $175,000 of Iuka Shirt's equipment, consisting mostly of sewing machines. This was only a portion of Iuka Shirt's assets, however. The remaining assets consisted of piece goods worth $100,000, work in process worth $200,000, trim items worth $30,000 and finished products inventory of $400,000.

The two companies were totally unrelated, having no common directors, officers of shareholders. Prentiss Manufacturing did not know any of Iuka Shirt's customers, and bought none of its good will, accounts receivable, or any other assets, tangible or intangible.

The Commission found Prentiss Manufacturing to be a successor corporation under the provisions of Miss.Code Ann. Sec. 71-5-355(2)(b)(v) for purposes of assessing Prentiss Manufacturing's unemployment rate of contributions.

The circuit court of the First Judicial District of Hinds County affirmed, and Prentiss Manufacturing has appealed.

LAW

For a number of years this state has had a Mississippi Employment Security Law to promote employment security in job placement and to provide through the accumulation of reserves for the payment of compensation to unemployed individuals. Miss. Code Ann. Sec. 71-5-1 (1972). The public policy of this state has been to require employers, with certain exceptions, to pay a certain amount of each employee's wages to the Employment Security Administration fund of the state treasury. Miss. Code Ann. Secs. 71-5-3, 71-5-111 (1972). This law and the programs thereunder have been administered by the Mississippi Employment Security Commission [MESC]. Miss.Code Ann. Sec. 71-5-101 et seq. (1972)

Under formulas and rates set by law, employers have paid a certain percentage of each employee's wages to the fund. Unemployment benefit records are kept on all employees, and provision is also made whereby employers who have a low "experience-rating record" will be charged "modified rates." Thus, employers periodically will have their required contributions modified based upon the unemployment benefits which have been paid during a previous set period of time, or "base period." Miss.Code Ann. Secs. 71-5-351 to -355 (Supp.1981).

In determining the modified rates to an employer, Sec. 71-5-355(2)(b)(ii) provides that benefits paid to an eligible individual shall be charged against the experience-rating during the base period.

Mississippi Employment Security Commission v. City of Columbus, etc., 424 So.2d 553, 554 (Miss.1982).

Rather than use Prentiss Manufacturing's experience rating record, however, the Commission assessed this company for unemployment contributions based upon Iuka Shirt's experience rating record. The Commission based this assessment upon the provisions of Miss.Code Ann. Sec. 71-5-355(2)(b)(v) which provides:

(v) When any employing unit in any manner succeeds to or acquires the organization, trade, business or substantially all the assets thereof of an employer, excepting any assets retained by such employer incident to the liquidation of his obligations, whether or not such acquiring employing unit was an employer within the meaning of Section 71-5-11, subsection H, prior to such acquisition, and continues such organization, trade or business, the experience-rating and payroll records of the predecessor employer shall be transferred as of the date of acquisition to the successor employer for the purpose of rate determination. [Emphasis added]

We conclude...