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Neenah Foundry Co. v. Labor & Industry Review Commission. WI unemployment insurance, bankruptcy
In 2010, Neenah Foundry filed for Chapter 11 bankruptcy. This followed a large layoff of employees, which resulted in an adverse experience rating for purposes of unemployment insurance. After the bankruptcy couet confirmed the Chapter 11 reorganization, the Foundry requested the Department of Workforce Development to treat the company as a new company, effectively letting it start with a clean slate, rather than being saddled with the experience rating. The effect of the experience rating over a seven-year period would be additional unemployment premiums of as much as a half million dollars.
The request was denied, and the Foundry appealed, eventually to the Wisconsin Court of Appeals.
The old experience rating applies if the transferee of the company assets is a "mandatory successor" of the previous owner, under Wis. Stat. 108.16(8) . The Court of Appeals held that any transfer in this case was mandatory, thus not allowing the Foundry to escape the experience rating. In so holding, the court first held that it should grant great deference to the administrative agency's determination, in this case, this Labor & Industry Review Commission. Accordingly, it reviewed merely as to whether that agency's determination was reasonable. It focused on the agency's determination that the Foundry, in the words of the statute, was "owned, managed, or controlled in whole or in substantial part, either directly or indirectly by legally enforceable means or otherwise, by the same interest or interests."
In this case, while the corporate structure and board membership changed, the company was still under the control of six of the original eight executives. Since the management was the same, even if the ownership or control changed, the court held that this was a reasonable approach.
The court went on to conclude that federal bankruptcy law did not preempt this holding.
No. 2014AP1113 (Wis. Ct. App. Jan. 29, 2015).
Please see the original opinion for the court's exact language.
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Richard P. Clem is an attorney and continuing legal education (CLE) provider in Minnesota. He has been in private practice in the Twin Cities for 25 years. He has a J.D., cum laude, from Hamline University School of Law in St. Paul and a B.A. in History from the University of Minnesota. His reported cases include: Asociacion Nacional de Pescadores a Pequena Escala o Artesanales de Colombia v. Dow Quimica de Colombia, 988 F.2d 559, rehearing denied, 5 F.3d 530 (5th Cir. 1993), cert. denied, 510 U.S. 1041 (1994); LaMott v. Apple Valley Health Care Center, 465 N.W.2d 585 (Minn. Ct. App. 1991); Abo el Ela v. State, 468 N.W.2d 580 (Minn. Ct. App. 1991).
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