STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

MARILYN L PETERSON, Employee 

NORTH STAR SALES INC, Employer

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 00608876RC


On October 4, 2000, the Department of Workforce Development issued an initial determination which held that the employee quit her employment but not for a reason allowing for immediate eligibility for unemployment insurance. The employee filed a timely request for hearing on the adverse determination, and hearing was held on November 22, 2000 in Racine, Wisconsin before a department administrative law judge. On December 1, 2000, the administrative law judge issued an appeal tribunal decision affirming the initial determination. The employee filed a timely petition for commission review of the adverse decision; by January 19, 2001 order, the commission remanded the matter for additional hearing, which was held on April 25, 2001. The matter is again before the commission, and now is ready for disposition.

Based upon the applicable law and the records and other evidence in the case, the commission issues the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The employee worked for about 21 years for the employer corporation, a Tupperware franchise. In her last five years of employment she was the president of the corporation and owned 100 percent of the stock. Her last day of work was September 13, 2000 (week 38).

Because the business was losing money and could not meet a debt repayment schedule imposed on it by Tupperware U.S. Incorporated, the employee informed that corporation in mid-June, 2000 that she would have to give the 60 days notice called for in the contract between her corporation and the other corporation. Tupperware Inc. asked her to remain in business until a buyer could be found. Her last day of work occurred when it did because a buyer was found.

The end of the employee's employment originated with her decision that the business would have to be closed. This is a quitting that would not allow the immediate payment of benefits unless it is covered by Wis. Stat. § 108.04(7)(r).

Wisconsin Stat. § 108.04(7)(r) provides as follows:

Paragraph (a) does not apply if the department determines that the employee owns or controls, directly or indirectly, an ownership interest, however designated or evidenced, in a family corporation and the employee's employment was terminated by the employer because of an involuntary cessation of the business of the corporation under one or more of the conditions specified in sub. (1)(gm). In this paragraph, "family corporation" has the meaning given in s. 108.02(15m) and also includes a corporation in which 50% or more of the ownership interest is or was controlled, directly or indirectly, by one or more brothers or sisters of a claimant, or by a combination of one or more brother or sisters and one or more persons specified in s. 108.02(15m)(a).

Wisconsin Stat. § 108.02(15m) provides as follows:

Except as provided in s. 108.04(7)(r), "family corporation" means:

(a) A corporation in which 50% or more of the ownership interest, however designated or evidenced, is or during a claimant's employment was owned or controlled, directly or indirectly, by the claimant or by the claimant's spouse or child, or by the claimant's parent if the claimant is under the age of 18, or by a combination of 2 or more of them; or

(b) Except where par. (a) applies, a corporation in which 25% or more of ownership interest, however designated or evidenced, is or during a claimant's employment was owned or controlled, directly or indirectly, by the claimant.

Wisconsin Stat. § 108.04(1)(gm) of the statutes provides:

Paragraph (g) does not apply if the department determines that the individual whose base period wages are being computed was employed by an employer which is a family corporation and the individual's employment was terminated by the employer because of involuntary cessation of business of the family corporation under one or more of the following circumstances:

108.04(1)(gm)1. Dissolution of the corporation, due to economic inviability, under ch. 180 or the analogous applicable laws of the jurisdiction in which the corporation is incorporated;

108.04(1)(gm)2. Filing for corporate bankruptcy;

108.04(1)(gm)3. Filing for personal bankruptcy by all owners who are personally liable for any of the debts of the corporation; or

108.04(1)(gm)4. Disposition of a total of 75% or more of the assets of the corporation using one or more of the following methods:

108.04(1)(gm)4. a. Assignment for the benefit of creditors.

108.04(1)(gm)4. b. Surrender to one or more secured creditors or lienholders.

108.04(1)(gm)4. c. Sale, due to economic inviability, if the sale does not result in ownership or control by substantially the same interests that owned or controlled the family corporation. It is presumed unless shown to the contrary that a sale, in whole or in part, to a spouse, parent or child of an individual who owned or controlled the family corporation, or to any combination of 2 or more of them, is a sale to substantially the same interests that owned or controlled the family corporation.

The employee was rear-ended in 1996 by a drunk driver, after which she executed a promissory note to her parents for $104,430.00 in order for her to remain in business. As of the time the employee sold the business, she still owed approximately $96,000.00 on the note. The employee sold the business to the above-mentioned third party in exchange for a promissory note in the value of $54,608.00. The employee in turn assigned the note to Tupperware U. S. Incorporated. In addition to the value of the note, the employee turned over inventory and furniture, fixtures, and office supplies of approximately $5,000.00 in value. The total sum to come to the employee thus would be approximately $59,600.00. The employee actually received $37,308.00, because at the time of sale she owed Tupperware U. S. Incorporated approximately $22,000.00. The employee turned over the $37,308.00 she received, to her parents as partial payment on the promissory note she had executed in 1996. The employee retained only a computer with a value of approximately $1,000.00, and a digital duplicator and a copier with virtually no value.

Based upon the above, the commission must conclude that the employee disposed of 75 percent or more of the assets of the corporation, pursuant to Wis. Stat. § 108.04(1)(gm)4. The commission therefore finds that, in week 38 of 2000, the employee's work for a family corporation in which the employee had an ownership interest ended because the employer involuntarily ceased business operations, within the meaning of Wis. Stat. § 108.04(7)(r).

DECISION

The appeal tribunal decision is reversed. Accordingly, the employee is eligible for unemployment insurance beginning in week 38 of 2000, if she is otherwise qualified.

Dated and mailed June 29, 2001
peterma . urr : 105 : 1 VL 1054.09 

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner


NOTE: The commission did not confer with the administrative law judge before determining to reverse the appeal tribunal decision in this case. The commission's reversal is not based upon a differing credibility assessment from that made by the administrative law judge; rather, the commission's reversal is based upon quantitative evidence adduced at the remand hearing, evidence not before the administrative law judge when he issued his decision.


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