Wis.LIRC UC Decision: Bruecks, Mark - March 2, 2005 - VL 1054.09 - Voluntary Quitting - Sale of interest in business, cessation or suspension of business, corporate entity - employee's sale of corporation he controlled, which resulted in his becoming unemployed, was not due to economic inviability within meaning of � 108.04(1)(gm) - where corporation had paid employee and wife substantial salaries and showed profit, it could and should have had resources to operate

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

MARK R BRUECKS, Employee

SCHOOL SERVICE INC, Employer

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 04607178MW

On July 20, 2004, the Department of Workforce Development issued an initial determination which held that the employee sold his family corporation due to economic inviability within the meaning of Wis. Stat. § 108.04(1)(gm). The employer filed a timely request for hearing on the adverse determination, and hearing was held on August 25, 2004 in Milwaukee, Wisconsin before a department administrative law judge. On August 30, 2004, the administrative law judge issued an appeal tribunal decision amending and affirming the initial determination. The employer filed a timely petition for commission review of the adverse decision, and the matter 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 was the sole shareholder in the corporation operating the employer, a school publications concern. His employment ended following his sale of the corporation, and the issue is whether the sale was due to economic inviability within the meaning of Wis. Stat. § 108.04(1)(gm). The commission concludes that it was not, and so reverses the appeal tribunal decision.

The employee sold the business effective May 1, 2004. He did so because there was no personal or corporate credit then available for him to pay the estimated $15,000 in seasonal start-up costs to print materials in anticipation of the fall 2004 academic term. The employee understood that, by selling the business, he would become unemployed.

The record indicates that only the employee and his wife worked for the corporation. In 2003, the employee drew compensation of $68,897. In addition, the corporation paid wages (presumably to the employee's wife) in 2003 of $13,855. The corporation's tax returns show a profit in 2003 as well, of $19,596.

Wisconsin Stat. § 108.04(7)(r) states: "Paragraph (a) [suspending benefits after quitting] 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)." One of the specified conditions in § 108.04(1)(gm) indicates that no benefit reduction will take place if there is disposition of a total of 75% of more of the assets of the family corporation by 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. The commission cannot conclude, however, that the employee's sale of the corporation was due to economic inviability. The commission has no reason to dispute the employee's assertion that he did not have the necessary funds for the seasonal start-up work in question but, based upon the employee's 2003 salary and the profit the business showed in that year, he could have and he should have.

The commission therefore finds that, in week 18 of 2004, the employee's work for a family corporation in which the employee had an ownership interest ended voluntarily and not involuntarily within the meaning of Wis. Stat. § 108.04(1)(gm). The commission also finds that the employee was paid unemployment benefits for weeks 27 through 38 of 2004, totaling $3,948, for which he was not eligible and to which he was not entitled, within the meaning of Wis. Stat. § 108.03(1). Pursuant to Wis. Stat. § 108.22(8)(a), he must repay such sum to the Unemployment Reserve Fund. The commission finds, finally, that waiver of benefit recovery is not required under Wis. Stat. § 108.22(8)(c). Although the overpayment did not result from employee fault as provided in Wis. Stat. § 108.04(13)(f), it also was not the result of departmental error. See Wis. Stat. § 108.22(8)(c)2.

DECISION

The appeal tribunal decision is reversed. Accordingly, the employee is ineligible for benefits beginning in week 18 of 2004, and until four weeks have elapsed since the end of the week of quitting and the employee has earned wages in covered employment performed after the week of quitting equaling at least four times the employee's weekly benefit rate which would have been paid had the quit not occurred. The employee must repay $3,948 to the Unemployment Reserve Fund.

Dated and mailed March 2, 2005
bruecma . urr : 105 : 4 VL 1054.09

/s/ James T. Flynn, Chairman

/s/ David B. Falstad, Commissioner

/s/ Robert Glaser, Commissioner

NOTE: The commission did not confer with the administrative law judge before determining to reverse the appeal tribunal decision in this matter. The commission's reversal is not based upon a differing credibility assessment from that made by the administrative law judge. Rather, the commission has concluded that as a matter of law the 2003 financial status of the corporation precludes a finding of economic inviability under Wis. Stat. § 108.04(1)(gm).

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