2005-384, APPEAL OF FIRST STUDENT, INC.

that were recalculated on a retroactive basis. We reverse. board, ordering it to pay unemployment compensation contribution payments

liabilities of First Student, Inc. For the remainder of this case we refer to First company, for the purported purpose of diminishing and distributing certain

Department of Employment Security (DES), as affirmed by the DES appellate

employees and certain assets to First Student Services, LLC, a subsidiary formed under Delaware law. In January 2001, First Student, Inc. transferred Hampshire and many other States. In 1998, First Student Services LLC was provides bus transportation for school systems and conducts business in New This appeal involves two entities with similar names. First Student, Inc.

of the administrative hearing committee (AHC) for the New Hampshire BRODERICK, C.J. The petitioner, First Student, Inc., appeals a decision

Employment Security. general, on the brief and orally), for the New Hampshire Department of Kelly A. Ayotte, attorney general (Mary E. Schwarzer, assistant attorney Errors may be reported by E-mail at the following address:

orally), for the petitioner. Pierce Atwood LLP, of Portsmouth (David A. Anderson on the brief and

(New Hampshire Department of Employment Security)

errors in order that corrections may be made before the opinion goes to press. No. 2005-384 Hampshire, One Noble Drive, Concord, New Hampshire 03301, of any editorial Department of Employment Security Readers are requested to notify the Reporter, Supreme Court of New ___________________________

a.m. on the morning of their release. The direct address of the court's home reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00

well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule 22 as in September 2003. interest. p. 2 “Determination of Liability” did not bar DES from issuing its new determination Inc.’s motion for reconsideration, AHC further ruled that DES’ January 2001

to pay into its account a balance due of $123,321.59, plus $17,792.28 in

Inc.’s higher merit rating pursuant to RSA 282-A:79 (1999). In response to Old

the wages of the drivers. New LLC paid DES all required unemployment compensation contributions on since January 2001 based upon Old Inc.’s higher tax rate and ordered Old Inc. account. It also recalculated the contribution tax due on the bus driver wages account. Thus, contributions were required to be paid in accordance with Old contribution taxes paid by New LLC since January 2001 into Old Inc.’s identified as employees by New LLC had to be reported under Old Inc.’s employer pursuant to RSA 282-A:7, II (1999), and that the bus drivers 2

Inc. contracted with New LLC for those same drivers to operate Old Inc. buses.

LLC’s unemployment compensation contribution account and transferred the reduction when applicable.” September 2003 DES determination. The AHC found that New LLC was not an

Inc. transferred 168 of its 176 employees (all bus drivers) to New LLC, and Old

drivers “were actually in the employ of [Old Inc.]” DES, therefore, voided New II (Supp. 2005), and assigned it a merit rate of “2.7% less any fund balance September 15, 2003, DES issued a new determination that the New LLC bus the commissioner of DES, conducted a hearing on the merits, and affirmed the Old Inc. appealed the DES determination. The AHC, acting on behalf of

year); RSA 282-A:81 (1999) (rate for newly covered employers). Thereafter, Old

New LLC as an “employer” effective January 1, 2001, pursuant to RSA 282-A:8, intended to conduct a review of prior “Determinations of Liability.” On 10, 2001, DES issued a “Determination of Liability” to New LLC. It identified More than two and one-half years later, DES informed New LLC that it January 1, 2001, and that it had acquired 5% of Old Inc.’s assets. On January

Report (ESR) with DES as required by law,

obligated to pay contributions based upon portion of wages for each calendar

representing that it would furnish employment in New Hampshire beginning

challenged on appeal. In December 2000, New LLC filed an Employer Status The following facts are supported by the record or are not otherwise

of December 31, 2003, New LLC liquidated back into Old Inc., and Old Inc. is Student, Inc. as “Old Inc.” and to First Student Services LLC as “New LLC.” As contributions on their own behalf and with respect to benefits charged against

p. 3 year by assessing an employer’s “actual experience in the payment of

based upon an employer’s “merit rating” that DES calculates each calendar individual accounts. RSA 282-A:74, I (1999). Contribution payments are RSA 282-A:69, I. DES maintains employers’ contributions in separate

percentage of wages paid or payable to its employees during the calendar year,

as defined by statute, RSA 282-A:7, :8 (Supp. 2005), must pay DES a employer. RSA 282-A:74, II (1999). Regarding contributions, each employer, individual are charged against the account of the claimant’s most recent

paying qualifying individuals from the unemployment compensation fund. RSA “Furthermore, we will uphold the department’s decision unless its findings or benefits and contributions. With respect to benefits, DES is charged with framework encompasses two primary and complementary components:

and rulings of the AHC.

the weight of the evidence on questions of fact.” RSA 282-A:67, V (1999). context for the present dispute. The unemployment compensation statutory relevant portions of the unemployment compensation chapter to provide Before turning to the specific arguments advanced on appeal, we review determination, but simply sustained it, we confine our review to the findings drivers for purposes of the unemployment compensation statute. III

N.H. 289, 291 (1989) (quotation omitted); see also RSA 282-A:67, V.

denied. A:67, we will not “substitute [our] judgment for that of the appeal tribunal as to cert. denied, 488 U.S. 1011 (1989). In reviewing decisions under RSA 282-

the appellate board in this case neither clarified nor limited AHC’s record or determining whether Old Inc. or New LLC was the employing unit of the bus tribunal as reversed, modified, or affirmed by the appellate board.” Because which specifies the procedure for appealing “a final decision of the appeal Judicial review of DES decisions is controlled by RSA 282-A:67, II (1999),

This appeal followed. sustained the decision of the AHC. Old Inc.’s motion to reopen the case was RSA 282-A:7, II was unconstitutionally vague. The appellate board summarily contended that the standard for defining an “employing unit” set forth under

argued that the AHC misapplied the standard under RSA 282-A:7 (1999) for judicata from reversing its January 2001 “Determination of Liability.” It also barred by RSA 282-A:95 (1999) and by the doctrine of administrative res Old Inc. appealed to the DES appellate board. It argued that DES was p. 4 4

fund are required to pay a greater share based upon a “higher” merit rating. doctrine of of the fund, such that those employers who impose a greater burden upon the of avoiding the application of this chapter. employment security that such contracting is not for the purpose to maintain the solvency of the unemployment compensation fund. to administer the unemployment compensation chapter in a manner sufficient contributions for them. Indeed, the legislature requires the DES commissioner

res judicata further precludes its subsequent modification. Thus,

January 2001 determination “final and conclusive,” and that the common law intent to place a proportional burden upon employers to maintain the solvency “Determination of Liability.” It contends that RSA 282-A:95 renders the Old Inc. argues that DES was barred from revisiting its January 2001 to the satisfaction of the commissioner of the department of

to perform its usual work without paying unemployment compensation the dispute before us. benefits and ensures the fund’s solvency. With this background, we turn to unemployment contributions results in adequate funding for unemployment See RSA 282-A:79. Ascribing to each employer its proportional burden to pay further defined in RSA 282-A:7, II, which includes the following qualification: the Federal Unemployment Tax Act. RSA 282-A:8, II. “Employing unit” is

282-A:103, :112, I (1999). The merit rating system evinces the legislature’s

trying to limit its unemployment contribution tax burden by using individuals part of its usual business. This provision seeks to prevent an employer from “employing unit” for individuals it uses under contract to perform work that is Thus, RSA 282-A:7, II creates a statutory presumption that an entity is the

is an “employing unit” with particular characteristics, such as being subject to

employ of such contractors or subcontractors shall be considered 282-A:81, which is adjustable in succeeding years, trade, occupation, profession or business, individuals in the contractor or subcontractor for any work which is part of its usual calculation of an employer’s merit rating. Whenever any employing unit contracts with or has under it any

2005) (each calendar year contributions due from “employer”). An “employer” must be an “employer,” as defined in RSA 282-A:8. See RSA 282-A:69 (Supp. To be subject to the unemployment compensation chapter, an entity

Supp. 2005). New employers initially are assessed at a rate of 2.7 percent, RSA

such experience.” RSA 282-A:79 (1999). Various factors may affect the their accounts, with a view toward fixing such contribution rates as will reflect individuals who are performing for it under contract.

p. 5 appropriate “employing unit” for unemployment taxes on the wages of obligation required DES to discern whether a particular entity is the successorship.” RSA 282-A:94 (1999). The comprehensive scope of this

contributions, the rate at which contributions shall be paid and

liability of employing units or employers or both, including the amount of January 2001 to “make an initial determination on all questions relating to the under a contractual agreement.” By statute, however, DES was required in

A:145 (1999) for raising substantive matters. September 2003 determination fell within the limitations period of RSA 282-

whether New LLC was the ‘employing unit’ for employees it provided to Old Inc.

“[n]othing in [its] January 10, 2001 determination reached a conclusion as to

the latter’s bus drivers under RSA 282-A:7, II. It argues that RSA 282-A:101 relationship between Old Inc. and New LLC with respect to the former’s use of 2003 determination assessed for the first time the nature of the contractual RSA 282-A:8 (“‘Employer’ means . . . [a]ny employing unit which . . . .”). chapter itself, an entity must be an “employing unit” under RSA 282-A:7. See Indeed, to be an “employer” subject to the unemployment compensation the plain import of this statutory language. It contends, however, that purposes,” with limited exceptions not applicable here. DES does not challenge See RSA 282-A:7, II.

pursuant to RSA 282-A:94 (1999). DES further asserts that its September

DES, if unappealed, becomes “final and conclusive in all respects and for all Under RSA 282-A:95, an initial “Determination of Liability” issued by

context of the overall legislative scheme and not in isolation. Id. ascribing to its words their plain and ordinary meanings, and interpret it in the Donovan, 152 N.H. 55, 58 (2005). We examine the language of the statute, the words of the statute considered as a whole. In the Matter of Donovan & interpretation, we are the final arbiter of the legislature’s intent as expressed in issuing its September 2003 determination. In matters of statutory the Federal Unemployment Tax Act and had employees in New Hampshire and conclusive under RSA 282-A:95 such that DES was precluded from determination “was uniquely focused upon” whether New LLC was subject to We first examine whether DES’ January 2001 determination was final

contributions recalculated on a retroactive basis. since January 2001 to Old Inc.’s account, and requiring Old Inc. to pay

determinations were distinct in scope. It contends that the January 2001 According to DES, however, its January 2001 and September 2003

New LLC account, transferring the wages reported and taxes paid by New LLC Old Inc. argues that DES erred in September 2003 by retroactively voiding the made.

p. 6 quarter next succeeding the quarter in which the discovery is

effective and applicable to taxable wages as of the first day of the in effect on the date of discovery, such new rate shall become results in a contribution rate either higher or lower than that rate

notice to the employer of the result thereof. If such recomputation

the employees it contracted to Old Inc. conclusive” concerning New LLC’s liability to make contribution payments for Accordingly, we conclude that the January 2001 determination was “final and to investigate the nature of the ongoing relationship between the two entities.

due, RSA 282-A:79. provisions of this subdivision, of such employer’s account with employer’s merit rating, which in turn affects the calculation of its contribution

DES had sufficient information before it on the ESR form to alert it of the need liabilities of New LLC as was required under RSA 282-A:94, we conclude that own all vehicle assets.” In order for it to properly assess the contribution

immediate recomputation, in accordance with the applicable year, RSA 282-A:69, I, and DES is required to annually reevaluate each assigned prior to the date of discovery, but there shall be an Such readjustment shall not affect any computation or rate

its retroactive recalculation of contribution payments in this case. In fact, it In this case, however, DES relies upon none of these provisions to justify Hampshire and would “continue management function and . . . continue to

RSA 282-A:89. Further, contributions become due and payable each calendar account, the same shall be readjusted as of the date of discovery.

For example, DES may correct errors in an employer’s account. permitting DES to reconsider, reassess, or recalculate prior determinations. New LLC further disclosed that Old Inc. would remain in business in New determination under RSA 282-A:94 is subject to several statutory provisions any of the New Hampshire assets of any other employing unit or employer.” the form asking whether it had “acquired the organization, trade, business or

charges or credits are found to have been made to an employer’s through inadvertence, mistake or any other means erroneous Except as otherwise provided in this subdivision, whenever

We note, however, that while “final and conclusive,” a DES initial

entities. New LLC identified “First Student, Inc.” in response to an inquiry on

with DES in December 2000 revealed an ongoing relationship between the two informed of that relationship at the time.” The ESR form that New LLC filed relationship with Old Inc. was proper,” and that DES “had not even been [DES] an adequate opportunity to determine whether New LLC’s contractual We reject DES’ arguments that “the January 2001 decision did not give p. 7 1, 2001, and require Old Inc. to pay contributions recalculated on a retroactive

recalculated on a retroactive basis. whichever is later.

provision provides: Inc.’s account, retroactively reapply wages to Old Inc.’s account from January no substantive authority for DES to transfer taxes paid by New LLC into Old unemployment compensation chapter. Standing alone, this provision provides

described. to a different entity’s account, and requiring that entity to pay contributions first day of January of the calendar year succeeding the year above 7 account to a different entity’s account, reapplying wages from January 1, 2001, after the department is put on notice that the cause exists, LLC’s account as of January 1, 2001, transferring taxes paid from the voided

within six years of the New LLC’s filing as a New Hampshire employer.” The

the limitations period within which DES may bring an action under the

permanently remove such employer’s separate account as of the commenced within 6 years of the time the cause arose or 2 years authorize the actions DES took in this case; namely, retroactively voiding New

decision is consistent with this limitations period, as the issue was addressed

RSA 282-A:145 (1999). Section 145 is simply a procedural statute, defining

forth in this chapter, he shall terminate such employer and year did not satisfy the conditions of becoming an employer as set No action may be maintained under this chapter unless completed calendar year” reviewed by DES. Section 101, on its face, does not finds that an employer during the then last completed calendar account only as of January 1 of the calendar year succeeding the “last not satisfy the conditions of becoming an employer, it can void that entity’s

Second, DES relies upon section 145 to argue that its “September 2003

commissioner, after such investigation as he deems necessary,

completed calendar year, and should it determine that a particular entity did RSA 282-A:101. This provision authorizes DES to look back to the last

turn. with” the limitations period under RSA 282-A:145. We review each statute in RSA 282-A:101, and that its September 2003 determination “is consistent

Except as otherwise provided in this subdivision, where the

First, section 101 states:

applicable. Rather, it contends that it voided New LLC’s account pursuant to specifically states that RSA 2 p. 8 82-A:89 concerning recomputation is not 8

conclude that it is not necessary to address its remaining arguments.

challenge to the retroactive nature of the September 2003 determination, we upon Old Inc.’s merit rating. Having resolved on a statutory basis Old Inc.’s January 2001 and which recalculated retroactive contributions due based

account both taxes paid by New LLC and wages reported by New LLC since

DALIANIS, DUGGAN, GALWAY and HICKS, JJ., concurred.

upholding the September 2003 determination which transferred to Old Inc.’s Accordingly, we conclude that the AHC erred as a matter of law in

underlying substantive provision. basis. RSA 2 p. 8 82-A:7, II also provides no such authority, and DES cites no other