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Baxter Decorating and Painting Co. v MESC 2.10

Section 22

SUCCESSORSHIP, Transfer of business, Transfer of rating account

CITE AS: Baxter Decorating and Painting Co. v MESC, 34 Mich App 380 (1971).

Appeal pending: No

Plaintiff: Baxter Decorating and Painting Co.

Employer: Grand Rapids Industrial Painting Co. (GRIPCO)

Docket No. L67-4414-1321

COURT OF APPEALS HOLDING: Where various business elements were transferred including some physical assets, disclosure of customers, gain of business from several customers of transferor, there was substantial evidence of a business transfer although the computation of the percentage of the rating account to be transferred was arbitrary.

FACTS: Pursuant to a contract GRIPCO transferred physical assets (painting and office equipment) to Baxter and right to use its customer list. In addition, the former general manager of GRIPCO accepted employment with Baxter. His role was to solicit former GRIPCO clientele for Baxter. Baxter paid $17,000 to GRIPCO in addition to making a separate financial arrangement with Mr. Harris. GRIPCO continued in business. Issues are: 1. whether transferee (Baxter) continued or resumed all or part of the business of transferor (GRIPCO), and 2. whether it was proper to transfer 95.5% of GRIPCO's rating account to Baxter.

DECISION: There was a transfer of a business within the meaning of Section 22(a). Remanded for purpose of determining what percentage of the assets were transferred.

RATIONALE: The test that must be met is whether there was a continuation or resumption of all or part of the transferor's business. The transfer need not result in an increase in business for the transferee or for that matter, in a successful continuation or resumption. "[T]he test... is not whether the successor employer made a good bargain."

Many factors besides physical assets must be evaluated to determine what percentage of the business was transferred. The physical assets and the business are not identical concepts. "A proper determination cannot be based solely on the value of the transferred physical assets, especially where the tranferor continues in business and retains most of its own employees and continues to be in competition with the tranferee."



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