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Chapter 2 EMPLOYER LIABILITY, TAX RATE, SUCCESSORSHIP Sections 11(g), 13, 13a-13k, 15, 18-22, 41

MESC v Arrow Plating 2.01

Section 22

LIABILITY, Successorship, Leasehold interest, Organization, Accounts receivable

CITE AS: MESC v Arrow Plating, 10 Mich App 323 (1968)

Appeal pending: No

Employer: Arrow Plating Company, Inc.

Docket No: L66 176 1277

COURT OF APPEALS HOLDING: "If a vital integral part of the business is not transferred, regardless of how many people make up that integral part, so that the business could not continue, then there has not been a transfer of the `organization' for the purposes of this Act."

FACTS: The employer bought much of the assets of Wade Boring Works. The main asset of Wade Boring was the right of possession to a building leased by Wade Boriinng because special zoning allowing the flushing of waste chemicals into the public sewer system. Wade Boring Works retained its phone number, customers, and the right to compete. Arrow's business was confined to plating operations, while Wade Boring had done both plating and sheet metal fabrication.

DECISION: The employer is not a successor employer under the Act.

RATIONALE: The critical wording of Sec. 41(2) is the phrase defining what must be acquired by a successor employer as "the organization; trade or business, or 75% or more of the assets." As for "trade or business" it is clear that Arrow did not assume the trade or business, since the clientele were different and the type of work performed by the two companies would appeal to different markets.

In accordance with standard accounting principles, accounts receivable are assets to be considered when computing the percentage of assets transferred.

Arrow Plating's right to use the building with favorable zoning was the primary concern, but such right was not assigned a value in the transfer. Poor accounting practices made it impossible for the Court to accurately determine the exact value of assets transferred and retained.

"`Organization' means the vital, integral parts which are necessary for continued operation. In this case, there was not a transfer of the vital, integral parts required for continued operation of the Wade Boring Works. Mr. Frank Beck constituted the entire managerial component of Wade Boring Works, and it could not have continued as a going business without managerial talent."



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