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decided: July 16, 1985.


Appeal from the Order of the Department of Labor and Industry, Employer Accounts Review Board, in case of In Re: 1982 Contribution Rate Appeal of Appleton Papers, Inc. (formerly Germaine Monteil Cosmetiques Corporation), Employer Account No. 99-1981.


C. Grainger Bowman, McNees, Wallace & Nurick, for petitioner.

Sean F. Creegan, Assistant Chief Counsel, with him, Herbert W. Hoffman, Deputy Chief Counsel, for respondent.

Judges Craig and Doyle, and Senior Judge Kalish, sitting as a panel of three. Opinion by Judge Doyle.

Author: Doyle

[ 90 Pa. Commw. Page 401]

Appleton Papers, Inc. (Petitioner) appeals from a determination of the Employer Accounts Review Board (Board) which affirmed the decision of the Office of Employment Security (OES) denying Petitioner's 1982 contribution rate appeal.

Prior to 1982, a former corporation having the name Appleton Papers, Inc. (Old Appleton) existed as a wholly owned subsidiary of Germaine Monteil Cosmetiques Corporation (GMCC). Both GMCC and Old Appleton were Pennsylvania employers, and had established separate employer contribution accounts with the OES. On January 2, 1982, the two corporations merged,*fn1 with GMCC being the surviving corporation. After the merger, GMCC changed its name to Appleton Papers, Inc. (New Appleton). It is New Appleton which is the present petitioner. New Appleton's contribution rate for the remainder of 1982 was determined pursuant to the provisions of Section 301(d)(2) of the Unemployment Compensation Law (Act),*fn2 43 P.S. § 781(d)(2), which states:

A . . . successor-in-interest who, prior to the transfer, was an employer during the calendar year in which the transfer occurred, shall not have his rate of contribution adjusted under the provisions of this subsection for the remainder of such year. A successor-in-interest, who prior to the transfer, was not an employer during the calendar year in which the transfer occurred . . . shall be assigned the same rate of contribution as the preceding employer for the remainder of such year. . . .

[ 90 Pa. Commw. Page 402]

Since New Appleton had been an "employer" prior to the transfer,*fn3 its contribution rate was not adjusted for the remainder of 1982, and thus did not reflect the lower contribution rate which had been assigned to its former subsidiary, Old Appleton.*fn4 New Appleton applied for a redetermination of its contribution rate, requesting that its former subsidiary's experience record and reserve account balance be considered. The OES denied the application, and the Board affirmed.

In its present appeal, New Appleton challenges the constitutionality of Section 301(d)(2) of the Act on equal protection grounds.*fn5 New Appleton attacks as arbitrary the classification which allows the contribution rate of a successor-in-interest to be determined on the basis of whether or not the successor-in-interest was an employer in Pennsylvania prior to the transfer.

We begin our analysis by noting that a strong presumption exists in favor of the constitutionality of an act of the legislature and the burden lies heavily upon one challenging the act to show that it clearly, palpably and plainly violated the Constitution. Picariello v. Commonwealth, 54 Pa. Commonwealth Ct. 252, 421 A.2d 477 (1980); Wallace v. Unemployment Compensation Board of Review, 38 Pa. Commonwealth Ct. 342,

[ 90 Pa. Commw. Page 403393]

A.2d 43 (1978). In the context of an economic benefits statute such as an unemployment compensation act, where no fundamental right is involved, a classification established by the statute which is not inherently suspect will pass muster under the equal protection clause if it bears some rational relationship to the legitimate purpose of the legislation. Wallace, 38 Pa. Commonwealth Ct. at 347, 393 A.2d at 46. See Regan v. Taxation with Representation, 461 U.S. 540 (1983).

The Department of Labor and Industry (Department) argues that Section 301(d)(2) is rationally related to the legislative goal of assuring that a successor-in-interest will be assigned only one tax rate for the entire transfer year. The Department suggests that the legislature's intent that a single yearly rate apply to each employer is implicit in the language of Section 301(e)(2) of the Act, 43 P.S. § 781(e)(2), which states that the Department shall "notify each employer of his rate contribution for the calendar year." (Emphasis added.)

We must agree with the Department that the classification in Section 301(d)(2) bears a rational relationship to this legitimate legislative goal. It is only where the successor-in-interest is an employer before the transfer that the potential for two applicable rates exists. If such a successor could, upon transfer, assume the contribution rate of its predecessor, then two different rates would apply during the calendar year -- one rate before the transfer date, and one rate after the transfer date. Section 301(d)(2) assures a single contribution rate in such situations by requiring the successor-in-interest to continue its existing contribution rate for the remainder of the year.

A successor-in-interest who is not an employer before the transfer, on the other hand, has no contribution

[ 90 Pa. Commw. Page 404]

    rate applicable to it before the date of transfer. Thus, this successor can, upon transfer, properly assume the contribution rate of its predecessor without the possibility that two different rates could apply during the same calendar year.

Since the two classes of successors-in-interest differ with respect to the existence of an applicable pretransfer rate of contribution, it is reasonable for the statute to treat them differently for purposes of assuring a single yearly rate of contribution during the transfer year.*fn6

We are mindful of the disadvantage the present classification scheme presents to New Appleton. However, the mere fact that the legislature could have achieved its goal in some other fashion, or might have done so without adversely affecting those in New Appleton's position, does not make the present classification unconstitutional. Hughes v. Alexandria Scrap Corp., 426 U.S. 794 (1976).*fn7

For these reasons, we reject New Appleton's claim of unconstitutionality, and affirm the order of the Board upholding New Appleton's contribution rate for 1982.

[ 90 Pa. Commw. Page 405]


Now, July 16, 1985, the order of the Employer Accounts Review Board in the above referenced matter, dated January 6, 1984, is hereby affirmed.



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