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August 15, 1997


Appealed From No. 7030. State Agency Department of Labor and Industry.

Before: Honorable Doris A. Smith, Judge, Honorable Bonnie Brigance Leadbetter, Judge, Honorable Charles A. Lord, Senior Judge. Opinion BY Judge Leadbetter.

The opinion of the court was delivered by: Leadbetter


FILED: August 15, 1997

The Glidden Company, Inc. (Glidden) appeals from the order of the Pennsylvania Department of Labor and Industry (DLI) requiring a retroactive increase in the unemployment compensation tax rate paid by Glidden. The question presented on appeal is whether the sale of the stock of a corporation from one independent parent corporation to another constitutes a transfer between employers under Section 301(d)(1)(B) of the Unemployment Compensation Law (Law), December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S. § 781(d)(1)(B). *fn1 Although only one *fn2 in a long series of corporate transfers is involved in the present appeal, the entire history is set out to put the disputed transaction in context.

Glidden is a corporation engaged in the manufacture and sale of paint products. Prior to March 31, 1986, Glidden was "Glidden Coatings and Resins Division," a division of SCM Corporation (SCM). *fn3 Then, on March 31, 1986, Hanson Trust Co. (Hanson) acquired the Glidden Coatings and Resins Division through a hostile takeover of SCM. In August 1986, Hanson placed the assets of the Glidden Coatings and Resin Division into its subsidiary corporation, HSCM-6, which was later renamed "The Glidden Company."

In October 1986, ICI American Holdings, Inc. (ICI), purchased 100% of the stock of The Glidden Company from Hanson. Despite this stock transfer, The Glidden Company continued to exist as the same operating corporate entity. On December 23, 1986, ICI submitted an Employer's Initial Statement (EIS) to the Bureau of Employer Tax Operations (Bureau) to register the unemployment compensation tax account of The Glidden Company. Thereafter, ICI sought "new employer" status for The Glidden Company pursuant to Section 301(a)(4) of the Law. *fn4 Specifically, ICI claimed that the stock purchase from Hanson was a transfer of business and that there was no common ownership or control between Hanson and ICI.

On December 30, 1986, The Glidden Company was formally dissolved and its assets distributed to two of ICI's subsidiaries. One of the subsidiaries, Atkemix-Eight, Inc., was then renamed "The Glidden Company, Inc." (This corporation, which is the appellant herein, is referred to simply as "Glidden." References to "The Glidden Company" relate to the corporation originally known as "HSCM-6" transferred from Hanson to ICI.) Glidden then filed a second EIS with the Bureau in which it acknowledged common ownership between ICI and Glidden. Thereafter, Glidden paid its unemployment compensation taxes based on the "new employer" rate, even though DLI had not yet ruled on ICI/Glidden's application for the new rate. The Bureau accepted payment at this rate for four years. In April 1991, however, the Bureau informed Glidden that ICI's purchase of 100% of the stock of The Glidden Company from Hanson was not a transfer between employers because the employer, The Glidden Company, never changed despite the change in legal ownership. Thus, The Glidden Company retained its experience rating and reserve account balance, even after its stock was acquired by ICI. Glidden paid the assessed "delinquent" unemployment compensation tax, but appealed the Bureau's decision to DLI. DLI conducted a hearing and issued its order denying Glidden's appeal in February of 1996.

In this appeal, Glidden contends that DLI erred in concluding that the sale of The Glidden Company from Hanson to ICI by a written agreement and 100% stock purchase did not constitute a transfer between employers. Specifically, Glidden argues that DLI's interpretation of Section 301(d)(1)(B) is contrary to the section's language and plain meaning. The section language at issue is:

any transfer by an employer . . . of its organization, trade or business in whole or in part, whether such transfer was by merger, consolidation, sale or transfer, descent or otherwise . . . .

43 P.S. § 781(d)(1)(B) (emphasis added).

Initially, we emphasize that "the interpretation given to a statute by the agency charged with its application is entitled to great weight and should be disregarded or overturned only if such construction is clearly erroneous." Zemprelli v. State Employees Retirement Bd., 680 A.2d 919, 921 (Pa. Commw. 1996), appeal denied, Pa. , 690 A.2d 239 (1997). Moreover, "when the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit." 1 Pa. C.S. § 1921(b); Allegheny County Institution Dist. v. Dep't. of Public Welfare, 668 A.2d 252 (Pa. Commw. 1995), appeal denied, Pa. , 692 A.2d 567 (1997). DLI interpreted the language of Section 301(d)(1)(B) to mean that the provisions of the section are applicable only when there has been a transfer of business from one employer to another different employer, and we agree that the plain language of the statute supports, if not mandates, this interpretation. This is not the end of the inquiry, however. Hanson indisputably transferred its subsidiary corporation, The Glidden Company, to ICI. The critical question then becomes whether Hanson, the transferor-parent, or The Glidden Company, the transferee-subsidiary, was the "employer."

In its brief to this Court, Glidden asserts that the term "employer" as used in Section 301, refers to the legal owner of the corporation. To accept Glidden's definition of "employer," however, would require this Court to ignore the general principles of corporate law which recognize The Glidden Company as an entity which is separate and distinct from the parent corporation that owns its stock. Clark v. Matsushita Electric Indus. Co., 811 F. Supp. 1061, 1067 (M.D.Pa. 1993)("Subsidiaries, even if wholly-owned, are presumed separate and distinct entities from their parent corporations.") The statutory definition of "employer" under the Law *fn5 states in relevant part that:

"Employer" means the Commonwealth of Pennsylvania, its political subdivisions, and their instrumentalities and every individual, copartnership, association, corporation (domestic or foreign) . . . who or which employed or employs any employe in employment subject ...

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