November 28, 2012
HARRY G. STRATIGOS D/B/A DAIRY QUEEN, PETITIONER
DEPARTMENT OF LABOR AND INDUSTRY, OFFICE OF UNEMPLOYMENT COMPENSATION TAX SERVICES, RESPONDENT
The opinion of the court was delivered by: P. Kevin Brobson, Judge
Submitted: September 14, 2012
BEFORE: HONORABLE RENEE COHN JUBELIRER, Judge HONORABLE P. KEVIN BROBSON, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge
OPINION BY JUDGE BROBSON
Harry G. Stratigos (Mr. Stratigos), d/b/a Dairy Queen, pro se, petitions for review of the decision by the Department of Labor and Industry (Department) to affirm the decision of the Office of Unemployment Compensation Tax Services (OUCTS), which denied Mr. Stratigos' request to re-determine-i.e., reduce-his unemployment compensation (UC) contribution rate.*fn1 For the reasons set forth below, we affirm.
The facts of this case are undisputed. On October 11, 1995, Mr. Stratigos registered a Dunkin' Donuts franchise for Pennsylvania UC taxes.
(Amended Reproduced Record (A.R.R.) at 51.) Mr. Stratigos first paid wages as an employer on September 8, 1995. (A.R.R. at 51.) On October 8, 2008, Mr. Stratigos notified the UC Field Accounting Office (FAO) that, on June 13, 2008, he had discontinued operation of his Dunkin' Donuts franchise and ceased paying wages as an employer. (Id. at 46.) Also, Mr. Stratigos informed the FAO that he did not transfer all or any part of the Dunkin' Donuts franchise to another Pennsylvania business. (Id.)
In September 2008, Mr. Stratigos acquired a Dairy Queen franchise.
(Id. at 17.) On October 17, 2008, by filing the PA Enterprise
Registration Form, Mr. Stratigos registered the Dairy Queen franchise
for, inter alia, UC taxes and services. (Id. at 32-33, 49.)
Furthermore, he indicated on the registration form that he was a sole
proprietor of the Dairy Queen franchise and that he had not acquired
the franchise or any part of it, including any assets, from another
business. (Id. at 32-34.) He also indicated on the registration form
that he first paid wages as an employer on November 7, 2008, and that
he did not provide employment prior to the acquisition of the Dairy
Queen franchise. (Id. at 33.) Finally, because Mr. Stratigos did not
identify any predecessors of his Dairy Queen franchise on the
registration form, he did not apply for the experience record and
reserve account balance (Experience) of any predecessor.*fn2
(Id. at 34-35.) Mr. Stratigos' UC contribution rate for 2009
was .018370. (Id. at 18.)
On December 31, 2009, OUCTS informed Mr. Stratigos that his UC contribution rate for the year 2010 would be .084792-i.e., 8.4792 percent. (Id. at 36.) Mr. Stratigos appealed. (Id. at 41.) In his January 6, 2010, appeal letter, Mr. Stratigos argued that he had relied on the advice of an OUCTS' representative in forgoing the acquisition of his predecessor's Experience.*fn3 (Id.) Specifically, he argued that the OUCTS' representative advised him that "[he] would [not] incur a substantial increase if [his] Reserve Balance was positive after all of the employees were called back to the new Dunkin['] Donut[s] ownership group."*fn4 (Id.) He also argued that, because the Dunkin' Donuts franchise renovations caused the temporary layoffs, OUCTS should not take into account the UC benefits that the laid-off employees collected as a result of the temporary layoffs in fiscal year 2009. (Id.) According to Mr. Stratigos, those benefits were an anomaly and, therefore, unlikely to recur. (Id.) On March 11, 2010, OUCTS denied Mr. Stratigos' 2010 contribution rate appeal. (Id.) OUCTS determined:
The basic reason for the rate assigned to [Mr. Stratigos] is that unemployment compensation benefits collected by former employees, in the amount of $1,579.00 and $26,384.00 were charged to [Mr. Stratigos'] account for the fiscal years 2008 and 2009. Notices of these charges were forwarded to [him] at the time compensation was paid. (Id.)
On March 20, 2010, Mr. Stratigos appealed OUCTS' denial to the Department.*fn5 (Id. at 17-18.) He essentially repeated the arguments contained in his first appeal before the Department. In discussing his reliance on the OUCTS' representative's advice, Mr. Stratigos asserted:
I was concerned that my rate would increase detrimentally if I kept my old experience and rate. My accountant had advised me and I suggested to the [Department] representative that I transfer [Mr. Fafalios'] rate since it was the lowest, at .018370, like mine. I was advised by this unemployment office employee to continue using my experience rate especially since I had a Reserve Balance of 31,740 as of 6/30/08 as opposed to transferring [Mr. Fafalios'] rate. I was told specifically that since my reserve balance was so high, I would not incur a substantial increase if my Reserve Balance was positive after all of the employees were called back to the new [renovated] Dunkin['] Donut[s]. . . . I relied on one of the employees at the [Department] instead of transferring [Mr. Fafalios'] rate of the [Dairy Queen franchise] that I purchased. This was my desire, but I was told not to.*fn6
(Id.) Interestingly, the additional evidence Mr. Stratigos submitted to the Department during the appeal indicated that his accountant, Constantine M. Scoumis (Mr. Scoumis), had advised him to acquire Mr. Fafalios' Experience. (Id. at 50.) Indeed, Mr. Scoumis even filled out parts of the application form relating to the acquisition of a predecessor's Experience, and he instructed Mr. Stratigos to complete the remainder of the form by obtaining all necessary information from Mr. Fafalios. (Id. at 50-51, 58.) Notwithstanding the advice of Mr. Scoumis, Mr. Stratigos relied on the OUCTS' representative's advice that his 2010 experience-based contribution rate would not substantially increase because of his high reserve balance. (Id. at 50-51.)
On March 21, 2012, the Department issued its decision, affirming OUCTS' determination. (Id. at 14.) The Department concluded that, although Mr. Stratigos might have discussed his compensation rate with an OUCTS' representative, it was improper for Mr. Stratigos to have relied on the representative's proffered advice on that matter. (Id. at 6-7, 13.) The Department found that, despite the representative's advice, "[Mr. Stratigos] was not prevented from applying for [the transfer of Mr. Fafalios' Experience], either implicitly or explicitly." (Id. at 13.) Also, the Department found that Mr. Stratigos did not challenge the statutory formula for computing experience-based UC contribution rates or the three-year averages. (Id. at 11-13.) Moreover, it found that the Law contains no provision by which it allows OUCTS to exempt any properly assessed benefit charges from its computation of experience-based compensation rates. (Id.) Ultimately, the Department concluded that the 2009 benefit charges and the reserve account balance were properly calculated and appropriately used in the computation of Mr. Stratigos' 2010 experience-based compensation rate. (Id.) Mr. Stratigos now petitions this Court for review.
On appeal,*fn7 Mr. Stratigos propounds two arguments. First, Mr. Stratigos argues that the Department committed an error of law by concluding that an OUCTS' representative's advice on his 2010 compensation rate did not prevent him from applying for Mr. Fafalios' Experience. Second, he appears to argue that the Department erred as a matter of law in refusing to set aside the 2010 contribution rate.
The Law provides for two ways in which Mr. Stratigos could have transferred Mr. Fafalios' Experience. Mr. Stratigos could have applied to have Mr. Fafalios' experience transferred to him or, alternatively, Mr. Stratigos could have established a commonality of ownership, control, or management of the Dairy Queen franchise with Mr. Fafalios to transfer the Experience.*fn8 Under Section 301(d)(1)(A) of the Law, 43 P.S. § 781(d)(1)(A), Mr. Stratigos had until December 31, 2009-the year subsequent to the 2008 Dairy Queen franchise acquisition-to apply for Mr. Fafalios' Experience. The facts of this case establish that Mr. Stratigos neither applied to have Mr. Fafalios' Experience transferred nor established a commonality of ownership, control, or management of the franchise with Mr. Fafalios. Indeed, Mr. Stratigos failed to even indicate on his registration form for the Dairy Queen franchise that he had acquired all or parts of an existing business.
We reject Mr. Stratigos' contention that the OUCTS' representative is to blame for the increase in his 2010 contribution rate. Here, Mr. Stratigos discussed his contribution rate with the representative in 2008. Despite the representative's advice, Mr. Stratigos was aware of Mr. Scoumis' advice-i.e., applying for Mr. Fafalios' Experience.*fn9 As Mr. Stratigos admits, Mr. Scoumis' and the OUCTS' representative's advice seemingly impacted his 2010 contribution rate for the Dairy Queen franchise. To determine which competing advice to follow, Mr. Stratigos should have questioned their respective effect on his contribution rate, or broadly put, on his business. In the instant case, Mr. Stratigos chose to rely on the OUCTS' representative's 2008 advice and dismiss Mr. Scoumis' advice. The evidence indicates that Mr. Stratigos failed to examine fully the impact of either advice on his business. In fact, Mr. Stratigos had until December 31, 2009, to apply for Mr. Fafalios' Experience. There is no evidence of record, however, that suggests that Mr. Stratigos had any discussion with Mr. Fafalios about transferring Mr. Fafalios' Experience. Based on the evidence, we conclude that Mr. Stratigos did not act prudently and with due diligence in making an informed business judgment regarding the Dairy Queen franchise's 2010 contribution rate.
Next, we address Mr. Stratigos' argument that the Department erred as a matter of law in refusing to set aside the 2010 contribution rate. In particular, although he does not specifically mention it, Mr. Stratigos appears to argue that the $26,384.00 in benefits that OUCTS charged to his account in the fiscal year 2009 should be exempted from the computation of the reserve ratio and the benefit ratio factors.*fn10 In other words, he desires a contributions rate of "around two percent or slightly [higher]" for fiscal year 2010. (A.R.R. at 18.) Mr. Stratigos, however, does not cite to any legal authority pursuant to which an exemption of those factors would be justified or permitted. Reading the Law in its entirety, we find no provision that would permit the Department or OUCTS to exempt any benefit charges, regardless of whether they are an anomaly, from the statutory formula used to calculate an experience-based contribution rate. As noted earlier, Mr. Stratigos does not challenge the legality of the statutory formula used to calculate the factors. Also, he does not challenge the accuracy of OUCTS' computation of his 2010 compensation rate. Mr. Stratigos merely hopes to have a different contribution rate apply to his Dairy Queen franchise than that which OUCTS statutorily calculated. To the extent Mr. Stratigos argues potential future stability in his employment force to justify the exemption of the factors, his argument is unavailing. The statutory formula does not take into account events that have not yet occurred. The statutory formula is reactive, inasmuch as it only uses events that already have occurred. We, therefore, conclude that the Department did not err in refusing to deviate from the statutory formula when calculating Mr. Stratigos' experience-based contribution rate for the fiscal year 2010.
Accordingly, we affirm the Department's order.
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Harry G. Stratigos d/b/a Dairy Queen, : Petitioner : : v. Department of Labor and Industry, : Office of Unemployment Compensation : Tax Services, : Respondent :
: No. 694 C.D. 2012 :
AND NOW, this 28th day of November, 2012, the order of the Department of Labor and Industry is hereby AFFIRMED.
P. KEVIN BROBSON, Judge