H.B. 10 Enrolled

EMPLOYMENT SECURITY ACT AMENDMENTS
2005 GENERAL SESSION
STATE OF UTAH
Sponsor: David N. Cox
Steven R. Mascaro
Karen W. MorganLaWanna Lou ShurtliffPeggy Wallace
LONG TITLE
General Description:
This bill modifies the Employment Security Act as related to employer unemployment
experience ratings.
Highlighted Provisions:
This bill:
. conforms state law to newly enacted federal law aimed at prohibiting state
unemployment tax avoidance;
. defines taxable wages and unemployment experience for purposes related to an
employer's overall basic contribution rate, including the acquisition of the
unemployment experience of another employer;
. provides for assignment of rates and unemployment experience transfers upon the
transfer or acquisition of a trade or business;
. provides penalties for a person who violates or attempts to violate provisions related
to determining the assignment of a contribution rate; and
. provides that a violation may be prosecuted for unemployment insurance fraud.
Monies Appropriated in this Bill:
None
Other Special Clauses:
This bill provides an immediate effective date.
Utah Code Sections Affected:
AMENDS:

35A-4-204, as last amended by Chapter 265, Laws of Utah 2001
35A-4-208, as last amended by Chapter 60, Laws of Utah 2000
35A-4-301, as renumbered and amended by Chapter 240, Laws of Utah 1996
35A-4-303, as last amended by Chapter 21, Laws of Utah 2004
REPEALS AND REENACTS:
35A-4-304, as renumbered and amended by Chapter 240, Laws of Utah 1996

Be it enacted by the Legislature of the state of Utah:
Section 1. Section 35A-4-204 is amended to read:
35A-4-204. Definition of employment.
(1) Subject to the other provisions of this section, "employment" means any service
performed for wages or under any contract of hire, whether written or oral, express or implied,
including service in interstate commerce, and service as an officer of a corporation.
(2) "Employment" includes an individual's entire service performed within or both within
and without this state if one of Subsections (2)(a) through (k) is satisfied.
(a) The service is localized in this state. Service is localized within this state if:
(i) the service is performed entirely within the state; or
(ii) the service is performed both within and without the state, but the service performed
without the state is incidental to the individual's service within the state, for example, is
temporary or transitory in nature or consists of isolated transactions.
(b) (i) The service is not localized in any state but some of the service is performed in
this state and the individual's base of operations, or, if there is no base of operations, the place
from which the service is directed or controlled, is in this state; or
(ii) the individual's base of operations or place from which the service is directed or
controlled is not in any state in which some part of the service is performed, but the individual's
residence is in this state.
(c) (i) (A) The service is performed entirely outside this state and is not localized in any
state;

(B) the worker is one of a class of employees who are required to travel outside this state
in performance of their duties; and
(C) (I) the base of operations is in this state; or
(II) if there is no base of operations, the place from which the service is directed or
controlled is in this state.
(ii) Services covered by an election under Subsection 35A-4-310 (3), and services
covered by an arrangement under Section 35A-4-106 between the division and the agency
charged with the administration of any other state or federal unemployment compensation law,
under which all services performed by an individual for an employing unit are considered to be
performed entirely within this state, are considered to be employment if the division has
approved an election of the employing unit for whom the services are performed, under which
the entire service of the individual during the period covered by the election is considered to be
insured work.
(d) (i) The service is performed after December 31, 1977, in the employ of this state or
any of its instrumentalities or any county, city, town, school district, or any political subdivision
thereof or any of its instrumentalities or any instrumentality or more than one of the foregoing or
any instrumentality of any of the foregoing and one or more other states or political subdivisions
or Indian tribes or tribal units if:
(A) the service is excluded from employment as defined in the Federal Unemployment
Tax Act, 26 U.S.C. 3306(c)(7);
(B) the service is not excluded from employment by Section 35A-4-205 ; and
(C) as to any county, city, town, school district, or political subdivision of this state, or
any instrumentality of the same or Indian tribes or tribal units, that service is either:
(I) required to be treated as covered employment as a condition of eligibility of
employers in this state for Federal Unemployment Tax Act employer tax credit;
(II) required to be treated as covered employment by any other requirement of the
Federal Unemployment Tax Act, as amended; or
(III) not required to be treated as covered employment by any requirement of the Federal

Unemployment Tax Act, but coverage of the service is elected by a majority of the members of
the governing body of the political subdivision or instrumentality or tribal unit in accordance
with Section 35A-4-310 .
(ii) Benefits paid on the basis of service performed in the employ of this state shall be
financed by payments to the division instead of contributions in the manner and amounts
prescribed by Subsections 35A-4-311 (2)(a) and (4).
(iii) Benefits paid on the basis of service performed in the employ of any other
governmental entity or tribal unit described in this Subsection (2) shall be financed by payments
to the division in the manner and amount prescribed by the applicable provisions of Section
35A-4-311 .
(e) The service is performed by an individual in the employ of a religious, charitable,
educational, or other organization, but only if:
(i) the service is excluded from employment as defined in the Federal Unemployment
Tax Act, 26 U.S.C. 3306(c)(8), solely by reason of Section 3306(c)(8) of that act; and
(ii) the organization had four or more individuals in employment for some portion of a
day in each of 20 different weeks, whether or not the weeks were consecutive, within either the
current or preceding calendar year, regardless of whether they were employed at the same
moment of time.
(f) (i) The service is performed outside the United States after December 31, 1971,
except in Canada, in the employ of an American employer, other than service that is considered
employment under the provisions of this Subsection (2) or the parallel provisions of another
state's law if:
(A) the employer's principal place of business in the United States is located in this state;
(B) the employer has no place of business in the United States but is:
(I) an individual who is a resident of this state;
(II) a corporation that is organized under the laws of this state; or
(III) a partnership or trust in which the number of partners or trustees who are residents
of this state is greater than the number who are residents of any one other state; or

(C) none of the criteria of Subsections (2)(f)(i)(A) and (B) is met but:
(I) the employer has elected coverage in this state; or
(II) the employer fails to elect coverage in any state and the individual has filed a claim
for benefits based on that service under the law of this state.
(ii) "American employer" for purposes of this Subsection (2) means a person who is:
(A) an individual who is a resident of the United States;
(B) a partnership if 2/3 or more of the partners are residents of the United States;
(C) a trust if all of the trustees are residents of the United States;
(D) a corporation organized under the laws of the United States or of any state;
(E) a limited liability company organized under the laws of the United States or of any
state;
(F) a limited liability partnership organized under the laws of the United States or of any
state; or
(G) a joint venture if 2/3 or more of the members are individuals, partnerships,
corporations, limited liability companies, or limited liability partnerships that qualify as
American employers.
(g) The service is performed after December 31, 1971:
(i) by an officer or member of the crew of an American vessel on or in connection with
the vessel; and
(ii) the operating office from which the operations of the vessel, operating on navigable
waters within, or within and without, the United States, is ordinarily and regularly supervised,
managed, directed, and controlled within this state.
(h) A tax with respect to the service in this state is required to be paid under any federal
law imposing a tax against which credit may be taken for contributions required to be paid into a
state unemployment fund or that, as a condition for full tax credit against the tax imposed by the
Federal Unemployment Tax Act, is required to be covered under this chapter.
(i) (i) Notwithstanding Subsection 35A-4-205 (1)(t), the service is performed:
(A) as an agent-driver or commission-driver engaged in distributing meat products,

vegetable products, fruit products, bakery products, beverages other than milk, or laundry or dry
cleaning services, for the driver's principal; or
(B) as a traveling or city salesman, other than as an agent-driver or commission-driver,
engaged on a full-time basis in the solicitation on behalf of and the transmission to the salesman's
principal, except for sideline sales activities on behalf of some other person, of orders from
wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar
establishments for merchandise for resale or supplies for use in their business operations.
(ii) The term "employment" as used in this Subsection (2) includes services described in
Subsection (2)(i)(i) performed after December 31, 1971, only if:
(A) the contract of service contemplates that substantially all of the services are to be
performed personally by the individual;
(B) the individual does not have a substantial investment in facilities used in connection
with the performance of the services other than in facilities for transportation; and
(C) the services are not in the nature of a single transaction that is not part of a
continuing relationship with the person for whom the services are performed.
(j) The service is performed after December 31, 1977, by an individual in agricultural
labor as defined in Section 35A-4-206 .
(k) The service is domestic service performed after December 31, 1977, in a private
home, local college club, or local chapter of a college fraternity or sorority performed for a
person who paid cash remuneration of $1,000 or more during any calendar quarter in either the
current calendar year or the preceding calendar year to individuals employed in the domestic
service.
(3) Services performed by an individual for wages or under any contract of hire, written
or oral, express or implied, are considered to be employment subject to this chapter, unless it is
shown to the satisfaction of the division that:
(a) the individual is customarily engaged in an independently established trade,
occupation, profession, or business of the same nature as that involved in the contract of hire for
services; and

(b) the individual has been and will continue to be free from control or direction over the
means of performance of those services, both under the individual's contract of hire and in fact.
(4) If an employer, consistent with a prior declaratory ruling or other formal
determination by the division, has treated an individual as independently established and it is
later determined that the individual is in fact an employee, the department may by rule provide
for waiver of the employer's retroactive liability for contributions with respect to wages paid to
the individual prior to the date of the division's later determination, except to the extent the
individual has filed a claim for benefits.
[(5) Notwithstanding any other provisions of this chapter, and in accordance with rules
made by the department, if two or more related corporations concurrently employ the same
individual and compensate the individual through a common paymaster that is one of the
corporations, each corporation:]
[(a) is considered to have paid as remuneration to the individual only the amounts
actually disbursed by it to the individual; and]
[(b) is not be considered to have paid as remuneration to the individual amounts actually
disbursed to the individual by another of the other related corporations.]
Section 2. Section 35A-4-208 is amended to read:
35A-4-208. Wages defined.
(1) As used in this chapter, "wages" means wages as currently defined by Section
3306(b), Internal Revenue Code of 1986, with modifications, subtractions, and adjustments
provided in Subsections (2), (3), and (4).
(2) For purposes of Section 35A-4-303 , "wages" does not include that amount paid to an
individual by an employer with respect to employment subject to this chapter that is in excess of
75% of the insured average fiscal year wage, rounded to the next higher multiple of $100, during
the fiscal year prior to the calendar year of the payment to the individual by the individual's
employer on or after January 1, 1988.
(3) For the purpose of determining whether the successor employer during the calendar
year has paid remuneration to an individual with respect to employment equal to the applicable

taxable wages as defined by this Subsection (3), any remuneration with respect to employment
paid to the individual by a predecessor employer during the calendar year and prior to an
acquisition is considered to have been paid by a successor employer if:
(a) the successor employer during any calendar year acquires [substantially all the
property used in a trade or business] the unemployment experience within the meaning of
Subsection 35A-4-303 (8) or 35A-4-304 (3) of a predecessor employer; and
(b) immediately after the acquisition employs in the successor employer's trade or
business an individual who immediately prior to the acquisition was employed in the trade or
business of the predecessor.
(4) The remuneration paid to an individual by an employer with respect to employment
in another state, upon which contributions were required of the employer under the
unemployment compensation law of that state, shall be included as a part of the taxable wage
base defined in this section.
(5) As used in this chapter, "wages" does not include:
(a) the amount of any payment, including any amount paid by an employer for insurance
or annuities, or into a fund, to provide for a payment, made to, or on behalf of, an employee or
any of the employee's dependents under a plan or system established by an employer that makes
provision for:
(i) (A) the employer's employees generally;
(B) the employer's employees generally and their dependents;
(C) a class or classes of the employer's employees; or
(D) a class or classes of the employer's employees and their dependents; and
(ii) on account of:
(A) sickness or accident disability, but, in the case of payments made to an employee or
any of the employee's dependents, Subsection [(6)] (5)(a)(i) excludes from wages only payments
that are received under a workers' compensation law;
(B) medical or hospitalization expenses in connection with sickness or accident
disability; or

(C) death;
(b) any payment on account of sickness or accident disability, or medical or
hospitalization expenses in connection with sickness or accident disability, made by an employer
to, or on behalf of, an employee after the expiration of six calendar months following the last
calendar month in which the employee worked for the employer;
(c) the payment by an employing unit, without deduction from the remuneration of the
individual in its employ, of the tax imposed upon an individual in its employ under Section 3101,
Internal Revenue Code, with respect to domestic services performed in a private home of the
employer or for agricultural labor;
(d) any payment made to, or on behalf of, an employee or the employee's beneficiary:
(i) from or to a trust described in Section 401(a), Internal Revenue Code, that is exempt
from tax under Section 501(a), Internal Revenue Code, at the time of the payment, except for a
payment made to an employee of the trust as remuneration for services rendered as an employee
and not as a beneficiary of the trust;
(ii) under or to an annuity plan that at the time of the payment is a plan described in
Section 403(a), Internal Revenue Code;
(iii) under a simplified employee pension, as defined in Section 408(k)(l), Internal
Revenue Code, other than any contributions described in Section 408(k)(6), Internal Revenue
Code;
(iv) under or to an annuity contract described in Section 403(b), Internal Revenue Code,
except for a payment for the purchase of the contract that is made by reason of a salary reduction
agreement whether or not the agreement is evidenced by a written instrument;
(v) under or to an exempt governmental deferred compensation plan as defined in
Section 3121(v)(3), Internal Revenue Code; or
(vi) to supplement pension benefits under a plan or trust described in Subsections [(6)]
(5)(d)(i) through (v) to take into account a portion or all of the increase in the cost of living, as
determined by the Secretary of Labor, since retirement, but only if the supplemental payments are
under a plan that is treated as a welfare plan under Section 3(2)(B)(ii) of the Employee Income

Security Act of 1974; or
(e) any payment made to, or on behalf of, an employee or the employee's beneficiary
under a cafeteria plan within the meaning of Section 125, Internal Revenue Code, if the payment
would not be treated as wages under a cafeteria plan.
Section 3. Section 35A-4-301 is amended to read:
35A-4-301. Definitions.
As used in this part:
(1) "Benefit cost rate" means benefit costs of all individuals paid in a calendar year, as
defined in Subsection (2), including the state's share of extended benefit costs, divided by the
total wages paid by all employers subject to contributions in the same calendar year, calculated to
four decimal places, disregarding the remaining fraction, if any.
(2) "Benefit costs" means the net money payments made to individuals who were
employed by employers subject to contributions, excluding extended benefit costs, as provided in
this chapter with respect to unemployment.
(3) "Computation date" means July 1 of any year, beginning July 1, 1984.
(4) "Contribution year" means any calendar year beginning on January 1 and ending on
December 31.
[(5) "Cut-off date" means February 15 with respect to contribution rates effective for
calendar years occurring after December 31, 1982.]
[(6)] (5) "Fiscal year" means the year beginning with July 1 of one year and ending June
30 of the next year. For example, fiscal year 1992 begins July 1, 1991, and ends June 30, 1992.
[(7)] (6) "New employer" means any employer [other than a reopening employer,] who
has been an employer as defined in this chapter and whose account has been chargeable with
benefits for less than one fiscal year immediately preceding the computation date.
[(8)] (7) "Payroll" means total wages.
[(9)] (8) "Qualified employer" means any employer who was an employer as defined in
this chapter during each quarter of the prior fiscal year immediately preceding the computation
date.

[(10)] (9) "Qualifying period" means the four fiscal years immediately preceding the
contribution year on or after January 1, 1985. If four fiscal years of data are not available, the
qualifying period is the lesser number of fiscal years for which data are available, but not less
than one fiscal year.
[(11)] (10) "Reserve" means that amount of money in the fund which has been
appropriated or is subject to appropriation by the Legislature, exclusive of moneys transferred to
the fund under the Federal Employment Security Administrative Financing Act of 1954, 42
U.S.C. 1101 et seq.
(11) "Taxable wages" means all remuneration paid by an employer to employees for
insured work that is subject to unemployment insurance contributions.
(12) "Total wages" means all remuneration paid by an employer to employees for insured
work.
(13) "Unemployment experience" means all factors, including benefit costs and taxable
wages, which bear a direct relation to an employer's unemployment risk.
Section 4. Section 35A-4-303 is amended to read:
35A-4-303. Determination of contribution rates.
(1) (a) On or before January 1 of each year beginning January 1, 1985, an employer's
basic contribution rate will be the same as the employer's benefit ratio, determined by dividing
the total benefit costs charged back to an employer during the immediately preceding four fiscal
years by the total taxable wages of the employer for the same time period, calculated to four
decimal places, disregarding the remaining fraction, if any.
(b) In calculating the basic contribution rate under Subsection (1)(a):
(i) if four fiscal years of data are not available, the data of three fiscal years shall be
divided by the total taxable wages for the same time period;
(ii) if three fiscal years of data are not available, the data of two fiscal years shall be
divided by the total taxable wages for the same time period; or
(iii) if two fiscal years of data are not available, the data of one fiscal year shall be
divided by the total taxable wages for the same time period.

(2) (a) On or before January 1 of each year beginning with January 1, 1985, all social
costs as defined in Subsection 35A-4-307 (1) applicable to the immediately preceding four fiscal
years shall be divided by the total taxable wages of all employers subject to contributions for the
same time period, calculated to four decimal places, disregarding the remaining fraction, if any.
(b) In calculating the social contribution rate under Subsection (2)(a):
(i) if four fiscal years of data are not available, the data of three fiscal years shall be
divided by the total taxable wages for the same time period; or
(ii) if three fiscal years of data are not available, the data of two fiscal years shall be
divided by the total taxable wages for the same time period.
(c) On or after January 1, 2000, the social contribution rate shall be:
(i) set at 0.0010 for any rate year in which the reserve factor established in Subsection
(3)(c) is equal to or less than 1.0000; or
(ii) calculated by dividing all social costs as defined in Subsection 35A-4-307 (1)
applicable to the preceding four fiscal years by the total taxable wages of all employers subject to
contributions for the same time period, calculated to four decimal places, disregarding any
remaining fraction, for any rate year in which the reserve factor established in Subsection (3)(c)
is greater than 1.0000.
(d) (i) The social contribution rate for the rate year beginning January 1, 2004, is set at
.003.
(ii) On or after January 1, 2005, the social contribution rate shall be calculated by
dividing all social costs as defined in Subsection 35A-4-307 (1) applicable to the preceding four
fiscal years by the total taxable wages of all employers subject to contributions for the same
period, calculated to four decimal places, disregarding any remaining fraction.
(iii) Notwithstanding Subsection (2)(d)(ii), the social contribution rate for only the rate
year beginning January 1, 2005, may not exceed .004.
(3) (a) On or before January 1 of each year beginning with January 1, 1985, the reserve
factor shall be computed under Subsection (3)(b). For purposes of computing the reserve factor:
(i) the five-year average benefit cost rate is calculated by:

(A) determining the five highest benefit cost rates experienced in the 25 years ending
December 31 one year prior to the computation date;
(B) adding together the rates determined under Subsection (3)(a)(i)(A); and
(C) dividing the amount under Subsection (3)(a)(i)(B) by five, calculated to four decimal
places, disregarding the remaining fraction, if any;
(ii) the minimum adequate reserve fund balance is calculated by:
(A) multiplying the five-year average benefit cost rate by 1.5; and
(B) multiplying the amount under Subsection (3)(a)(ii)(A) by total wages of the fiscal
year ending prior to the computation date, rounded to the nearest dollar;
(iii) the maximum adequate reserve fund balance is calculated by:
(A) multiplying the five-year average benefit cost rate by 2.0; and
(B) multiplying the amount under Subsection (3)(a)(iii)(A) by the total wages used under
Subsection (3)(a)(ii)(B), rounded to the nearest dollar; and
(iv) the computation date is the January 1 on which the reserve factor is calculated.
(b) (i) The reserve factor is one if the actual reserve fund balance as of June 30 preceding
the computation date is:
(A) equal to or greater than the minimum adequate reserve fund balance; and
(B) equal to or less than the maximum adequate reserve fund balance.
(ii) If the actual reserve fund balance as of June 30 preceding the computation date is less
than the minimum adequate reserve fund balance, the reserve factor shall be the greater of:
(A) 2.0000 minus an amount equal to the actual reserve fund balance divided by the
minimum adequate reserve fund balance, calculated to four decimal places, disregarding the
remaining fraction, if any; or
(B) the reserve factor calculated in the prior year.
(iii) The reserve factor is 2.0000 if:
(A) the actual reserve fund balance as of June 30 preceding the computation date is:
(I) insolvent; or
(II) negative; or

(B) there is an outstanding loan from the Federal Unemployment Account.
(iv) If the actual reserve fund balance as of June 30 preceding the computation date is
more than the maximum adequate reserve fund balance, the reserve factor shall be calculated by:
(A) dividing the actual reserve fund balance by the maximum adequate reserve fund
balance, calculated to four decimal places, disregarding the remaining fraction, if any; and
(B) subtracting the amount under Subsection (3)(b)(iv)(A) from 2.0000.
(c) Beginning January 1, 2000, the division shall by administrative decision set the
reserve factor at a rate that shall sustain an adequate reserve. For the purpose of setting the
reserve factor:
(i) the adequate reserve is defined as between 17 and19 months of benefits at the average
of the five highest benefit cost rates in the last 25 years;
(ii) the reserve factor shall be 1.0000 if the actual reserve fund balance as of June 30
preceding the computation date is determined to be an adequate reserve;
(iii) the reserve factor will be set between 0.5000 and 1.0000 if the actual reserve fund
balance as of June 30 preceding the computation date is greater than the adequate reserve;
(iv) the reserve factor will be set between 1.0000 and 1.5000 if the actual reserve fund
balance as of June 30 prior to the computation date is less than the adequate reserve;
(v) if the actual reserve fund balance as of June 30 preceding the computation date is
insolvent or negative or if there is an outstanding loan from the Federal Unemployment Account,
the reserve factor will be set at 2.0000 until the actual reserve fund balance as of June 30
preceding the computation date is determined to be an adequate reserve;
(vi) the reserve factor will be set on or before January 1 of each year; and
(vii) monies made available to the state under Section 903 of the Social Security Act, as
amended, which are received on or after January 1, 2004, may not be considered in establishing
the reserve factor under this section for the rate year 2005 or any subsequent rate year.
(4) (a) Until January 1, 1995, an employer's overall contribution rate is the employer's
basic contribution rate multiplied by the reserve factor, if there is a reserve factor, calculated to
four decimal places, disregarding any further fraction, plus the social contribution rate, and

rounded up to the next higher multiple of .10%, but not more than a maximum overall
contribution rate of 8.0% and not less than 1% for new employers.
(b) On or after January 1, 1995, an employer's overall contribution rate is the employer's
basic contribution rate multiplied by the reserve factor, calculated to four decimal places,
disregarding any further fraction, plus the social contribution rate, and rounded to three decimal
places, disregarding any further fraction, if the fourth decimal place is .0004 or less, or rounding
up to the next higher number, if the fourth decimal place is .0005 or more, but not more than a
maximum overall contribution rate of 8.0% and not less than 1% for new employers.
(c) On or after January 1, 2000, an employer's overall contribution rate is the employer's
basic contribution rate multiplied by the reserve factor established according to Subsection (3)(c),
calculated to four decimal places, disregarding the remaining fraction, plus the social
contribution rate established according to Subsection (2)(c), and calculated to three decimal
places, disregarding the remaining fraction, but not more than a maximum overall contribution
rate of 8.0%, plus the applicable social contribution rate and not less than 1.1% for new
employers.
(d) On or after January 1, 2004, an employer's overall contribution rate is the employer's
basic contribution rate multiplied by the reserve factor established according to Subsection (3)(c),
calculated to four decimal places, disregarding the remaining fraction, plus the social
contribution rate established according to Subsection (2)(d), and calculated to three decimal
places, disregarding the remaining fraction, but not more than a maximum overall contribution
rate of 9.0%, plus the applicable social contribution rate and not less than 1.1% for new
employers.
(e) The overall contribution rate does not include the addition of any penalty applicable
to an employer as a result of delinquency in the payment of contributions as provided in
Subsection [(10)] (9).
(f) The overall contribution rate does not include the addition of any penalty applicable
to an employer assessed a penalty rate under Subsection 35A-4-304 (5)(a).
(5) Except as provided in Subsection [(10)] (9), each new employer shall pay a

contribution rate based on the average benefit cost rate experienced by employers of the major
industry as defined by department rule to which the new employer belongs, the basic contribution
rate to be determined as follows:
(a) Except as provided in Subsection (5)(b), on or before January 1 of each year, the
basic contribution rate to be used in computing the employer's overall contribution rate is the
benefit cost rate which is the greater of:
(i) the amount calculated by dividing the total benefit costs charged back to both active
and inactive employers of the same major industry for the last two fiscal years by the total
taxable wages paid by those employers that were paid during the same time period, computed to
four decimal places, disregarding the remaining fraction, if any; or
(ii) 1%.
(b) If the major industrial classification assigned to a new employer is an industry for
which a benefit cost rate does not exist because the industry has not operated in the state or has
not been covered under this chapter, the employer's basic contribution rate shall be 5.4%. This
basic contribution rate is used in computing the employer's overall contribution rate.
[(6) (a) A reopening employer's basic contribution rate is the average overall contribution
rate for all employers in the state, but not less than 1%, until such time as the reopening employer
becomes a qualified employer as defined in Section 35A-4-301 .]
[(b) The average overall contribution rate for all employers in the state shall be defined
by rule.]
[(c) The reopening employer is an employer that is not substantially related to or
affiliated with the predecessor employer and that acquires, for the purpose of reopening,
substantially all the assets of a business or operating component of a business that has been
closed or substantially closed for 90 days or more of its normal operating period immediately
prior to the acquisition.]
[(d) A business or operating component of a business has been substantially closed if:]
[(i) its normal production has been stopped;]
[(ii) a majority of its workers have been laid off; and]

[(iii) the services of remaining employees are devoted to the protection and disposition of
assets and inventory or administrative duties.]
[(7)] (6) Notwithstanding any other provision of this chapter, and except as provided in
Subsection [(8)] (7), if an employing unit that moves into this state is declared to be a qualified
employer because it has sufficient payroll and benefit cost experience under another state, a rate
shall be computed on the same basis as a rate is computed for all other employers subject to this
chapter if that unit furnishes adequate records on which to compute the rate.
[(8)] (7) An employer who begins to operate in this state after having operated in another
state shall be assigned the maximum overall contribution rate until the employer acquires
sufficient experience in this state to be considered a "qualified employer" if the employer is:
(a) regularly engaged as a contractor in the construction, improvement, or repair of
buildings, roads, or other structures on lands;
(b) generally regarded as being a construction contractor or a subcontractor specialized in
some aspect of construction; or
(c) required to have a contractor's license or similar qualification under Title 58, Chapter
55, Utah Construction Trades Licensing Act, or the equivalent in laws of another state.
[(9)] (8) (a) If an employer[, other than a reopening employer,] acquires the business or
all or substantially all the assets of another employer and the other employer had discontinued
operations upon the acquisition or transfers its trade or business, or a portion of its trade or
business, under Subsection 35A-4-304 (3)(a):
(i) for purposes of determining and establishing the acquiring party's qualifications for an
experience rating classification, the payrolls of both employers during the qualifying period shall
be jointly considered in determining the period of liability with respect to:
(A) the filing of contribution reports;
(B) the payment of contributions; and
(C) after January 1, 1985, the benefit costs of both employers; [and]
(ii) the transferring employer shall be divested of the transferring employer's [payroll]
unemployment experience[.] provided the transferring employer had discontinued operations, but

only to the extent as defined under Subsection 35A-4-304 (3)(c); and
(iii) if an employer transfers its trade or business, or a portion of its trade or business, as
defined under Subsection 35A-4-304 (3), the transferring employer may not be divested of its
employer's unemployment experience.
(b) Any employing unit or prospective employing unit that acquires the [payroll]
unemployment experience of an employer shall, for all purposes of this chapter, be an employer
as of the date of acquisition.
(c) Notwithstanding Section 35A-4-310 , when a transferring employer, as provided in
Subsection [(9)] (8)(a), is divested of the employer's [payroll] unemployment experience by
transferring all of the employer's business to another and by ceasing operations as of the date of
the transfer, the transferring employer shall cease to be an employer, as defined by this chapter,
as of the date of transfer.
[(10)] (9) (a) A rate of less than 8% shall be effective January 1 of any contribution year
on or after January 1, 1985, but before January 1, 1988, and a rate of less than the maximum
overall contribution rate on or after January 1, 1988, only with respect to new employers and to
those qualified employers who, except for amounts due under division determinations that have
not become final, paid all contributions prescribed by the division with respect to the four
consecutive calendar quarters in the fiscal year immediately preceding the computation date on or
after January 1, 1985.
(b) Notwithstanding Subsections (1), (5), (6), [(7),] and [(9)] (8), on or after January 1,
1988, any employer who fails to pay all contributions prescribed by the division with respect to
the four consecutive calendar quarters in the fiscal year immediately preceding the computation
date, except for amounts due under determinations that have not become final, shall pay a
contribution rate equal to the overall contribution rate determined under the experience rating
provisions of this chapter, plus a surcharge of 1% of wages.
(c) Any employer who pays all required contributions shall, for the current contribution
year, be assigned a rate based upon the employer's own experience as provided under the
experience rating provisions of this chapter effective the first day of the calendar quarter in which

the payment was made.
(d) Delinquency in filing contribution reports shall not be the basis for denial of a rate
less than the maximum contribution rate.
Section 5. Section 35A-4-304 is repealed and reenacted to read:
35A-4-304. Special provisions regarding transfers of unemployment experience and
assignment rates.
(1) As used in this section:
(a) "Knowingly" means having actual knowledge of or acting with deliberate ignorance
or reckless disregard for the prohibition involved.
(b) "Person" has the meaning given that term by Section 7701(a)(1) of the Internal
Revenue Code of 1986.
(c) "Trade or business" includes the employer's workforce.
(d) "Violate or attempt to violate" includes intent to evade, misrepresentation, or willful
nondisclosure.
(2) Notwithstanding any other provision of this chapter, Subsections (3) and (4) shall
apply regarding assignment of rates and transfers of unemployment experience.
(3) (a) If an employer transfers its trade or business, or a portion of its trade or business,
to another employer and, at the time of the transfer, there is common ownership, management, or
control of the employers, then the unemployment experience attributable to each employer shall
be combined into a common experience rate calculation.
(b) The contribution rates of the employers shall be recalculated and made effective upon
the date of the transfer of trade or business as determined by division rule in accordance with
Title 63, Chapter 46a, Utah Administrative Rulemaking Act.
(c) (i) If one or more of the employers is a qualified employer at the time of the transfer,
then all employing units that are party to a transfer described in Subsection (3)(a) of this section
shall be assigned an overall contribution rate under Subsection 35A-4-303 (4)(d), using combined
unemployment experience rating factors, for the rate year during which the transfer occurred and
for the subsequent three rate years.

(ii) If none of the employing units is a qualified employer at the time of the transfer, then
all employing units that are party to the transfer described in Subsection (3)(a) shall be assigned
the highest overall contribution rate applicable at the time of the transfer to any employer who is
party to the acquisition for the rate year during which the transfer occurred and for subsequent
rate years until the time when one or more of the employing units is a qualified employer.
(iii) Once one or more employing units described in Subsection (3)(c)(ii) is a qualified
employer, all the employing units shall be assigned an overall rate under Subsection
35A-4-303 (4)(d), using combined unemployment experience rating factors for subsequent rate
years, not to exceed three years following the year of the transfer.
(d) The transfer of some or all of an employer's workforce to another employer shall be
considered a transfer of its trade or business when, as the result of the transfer, the transferring
employer no longer performs trade or business with respect to the transferred workforce, and the
trade or business is now performed by the employer to whom the workforce is transferred.
(4) (a) Whenever a person is not an employer under this chapter at the time it acquires
the trade or business of an employer, the unemployment experience of the acquired business shall
not be transferred to that person if the division finds that the person acquired the business solely
or primarily for the purpose of obtaining a lower rate of contributions.
(b) The person shall be assigned the applicable new employer rate under Subsection
35A-4-303 (5).
(c) In determining whether the business was acquired solely or primarily for the purpose
of obtaining a lower rate of contributions, the division shall use objective factors which may
include:
(i) the cost of acquiring the business;
(ii) whether the person continued the business enterprise of the acquired business;
(iii) how long the business enterprise was continued; or
(iv) whether a substantial number of new employees were hired for performance of
duties unrelated to the business activity conducted prior to acquisition.
(5) (a) If a person knowingly violates or attempts to violate Subsection (3) or (4) or any

other provision of this chapter related to determining the assignment of a contribution rate, or if a
person knowingly advises another person in a way that results in a violation of any of those
subsections or provisions, the person is subject to the following penalties:
(i) (A) If the person is an employer, then the employer shall be assigned an overall
contribution rate of 5.4% for the rate year during which the violation or attempted violation
occurred and for the subsequent rate year.
(B) If the person's business is already at 5.4% for any year, or if the amount of increase in
the person's rate would be less than 2% for that year, then a penalty surcharge of contributions of
2% of taxable wages shall be imposed for the rate year during which the violation or attempted
violation occurred and for the subsequent rate year.
(ii) (A) If the person is not an employer, the person shall be subject to a civil penalty of
not more than $5,000.
(B) The fine shall be deposited in the penalty and interest account established under
Section 35A-4-506 .
(b) (i) In addition to the penalty imposed by Subsection (5)(a), a violation of this section
may be prosecuted as unemployment insurance fraud.
(ii) The determination of the degree of an offense shall be measured by the total value of
all contributions avoided or reduced or contributions sought to be avoided or reduced by the
unlawful conduct as applied to the degrees listed under Subsection 76-8-1301 (2)(a).
(6) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
division shall make rules to identify the transfer or acquisition of a business for purposes of this
section.
(7) This section shall be interpreted and applied in a manner that meets the minimum
requirements contained in any guidance or regulations issued by the United States Department of
Labor.
Section 6. Effective date.
If approved by two-thirds of all the members elected to each house, this bill takes effect
upon approval by the governor, or the day following the constitutional time limit of Utah

Constitution Article VII, Section 8, without the governor's signature, or in the case of a veto, the
date of veto override.