               IN THE COURT OF APPEALS OF TENNESSEE
                           AT NASHVILLE
                             February 25, 2015 Session

  ADMINISTRATIVE MANAGEMENT RESOURCES, LLC v. JAMES G.
                       NEELEY

               Appeal from the Chancery Court for Davidson County
                   No. 110034II   Carol L. McCoy, Chancellor




                No. M2014-01073-COA-R3-CV – Filed June 23, 2015


A staff leasing company filed this petition for judicial review of the administrative
decision of the Tennessee Department of Labor and Workforce Development (“the
Department”). In its decision, the Department determined that the company had illegally
transferred employees from one entity to another to acquire a lower unemployment
insurance premium rate. We affirm the chancery court‟s decision finding substantial and
material evidence to support the Department‟s determination.

 Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed

ANDY D. BENNETT, J., delivered the opinion of the court, in which FRANK G. CLEMENT,
P.J., M.S., and W. NEAL MCBRAYER, J., joined.

Robert E. Boston, Mark W. Peters, and Michael T. Harmon, Nashville, Tennessee and
Arthur M. Fowler, Jr., Johnson City, Tennessee, for the appellant, Administrative
Management Resources, LLC.

Herbert H. Slatery, III, Attorney General and Reporter; Andrée S. Blumstein, Solicitor
General; and Jason I. Coleman, Assistant Attorney General, for the appellee, Tennessee
Department of Labor and Workforce Development.
                                  MEMORANDUM OPINION1

                             FACTUAL AND PROCEDURAL BACKGROUND

       Administrative Management Resources, LLC (“AMR”) was a staff leasing
company owned by Rick and Sharon Thomason. Staff leasing companies place
employees of a client company onto the leasing company‟s payroll and then lease the
employee back to the client company. The Thomasons also owned other companies that
offered services similar to those offered by AMR; one of those companies was ARI. As
will be discussed below, a prior case against ARI by the Department is relevant to the
Department‟s claims against AMR in this case.

                                           SUTA Dumping

       The Tennessee Employment Security Law requires all non-governmental covered
employers to pay their share of state unemployment tax act (“SUTA”) premiums to the
Department. Tenn. Code Ann. §§ 50-7-402, 50-7-403 (2006).2 Employers can pay their
premiums in one of two ways: a flat sum equal to 5.5% of wages, or according to a
formula based upon their individual reserve experience. Tenn. Code Ann. §§ 50-7-
402(a), 50-7-403(b) (2006). The premium for an employer that pays based upon its
individual reserve experience is determined as follows: the total benefits charged to the
employer‟s account are subtracted from the amount of premiums paid by the employer.
Tenn. Code Ann. § 50-7-403(b)(1)(A) (2006). The difference is divided by the average
taxable payroll for the most recent three-year period, yielding a reserve ratio, which is the
employer‟s premium rate. Id.

       Tennessee Code Annotated section 50-7-403(b) (2006) contains provisions aimed
at prohibiting companies from and penalizing companies for engaging in the practice of
“SUTA dumping,” which occurs when an employer manipulates the experience rating
system to obtain a more favorable premium rate. The employer typically accomplishes
the goal of SUTA dumping by transferring payroll, benefits, and premium experience to a
company with a lower rate in order to pay lower SUTA premiums. The Department is


1
    Tenn. R. Ct. App.10 states:

          This Court, with the concurrence of all judges participating in the case, may affirm,
          reverse or modify the actions of the trial court by memorandum opinion when a formal
          opinion would have no precedential value. When a case is decided by memorandum
          opinion, it shall be designated “MEMORANDUM OPINION,” shall not be published,
          and shall not be cited or relied on for any reason in any unrelated case.
2
  The relevant audit is for the time period from 2005 through 2008. The new SUTA provisions (discussed
below), which allow for a two-percent penalty, took effect on January 1, 2006, and are substantially
similar to the current provisions.

                                                   2
responsible for making sure that employers pay their SUTA taxes in full. See Tenn. Code
Ann. §§ 50-7-403, 50-7-452.

      Prior to January 1, 2006, the relevant provisions of the Employment Security Law
provided as follows:

      Notwithstanding any of the foregoing provisions of this section, if the
      administrator finds in any case that the acquisition of any business or a
      distinct, severable, identifiable and segregable part thereof is made solely or
      primarily for the purpose of obtaining a more favorable rate of premiums,
      the transfer of accounts shall not be approved. The acquisition shall be
      deemed to have been made solely or primarily for such purpose if the
      administrator finds an absence of any reasonable business purpose of the
      acquisition other than a more favorable premium rate.

Tenn. Code Ann. § 50-7-403(b)(5)(A) (2005). The 2005 law also stated:

      No total or partial transfer of taxable payroll, benefit and premium
      experience may be made without the written consent of all employers or
      employing units involved and filed with the division of employment
      security during the calendar quarter in which the acquisition occurs or
      during the calendar quarter immediately following such quarter.

Tenn. Code Ann. § 50-7-403(b)(4) (2005).

      A major revision to the SUTA provisions occurred during the 2005 General
Assembly and took effect on January 1, 2006. See 2005 TENN. PUB. ACTS ch. 357, §§ 2-
9. The relevant provisions include the following:

      (C) Notwithstanding any other law, this subdivision (b)(2)(C) shall apply
      regarding assignment of premium rates and transfer of benefit and premium
      experience of an employer‟s trade or business, or a portion of an
      employer‟s trade or business, to another employer, if, at the time of the
      transfer, there is any common ownership, management or control of the two
      (2) employers. In such cases, the benefit and premium experience
      attributable to the transferred trade or business shall be transferred to the
      employer to whom the trade or business is so transferred. The reserve
      ratios and premium rates of both employers shall be recalculated and made
      effective immediately upon the date of the transfer of the trade or business.
      ...
      (D) If, following a transfer of experience under subdivision (b)(2)(C), the
      administrator, pursuant to the factors in subdivision (b)(2)(F), determines
      that a substantial purpose of the transfer of trade or business was to obtain a

                                            3
          reduced liability for premiums, the experience rating factors of the
          employers involved shall be combined into a single account and a single
          premium rate assigned to the account as of the date of the transfer.
          ...
          (F) In determining whether a business was acquired, or a transfer of a trade
          or business, or a portion of a trade or business, was made solely or
          primarily or substantially for the purpose of obtaining a lower rate of
          premiums, the administrator shall use objective factors, which may include
          the cost of acquiring the business, whether the person or employing unit
          continued the business enterprise of the acquired business, how long the
          business enterprise was continued, or whether a substantial number of new
          employees were hired for performance of duties unrelated to the business
          activity conducted prior to acquisition.

Tenn. Code Ann. § 50-7-403(b)(2)(C)(D) & (F) (2006).

                                             Previous decision

       In 2004, the Department performed an audit of ARI, Inc., d/b/a Southgate Styling
Salon, another company owned by the Thomasons, for the period from January 2002
through the end of March 2004. ARI, Inc. v. Neeley, No. M2011-02272-COA-R3-CV,
2012 WL 3157120, at *1 (Tenn. Ct. App. Aug. 3, 2012). Based upon the audit, the
Department determined that ARI had engaged in “a practice of reporting wages for
unemployment insurance premium purposes that violate[d] the experience rating
principles of the Tennessee Employment Security Law.” Id. The Department found that
ARI owed a total of over half a million dollars in unpaid unemployment insurance
premiums and interest. Id. ARI appealed through the administrative process. Id. at *1-2.
The Department issued a 102-page redetermination decision including detailed findings
of fact and affirming its initial determination. Id. at *1. At all remaining levels of
administrative review, the Department affirmed the original decision finding ARI liable,3
but the amount owed was determined to be higher when recalculated. Id. at *1-3.



3
    The decision of the Appeals Tribunal includes the following factual findings:

          A.R.I.‟s SUTA premium rate was calculated to be 3.3%.

          On or about April 2002, A.R.I. acquired a beauty salon doing business as Southgate
          Styling Salon (“Southgate”). Southgate was taxed at a SUTA premium rate of .20%.
          The employer [A.R.I.] then began shifting its payroll from entities under its control to the
          payroll of Southgate. By December, 2002 there were 100 employees being compensated
          on Southgate‟s payroll. By the end of the second quarter of 2003, more than a thousand
          employee payroll accounts had been transferred to Southgate.
          ...

                                                       4
       ARI appealed to chancery court, arguing that the transfers were for a reasonable
business purpose and that the Department‟s decisions upholding the redetermination
decision violated due process because the Department “purport[ed] to establish liability
based upon an argument for which ARI was offered no notice prior to the hearing,”
namely—failure to notify the Department of the transfers. Id. at *3. The chancery court
rejected ARI‟s due process argument because ARI failed to raise it below and had failed
to show any prejudice. Id. at *4. The court also found evidence to support the
Department‟s finding of the amount of underpaid SUTA premiums. Id.

       On appeal to this Court, ARI argued that its due process rights had been violated,
that the remedy ordered in the redetermination decision—the aggregation of multiple
accounts—was not allowed when calculating its liability, and that the Department had not
substantiated its claim regarding the amount of taxes owed by ARI. Id. This Court
rejected all three of ARI‟s arguments. Id. at *9. As to the argument regarding the
aggregation of multiple accounts, the Department cited Tenn. Code Ann. §§ 50-7-
403(b)(2)(A) and (5)(B) as authority for its actions. Id. at *7. At that time, those two
provisions stated, in pertinent part:

       (2)(A) In the event of a successorship or merger of employers or employing
       units and the combined or successor employer is a new entity, the
       combined taxable payroll, benefit and premium experience of the
       employers or employing units involved shall be computed as of the
       effective date of successorship or merger to determine a new reserve ratio
       and premium rate applicable to the combined or successor employer. In the
       event that any employing unit subsequent to January 1, 1951, acquires or
       has acquired a distinct, severable, identifiable and segregable portion of the
       business of an employer and continues or has continued such an acquired
       portion of the business of the predecessor, the successor shall succeed to
       that part of the taxable payroll, benefit, and premium experience of the
       predecessor which is attributable solely to that portion of the business
       which was acquired. . . .
       . . .
       (5)(B) Unless and until it has been shown to the satisfaction of the
       administrator that both the successor and the predecessor are not the same
       parties of interest, any successor, whether or not an employer at the time of
       acquisition, that is controlled either directly or indirectly by legally
       enforceable means or other wise by an individual, type of organization, or

       A visit to the premises of Southgate on July 12, 2004 by two Agency auditors uncovered
       the fact that Southgate was occupied and being operated by only three working
       hairstylists.

ARI, 2012 WL 3157120, at *1-2.

                                                 5
       employing unit having a commonality of beneficial interest or interests as
       those of the predecessor will be considered the same party of interests as
       the predecessor and will acquire the experience rating factors of the
       predecessor employer. These factors consist of premiums paid, benefit
       experience, annual taxable payrolls of the predecessor employer, and any
       remaining liabilities. . . .

Id. at *7. This Court determined that Mr. Thomason made employee transfers that “fell
within the purview” of these statutes. Id. at *8. We affirmed the decision of the chancery
court. Id. at *9.

                           Current Department claims against AMR

       In 2009, while ARI‟s administrative appeal of its redetermination decision was
pending, the Department initiated an audit against AMR covering the period from 2005 to
2008. On March 23, 2009, the Department sent AMR a notice of determination and
premium rate stating that AMR; Blue Ridge Management Services, LLC; Payroll
Transfers LLC; Administrative Resources P/R; Staffing Solutions, Inc.; ARI,
Inc./Southgate Styling Salon; ARI Payroll Transfers DIV; and Human Resource Services,
Inc. were “subject to transfer of experience ratings pursuant to T.C.A. 50-7-
403(b)(2)(C).” All of these companies had been determined to be under “common
management and control.” The notice further provided that these companies were subject
to a penalty for violating Tenn. Code Ann. § 50-7-403(b)(2) by failing to notify the
Department of mandatory transfers that would have resulted in higher premium rates.
The Department, therefore, assessed a penalty of 2% in accordance with Tenn. Code
Ann. § 50-7-403(b)(2)(G).

        The Department transferred the experience rating of each of the other companies
(other than AMR) to AMR beginning with the first quarter of 2005. As a result, as of the
first quarter of 2009, the new premium rate for AMR would be 4.5%. The 2% penalty for
failure to provide the information necessary to determine the correct experience rating
would be assessed from January 1, 2006 through June 30, 2009. The additional premium
due, plus interest and 2% penalty, was calculated to be $1,601,359.45.

      AMR filed an application for review of this notice of determination. On July 20,
2009, the Department issued a Redetermination Decision in which it agreed that the
companies had violated the Tennessee Employment Security Act (“TESA”), but
determined that the amount due was less than previously calculated, $1,505,683.78. On
May 10, 2010, after a hearing,4 the Appeals Tribunal affirmed the Redetermination
4
 The hearing in AMR‟s case took place on March 3, 2010, the same day as the hearing on ARI‟s appeal
of the redetermination decision in its case. The hearing in AMR‟s case included the testimony of one
witness: Mr. Thomason. The parties stipulated that all of the testimony given by Mr. Thomason at the
hearing earlier that day in the ARI case would be incorporated into the hearing in the AMR case. Mr.

                                                 6
Decision, and on November 29, 2010, the Board of Review affirmed the Appeals
Tribunal.

       On January 10, 2011, AMR filed a petition for judicial review in chancery court.
AMR argued, inter alia, that the movement of employees was not made with the
substantial purpose of reducing SUTA taxes; that the “lower tribunal” abused its
discretion in accepting the argument that AMR should have corrected the Department‟s
failure to aggregate the SUTA accounts of AMR‟s related companies; that the lower
tribunal‟s decision was in violation of due process because it purported to base liability
upon an argument for which AMR had no notice; that the decision of the lower tribunal
was in violation of pertinent statutory provisions in allowing the Department to aggregate
employer accounts without statutory authority; that there was no basis or support to show
that Mr. Thomason‟s companies “knowingly” attempted to avoid paying SUTA taxes;
and that the decision of the lower tribunal was made upon unlawful procedure because
the hearing officer issued an opinion while the hearing was still open to allow the parties
an opportunity to submit proposed findings of fact and conclusions of law and because
AMR was not offered a three-member panel to review the decision of the hearing officer.

       The chancery court found no merit in AMR‟s arguments. We will consider the
court‟s analysis in detail as relevant below. AMR has appealed the decision of the
chancery court.

                                        ISSUES ON APPEAL

       AMR has raised multiple issues on appeal, which we restate as follows: (1)
whether the trial court erred in upholding a decision requiring AMR to aggregate multiple
SUTA tax accounts into one, recalculate the SUTA taxes under the aggregated account,
and pay additional taxes; (2) whether the trial court erred in upholding the Department‟s
finding that AMR knowingly violated TESA; and (3) whether the procedural flaws in the
hearing violated AMR‟s due process rights.

                                      STANDARD OF REVIEW

       In reviewing an unemployment compensation case, this Court employs the same
standard of review as that used by the chancery court below. Armstrong v. Neel, 725
S.W.2d 953, 955 n.1 (Tenn. Ct. App. 1986). Tennessee Code Annotated section 50-7-
304(i)(2)-(3) sets out the principles that govern the chancellor‟s review:

       (2) The chancellor may affirm the decision of the commissioner or the
       chancellor may reverse, remand or modify the decision if the rights of the
Thomason testified (in the AMR hearing) that the transfers of employees made between AMR and the
other companies involved in the present case were made to obtain more favorable workers‟ compensation
rates. The record in the present appeal does not contain the transcript of the hearing in the ARI case.

                                                  7
      petitioner have been prejudiced because the administrative findings,
      inferences, conclusions or decisions are:

      (A) In violation of constitutional or statutory provisions;
      (B) In excess of the statutory authority of the agency;
      (C) Made upon unlawful procedure;
      (D) Arbitrary or capricious or characterized by abuse of discretion or
      clearly unwarranted exercise of discretion; or
      (E) Unsupported by evidence that is both substantial and material in the
      light of the entire record.

      (3) In determining the substantiality of evidence, the chancellor shall take
      into account whatever in the record fairly detracts from its weight, but the
      chancellor shall not substitute the chancellor‟s judgment for that of the
      commissioner‟s designee as to the weight of the evidence on questions of
      fact. No decision of the commissioner‟s designee shall be reversed,
      remanded or modified by the chancellor, unless for errors that affect the
      merits of the final decision of the commissioner‟s designee.

       Substantial and material evidence has been defined as “„such relevant evidence as
a reasonable mind might accept as adequate to support a rational conclusion and such as
to furnish a reasonably sound basis for the action under consideration.‟” City of Memphis
v. Civil Serv. Comm’n, 239 S.W.3d 202, 207 (Tenn. Ct. App. 2007) (quoting Dickson v.
City of Memphis Civil Serv. Comm’n, 194 S.W.3d 457, 464 (Tenn. Ct. App. 2005));
accord McClellan v. Bd. of Regents of State Univ., 921 S.W.2d 684, 691 (Tenn. 1996).
Substantial evidence requires “something less than a preponderance of the evidence but
more than a scintilla or a glimmer.” Ware v. Greene, 984 S.W.2d 610, 614 (Tenn. Ct.
App. 1998) (citing Wayne Cnty. v. Tenn. Solid Waste Disposal Control Bd., 756 S.W.2d
274, 280 (Tenn. Ct. App. 1988)); see McEwen v. Tenn. Dep’t of Safety, 173 S.W.3d 815,
821 n.10 (Tenn. Ct. App. 2005) (noting that the “preponderance of the evidence”
standard is harder to satisfy than the “substantial and material evidence” standard).

       We may overturn an administrative agency‟s factual findings “only if a reasonable
person would necessarily reach a different conclusion based on the evidence.” Davis v.
Shelby Cnty. Sheriff’s Dep’t, 278 S.W.3d 256, 265 (Tenn. 2009); Martin v. Sizemore, 78
S.W.3d 249, 276 (Tenn. Ct. App. 2001). Our function in reviewing the Board of
Review‟s application of the statute has been described as “severely limited.” Sabastian v.
Bible, 649 S.W.2d 593, 594 (Tenn. Ct. App 1983). “All that is needed to support the
commission‟s interpretation is that it has warrant in the record and a reasonable basis in
law.” Id. at 594-95. Moreover, “[c]ourts should not disturb a reasonable decision of any
agency which has expertise, experience and knowledge in a particular field.” Millen v.
Tenn. Dep’t. of Labor & Workforce Dev., 205 S.W.3d 929, 932 (Tenn. Ct. App. 2006)
(quoting Ford v. Traughber, 813 S.W.2d 141, 144 (Tenn. Ct. App. 1991)).

                                            8
                                        ANALYSIS

                                (1)(A) Statutory violation

       The first issue is whether the trial court erred in upholding the Department‟s
determination that AMR violated TESA by engaging in SUTA dumping—transferring
employees among its various companies to avoid unemployment insurance premiums.
There is no debate that, during the period from 2005 through 2008, AMR made transfers
of employees among companies commonly owned, operated, and managed by Mr.
Thomason and that, as a result, AMR and the other entities paid significantly less in
unemployment taxes than they would have without the transfers. AMR asserts that,
contrary to the Department‟s contention, AMR did provide actual notice to the
Department of its employee transfers. Therefore, AMR argues, it did not violate TESA.

        AMR and the Department agree that AMR was required to provide the
Department with notice of the transfers of employees, but they do not agree on the
contents of that notice. We have determined that AMR waived the notice issue by failing
to raise it in the chancery court. Issues not raised in a party‟s petition for review before
the chancery court are considered waived on appeal. Dick Broad. Co., Inc. of Tenn. v.
Oak Ridge FM, Inc., 395 S.W.3d 653, 670 (Tenn. 2013); McClellan, 921 S.W.2d at 690;
Rich v. Tenn. Bd. of Med. Exam’rs, No. M2009-00813-COA-R3-CV, 2010 WL 3565668,
at *4 (Tenn. Ct. App. Sept. 14, 2010), aff’d in part, vacated in part, 350 S.W.3d 919
(Tenn. 2011).

        Another argument made by AMR with respect to the trial court‟s finding that it
violated TESA is that an employer cannot be found liable for additional SUTA taxes if it
pays according to the official tax notices sent to it by the Department. This argument
must fail. As the Department points out, it had no way of knowing that its notices were
incorrect unless and until AMR provided it with proper notice of the employee transfers
at issue here. Without that information, the Department could not correct the information
upon which its tax notices were based.

                               (1)(B) Aggregating accounts

       Having failed to show that the trial court erred in concluding that AMR violated
Tenn. Code Ann. § 50-7-403, we must consider the issue of whether the Department had
the authority to require AMR to aggregate multiple SUTA tax accounts into one and
recalculate the SUTA taxes under the aggregated account.

      AMR begins by arguing that Tenn. Code Ann. § 50-7-403(b)(2)(C) does not allow
the Department to aggregate multiple commonly-owned employer accounts, only two
accounts. Subsection (b)(2)(C) applies to the “assignment of premium rates and transfers

                                             9
of benefit and premium experience of an employer‟s trade or business,” or a portion
thereof, to another employer, if there is “any common ownership, management or control
of the two (2) employers.” (Emphasis added). If so, “the benefit and premium experience
attributable to the transferred trade or business shall be transferred to the employer to
whom the trade or business is so transferred.” Tenn. Code Ann. § 50-7-403(b)(2)(C).
Subsection (b)(2)(D), however, is the key provision:

      If, following a transfer of experience under subdivision (b)(2)(C), the
      administrator, pursuant to the factors in subdivision (b)(2)(F), determines
      that a substantial purpose of the transfer of trade or business was to obtain a
      reduced liability for premiums, the experience rating factors of the
      employers involved shall be combined into a single account and a single
      premium rate assigned to the account as of the date of the transfer.

Tenn. Code Ann. § 50-7-403(b)(2)(D) (emphasis added). This is the provision relied
upon by the Department to authorize its aggregation of the employer accounts involved in
AMR‟s case. In ARI v. Neeley, 2012 WL 3157120, at *7-8, this Court determined that
the statutes in effect in 2005 (Tenn. Code Ann. § 403(b)(2)(A), quoted above) allowed
the aggregation of multiple accounts. Mindful of the deference due to the Commissioner,
Ford, 813 S.W.2d at 144, we agree with the Department that Tenn. Code Ann. § 50-7-
403(b)(2)(D) (2006) also authorizes the aggregation of multiple accounts.

       AMR‟s chief assertion with respect to Tenn. Code Ann. § 50-7-403(b)(2)(D) is
that the Department failed to show that a “substantial purpose of the transfer . . . was to
obtain a reduced liability for premiums.” AMR further alleges that the Department
accepted Mr. Thomason‟s testimony that the transfers were made to help secure more
favorable workers‟ compensation insurance.

        In examining whether there is substantial and material evidence to support a
finding of substantial purpose, it is important to keep in mind that substantial and
material evidence requires “something less than a preponderance of the evidence but
more than a scintilla or a glimmer.” Ware, 984 S.W.2d at 614. Moreover, substantial
evidence “is not limited to direct evidence but may also include circumstantial evidence
or the inferences reasonably drawn from direct evidence.” Wayne Cnty., 756 S.W.2d at
280. Courts “do not substitute their judgement for that of the agency as to the weight of
the evidence, even when the evidence could support a different result.” Id. at 279
(citations omitted).

       Pursuant to Tenn. Code Ann. § 50-7-403(b)(2)(F), the Department is to rely upon
“objective factors” in determining whether a business was transferred “solely or primarily
or substantially for the purpose of obtaining a lower rate of premiums.” Such objective
factors include “whether a substantial number of new employees were hired for
performance of duties unrelated to the business activity conducted prior to acquisition.”

                                            10
Tenn. Code Ann. § 50-7-403(b)(2)(F). The Appeals Tribunal5 made the following
observations concerning other objective factors (not listed in the statute): “Perhaps the
most obvious such factor is the overall fiscal effect of the transfer on the employer. In
other words, what net benefit or detriment to the employer would the employer realize if
the transfer were to be allowed?” The Board of Review stated: “Although there may
have been another intent involved in moving the employees [obtaining workers‟
compensation benefits], the result is still that the employer did not report the changes to
the department as required and failed to pay the appropriate tax rate.”

      What evidence is there in the record to support a finding that a substantial purpose
of AMR‟s transfers was to reduce its liability for SUTA premiums?                   In its
Redetermination Decision, the Department determined that the difference between what
AMR would have paid if it had properly reported and transferred experience ratings and
what it actually paid was $890,278.50. (With a two percent penalty, the total was
$1,505,683.76). The Redetermination Decision states: “Mr. Thomason has previously
been notified by the department of the requirements under T.C.A. § 50-7-403 from
previous determinations regarding A.R.I., Inc. dba Southgate Styling Salon . . . .” The
Board of Review stated:

       Although there may have been another intent involved in moving the
       employees, the result is still that the employer did not report the changes to
       the department as required and failed to pay the appropriate tax rate. . . . The
       employer knowingly continued the practice of transferring employees
       between the business entities following a prior audit and decision of such
       violation in 2005.

       The chancery court stated that, “Mr. Thomason did not refute the Department‟s
finding that AMR‟s actions amount to SUTA dumping.” Simply asserting that AMR
acted to obtain more favorable workers‟ compensation insurance is not enough. The
record contains ample evidence to support a finding that a substantial purpose of AMR‟s
actions was to reduce its liability for SUTA premiums.

                                      (2) “Knowingly” requirement

       Tennessee Code Annotated section 50-7-403(b)(2)(G) (2006) provides: “Any
person or employing unit that knowingly violates or attempts to violate this section . . .
shall be subject to” the statutory penalties. (Emphasis added). The term “knowingly” is
defined to mean “having actual knowledge of or acting with deliberate ignorance or
reckless disregard for the prohibition involved.”          Tenn. Code Ann. § 50-7-

5
 The decision of the Appeals Tribunal is somewhat confusing because, in parts, it references the facts
pertaining to the previous audit involving ARI. It also, however, references the liability applicable to
AMR in the present case and discusses legal principles relevant to the issues in this case.

                                                  11
403(b)(2)(H)(i). AMR asserts that the chancery court erred in upholding a penalty
against it for knowingly violating the TESA.

       Upon what basis was AMR determined to have knowingly violated the Act? As
quoted above, the Board of Review stated that AMR “knowingly continued the practice
of transferring employees between the business entities following a prior audit and
decision of such violation in 2005.” This suggests that the prior audit and decision put
AMR in the position of “knowing” that its practice of transferring employees was
improper and in violation of the statute. In its decision, the chancery court stated:

        In light of the fact that AMR had notice of statutory requirements, due to
        previous determinations related to ARI . . . and because all employers are
        charged with familiarizing themselves with the requirements of the law that
        governs their actions, the Board of Review held that there was substantial
        and material evidence that AMR “knowingly” violated [TESA].

We cannot agree with the second prong of the chancery court‟s statement, regarding
employers‟ duty to familiarize themselves with the law, as this would effectively write
the “knowingly” requirement out of the statute by making all violations of the act
knowing. In this case, AMR had knowledge of the statutory requirements as a result of
its experience with ARI. Under these circumstances, we find substantial and material
evidence to support the trial court‟s finding that AMR knowingly violated the statute and
was properly assessed penalties.6

                                               (3) Due process

       Finally, AMR argues that it was deprived of procedural due process because it was
not afforded a full and fair hearing. After the administrative hearing before the Appeals
Tribunal on March 3, 2010, the hearing officer stated that he would keep the hearing
open pending the submission of proposed findings of fact and conclusions of law and
post-hearing briefs, which were to be submitted within thirty days of receipt of the
hearing transcripts. On May 10, 2010, before the parties had even received the hearing
transcript, the hearing officer issued an opinion affirming the Redetermination Decision.
Because the parties never had a chance to submit proposed findings of fact and


6
  AMR also includes an argument that the chancery court erred in allowing the retroactive application of
the taxing statutes. The basis of this argument is AMR‟s assertion that the Department applied the new
statute that took effect on January 1, 2006 to actions that occurred prior to that date. Most of the
statements made by AMR to support this assertion are not accompanied by citations to the record; the few
citations to the record are to the pleadings. Moreover, the Department cites its Report of Field
Investigation, the basis of its initial decision in this case, which clearly delineates the AMR case as
covering the period from the first quarter of 2005 through the fourth quarter of 2008 and states that the
new statute was applied only as of January 1, 2006.

                                                   12
conclusions of law or post-hearing briefs, AMR contends that it was not afforded a full
and fair hearing.

       Although “due process does not dictate particular procedures in every instance,
administrative proceedings must afford parties: 1) adequate notice, 2) an opportunity for
a hearing at a meaningful time and in a meaningful manner, and 3) an opportunity to
obtain judicial review of the board‟s or agency‟s decision.” ARI, 2012 WL 3157120, at
*5. The question here is whether AMR was afforded a meaningful hearing, which
requires “a fair trial before a neutral or unbiased decision-maker.” Martin, 78 S.W.3d at
264. In its decision, the chancery court noted that neither the Rules of Civil Procedure
nor the common law rules of evidence generally apply before administrative bodies:

      Accordingly, in reviewing decisions from these “less than legally formal
      hearings,” appellate courts are guided, not by the Rules of Evidence, but
      instead “by a sense of fair play and the avoidance of undue prejudice to
      either side of the controversy and [must determine] whether . . . the action
      of the hearing Board in admitting or excluding evidence was unreasonable
      or arbitrary.” Goodwin [v. Metro. Bd. of Health, 656 S.W.2d 383, 388
      (Tenn. Ct. App. 1983)].

Davis v. Shelby Cnty. Sheriff’s Dep’t, 278 S.W.3d 256, 266 (Tenn. 2009). Thus, in
evaluating whether AMR was afforded a meaningful hearing, we are guided not by the
formal rules of civil procedure but by a general “sense of fair play and the avoidance of
undue prejudice to either side of the controversy.” Id.

        As the Department points out, AMR does not dispute that both sides were allowed
a fair opportunity to examine witnesses and present evidence before the hearing officer.
All of the deficiencies cited by AMR—not being able to submit findings of fact and
conclusions of law and post-trial briefs—were experienced equally by both parties.
Moreover, as stated by the chancery court, AMR does not cite evidence to support a
contrary result in the case.

       AMR also makes another due process argument: that the Department violated its
due process rights by failing to provide adequate notice of the Department‟s claim.
According to AMR, “the Department did not provide notice of its true claim against
Administrative Management before the administrative hearing.” AMR does not explain
what the “true claim” is alleged to be, but cites to the previous decision regarding ARI in
which the court determined that ARI was notified of the Department‟s finding of a
violation of Tenn. Code Ann. § 50-7-403(b)(4) (2005) (regarding failure to provide notice
of transfers to the Department) in the Appeals Tribunal decision and did not ask the
Board of Review to reopen the proof on the notice issue, thereby waiving the issue. ARI,
2012 WL 3157120, at *6. AMR does not explain how this reasoning applies here.


                                            13
Failure to notify was specifically set forth in the original notice of determination in this
case. We find no merit in this argument.7

        At the end of its brief, AMR also includes a one-sentence argument: “The record
contains no evidence that the Department correctly calculated the amount of taxes and
penalties it claims Administrative Management owes.” AMR provides no argument,
citation of authority, or proposed calculation to support this conclusion. This court has
addressed a party‟s duty to construct an argument and waiver by failing to do so:

          A skeletal argument that is really nothing more than an assertion will not
          properly preserve a claim, especially when the brief presents a multitude of
          other arguments. United States v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991)
          (per curiam). It is not the function of the appellate court to research and
          construct the parties‟ arguments. United States v. Berkowitz, 927 F.2d 1376,
          1384 (7th Cir. 1991). The Appellant‟s Brief “should contain an argument
          setting forth the contentions of the appellant with respect to the issues
          presented with citations to the authorities and appropriate references to the
          record.” Rhea County v. Town of Graysville, No. E2001-02313-COA-R3-
          CV, 2002 Tenn. App. LEXIS 539, at *20, 2002 WL 1723681, at *7 (Tenn.
          Ct. App. July 25, 2002); see also Berkowitz, 927 F.2d at 1384. The failure
          of a party to cite to any authority or to construct an argument regarding his
          position on appeal constitutes waiver of that issue. See Rector v.
          Halliburton, No. M1999-02802-COA-R3-CV, 2003 Tenn. App. LEXIS
          149, at *25, 2003 WL 535924, at *9 (Tenn. Ct. App. Feb. 26, 2003) (per
          curiam); Rhea County, 2002 Tenn. App. LEXIS 539, at *19-20, 2002 WL
          1723681, at *7.

Newcomb v. Kohler Co., 222 S.W.3d 368, 400-01 (Tenn. Ct. App. 2006). AMR‟s
argument fails to comply with the requirements of Tenn. R. App. P. 27(a)(7), which
requires a party‟s brief to include reasons for its contentions, citations to authorities, and
appropriate references to the record. AMR has waived this issue on appeal. See Bean v.
Bean, 40 S.W.3d 52, 55 (Tenn. Ct. App. 2000) (courts routinely hold that failure to make
appropriate references to the record and cite relevant authority constitutes waiver of the
issue).




7
    This due process argument was not mentioned in the chancery court‟s decision.

                                                     14
                                  CONCLUSION

       We affirm the judgment of the chancery court. Costs of appeal are assessed
against the appellant, AMR, and execution may issue if necessary.



                                                    _________________________
                                                    ANDY D. BENNETT, JUDGE




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