FOR PUBLICATION
ATTORNEYS FOR APPELLANT:                         ATTORNEYS FOR APPELLEE:

THOMAS DEER                                      GREGORY F. ZOELLER
TODD KAISER                                      Attorney General of Indiana
Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
Indianapolis, Indiana                            ELIZABETH ROGERS
                                                 Deputy Attorney General
                                                 Indianapolis, Indiana


                                                                           Apr 18 2013, 8:52 am

                               IN THE
                     COURT OF APPEALS OF INDIANA


TPUSA, INC.,                                     )
                                                 )
       Appellant-Defendant,                      )
                                                 )
               vs.                               )     No. 93A02-1207-EX-605
                                                 )
UNEMPLOYMENT INSURANCE APPEALS                   )
OF THE INDIANA DEPARTMENT OF                     )
WORKFORCE DEVELOPMENT,                           )
                                                 )
       Appellee-Plaintiff.                       )



        APPEAL FROM THE DEPARTMENT OF WORKFORCE DEVELOPMENT
                    UNEMPLOYMENT INSURANCE APPEALS
           The Honorable Joanne T. Green, Liability Administrative Law Judge
                                 Cause No. 12-04717




                                      April 18, 2013

                              OPINION - FOR PUBLICATION

BARTEAU, Senior Judge
                             STATEMENT OF THE CASE

      TPUSA Inc. appeals the liability administrative law judge’s (“LALJ”)

determination that TPUSA owes $125,666.33 to the Indiana Department of Workforce

Development (“Department”).

      We reverse and remand.

                                         ISSUE

      TPUSA presents five issues, which we consolidate into a single dispositive issue:

whether the LALJ erred by determining that TPUSA owes $125,666.33 in unemployment

insurance contributions, interest, and penalties for 2010 when TPUSA had no employees

in Indiana in 2010 and paid no wages in Indiana in 2010.

                       FACTS AND PROCEDURAL HISTORY

      TPUSA owns and manages call centers around the country. It is owned by

Teleperformance Group Inc., a Florida holding company. In 2009, TPUSA operated a

call center in Fishers, Indiana.   After September 30, 2009, TPUSA no longer had

employees in Indiana, and the Fishers facility officially closed on October 31, 2009.

TPUSA made contributions to the Department for unemployment insurance for its

employees until the facility closed. TPUSA submitted its 2009 fourth quarter wage

report showing that it had no employees and had paid no wages. Having no operations or

employees in the State of Indiana in 2010, TPUSA did not file any quarterly payroll

reports with the Department for that year.



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      The Department sent a notice (“Penalty Letter”) to TPUSA on March 21, 2011,

informing TPUSA that it had failed to submit payroll reports for 2010 and instructing that

it file all reports or have its account subject to estimation of its overdue unemployment

insurance contributions. Receiving no response to the Penalty Letter, the Department

sent another notice (“Notice and Demand Letter”) to TPUSA on April 26, 2011, notifying

TPUSA of the estimation amount that had been placed on its account. The Department’s

estimation of TPUSA’s overdue unemployment insurance contributions, plus interest and

penalties, totaled $125,666.33. TPUSA protested this assessment on November 18, 2011.

      On June 11, 2012, a liability hearing was held before the LALJ. The first issue

upon which the parties presented evidence was the timeliness of TPUSA’s protest. On

this issue, the LALJ found:

      With regard to an issue of the timeliness of the filing of a protest, the
      burden of proof lies with the Department. The Liability Administrative
      Law Judge finds that the Department has failed to conclusively establish,
      by introduction of a copy of the four Notice and Demands, the date on the
      face of the Notice and Demands, or that appeal rights were communicated
      to the employer. Therefore, Liability Administrative Law Judge finds the
      employer’s protest to be timely under the circumstances.

Appellant’s App. p. 8. Although the LALJ determined that TPUSA’s protest was timely

filed, it denied the protest and found the Department’s estimation of contributions and

assessment of interest and penalties to be proper. It is from this decision that TPUSA

appeals.

                              DISCUSSION AND DECISION



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       TPUSA contends that the LALJ erred in its determination that, although TPUSA

had no Indiana employees and paid no Indiana wages for 2010, it owes unemployment

insurance contributions for 2010, plus interest and penalties totaling $125,666.33. The

Indiana Unemployment Compensation Act provides that any decision of the LALJ shall

be conclusive and binding as to all questions of fact. See Ind. Code § 22-4-32-9(a)

(1995). When the LALJ’s decision is challenged as contrary to law, we are limited to a

two-part inquiry into the sufficiency of the facts found to sustain the decision and the

sufficiency of the evidence to sustain the findings of fact.       UTLX Mfg., Inc. v.

Unemployment Ins. Appeals of Ind. Dep’t. of Workforce Dev., 906 N.E.2d 889, 891-92

(Ind. Ct. App. 2009); see Ind. Code § 22-4-32-12 (1990). Pursuant to this standard, basic

facts are reviewed for substantial evidence, conclusions of law are reviewed for their

correctness, and ultimate facts are reviewed to determine whether the LALJ’s finding is a

reasonable one. UTLX Mfg., 906 N.E.2d at 892. Ultimate facts are conclusions or

inferences from the basic facts. Id.

       Indiana’s unemployment compensation system is in place to protect against

economic insecurity due to unemployment. Ind. Code § 22-4-1-1 (1995). This system is

administered by the Department, see Ind. Code § 22-4-18-1(b)(1) (2007), and is funded

by imposing a tax, referred to as a “contribution,” on employers of this state. Ind. Code

§§ 22-4-10-1 (2009), 22-4-2-4 (1987).      Contributions are determined based upon a

percentage of wages paid in a calendar year. Ind. Code §§ 22-4-10-3 (2009), -1.



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       Every employer that is subject to Indiana Code article 22-4 must file quarterly

contribution reports and wage reports. 646 Ind. Admin. Code 3-1-1 (1994). Where the

status of an employer is changed by cessation, the employer shall immediately notify the

Department and immediately file the necessary contribution and wage reports. 646 Ind.

Admin. Code 3-1-6(a) (1994). Reports dealing with the quarter in which the employer’s

change of status occurred shall be marked “final report.” Id.

       In the present case, TPUSA did not mark its fourth quarter 2009 report as “final

report,” and it did not file any reports with the Department in 2010. It also did not notify

the Department that it had ceased operations in Indiana. Thus, the Department, unaware

that TPUSA had ceased doing business and paying wages in Indiana, expected to

continue to receive quarterly contribution and wage reports from TPUSA. Therefore,

when the Department did not receive the required reports, it followed the course of action

as outlined in the applicable statutes.

       First, Indiana Code section 22-4-19-9 (2001) mandates that a written notice

(Penalty Letter) be mailed to the employer if it fails to submit any payroll report required

under the unemployment compensation system statutes. The Penalty Letter informs the

employer that it must file all reports within ten days or have its account subject to

estimation. If, after ten days, the employer fails to file a report, an estimation is made of

the amount of the contribution due from the employer, and this amount is considered

prima facie correct. Id.



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       Once an estimation is placed on an employer’s account, the Department must

notify the employer via a Notice and Demand Letter. Ind. Code § 22-4-11-4(a) (2002).

The employer then has fifteen days in which to file a report in order to establish the

correct amount it owes to the Department. Id. If the employer does not file a report

within this time period, the Department uses its estimation amount, and this amount

generally may not be reduced even upon subsequently ascertained information.             Id.

Further, the estimation amount is considered prima facie correct. Id. In addition to the

estimation amount, Indiana Code section 22-4-29-1 (1995) permits the calculation of

penalties and interest upon delinquent contributions. If certain criteria are met, however,

subsection (b) of Indiana Code section 22-4-11-4 does allow for a reduction of the

estimated amount of contribution based upon subsequently ascertained information.

These criteria are: (1) the employer makes an affirmative showing of “reasonable cause”

for the failure to timely file any payroll report, and (2) the employer submits accurate and

reliable payroll reports. Id.

       Here, the Department sent a Penalty Letter to TPUSA on March 21, 2011. The

Department nevertheless received no reports from TPUSA, so the Department placed an

estimation on TPUSA’s account. Subsequently, on April 26, 2011, the Department sent

Notice and Demand Letters to TPUSA, to which TPUSA did not respond.                     The

Department then used its estimation of contributions owed, plus interest and penalties, to

arrive at $125,666.33.



                                             6
      At the hearing, TPUSA introduced Exhibit 4, which shows that for the fourth

quarter of 2009, TPUSA paid no wages in Indiana and had no employees in the state.

Appellant’s App. pp. 85, 86.     In addition, Christina Miller, Reporting Manager at

TPUSA, testified at the hearing on behalf of her employer. She stated that in 2009,

TPUSA’s finance and payroll department was split into two departments with one

department located on the East Coast and one department located on the West Coast.

Miller testified that the East Coast operation was handling payroll notifications at the

time, and by the time the two departments were consolidated into the West Coast

operation, the Indiana site had been officially closed, and she had no reason to believe

that everything had not been taken care of.      Miller was not aware that TPUSA’s

unemployment insurance tax account in Indiana was still active until September 2011

when she received a notice from the Department. She further testified that until she

received this notice, she had not been made aware of any delinquency or any Notice and

Demand Letters.     After receiving the notice, TPUSA protested the $125,666.33

assessment.

      When questioned about the certified mail return receipts from the Notice and

Demand Letters mailed by the Department on April 26, 2011, Miller testified that she had

since researched the signature on the receipts and had discovered that they were signed

for by a receptionist in Columbus, Indiana on April 29, 2011. However, Miller never

received any letters. Further investigation showed the letters were sent to the human

resources department in Columbus which sent them on to another department, but no one

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could verify where the letters were sent or to whom, and no one had any record or copies

of the letters.

       Jennifer Chappel, Director of Unemployment Insurance Tax Administration with

the Department, testified that reasonable cause, as provided for in Indiana Code section

22-4-11-4(b), is defined as acts of God, nature, war or terrorism, death or incapacitation

of an owner/preparer, or theft or embezzlement by a fiduciary of the company.

       In finding for the Department, the LALJ determined:

       Ind. Code § 22-4-11-4 (2011) [sic] requires an estimate of contributions if
       the employer fails to file a quarterly report. The estimate is considered
       prima facie correct in the absence of an affirmative showing of “reasonable
       cause” for failure to file a timely payroll report and provide accurate
       records. The Department interprets “reasonable cause” as extreme
       circumstances. Merely failing to notify the Department that the employer is
       out of business does not fall within the Department’s interpretation.
       Although the Department’s interpretation appears harsh concerning
       employers who no longer do business in the state and have to pay
       contributions, interest and penalties when there was no payroll, the statute
       requires the Department to take certain actions when an employer stops
       paying contributions without explanation. The Department has the
       authority to make estimations and charge interest and penalt[ies] and there
       is no requirement that the Department take a “soft” approach in defining
       “reasonable cause.”

Appellant’s App. pp. 8-9.

       In the present case, it is uncontested that TPUSA timely filed accurate reports with

the Department showing that it had paid no wages and that it had no employees for the

fourth quarter of 2009. In addition, the Department does not contest that TPUSA’s

Fishers facility ceased operations in 2009 and had no employees and paid no wages in

2010. It is undisputed then, given these facts, that although TPUSA failed to mark its

                                            8
fourth quarter 2009 reports “final report,” it had no continuing obligation to pay further

unemployment insurance contributions to the Department.

         Therefore, we hold that where an employer has ceased business operations in

Indiana, no longer pays wages or has any employees in the state, and files accurate

reports with the Department indicating such, this may be considered “reasonable cause,”

as required by Indiana Code section 22-4-11-4(b), so as to allow for an adjustment (i.e.,

reduction) in the amount of the estimated contribution.

         Based upon the facts of this case, we find that the evidence shows that TPUSA

demonstrated reasonable cause and that the Department erroneously assessed past due

unemployment insurance contributions, together with interest and penalties. To hold

otherwise under these facts would produce an absurdity whereby a business would be

required to pay more than $125,000.00 on an account upon which it owed nothing.

Moreover, we are mindful of the possible far-reaching effect of such a holding in

thwarting businesses from opening new or maintaining existing operations within our

state.

         More appropriate action in these circumstances is provided for in Indiana Code

section 22-4-19-10 (1995), which provides that an employer that negligently or willfully

fails to submit any report required for proper administration of Indiana Code article 22-4

shall be assessed a penalty of $25.00. As we previously stated, because TPUSA failed to

mark “final report” on its fourth quarter 2009 reports, the Department was unaware of its

cessation of business in Indiana. Thus, quarterly reports were required to be filed with

                                            9
the Department by TPUSA for each quarter of 2010 until the Department was notified of

TPUSA’s cessation of business in the state. See 646 Ind. Admin. Code 3-1-1, -6. Two

reports are required each quarter. See 646 Ind. Admin. Code 3-1-1. A calculation of

TPUSA’s fines for failing to file quarterly reports in 2010 is $200. Pursuant to our

finding of reasonable cause under Indiana Code section 22-4-11-4(b), the Department’s

assessment against TPUSA for overdue estimated contributions, interest, and penalties in

the amount of $125,666.33 is reduced to $200 in fines.

                                    CONCLUSION

      For the reasons stated, we conclude that the LALJ erred by determining that

TPUSA owes $125,666.33 in unemployment insurance contributions, interest, and

penalties for 2010 when TPUSA had no employees in Indiana in 2010 and paid no wages

in Indiana in 2010.

      Reversed and remanded.

BAKER, J., and PYLE, J., concur.




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