G&A OUTSOURCING, INC.; G&A OUTSOURCING II, L.L.C.; AND G&A OUTSOURCING III, L.L.C., Appellants
TEXAS WORKFORCE COMMISSION, Appellee
Appeal from the 98th District Court Travis County, Texas
Trial Court Cause No. D-1-GN-14-005431
consists of Justices Wise, Jewell, and Hassan.
Outsourcing, Inc., G&A Outsourcing II, L.L.C., and
G&A Outsourcing III, L.L.C. (collectively,
"Appellants") appeal the decision of the district
court, which affirmed the Texas Workforce Commission's
("TWC") denial of Appellants' request for an
unemployment tax refund. TWC denied the refund request after
rejecting Appellants' applications for a partial transfer
of compensation experience under the relevant Labor Code
provisions. For the reasons below, we affirm.
Texas Unemployment Compensation Act and Transfers of
Texas Unemployment Compensation Act ("TUCA") levies
an unemployment tax on employers to fund Texas's
unemployment benefits. See Tex. Lab. Code Ann.
§ 204.002 (Vernon 2015). The applicable tax rate is
based in part on an employer's "compensation
experience," which measures how frequently the
employer's former employees collect unemployment
benefits. See id. §§ 204.041-.044 (Vernon
2015). Employers whose former employees generate more claims
for unemployment benefits generally have a higher
compensation experience rating and a higher tax rate. See
G&A Outsourcing IV, L.L.C. v. Tex. Workforce
Comm'n, No. 03-16-00752-CV, 2017 WL 3585219, at *1
(Tex. App.- Austin Aug. 17, 2017, no pet.) (mem. op.).
experience is calculated annually based on an employer's
"benefit ratio:" its chargebacks (the amount of
unemployment benefits paid to former employees) divided by
its taxable wages over the preceding three-year period. Tex.
Lab. Code Ann. §§ 204.021 (Vernon 2015), .044. When
an employer transfers all or part of its business to another
employer with whom it shares common ownership, section
204.083 requires the employer to also transfer its
The transfer of the predecessor employer's compensation
experience to the successor employer is required if the
predecessor employing unit transfers, through any means, all
or part of the organization, trade, or business, to the
successor employer and there is substantially common
ownership of the entities.
Id. § 204.083 (Vernon 2015).
a section 204.083 transfer of compensation experience, two
sections govern the computation of the successor
employer's tax rate:
• Section 204.0851 provides the general scheme to
calculate the tax rate of successor employers following
section 204.083 transfers. See id. § 204.0851
(Vernon 2015). Rates calculated pursuant to section 204.0851
count the predecessor employer's compensation experience
simultaneously against both the predecessor and successor
employers. See id.
• Section 204.085 calculates the tax rate for successor
employers following certain partial acquisitions "if the
commission determines that the part of the organization,
trade, or business transferred is definitely identifiable and
segregable and that compensation experience can be
specifically attributed to that part of the organization,
trade, or business . . . ." Act of June 18, 2005, 79th
Leg., R.S., ch. 1315, § 6, 2005 Tex. Gen. Laws 4123,
4125 (amended 2015) (current version at Tex. Lab. Code §
204.085). If these requirements are met, only a
portion of the predecessor employer's compensation
experience is counted against the successor - the portion
attributable to the business the successor employer acquires.
this statutory scheme in mind, we turn to the facts of the
and Procedural History
G&A Outsourcing, Inc. ("G&A"), G&A
Outsourcing II, L.L.C. ("G&A II"), and G&A
Outsourcing III, L.L.C. ("G&A III") are
commonly-owned professional employment organizations
("PEOs"). PEOs are retained by employers to provide
payroll administration and other services necessary to
running a business. PEOs issue payroll checks to the
employers' employees and remit the unemployment taxes due
on the employers' payrolls.
provided PEO services to approximately 187 employers. In
December 2010, G&A transferred 79 employers to G&A II
and 55 employers to G&A III. The parties do not dispute
that this transfer required a full transfer of G&A's
compensation experience under section 204.083.
August 2011, Appellants filed applications under section
204.085 for a partial transfer of G&A's compensation
experience to G&A II and G&A III based on the
employers the successor entities acquired. After TWC pointed
out inaccuracies in Appellants' data, Appellants filed
amended versions of their partial transfer applications. TWC
denied Appellants' amended applications.
sought a Rule 13 administrative hearing to contest the
applications' denials. In its written decision following
the hearing, TWC concluded the applications were properly
denied because Appellants "submitted inaccurate
paid the taxes due based on TWC's denial of the partial
transfer applications and requested a refund of the alleged
overpayment. TWC denied the refund, citing its Rule 13
decision. Appellants filed the underlying action to recover
the alleged overpayment.
filed in the trial court a motion to compel the deposition of
a TWC representative. The trial court signed an order denying
Appellants' motion to compel. The parties proceeded to a
bench trial in March 2018 and the trial court signed a final
judgment concluding TWC properly denied Appellants'
request for a refund of unemployment taxes.
trial court entered findings of fact and conclusions of law,
which it amended in June 2018. Appellants timely appealed to
the Third Court of Appeals and their case was transferred to