March 7th, 2019

Mergers, Acquisitions and Purchases and Workers’ Comp

Workers Comp 0

It is important for a new business owner who is taking over another business, either whole or in part, through a purchase, acquisition or merger, to understand how the BWC determines successorship. Generally, if the BWC determines the relationship between the predecessor (seller) and the successor (buyer) is a continuation of the business or operations, they will combine the predecessor’s policy with the successor’s; resulting in the transfer of experience and liability. This is important information for the successor to know before the takeover since you could inherit outstanding liabilities and claims resulting in penalty rated premiums.

Even though there is a change in ownership, BWC has historically considered the experience of the predecessor business as predictive of the future experience of the successor business. Retention of employees, same type of business operations, same location and retention of the same customer base are some of the factors used in determining successorship. BWC can consider exceptions to this when there is a substantial or total change in business operations.

It is highly recommended that the successor employer obtain the experience information and outstanding financial obligations of the predecessor employer prior to acquiring the business. BWC makes this information available by completing the Request for Business Transfer Information (AC-4) which must be signed by both the buyer and the seller.

The predecessor and successor are both required to notify BWC of a transfer of business operations. If you are the successor of the business and already have workers’ compensation coverage you are required to submit the Notification of Business Acquisition/Merger or Purchase/Sale (U-118). Otherwise, if you are without workers’ compensation coverage you must complete an Application for Ohio Workers’ Compensation Coverage (U-3). The predecessor must notify BWC of the transfer and request cancellation of coverage and has 45 days after cancellation to report final payroll.