§ 50-7-404 — Collection of premiums - Interest - Procedure when employer in default - Priorities - Adjustments - Refunds

Tennessee § 50-7-404

• Jurisdiction: Tennessee
• Title: 50

Text

(a) Interest on Past-Due Premiums. Premiums unpaid on the date on which they are due and payable, as prescribed by the commissioner, shall bear interest at the rate of one percent (1.0%) prior to July 1, 1983, and one and one-half percent (1.5%) thereafter, for each month or any portion of a month from and after that date until payment plus accrued interest is received by the commissioner. Interest collected pursuant to this subsection (a) shall be paid into the unemployment compensation special administrative fund. (b) Collection. (1) If, after due notice, any employer defaults in any payment of premiums, interest on premiums, penalties, or costs prescribed in this chapter, the amount due, including additionally incurred premiums, interest, penalties and costs, shall be a lien in favor of the department of labor and workforce development upon the assets of the employer. The lien shall commence upon the date the premiums, interest, or penalties become due and shall continue until the original and any subsequent premiums, interest, penalties, costs or assessments are paid in full. The lien shall attach to all interest in property either real or personal, tangible or intangible, in this state then owned, or subsequently acquired by the employer, and shall be enforced by original attachment issued by any court having jurisdiction of the amount claimed to be due, as provided by § 66-21-101 . The definition of "assessment" is provided for in subdivisions (c)(1)-(3). (2) (A) The commissioner shall cause a notice of the lien to be recorded in the office of the county register of deeds in the county or counties in which the employer's business or residence is located, or in any county in which the employer has an interest in property. The notice shall be recorded in the same manner as liens recorded in that office. Recordation shall constitute notice of both the original and all subsequent liabilities of the same taxpayer. (B) There shall be no fees collected by the county register at the time the notice is recorded, but the county register shall extend credit to the department for the fees that are chargeable and submit the county register's bill at the end of each month to the department in order to obtain payment. (C) The lien created in this chapter shall have the same priority, in relation to other liens and security interests created under Tennessee law, as the lien described in § 67-1-1403 . (D) Any lien of record in favor of the Tennessee department of employment security shall inure to the Tennessee department of labor and workforce development as a successor in interest to the Tennessee department of employment security by virtue of the Tennessee Workforce Development Act of 1999, compiled in title 4, chapter 3, part 14. (3) (A) In addition to the remedy provided for in subdivision (b)(2), it is further expressly provided as follows: if after due notice, any employer defaults in payment of premiums or interest on the premiums, the amount due may be collected by civil action in the name of the commissioner, and the employer adjudged in default shall pay the costs of the action; furthermore, and in addition to all other remedies delineated in subdivision (b)(2), the commissioner is expressly authorized to issue, under the commissioner's hand and seal, a distress warrant against the delinquent employer for the amount of the premiums and any interest on the premiums that may be due and unpaid as of the date of the issuance. (B) The distress warrant shall be returnable within thirty (30) days from its date and shall have the same effect as other distress warrants authorized by law for the collection of delinquent taxes or revenue owed to the state or any agency of the state. (C) Civil actions brought under this section to collect premiums or interest on the premiums from an employer shall be heard by the court at the earliest possible date and shall be entitled to preference upon the calendar of the court over all other civil actions except cases involving the Workers' Compensation Law, compiled in chapter 6 of this title, or state revenue. (D) The collection of all premiums shall be barred and any lien for the premiums shall be cancelled and extinguished, unless the premiums are collected or suit for the collection has been instituted within six (6) years from the due date of the premiums as prescribed by the commissioner; however, the period of limitations on collection of premiums or interest on the premiums shall be suspended for the period the assets of the employer are in control or custody of the court in any proceeding before any court of the United States or of any state, as defined in § 50-7-210 , and six (6) months thereafter. (4) Distress warrants issued under the authority of this chapter for the collection of premiums, payments in lieu of premiums, interest or penalties arising out of this chapter may, in the discretion of the commissioner, be addressed to and delivered to an employee or representative of the department for the purpose of execution, and the employee or representative shall have the same power and authority as a sheriff for the purpose of levying and executing the distress warrant. The employee or representative shall be entitled to the same fees and costs as would accrue to a sheriff for those services. The fees and costs shall be paid to the department for return to the United States department of labor as miscellaneous receipts. (5) (A) If the commissioner or the commissioner's delegate determines that the collection of premiums under this title will be jeopardized by delay, the commissioner shall, whether or not premiums accrued have become due, immediately assess the premiums together with all interest, penalties, and costs. (B) The amount of the assessment shall then become immediately due and payable, and immediate notice and demand shall be made by the commissioner or the commissioner's delegate for the payment of the assessment. (6) The employees or representatives shall not be subject to civil suit as a result of performing or attempting to perform the duties specified in this subsection (b). (7) (A) In addition to any remedies authorized by this chapter, the department may offset any covered unemployment compensation debt due to the department against any federal income tax refund due to the department's taxpayer debtor in accordance with § 6402 of the Internal Revenue Code ( 26 U.S.C. § 6402 ), and the federal Treasury Offset Program (compiled in 31 CFR part 285 ), or any successor program. (B) The department may exercise this right of setoff if the obligation of the debtor was the result of: (i) Past due contributions due to the state's unemployment fund that remain uncollected and the state has determined the taxpayer debtor to be liable for those contributions; or (ii) Any penalties and interest assessed by the department on a debt contemplated by this subdivision (b)(7). (C) Any fee or administrative expense imposed by the United States department of the treasury or the United States department of labor in connection with such offset shall be the responsibility of the debtor. (D) Following such offset, the amount of credit to which a debtor is entitled shall not exceed the amount of the credit received by the department. (c) Failure to Make Reports and Pay Premiums; Duty and Power of the Commissioner. (1) If any employing unit fails to make and file any report as and when required by the terms and provisions of this chapter, or by any rule or regulation of the commissioner, for the purpose of determining the amount of premiums due by the employing unit under this chapter, or if any report that has been filed is deemed by the commissioner to be incorrect or insufficient, and the employing unit after having been mailed written notice, to its last known address, by the commissioner to file the report, or a corrected or sufficient report, as the case may be, shall fail to file the report within thirty (30) days after the date of the filing of the notice, the commissioner may: (A) Determine the amount of premiums due from the employing unit on the basis of the information that may be readily available to the commissioner, which determination shall be prima facie correct; (B) Assess the employing unit with the greater of the amount of premiums so determined or fifty dollars ($50.00); and (C) Immediately give written notice, by certified mail, to the employing unit of the determination, assessment and damages, if any, added and assessed, demanding payment of the assessment and damages, together with interest and penalty, as herein provided on the amount of premiums from the date when the premiums were due and payable. (2) The determination and assessment shall be final and conclusive on the employing unit thirty (30) calendar days after the date of mailing of written notice of the determination and assessment to the last known address of the employing unit, or not later than thirty (30) calendar days after the date the written notice is given to the employing unit, whichever first occurs, unless the employing unit has timely filed with the department a written application for review and redetermination in accordance with subsection (h). Any premium or deficiencies in premiums found to be due by the department in the redetermination shall be assessed and paid, together with interest, penalty and assessed damages, if any, within fifteen (15) calendar days after the date of mailing of written notice of the redetermination and assessment and demand for payment of the assessment by the department to the last known address of the employing unit, or not later than fifteen (15) calendar days after the date the written notice is given to the employing unit, whichever first occurs. Any employer who neglects or refuses to file a quarterly wage report and a quarterly premium report, or who intentionally files an incomplete quarterly wage report or an incomplete quarterly premium report within the time required by this chapter, or by any rule or regulation of the commissioner, shall pay a penalty of ten dollars ($10.00) for each month, or portion of a month, the report is due; however, the total penalty for each report shall not exceed fifty dollars ($50.00). (3) (A) Except as otherwise provided in subdivision (c)(3)(B), beginning January 1, 2019, and each quarter thereafter, each employer, and every person or organization who reports wages on employees on behalf of one (1) or more subject employers, shall file the wage and premium reports electronically, in a format prescribed by the commissioner. (B) (i) If the electronic filing requirement imposed by subdivision (c)(3)(A) creates a hardship upon the employer, person, or organization subject to the requirement, the employer, person, or organization may submit an affidavit to the commissioner containing a statement made under the penalty of perjury that the employer, person, or organization would suffer an undue hardship by filing the wage and premium reports electronically, and the commissioner may allow the employer, person, or organization to file the wage and premium reports in a paper format. Any employer, person, or organization, who does not have prior approval to file in a paper format, and who is required to file the reports electronically but neglects or refuses to do so, will be considered to have filed an incomplete wage and premium report and shall be assessed a penalty pursuant to subdivision (c)(2). (ii) The affidavit required by subdivision (c)(3)(B)(i) must be submitted within the first quarter, beginning January 1, 2019, and annually thereafter. (d) Forfeiture of Right to Do Business Upon Noncompliance. (1) An employer liable for premiums under this chapter who fails to make and file the employer's returns and reports as required, or who fails to pay any premiums when due under the this chapter, shall forfeit the employer's right to do business in this state until the employer complies with all the provisions of this chapter and until the employer enters into a bond with sureties, to be approved by the commissioner, in an amount not to exceed all contributions estimated to become due by the employer under this chapter for any three-month period, conditioned to comply with this chapter and to pay all premiums legally due or to become due by the employer, and the commissioner may proceed by injunction to prevent the continuance of the business upon the failure by the employer, by applying to a court of competent jurisdiction for an injunction and any temporary injunction enjoining the continuance of the business may be granted after reasonable notice not less than ten (10) days by any judge or chancellor now authorized by law to grant injunctions. (2) This subsection (d) is to be deemed as cumulative and in addition to any other provisions of this chapter relating to the collection of premiums by the commissioner. (e) Priorities Under Legal Dissolution or Distributions. In the event of any distribution of an employer's assets pursuant to an order of any court under the laws of this state, including any receivership, assignment for benefit of creditors, adjudicated insolvency, composition, or similar proceeding, premiums then or thereafter due shall have the same priority as now provided by the state for the payment of debts and taxes due it. In the event of an employer's adjudication in bankruptcy, judicially confirmed extension proposal, or composition, under the federal Bankruptcy Act of 1898 [repealed], premiums then or thereafter due shall be entitled to the priority as is provided in § 64(a) of that act ( 11 U.S.C. § 104(a) [repealed]). (f) Adjustment or Refund. (1) If, not later than three (3) years after the date of payment of any premium or interest on the premium, an employer who has paid the premium or interest on the premium makes application for an adjustment of the premium in connection with subsequent premium payments, or for a refund of the premiums because the adjustment cannot be made, and the commissioner determines that the premiums or interest, or any portion of the premiums or interest, was erroneously collected, the commissioner shall allow the employer to make an adjustment, without interest, in connection with subsequent premium payments by the employer, or if the adjustment cannot be made, the commissioner shall refund the amount, without interest, from the fund; provided, that when an employer has erroneously paid to this state premiums or interest that should have been paid as contributions or interest under the unemployment compensation law of some other state, or of the United States, the commissioner may refund to the employer the amount of the premium or interest erroneously paid without interest, and without regard to any period of limitation, upon satisfactory proof to the commissioner that the contributions have been paid to the other state, or to the United States; and provided, further, that in no case shall an adjustment or refund be made with respect to premiums paid on wages that have been included in the determination of an eligible claimant for benefits, unless and until it is shown to the satisfaction of the commissioner that the determination was due entirely to the fault or mistake of the department. For like cause, and within the same period, adjustment or refund may be made on the commissioner's own initiative. Any refund of the interest erroneously paid, which was paid into the unemployment compensation special administrative fund provided for in this chapter, shall be refunded from the fund. When an adjustment or refund to any employer has been approved, the experience rating record provided for in § 50-7-403 shall be corrected, but no premium rate assigned to an employer shall be changed as a result of the adjustment or refund unless the application for the refund has been filed on or before the final day of February immediately preceding the premium rate year. Nothing in this subsection (f) shall be construed to deny any refund required under § 50-7-207(c)(1) . (2) Employers lawfully electing to make payments in lieu of premiums shall be entitled to refunds, if: (A) The commissioner finds that the payment in lieu of premiums was made in error; (B) If the claim for refund is based on benefits originally paid that were subsequently determined to be improperly paid and the claimant has repaid the commissioner for the benefits; and (C) The claim for refund has been filed with the commissioner within three (3) years from the date the payment in lieu of premiums was originally made. (g) Collection of Premiums on Public Contracts. (1) Any person, firm or corporation entering into a formal contract with the state or any county, municipality or political subdivision, or any public board, department, commission or institution that is a part thereof for construction or maintenance of public buildings, works or projects in which the total contract sum shall equal or exceed one hundred thousand dollars ($100,000) and the time of performance is more than six (6) months, shall notify the department in writing of the name of all subcontractors who will furnish or who are furnishing labor in performance of the contract and whose subcontracts are in the amount of ten thousand dollars ($10,000) or more, the notice to be given not less than thirty (30) days prior to paying the subcontractor the final five percent (5%) of the subcontract; and the contractor shall retain the final five percent (5%) for thirty (30) days following the notice or until there is compliance with subdivision (g)(2). (2) The department may, within thirty (30) days following the filing of notice pursuant to subdivision (g)(1), notify the contractor of premiums and interest required or believed to be required under this chapter and owed by the subcontractor by reason of performance of the subcontract or any part of the contract, and the contractor shall then, within the limits provided for in subdivision (g)(1), which is five percent (5%) of the subcontract amount, retain the amount claimed to be due by the subcontractor or require that the subcontractor furnish bond for the amount to the department or make such other arrangement for satisfaction of the obligation of the subcontractor as are satisfactory to and protect the rights of the department. (3) If the contractor fails to give notice as provided in this subsection (g), the contractor will be primarily liable for the obligations of the subcontractor that are described in subdivisions (g)(1) and (2), limited to five percent (5%) of the subcontract amount, and the obligation shall continue for a period of ninety (90) days from the date upon which a request is subsequently filed with the department by the contractor for final determination of the obligation of any subcontractor, or for one (1) year from the date upon which the final payment is received by the contractor from the state, county, municipality, political subdivision or any public board, department, commission or institution that is a part thereof, if notice of the claim is presented by the department within that time to the contractor. (4) The contractor will not be liable for obligations of the subcontractor unless notice is given by the department as provided in either subdivision (g)(2) or (g)(3). (h) Redeterminations. A person may file an application for review and redetermination by the department of certain determinations made by the department under this part only in accordance with the following: (1) A nonprofit organization or person other than a nonprofit organization may file an application for review and redetermination by the department of: (A) Any determination made by the department concerning the status of a nonprofit organization as an employer and of which the organization is sent written notice pursuant to § 50-7-403(h)(1)(E) ; (B) Any determination made by the department concerning the status of any person other than a nonprofit organization as an employer and of which the person is sent written notice; (C) Any bill rendered by the department under subdivision (g)(2) with respect to payments in lieu of premiums due from a nonprofit organization and of which the organization is sent written notice pursuant to subdivision (g)(2); (D) Any determination and assessment of premiums and damages, if any, made by the department under subsection (c) with respect to an employing unit and of which the employing unit is sent written notice pursuant to subsection (c); (E) Any determination made by the department concerning a premium rate assigned to an employer pursuant to this chapter and of which the employer is sent written notice; or (F) Any determination of seasonal employer status; (2) An application for review and redetermination shall be in writing and shall state the reason or reasons that the employer submits justifies a change in the initial determination, bill or assessment; (3) An application for review and redetermination must be filed with the department within thirty (30) calendar days after the date of mailing of written notice of the initial determination, bill or assessment, to the last known address of the person or not less than thirty (30) calendar days after the date the written notice is given to the person, whichever first occurs. In the absence of timely filing of the application, any determination, bill or assessment described in subdivision (h)(1) shall be final and conclusive on that person; and (4) (A) In the case of an application for review and redetermination timely and properly filed with the department in accordance with this subsection (h), the department shall review and reconsider the determination, the amount due specified in the bill or the assessment, shall issue a redetermination, and shall notify the person in writing within ninety (90) calendar days after the application for review and redetermination was so filed with the department. The redetermination shall become a final order of the commissioner and not subject to further review, unless an appeal is filed to the appeals tribunal pursuant to § 50-7-304 within twenty (20) calendar days after the date the written notification of the redetermination is given or mailed to the last known address of the interested party; (B) Any premium, payment in lieu of premiums, deficiencies in premiums, or deficiencies in payments in lieu of premiums found to be due by the department in the redetermination shall be assessed and paid together with interest, penalty and assessed damages, if any, within fifteen (15) calendar days after the date of mailing of written notice of the redetermination and assessment and demand for payment of the assessment by the department to the last known address of the person, or not later than fifteen (15) calendar days after the date the written notice is given to the person, whichever occurs first. (i) Discharge of Liens. (1) If the commissioner is not joined as a party, a judgment in any civil action or suit, or a judicial sale pursuant to the judgment with respect to property on which the department has or claims a lien under this title: (A) Shall be made subject to and without disturbing the lien of the department, if notice of the lien has been filed in the place provided by law for the filing at the time the action or suit is commenced; or (B) If a judicial sale of property pursuant to a judgment in any civil action or suit to which the department is not a party discharges a lien of the department arising under this title, the department may claim, with the same priority as its lien had against the property sold, the proceeds, exclusive of costs, of the sale at any time before the distribution of the proceeds is ordered. (2) (A) Notwithstanding subdivision (i)(1), a sale of property on which the department has or claims a lien, or a title derived from enforcement of a lien, under this title, made pursuant to an instrument creating a lien on the property, pursuant to a confession of judgment on the obligation secured by such an instrument, or pursuant to a nonjudicial sale under a statutory lien on the property shall, except as otherwise provided, be made subject to and without disturbing the lien or title, if notice of the lien was filed or the title recorded in the place provided by law for the filing or recording more than thirty (30) days before the sale and the department is not given notice of the sale in the manner prescribed in subdivision (i)(2)(B). (B) Special Rules. (i) Notice of Sale. Notice of sale to which subdivision (i)(2)(A) applies shall be given, in accordance with regulations prescribed by the commissioner, in writing, by registered or certified mail or by personal service, not less than twenty-five (25) days prior to the sale, to the commissioner or the commissioner's delegate. (ii) Consent to Sale. Notwithstanding the notice requirement of subdivision (i)(1), a sale described in subdivision (i)(2)(A) of the property shall discharge or divert the property of the lien or title of the department if the department consents to the sale of the property free of the lien or title. (iii) Sale of Perishable Goods. Notwithstanding the notice requirement of this section, a sale described in subdivision (i)(2)(A) of the property liable to perish or become greatly reduced in price or value by keeping, or that cannot be kept without great expense, shall discharge or divert the property of the lien or title of the department if notice of the sale is given, in accordance with regulations prescribed by the commissioner, in writing, by registered or certified mail or by personal service, to the commissioner or the commissioner's delegate before the sale. The proceeds, exclusive of costs, of the sale shall be held as a fund subject to the liens and claims of the department, in the same manner and with the same priority as the liens and claims had with respect to the property sold, for not less than thirty (30) days after the date of the sale. (3) Right to Redeem. (A) In the case of real property to which subdivision (i)(2)(A) applies, to satisfy a lien prior to that of the department, the commissioner or the commissioner's delegate may redeem the property within the period allowable for redemption under law. (B) Amount to be Paid. In any case in which the department redeems real property pursuant to § 50-7-304(c)(1) , the amount to be paid for the property shall be the amount paid by the purchaser, plus six percent (6%) interest per annum. (C) Certificate of Redemption. (i) In General. In any case in which real property is redeemed by the department pursuant to subdivision (i)(3), the commissioner or the commissioner's delegate shall execute a certificate of redemption therefor. (ii) Filing. The commissioner or the commissioner's delegate shall, without delay, cause the certificate to be duly recorded in the proper registry of deeds. (iii) Effect. A certificate of redemption executed by the commissioner or the commissioner's delegate shall constitute prima facie evidence of the regularity of the redemption and shall, when recorded, transfer to the department all the rights, title and interest in and to the property acquired by the person from whom the department redeems the property by virtue of the sale of the property. (j) Revocation of Charter or Authority to Conduct Business for Nonpayment. (1) The commissioner is empowered to certify to the secretary of state the name of any corporation or limited liability company permitted to conduct business in the state that meets the definition of employer or employing unit for the purposes of this chapter, and that fails or refuses to file any quarterly report or to pay any fees, premiums, penalties or interest required in this chapter; however, no certification shall be issued until the report, fees, premiums, penalties or interest has remained delinquent for a period of ninety (90) days. (2) At the time of the certification to the secretary of state, the commissioner shall give notice to the corporation or limited liability company of the action taken. Then, in the case of a corporation, the charter of the corporation or its domestication in the state shall stand as automatically revoked and the secretary of state shall note the revocation in its records. In the case of a limited liability company, the secretary of state shall administratively dissolve the limited liability company and shall note the dissolution in its records. (3) (A) In the case of a corporation, at any time after the date of the revocation, the charter may be reinstated upon the filing of all reports and the payment of all fees, premiums, penalties and interest due the state; and in the case of a limited liability company, the certificate of dissolution may be cancelled upon the filing of all reports and the payment of all fees, premiums, penalties and interest due the state; provided, that the title has not been taken by another corporation or limited liability company, and that proof is furnished sufficient to the commissioner that no third party will be injured by the reinstatement or cancellation, unless proof has been furnished sufficient to the secretary of state upon requesting the reinstatement or cancellation. (B) A corporation whose charter has been revoked or a limited liability company that has been administratively dissolved pursuant to subdivisions (j)(1) and (2) may apply to the secretary of state for reinstatement or cancellation by presenting a certificate from the commissioner certifying that the corporation or limited liability company has satisfied the requirements set forth in subdivision (j)(3)(A). (k) A client of a staff leasing company shall be jointly and severally liable with the staff leasing company for state unemployment premiums, unless the client is relieved of the joint and several liability as provided under [former] § 62-43-113(b)(2)(B) [repealed] of the Tennessee Employee Leasing Act.

Legislative History

Amended by 2018 Tenn. Acts, ch. 642, s 3, eff. 7/1/2018. Amended by 2016 Tenn. Acts, ch. 751, s 3, eff. 7/1/2016. Amended by 2015 Tenn. Acts, ch. 95, s 5, eff. 7/1/2015. Acts 1947, ch. 29, § 14; C. Supp. 1950, § 6901.14 (Williams, § 6901.38); Acts 1953, ch. 244, § 6; 1961, ch. 70, § 5; 1967, ch. 208, § 5; 1971, ch. 204, § 9; 1973, ch. 130, § 9; 1975, ch. 190, § 9; 1977, ch. 330, § 26; 1978, ch. 744, § 13; impl. am. Acts 1980, ch. 534, § 1; Acts 1980, ch. 641, §§ 5-7; 1981, ch. 249, §§ 4, 5; 1982, ch. 820, § 15; T.C.A. (orig. ed.), § 50-1329; Acts 1983, ch. 439, §§ 9-11; 1984, ch. 786, §§ 2-4; 1985, ch. 105, § 15; 1985, ch. 317, §§ 6, 11; 1985, ch. 318, §§ 58-64; 1989, ch. 333, §§ 6-8; 1993, ch. 169, § 2; 1995, ch. 503, §§ 6, 7; 1996, ch. 837, § 1; 1997 , ch. 82, § 1; 1999, ch. 45, §§ 3 - 6; 1999, ch. 520, § 41; 2001, ch. 82, § 3; 2004, ch. 510, § 4; 2004, ch. 699, §§ 4 - 6; 2006, ch. 623, § 5; 2012 , ch. 565, §§ 1 - 3; 2012 , ch. 824, § 3.