IN THE SUPERIOR COURT OF THE STATE OF DELAWARE 

IN AND FOR NEW CASTLE COUNTY 

PEARCE & MORETTO, INC., 
Appellants, ) 


v.

THE DELAWARE DEPARTMENT OF ) 
LABOR, DIVISION OF ) 
UNEMPLOYMENT APPEALS, ) 
Appellee. ) 

Date Submitted: September 4, 2007 

Date Decided: November 19, 2007 

Upon Appeal from the Division of Unemployment Appeals. 

AFFIRMED. 

O R D E R 

This 19th day of November 2007, upon consideration of the appeal of Pearce 
& Moretto, Inc. (“PMI”), from the decision of the Division of Unemployment 
Appeals (the “Division”) assigning PMI an unemployment compensation assessment 
at a new employer rate,1 it appears to the Court that: 

1. Shure-Line Construction,Inc.(“SLC”)beganitsoperationsinSeptember 
1991 and was owned by Messrs. Stoneberger, Wright, Pryor, and Everett, in equal 
25% shares. The Department of Labor (“the Department”) assigned SLC a new 
employer experience rate of 4.2, meaning that the Department required SLC to pay 
4.2% of its taxable wages to the State Unemployment Compensation Fund.2 The 
number of years the employer has maintained employment provides the basis for the 
rate - a new employer is required to pay a higher percentage than an employer who 
has established a consistent employment record.3 

2. Shure-Line Excavating (“SLX”) began its operations in March 2000. At 
the time of its formation, SLX was owned by Messrs. Stoneberger, Wright, Pryor, 
Everett, and Pearce. Messrs. Stoneberger, Wright, Pryor, and Everett each owned 
18.75% of the company (an aggregate of 75%) and Mr. Pearce was the majority 
shareholder, owning 25% of company. Mr. Pearce also managed the day to day 
operations of SLX. 

3. By statute, SLX would have been assigned a new employer rate of 6.3%. 
In the hopes of obtaining a lower employer rater, SLC and SLX filed an application 
requesting that the Department create a joint account for the two companies for the 
purpose of establishing the employer rate pursuant to 65 Del. Admin. C. § 600-38 
(“Section 600-38"), a regulation promulgated under 19 Del. C. § 3352 (“Section 
3352").4 According to the regulation, two or more employers who share 
“substantially the same ownership involving common or majority control of equity” 
may combine in a joint account for the purposes of employer experience rating. Once 
a joint account is established, it cannot be dissolved while “the individual employing 
units remain under substantially the same ownership.”5 A dissolution will occur, 
however, whenever any employing unit within the joint account is “purchased or 
otherwise acquired by outside interests.” If this occurs, the affected unit will be given 
a new employer account number.6 The Department approved the application and 
authorized SLC and SLX to form a joint account in 2000. 

4. On June 14, 2004, SLX sent the Department a letter announcing the 
acquisition of SLX by Messrs. Pearce and Morreto, effective July 1, 2004. 
Thereafter, SLX was to be known as Pearce and Moretto, Inc. (“PMI”). According 
to the terms of the transaction, Messrs. Pearce and Moretto would purchase the 75% 
interest held by Messrs. Stoneberger, Wright, Pryor and Everett, leaving Pearce and 
Moretto each with a 50% interest in the company. 

5. On July 30, 2004, the Department sent PMI a letter seeking additional 
information regarding the transaction and enclosed a UC-1 application and a UC-411 
form to be completed and returned to the Department. These forms were necessary 
to request a voluntary experience rating transfer pursuant to 19 Del. C. § 3353(b), 
which states, “Transfers of employment and benefit wage experience from a 
predecessor to a successor employer may be approved by the Department, upon 
request of the successor employer, if there is a continuation of essentially the same 
business activity as the predecessor employer by the successor employer.”7 Section 
3353(a) also provides for a mandatory transfer of employment experience if “there 
is substantial continuity of ownership and management by the successor of the 
business of the predecessor.”8 PMI never completed the forms necessary to request 
a voluntary transfer, but did respond in a letter, dated September 20, 2004, stating that 
PMI’s acquisition of SLX constituted only a change in the corporation’s name. 

6. On October 7, 2005, the Department received a letter from the president 
of SLC, Mr. Stoneberger, informing the Department that SLC was no longer affiliated 
with SLX or PMI. As a result, the Department dissolved the joint account and 
assigned PMI a new employer rate of 6.0%. SLC’s employer experience rate was also 
recalculated.9 

7. PMI challenged the Department’s decision to assign a new employer 
rating and a hearing was held on that challenge on December 19, 2006.10 The appeals 
referee determined that, pursuant to 65 Section § 600-38, PMI was correctly assigned 
a new employer rating because, after the sale of SLX to PMI, SLC and PMI no longer 
had substantially the same ownership. According to the referee, once Mr. Pearce and 
Mr. Moretto purchased the 75% ownership interest of SLX from the four other 
owners, common ownership no longer existed as between SLC and PMI. Absent 
common ownership, the statutory prerequisite for initially creating the joint account 
was gone. The referee acknowledged that Mr. Pearce was a common owner of both 
SLX and PMI. Nevertheless, the referee concluded that the affiliation of Mr. Pearce 
with both entities was insufficientto establish that “substantially the same ownership” 
had remained in tact because there was no longer any common ownership between 
SLC and PMI, the two members of the joint account. The referee also pointed out 
that Mr. Moretto was never an owner of SLC or SLX, but now owned 50% of PMI. 

Based on these facts, the referee concluded that PMI should be assessed at a new 
employer rating. 

8. On appeal to this Court, PMI challenges the referee’s interpretation of 
the applicable law that lead to the conclusion that PMI should be assessed at a new 
employer rate. Specifically, PMI argues that there is an apparent conflict between the 
applicable statute (Section 3353) and the applicable regulation (Section 600-38) and, 
therefore, the statute should govern here. The State responds that the decision of the 
appeals referee was free from legal error because there is no conflict between the 
statute and the regulation. According to the State, the statute regulates transfers of 
experience from predecessor to successor employers while the regulation governs the 
creation and dissolution joint accounts specifically. The State further contends that 
the referee’s decision is supported by substantial evidence. 

9. This Court repeatedly has emphasized the limited extent of its appellate 
review of administrative determinations. The Court’s review is confined to ensuring 
that the appeals referee made no errors of law and determining whether “substantial 
evidence” supports the referee’s factual findings.11 Questions of law that arise from 
the referee’s decision are subject to de novo review, pursuant to Superior Court Civil 
Rule 3(c), which requires the Court to determine whether the Division erred in 
formulating or applying legal precepts.12 Substantial evidence means “such relevant 
evidence as a reasonable mind might accept as adequate to support a conclusion.”13 
It is “more than a scintilla but less than a preponderance of the evidence.”14 The 
“substantial evidence” standard of review contemplates a significant degree of 
deference to the referee’s factual conclusions and its application of those conclusions 
to the appropriate legal standards.15 In its review, the Court will consider the record 
in the light most favorable to the prevailing party below.16 

A. The Governing Statute And Regulation Are Not In Conflict. 

10. In reviewing the decision below, the Court must first determine if the 
referee’s construction and interpretation of the applicable law was free from legal 
error. An agency’s interpretation of the law and application of that law to undisputed 
facts is given plenary review.17 At issue in this appeal is the interpretation of Section 
600-38 in conjunction with Section 3353. 

11. The Court finds that the Department’s regulation and the statute are not 
in conflict and govern separate and distinct situations. Each part of a statute passed 
by the General Assembly must be read “in light of every other part or section to 
produce a harmonious whole.”18 Section 3352 grants the Department sole authority 
to “prescribe regulations for the establishment, maintenance, and dissolution of joint 
accounts,” while Section 3353 governs the transfer of employment ratings between 
predecessor and successor employers. The existence of two separate statutes within 
the statutory scheme governing these distinct transactions is indicative of the General 
Assembly’s intent to treat the situations differently. Section 3352, and the regulations 
it authorizes the Department to promulgate, address joint accounts which are created 
by the application of two or more employers and, upon approval by the Department, 
share one employer experience rating.19 Section 3353, however, deals with a transfer 
of employment ratings from one employer to another. Under these circumstances, the 
two employers never share an employment rating simultaneously but rather pass it 
from one to another. When these two statutory provisions are read together, the 
General Assembly’s intent to treat joint accounts differently than predecessor and 
successor accounts is clear. 

B. 
The Referee’s Decision Correctly Applied The Law To The 
Undisputed Facts. 

12. The Department of Labor’s regulationgovernstheanalysisof these facts, 
not Section 3353. The evidence presented below indicates that one employer unit of 
a joint account was purchased by an outside interest, ending any common ownership 
between the two employers joined in the account. This event triggers the application 
of the Section 600-38, not Section 3353. 

13. The appeals referee correctly applied Section 600-38 to the undisputed 
facts before her. The plain language of the regulation explains the necessary steps for 
the creation and dissolution of joint accounts. It calls for the dissolution of a joint 
account when one member of the employing unit “is purchased or otherwise acquired 
by outside interests.”20 The regulation further explains that in this event, the affected 
employing unit will be assigned a new employer account number. The referee 
followed these directions in dissolving the joint account between SLC and SLX after 
SLX was acquired by outside interests, Messrs. Pearce and Moretto. After dissolving 
the account, the referee then assigned PMI a new employer account number, a process 
also prescribed by the regulation. There was no error in the referee’s application of 
the regulation to the facts presented below. 

C. 
The Referee’s Decision Was Supported By Substantial Evidence. 

14. The referee’s decision to dissolve the joint account created between SLC 
and SLX was supported by substantial evidence. The evidence presented below 
indicated that once PMI acquired SLX, the joint account was no longer appropriate. 
After that transaction occurred, SLC was owned by Messrs. Stoneberger, Wright, 
Pryor, and Everett, and PMI was owned by Messrs. Pearce and Moretto. SLC and 
PMI could not maintain the joint account because there was no longer common 
ownership as among the two employers. Further, PMI was not entitled to SLX’s 
employer rating as a successor employer because SLX never established an employer 
rating of its own. SLX shared an employer rating with SLC during the entire life of 
its business and was never assigned an individual rating. 

15. Based on the foregoing, the decision of the Division to assign PMI a new 
employer rating is AFFIRMED. 

IT IS SO ORDERED. 

Judge Joseph R. Slights, III 
Original to Prothonotary