Teed v. Thomas & Betts Power Solutions, LLC, Nos. 12-2440, 12-3029, 2013 WL 1197861 (7th Cir. March 26, 2013)
A federal appellate court agreed with the lower court to apply the doctrine of successor liability to cases dealing with violations of the Fair Labor Standards Act (“FLSA”). “[S]uccessor liability is appropriate in suits to enforce federal labor or employment laws – even when the successor disclaimed liability when it acquired the assets in question – unless there are good reasons to withhold such liability.”
The federal common law standard of successor liability is more favorable to employees than most state-law standards. Under state-law standards, successor liability is granted when the buyer (the successor) expressly or implicitly assumes the seller’s liabilities. The Court considered several factors in deciding whether to apply the federal standard of successor liability such as whether the successor had notice of the pending lawsuit; whether the predecessor would have been able to provide the relief sought in the lawsuit before the sale; whether the predecessor could have provided relief after the sale; whether the successor can provide the relief sought in the suit; and whether there is continuity between the operations and work force of the predecessor and the successor which favors successor liability on the theory that nothing really has changed.
Absent successor liability, an employer who violated the FLSA could escape liability or at least make relief much more difficult to obtain, by selling its assets without an assumption of liabilities by the buyer and then dissolving the company. This decision may help employees recover damages when their employer violates the FLSA even if the employer sells the company or becomes insolvent.
Please contact the employment lawyers at Fitapelli & Schaffer, (212) 300-0375, to schedule a free consultation so that we can discuss your rights under the Fair Labor standards Act and the New York Labor Law.