Restricting Successor Liability Underneath The FLSA: Wage And Hour Research
Lately, my friend Lindsey Marcus guest authored a publish on another successor liability situation, this time around from the Third Circuit. Her publish advised me of some other situation within the Seventh Circuit from 2013, along with a bigger point in the mergers and acquisitions a part of my practice and my days doing M&A within the tech world: labor and employment issues are extremely frequently overlooked in purchase contracts. Because the buyer discovered hard means by the situation Lindsey detailed, frequently lost out of all discuss asset valuations, tax implications, and structuring the financial lending are serious wage and hour issues that must definitely be addressed in the negotiating table, too. To prevent pricey lawsuits or Department of labor enforcement actions, FLSA and condition wage and hour research ought to be a considerable area of the overall research process in almost any deal involving a business with employees, whether or not individuals employees is going to be utilized by the customer.
To provide you with another example, in 2013, the Seventh Circuit stuck a good thing purchaser using the bill for any $500,000 FLSA settlement connected using its bankrupt Wisconsin predecessor. The asset purchaser needed to repay since it had notice from the FLSA suit before the asset purchase, it hired 247 from the predecessor’s 295 employees, and ongoing to operate the company in substantially exactly the same manner because the predecessor company: same name, same location, many of the same employees. Importantly for individuals individuals in acquisition mode, the truth that the asset purchaser had particularly disclaimed liability for that FLSA suit within the asset purchase agreement wasn’t enough to preclude successor liability. Based on the Seventh Circuit, allowing a good thing purchaser to contractually disclaim liability would frustrate the “statutory goals” from the FLSA, and “a violator from the [FLSA] could escape liability or at best make relief a lot more hard to obtain.”
Had the customer identified the scope from the FLSA problems pre-closing, it might have been in a position to avoid or minimize its ultimate liability. At the minimum, the customer could have been in a position to reflect on the real worth of the purchase and see whether or not this made sense to maneuver forward in order to negotiate a lesser purchase cost considering the substantial wage-and-hour risks involved. On Monday, I’ll share some solutions which will prevent or at best minimize FLSA successor liability.