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Recent Decisions Discuss A Successor Employer’s Liability in FLSA Cases

When an employer allegedly violates the Fair Labor Standards Act (FLSA), its employee, who believes his or her’s rights were violated, can sue the employer. If the employer is then found in violation of the FLSA, the employer is liable to the employee. But what happens when the employer who commits the violation is sold before the employee initiates his or her’s lawsuit? Can the employee sue the successor employer for the FLSA violation? Is the successor employer even liable to the employee for a FLSA violation committed by the company it bought?

In Paschal v. Child Development, Inc., the employee sued the successor employer for a FLSA violation committed by the previous employer. The successor employer filed a motion to dismiss the employee’s suit as a matter of law, on the grounds that since the successor employer was not in existence when the FLSA violation occurred, it cannot be liable.

In deciding the motion, the Arkansas Eastern District Court held that a successor employer could be liable for a FLSA violation if:

1. There is a continuity of business, and 2. The successor employer was aware of the violations when it took over the company that committed the FLSA violation,

In making its decision a court can also consider whether:
1. the same plant is being used;
2. the employees are the same;
3. the same jobs exist;
4. the supervisors are the same;
5. the same equipment and methods of production are being used; and
6. the same services are being offered.

The district court found in this particular case the successor employer never proffered any evidence to show that it did not know of the FLSA violation when it took over the company that committed the FLSA violation. The successor employer also did not prove there was no continuity of business. The successor employer’s motion to dismiss was premature and therefore denied.

In Battino v. Cornelia Fifth Ave., LLC, the successor employer filed a motion for summary judgment. The District Court, S.D. New York found that there were issues of fact regarding whether the successor employer was an innocent purchaser. As such the successor employer’s motion for summary judgment could not be awarded.

The Las Vegas law office of Lagomarsino Law did not represent anyone involved in the above-referenced case. The commentary is for educational and commentary purposes only. If you would like to be represented by a Nevada attorney, contact our office for a free confidential case review and receive a response within hours. Call Toll Free 866-414-0400.