Successor Liability Issues in Labor and Employment Cases

In the 21st century, when companies merge or sell their business, it can affect the people who work there. Employment lawyers have to study when a new company might be responsible for treating employees fairly. A famous court case in 1973 set the rules for this. It said that if a new company buys a business and knows about previous unfair treatment of employees, it might have to fix it. This rule was extended to cases involving discrimination as well. The court decided that the new company might be responsible if it knew about the discrimination complaint against the old company. The Sixth Circuit made changes to the rules on when a new company can be held responsible for the actions of the old company it took over. They said that the new company doesn’t have to be told about any discriminatory actions by the old company to be held responsible for them. Other courts have mostly agreed with this, but there is some disagreement. The 11th Circuit and the Sixth Circuit have different ideas about when a new company can be held responsible for the actions of an old company. The 11th Circuit says there has to be a direct sale or merger between the two companies, while the Sixth Circuit doesn’t think that’s always necessary. So, it depends on which court you’re in. In Cobb v. Contract Transport, Inc., a worker lost his job with a mail delivery company when they lost their contract with the Postal Service. He was then hired by a competitor, but when he needed surgery and took time off, they fired him. He sued them under the Family and Medical Leave Act (FMLA), claiming they were his rightful employer. The court ruled in favor of the competitor, saying they were a successor in interest even though they didn’t merge or transfer assets. They used a three-prong test to decide, which focuses on the interests of the employer and employee, as well as federal policy. This is a new way of looking at successor liability cases in labor and employment law. The court said that privity (a legal relationship) is not always needed to hold a new company responsible for the actions of a previous company it took over. But in cases involving discrimination or unfair labor practices, privity might be important to consider. However, if there is a specific law that requires a company to do something (like giving employees leave), privity is not necessary to hold the new company responsible for following that law. In the future, court decisions like Coffman and Cobb will affect how successor liability is analyzed in labor and employment cases. These decisions will weigh the legal duty of the employer and employee, as well as privity and notice issues. The Cobb decision may lead to a change in how successor liability cases are approached in the future.

Source: https://www.floridabar.org/the-florida-bar-journal/successor-liability-issues-in-labor-and-employment-cases/