Successor Liability for Employment Claims

Buyers are not necessarily protected from employment claim liabilities that arose under prior ownership.  Courts have held successors liable for employment claims when necessary to protect and effectuate the public policies behind employment laws such as the Family Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA), etc.  Courts look at the following criteria when determining whether to impose liability on the successor: (1) whether the buyer knew or should have known of the legal claim before the purchase; (2) the ability of the seller to provide relief, in other words, does the seller still exist; and (3) whether there has been a substantial continuation of the same business.  Courts may impose liability on the buyer even when the purchase agreement contains disclaimer language stating that the buyer does not assume the seller's liabilities.