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FLSA Successor Liability – More Than You Bargained For

A common method for business expansion is for one company to acquire another company’s operations and then merge the operations into the acquiring company.  However, even when care is taken to structure such acquisitions to limit or avoid the potential liabilities of the company being acquired, the transaction can result in the purchasing company being faced with unexpected employment claims, including claims made for unpaid minimum wage and overtime under the Fair Labor Standards Act (FLSA).  A purchaser of the assets of an existing company can be held liable for the acquired company’s violations of the FLSA as a successor in interest under federal common law.  In a recent case out of the Eastern District of Pennsylvania, a company that purchased the assets of a Philadelphia exotic dance nightclub discovered this fact the hard way. Herzfeld v. 1416 Chancellor, Inc., 2017 U.S. Dist. LEXIS 88732 (E.D. Pa. Jun. 9, 2017). Continue Reading