Source: https://www.floridabar.org/the-florida-bar-journal/successor-liability-issues-in-labor-and-employment-cases/
Timestamp: 2019-04-23 22:40:17+00:00

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As the 21st century roars ahead, there has been no slowing of business mergers, buyouts, other consolidations and sales, and bankruptcies. Of course, these corporate “shuffles” almost always impact the employment relationship in some fashion. As such, employment law practitioners will likely be faced with claims that will require careful analysis of federal common law successor liability theory, which differs significantly from state successor liability “alter ego” or “de facto merger” rules applicable to general business debts and other liabilities. This article identifies the primary cases that discuss when and under what circumstances a successor business entity may become or remain liable to a former or current employee for legal protections provided by the principal labor and employment law statutes, with a particular focus on a current federal circuit split regarding this issue.
In answering the second question framed by the MacMillan court, the court indicated that with respect to successor companies, Congress only intended that a charging party name those entities that were known to her and could have been charged within the limitations period.14 However, because the record was clear that the successor MacMillan had notice of the employee’s charge against the predecessor, the court did not decide whether successor liability would be appropriate if the successor had not been notified about the charge. This question was answered in subsequent Sixth Circuit opinions.
Although there appears to be near-uniform agreement among the circuits that a successor can be held liable for the discriminatory or retaliatory acts of a predecessor employer under a variety of different employment statutes, and that the nine MacMillan factors are the appropriate analytical touchstone, there have been recent developments in successor liability jurisprudence that have led to a circuit split.
The Sixth Circuit takes a different view. In mid-2006, the Sixth Circuit had occasion to revisit its MacMillan holding and address successor liability issues including the issue of whether a showing of privity between two employers is always a condition precedent to imposing successor liability.
In Cobb v. Contract Transport, Inc., 452 F.3d 543 (6th Cir. 2006), the plaintiff worked for a predecessor entity that provided contract mail delivery services for the U.S. Postal Service. This predecessor employer lost its contract with the Postal Service to a competitor through a bid process. Six months after being hired by the competitor, the plaintiff needed gallbladder surgery which necessitated a leave period of approximately two weeks. The competitor terminated the plaintiff which prompted him to bring an FMLA claim.25 In order to meet the eligibility standards under the FMLA,26 the plaintiff had to show that his most recent employer was a successor to his previous employer.
This pronouncement, depending on one’s perspective, modifies, clarifies, or redirects the focus of inquiry for courts and litigants when faced with successor liability questions in the context of labor and employment cases. The Sixth Circuit has now expressly indicated that in each case where the question of successor liability is in play, a court (at least in its circuit) must divine the specific legal obligation or duty at issue, balance that duty with the other two primary analytic factors (the employer’s and employee’s interests), use the nine secondary factors of MacMillan, if appropriate, to help formulate the proper inquiry and then decide as a matter of equity whether successor liability should be imposed.
As such, the Sixth Circuit held that the duty of an employer to grant leave or reinstate an employee at the conclusion of that leave arises under the FMLA statute itself and the source of that duty has no apparent relationship to a company’s physical assets; therefore, there is no reason to consider whether a merger or transfer of assets occurred as a precondition to the imposition of the statutory duty upon a successor.38 While the Sixth Circuit did not explicitly say so, the fact that the duty allegedly violated was that of the successor employer rather than the predecessor, almost certainly played some role in the balancing analysis.
The principle that emerges from Cobb is that privity can be a relevant factor to consider when confronting claims that include requests for relief for past discrimination, retaliation, or unfair labor practice, but in cases where an independent statutory duty exists that has no connection to a company’s assets, the absence of privity will not preclude the imposition of successor liability.
1 Upholsterers’ Int’l Union Pension Fund v. Artistic Furniture of Pontiac, 920 F.2d 1323, 1325 (7th Cir. 1990), quoting EEOC v. Vucitech, 842 F.2d 936, 944 (7th Cir. 1988).
2 John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (1964); NLRB v. Burns International Security, 406 U.S. 272 (1972); Golden State Bottling Co., Inc. v. National Labor Relations Board, 414 U.S. 168 (1973); Howard Johnson Co. v. Detroit Local Joint Exec. Bd., Hotel & Rest. Employees Int’l Union, 417 U.S. 249 (1974).
3 Golden State, 414 U.S. at 172.
7 MacMillan, 503 F.2d at 1088.
15 Wiggins v. Spector Freight System, Inc., 583 F.2d 882, 886 (6th Cir. 1978).
18 Rabidue v. Osceola Refining Company, a Division of Texas-American Petrochemicals, Inc., 805 F.2d 611, 616 (6th Cir. 1986), overruled on other grounds, Harris v. Forklift Systems, Inc., 510 U.S. 17 (1993).
19 NLRB v. South Harlan Coal, Inc., 844 F.2d 380, 385-386 (6th Cir. 1988).
20 See, e.g., Forde v. Kee Lox Mfg. Co., Inc., 584 F.2d 4 (2d Cir. 1978); Rego v. ARC Water Treatment Co. of Pa., 181 F.3d 396 (3d Cir. 1999); Rojas v. TK Communications, Inc., 87 F.3d 745 (5th Cir. 1996); EEOC v. G-K-G, Inc., 39 F.3d 740 (7th Cir. 1994); Dominguez v. Hotel, Motel, Restaurant & Miscell. Bartenders Union, 674 F.2d 732 (8th Cir. 1982); Slack v. Havens, 522 F.2d 1091 (9th Cir. 1975); Trujillo v. Longhorn Mfg. Co., Inc., 694 F.2d 221 (10th Cir. 1982); In re National Airlines, Inc., 700 F.2d 695 (11th Cir. 1983).
21 Korlin v. Chartwell Health Care, Inc., 128 F. Supp. 2d 609, 614 (E.D. Mo. 2001); Whitmore v. O’Connor Management, Inc., 156 F.3d 796, 799 (8th Cir. 1998).
22 Coffman, 411 F.3d 1231, 1237-1238.
23 Kicinski v. Constable Hook Shipyard, 168 F.2d 404, 408-09 (3d Cir. 1948)(A nurse returning from active duty sought reinstatement at the shipyard where she worked before entering military service, but during her absence, her former employer vacated the shipyard; thereafter, the yard was taken in condemnation proceedings and, after ending up in the possession of a bankruptcy trustee, was leased to a different shipbuilder a few weeks later. Third Circuit found that potential successor had no obligation to re-employ nurse since there was no “continuity or privity” between the two shipbuilding entities).
24 Coffman, 411 F.3d at 1237-1238.
25 Cobb, 452 F.3d at 547-548.
26 See 29 U.S.C. §2611(2)(A).
27 See 29 C.F.R. §825.107.
28 Cobb v. Contract Transport, Inc., 2005 WL 1645733 (E.D. Ky. 2005)(reversed).
29 Cobb, 452 F.3d at 551.
33 Id. at 552, 554-555, citing MacMillan, 503 F.2d at 1091.
Travis R. Hollifield is the founder of Hollifield Legal Centre in Winter Park which focuses on working women’s legal rights including FMLA, sexual harassment, and pregnancy discrimination claims. He earned his B.A. from the University of Central Florida in 1991 and his J.D. from Nova Southeastern University in 1996. Mr. Hollifield is a member of the Labor & Employment Law Section of The Florida Bar, the Federal Bar Association, and the National and Florida Employment Lawyers associations.
This column is submitted on behalf of the Labor and Employment Law Section, Cynthia Sass, chair, and Frank E. Brown, editor.

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