On November 15, 2012, NELA filed an amicus brief in the Seventh Circuit Court of Appeals in support of the plaintiffs in Teed v. Thomas & Betts Power Solutions. In this case, NELA filed in support of the plaintiffs’ efforts to preserve a favorable district court ruling on successor liability under the Fair Labor Standards Act (FLSA). Our brief was drafted by David E. Schlesinger and James H. Kaster of Nichols Kaster, PLLP (Minneapolis, MN).
The plaintiffs in this case filed suit against JT Packard & Associates for violations of the FLSA, seeking overtime pay. After the district court conditionally certified the case as a collective action, the defendants sought to stay or dismiss the proceedings because the company had entered receivership proceedings. The company was eventually purchased by Thomas & Betts, which, as part of that purchase, signed an agreement that included reference to an order asserting that the plaintiffs “intend to pursue both lawsuits under a theory of successor liability against defendant’s buyer.” I approving the sale, the state court in Wisconsin affirmed that Thomas & Betts was on notice of the plaintiffs’ claims, but did not by virtue of purchasing JT Packard’s assets automatically become its successor in liability.
While general common law rules only allow for successor liability in a narrow set of circumstances, there is a robust body of federal successor liability law that is much broader. The federal standard was developed in cases arising under the National Labor Relations Act (NLRA) and the Labor Management Relations Act (LMRA), and held that employees could recover for past unfair labor practices when there was “substantial continuity” between the two employers. The standard has since been extended to claims arising under the Employee Retirement Income Security Act (ERISA), the Age Discrimination in Employment Act (ADEA), and Title VII of the Civil Rights Act (Title VII). In addition, those courts that have examined the issue under the FLSA have accepted that the federal standard should apply there as well. The district court in this case accepted that the federal standard should apply in this case, and that the plaintiffs were entitled to pursue their claims against Thomas & Betts because 1) Thomas & Betts was on notice of the claims before purchasing JT Packard; 2) JT Packard was not able, either before or after the sale, to provide relief to the plaintiffs; and 3) there was substantial continuity in the operations and workforce between JT Packard and Thomas & Betts.
NELA’s brief surveys the development of the federal successor liability standard, as well as the reasons why the Supreme Court crafted the exception to the general common law rule. It points out that the same reasons that supported extending the rule to other employment discrimination statutes support the application of the rule in the FLSA context, and that courts in other circuits have already affirmed as much.