7th Circuit Holds Successor Liable for FLSA Claims, Despite Buyer’s Disclaimer

In Teed v. Thomas & Betts Power Solutions, LLC, the 7th Circuit in an opinion written by Judge Posner held that, absent a good reason to withhold liability, a purchaser of assets was subject to successor liability for Fair Labor Standards Act (“FLSA”) claims and other federal labor and employment laws, even if the successor disclaimed liability when it acquired the assets.

Plaintiffs filed collective actions for overtime pay under the FLSA. The original defendant was JT Packard & Associates (“Packard”). Packard guaranteed a loan by its parent company. When the parent company defaulted, Packard’s assets were placed in a receivership and auctioned off, with the proceeds going to the bank. Thomas & Betts Corporation bought Packard’s assets and placed them in a wholly owned subsidiary, Thomas & Betts Power Solutions, LLC (“Thomas & Betts”). Over Thomas & Betts’ objection, plaintiffs were allowed to substitute Thomas & Betts for the original defendants. Eventually, a judgment of $500,000 was entered against Thomas & Betts in this matter for FLSA violations that occurred when Packard owned the assets.

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