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Can I Sue For Wage Theft If The Company I Work For Was Sold? I Need A Lawyer!

| Nov 6, 2019 | minimum wage violation, overtime time violation, tipped employee violations |

Best Ohio Overtime Wage Lawyer Answer: What happens if my company gets bought out while I’m suing it for overtime violations? Can I sue my new company for past wage violations if I’m doing the same job? What should I do about unpaid overtime wages that I’m owed?

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A recent case from the Southern District of New York caught my eye because it contained my two favorite things, a prevailing employee and Thai Food. In Bautista v. Beyond Thai Kitchen, Inc., the employee, Gregorio Bautista, was suing his former employer for violating the Fair Labor Standards Act (“FLSA“) by not paying the employee all of his wages or for overtime hours. The only problem was that the previous owner of Beyond Thai Kitchen, Sirisuk, Inc., who committed the wage theft, sold the restaurant to Beyond Thai Kitchen, Inc. (“BTK”). The new owner argued that they cannot be held liable for any wage theft by the former owner. Our employment law attorneys have already blogged about what happens if you employer files bankruptcy: I Sued My Employer For Discrimination And It Filed For Bankruptcy. Best Lawyer Help!). In address what happens when a wage stealing company sells out to a new owner, the court made a very important finding, that the substantial continuity test applies in the FLSA context:

three circuits and several courts in this District have held that successor liability applies to FLSA claims; these courts reason that applying “substantial continuity” to FLSA claims was the “logical extension of existing case law,” Thompson v. Real Estate Mortg. Network, 748 F.3d 142, 151 (3d Cir. 2014), which already applies “substantial continuity” to other labor and employment claims, Steinbach v. Hubbard, 51 F.3d 843, 845 (9th Cir. 1995) (concluding that “successorship liability exists under the FLSA, as FLSA’s “fundamental purpose is as fully deserving of protection as the . . . policies underlying the NLRA, Title VII, 42 U.S.C. § 1981, ERISA, and MPPAA,” where successor liability had already been found to exist). Accord Teed v. Thomas & Betts Power Solutions, L.L.C., 711 F.3d 763, 766 (7th Cir. 2013) (“[S]uccessor liability is appropriate in suits to enforce federal labor or employment laws — even when the successor disclaimed liability when it acquired the assets in question — unless there are good reasons to withhold such liability.”); Jai Fu Chen v. New 9th Ave Pearl on Sushi Inc., No. 14 Civ. 580, 2015 WL 3947560, at *1 (S.D.N.Y. June 29, 2015) (applying successor liability to FLSA claim where predecessors sold defendants-successors assets for $40,000 and discarded “most of [its] accounting records and documents”); Alvarez v. 40 Mulberry Restaurant, Inc., No. 11 Civ. 9107, 2012 WL 4639154, at *6 (S.D.N.Y. Oct. 3, 2012) (concluding that “a reasonable jury could find that [defendant] is a successor in interest . . . under the `substantial continuity’ test”); Battino, 861 F. Supp. 2d at 402-04; Wong v. Hunda Glass Corp., No. 09 Civ. 4402, 2010 WL 2541698, at *1 (S.D.N.Y. June 23, 2010) (finding that successor liability applied because “there was substantial continuity between the businesses, and there was the same workforce, same job titles, same supervisors, same machinery, and same products”).

What does this mean? That there does not need to be legal continuity of ownership to sue your work under the FLSA, if the business changes hands, the new owner can be liable under a successor liability theory. There are nine factors that the court looks at when applying substantial continuity. Not one factor is controlling and not all factors must be met:

  1. whether the successor company had notice of the charge or pending lawsuit prior to acquiring the business or assets of the predecessor;
  2. the ability of the predecessor to provide relief;
  3. whether there has been a substantial continuity of business operations;
  4. whether the new employer uses the same plant;
  5. whether he uses the same or substantially the same work force;
  6. whether he uses the same or substantially the same supervisory personnel;
  7. whether the same jobs exist under substantially the same working conditions;
  8. whether he uses the same machinery, equipment, and methods of production; and
  9. whether he produces the same product.
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The Court looked at all the factors in this case and found that the third, fourth, eight, and ninth factors were easily satisfied and thus weighed heavily in favor of imposing successor liability. The court noted that BTK location remained unchanged, and they used the same machinery and equipment. BTK also kept the same phone number and a nearly identical menu.

The fifth through seventh factors relating to the workforce were not so easily satisfied and weighed only moderately in favor of successor liability. While the seventh factor was met, the jobs and working conditions were the same, the court held that a jury could find for either party on the fifth and sixth factors. BTK kept three of Srisuk’s eight employees and the chef, which could or could not be considered the same work force and same supervisory personnel.

The second factor was unclear, the court could not determine if Srisuk could provide relief. This would depend on whether Srisuk had any assets or conducted business, information the court did not have.

The first factor also weighed in favor of imposing successor liability because the court found ample evidence suggesting that BTK had constructive notice of the plaintiff’s claims. This is because BTK conducted little to no diligence investigating Srisuk’s liabilities prior to purchasing the restaurant. Further, the court thought the facts that BTK paid very little for the restaurant and closed on it within a month were very suspicious considering Srisuk’s ongoing settlement discussions with Plaintiff at the time.

In the end the court looked at all the factors and found that a reasonable jury could only conclude that BTK was liable as a successor to Srisuk. Thus BTK was liable for any FLSA violations that Srisuk had, and the former employee could still recover.

What does this mean for you and me? Even if the business you work for is sold, you may be able to sue the new employer for the former owner’s violation of the FLSA.

If you believe that your employer is not paying you all of your wages for all of your lawfully earned overtime compensation at a rate of one and half times your normal wages as requires under the Federal Fair Labor Standards Act or Ohio Minimum Fair Wage Standards laws or you are an nonexempt employee that has been misclassified as exempt or independent contractor, contact the attorneys at The Spitz Law Firm today for a free and confidential initial consultation. The wage and hour lawyers at The Spitz Law Firm will provide you with the best options for your overtime pay dispute situation. If you even think that you may be entitled to overtime pay that you are not being paid, call (216) 291-4744.

Disclaimer:

The materials available at the top of this overtime, wage and hour web page and at this employment law website are for informational purposes only and not for the purpose of providing legal advice. If you are still asking, “Am I entitled to overtime?”, “Does my job have to pay me for …”, “My paycheck is not right…” or “What do I do if…”, the your best option is to contact an Ohio overtime attorney to obtain advice with respect to FLSA questions or any particular employment law issue. Use and access to this employment law website or any of the links contained within the site do not create an attorney-client relationship. The legal opinions expressed at the top of this page or through this site are the opinions of the individual lawyer and may not reflect the opinions of The Spitz Law Firm, Brian Spitz, or any individual attorney.