Explore the legal intricacies of M&A transactions in our latest blog post. Delve into the liabilities asset buyers encounter under the Family and Medical Leave Act (FMLA) when integrating employees returning from leave. Gain insights from a recent case study involving the acquisition of A&P grocery stores by Albertson, shedding light on buyer responsibilities and potential pitfalls. Understand the importance of diligence in navigating FMLA regulations to mitigate risks during acquisitions.
M&A Stories
June 4, 2018
In a recent case emerging from New Jersey, the responsibilities of asset buyers concerning employees on family or medical leave during acquisitions came under scrutiny. This case, involving the acquisition of 76 A&P grocery stores by the Albertson grocery store group, sheds light on the potential liabilities buyers face when integrating employees returning from leave.
Greg, a butcher employed by A&P, was on medical leave when the buyer acquired the stores. Despite an agreement to hire A&P’s employees, Greg faced a setback upon his return to work. Due to administrative delays, the buyer did not have Greg’s employment data readily available, leaving him without compensation for six weeks.
Greg pursued damages under the federal Family and Medical Leave Act (FMLA), arguing that the buyer failed to promptly reinstate him. The court ruled in Greg’s favor, emphasizing that FMLA determines the buyer’s liability, irrespective of the asset purchase agreement or state corporate laws.
The court’s decision rested on the continuity of business operations between the seller and the buyer. Despite minor changes, such as signage and interior modifications, the core business remained unchanged, with the same workforce and managerial structure. Consequently, the buyer was deemed a successor-in-interest to the seller, subject to FMLA obligations.
The case highlights two potential FMLA pitfalls for asset buyers. Firstly, buyers must be aware of past FMLA violations by the seller during due diligence. Failure to uncover or address these violations can leave buyers liable. Secondly, buyers face direct FMLA liability if they fail to promptly rehire employees returning from leave post-acquisition.
In essence, asset buyers must navigate FMLA regulations diligently to mitigate risks associated with employee transitions during acquisitions.
Case Reference:
Podurgiel v. Acme Markets, Inc., Civil Action No. 16-cv-02262 (PGS)(TJB), United States District Court, D. New Jersey (May 21, 2018).
By John McCauley: I help people start, grow, buy and sell their businesses.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
Telephone: 714 273-6291
Check out my book: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles
Recent Comments