Because M&A Due Diligence Was Not Already Complicated Enough…

A recent federal appeals court decision suggests that businesses looking at potential acquisitions or mergers have yet another, relatively new concern to their due diligence list when examining the target business: an increased potential for claims alleging federal wage-and-hour law violations under a successor employer theory. In the case, the United State Court of Appeals for the Third Circuit concluded that the federal common law standard for successor liability – a much easier standard for plaintiffs to meet than state law successorship standards – applies to federal Fair Labor Standards Act wage-and-hour claims. This evolving successor liability standard means merger and acquisition considerations just received another layer of potential complexity.