Third Circuit Follows Suit in Expanding Reach of Successor Liability for FLSA Claims

This month, the Third Circuit became the latest court of appeals (following the Seventh and Ninth Circuits) holding that the federal common law standard should be applied when determining whether a successor may be liable for FLSA violations allegedly committed by its predecessor. So what does this mean for employers? We expect the ruling likely will make it easier for plaintiffs to assert FLSA claims against employers and to hold them liable for violations by their predecessor.

The plaintiff in Thompson v. Real Estate Mortgage Network (3d Cir. Apr. 3, 2014) was employed by Security Atlantic Mortgage Company until she and her colleagues were asked by their supervisors to complete new job applications to work for Real Estate Mortgage Network.  Her employment was then transferred to REMN, she was put on the REMN payroll, and Security Atlantic subsequently went out of business.Plaintiff brought FLSA claims on behalf of herself and a collective of employees, alleging, among other things, that REMN was liable for FLSA overtime violations committed by Security Atlantic on a theory of successor liability. The case came before the Third Circuit on appeal from the district court’s grant of defendants’ motion to dismiss.

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