In Texas, make sure that when you buy a business, you aren’t buying a lawsuit brought by a disgruntled current or former employee you didn’t know about.
If you buy a business from someone else – a “predecessor”, you are what is called a “successor.” In Texas, Successor Liability for unpaid wages may attach depending on the following factors:
- Whether the successor company had notice of the charge or pending lawsuit prior to acquiring the business or assets of the predecessor;
- The ability of the predecessor to provide relief;
- Whether there has been a substantial continuity of business operations;
- Whether the new employer uses the same plant;
- Whether he uses the same or substantially the same workforce;
- Whether he uses the same or substantially the same supervisory personnel;
- Whether the same jobs exist under substantially the same working conditions;
- Whether he uses the same machinery, equipment, and methods of production;
- Whether he produces the same product. Rojas v. TK Communications, Inc., 87 F.3d 745 (5th Cir. 1996)
Remember: “If it ain’t written down, it don’t exist!”
While it is not a foregone conclusion that you will be on the hook for a pre-existing employee wage-based lawsuit, don’t buy the business without performing your due diligence with the advice and counsel of an experienced business attorney.