Buying a Business? Don't Buy a Lawsuit!

Posted by William A. PiggApr 29, 20210 Comments

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 work force; 
  • 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; and 
  • whether he produces the same product.  Rojas v. TK Communications, Inc., 87 F.3d 745 (5th Cir. 1996).  

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.