91视频

When purchasing real estate, buyers are always concerned with minimizing potential liability for environmental issues. When clients approach me with a prospective business acquisition, most prefer to structure it as an asset deal to avoid liabilities associated with a stock purchase. I rarely hear that a client is merely upgrading some equipment or purchasing a few assets.

However, even an asset purchase is not immune from successor liability issues. The Oregon Supreme Court clarified in a recent case that new owners who acquire any business assets, regardless of the acquisition method, face potential successor liability for wage claims by employees who were not paid by the former employers.

In Blachana LLC v. Bureau of Labor and Industries, a bar closed its doors without paying some of its employees. Those employees sought and received payment from the Oregon Bureau of Labor and Industries’ Wage Security Fund. The former bar’s landlord then acquired its assets by repossession and reopened the bar a month later. BOLI then sued the new bar for reimbursement of wages paid out of the Wage Security Fund, alleging that the new bar was an 鈥渆mployer鈥� under the wage claim statute.

The wage claim statute includes in its definition of 鈥渆mployer鈥� two classes of individuals or entities: (i) a successor to the business of the employer; or (ii) a lessee or purchaser of any of the employer’s business assets, which assets are used in the continuance of the employer’s same business.

The central issue in Blachana was defining a 鈥渟uccessor to the business of employer鈥� as contemplated under the definition of 鈥渆mployer鈥� in the wage claim statute. Because the new bar did not lease or purchase the former bar’s business assets, the only way it could be deemed an 鈥渆mployer鈥� under the statute, and therefore liable to BOLI for reimbursement of wages paid, was if it was a 鈥渟uccessor to the business of employer.鈥�

The Supreme Court rejected the new bar’s argument that it was not a successor to the former bar because it was a separate and distinct entity with no ties to the former bar. Additionally, the Supreme Court disagreed with the lower courts’ conclusion that an entity was liable as a successor to the business of an employer only when that entity would be liable for the employer’s unpaid wages under some law other than the wage claim statute.

In holding that the new bar was a successor to the former bar as contemplated by the statute, the court accepted the test offered by BOLI: an employer was a successor for purposes of wage claims if it 鈥渃onducts essentially the same business as conducted by the predecessor.鈥� The court considered a number of factors introduced in a previous BOLI case to determine if this test was met: (i) the name or identity of the business; (ii) the business location; (iii) the amount of time between the operation of the predecessor’s business and the new business; (iv) the continuity between the predecessor’s workforce and the new business’ workforce; (v) the products or services offered by the predecessor compared to the products or services offered by the new business; and (vi) whether the same equipment or production methods were used by the predecessor and the new business. In analyzing whether the new bar was a successor to the business of the former bar, the court noted that not all of the six factors must be met.

There are some ways businesses can attempt to protect themselves from the wage claim successor liability in Blachana:

1. Perform significant due diligence. In addition to evaluating the condition and history of the assets you are acquiring, carefully examine the business’s financial and payroll records.聽 When performing the due diligence, inquire into the solvency of the seller.

2. Ensure strong representations, warranties and indemnification are in the purchase agreement. The buyer’s attorney should draft strong representations regarding the payment of wages and adequate indemnification provisions. The representations and indemnification provisions are only as strong as the seller or guarantor standing behind them. If there is any question as to the seller’s solvency, require a guarantor to be jointly and severally liable for the indemnification obligations.

3. Allocate the purchase price to payment of wages. Part of the purchase price could be allocated and a process established for the payment of any unpaid wages, vacation or other employee compensation at closing.

4. Establish a holdback. Another protective device is a holdback agreement that withholds a portion of the purchase price for one to two years and provides the acquirer with security not only for unpaid wages, but also for any other indemnification claims.

The Blachana case emphasizes the potential exposure that any acquirer of a business or any business asset faces and reconfirms the importance of performing thorough due diligence in any acquisition.

The potential successor liability for employers in this context applies to all subsequent owners 鈥� no matter how the acquisition is structured. It also potentially applies to a business (or individual) that acquired only a few assets from another business and then used those assets in a similar business. While a buyer of stock expects significant liabilities to follow, a buyer of assets does not. Any type of business asset purchase, large or small, opens the door to potential successor liability.

Krista Evans is an attorney at Jordan Ramis PC who regularly advises clients on a variety of business issues. She also has experience in real estate matters. Contact her at 503-598-5575 or [email protected].