Second Circuit: Does Successor Liability Apply to ERISA Withdrawals for Unacquired Facilities?

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January 27, 2022

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On January 27, 2022, the Second Circuit Court of Appeals ruled that successor liability to fund an ERISA pension plan does not apply to a business who did not acquire the facility or the employees making the complaint.

 In 2008, a business acquired some of another business entity’s locations and employees. A warehouse in Syracuse, New York, along with its unionized employees, was not acquired, but the new business and former business agreed on an independent contractor relationship where the former business maintained control of the Syracuse warehouse facility, employees, and operations. The former business subsequently filed for bankruptcy, causing its pension fund to file suit against the new business for the former business’s outstanding withdrawal liability, claiming successor liability and common control over the Syracuse facility and its unionized employees.

 The Second Circuit stated that successor liability applies to ERISA withdrawal claims but did not apply in this case. Specifically, the new business could not be found evade liability simply because they declined to assume the liability in the first place. Moreover, the new business specifically didn’t acquire the Syracuse warehouse and employees because of issues with the pension fund.

 

Action Items

    1. Inquire about unfunded pension plans and benefits when making acquisitions.
    2. Have legal counsel ensure all acquisition contracts have clear terms on the liabilities each party assumes.
    3. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

 

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

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