Successor corporation liability for employment discrimination

In Brzozowski v. Correctional Physician Services (3rd Cir 2/23/04), the court applied fairly well-established principles to find a corporation which had purchased the assets of an insolvent predecessor corporation liable for employment discrimination under Title VII.

Citing an earlier Third Circuit case, the court applied “three principal factors applicable to successor liability in the employment discrimination field: (1) continuity in operations and workforce of the successor and predecessor employers; (2) notice to the successor-employer of its predecessor’s legal obligation; and (3) the ability of the predecessor to provide adequate relief directly.”

Legal researchers note: footnote 1 lists similar decisions from the 5th, 7th, 9th, 10th, and 11th Circuits.

Corporate transactional lawyers note: inquiry into existing and probable employment claims is a worthwhile part of “due diligence”; allocation of risk and cost of such claims should probably be addressed in acquisition documentation.

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