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Business Law Practice Group: February 2011 Business Liability for Employee BenefitsIn a recent Federal Appellate Court decision a New Jersey corporation which purchased the assets of another corporation was found responsible for delinquent employee benefit fund contributions under the Employee Retirement Income Security Act (“E.R.I.S.A.”). Historically an asset purchaser is, with limited exceptions, not responsible for the seller’s liabilities. This contrasts with the purchaser of a corporation’s stock who is generally responsible for a seller’s liabilities. In this case the pension fund’s administrator sought to recoup the unpaid pension contributions for union employees from the purchasing corporation. The selling corporation was required to make the pension payments under its union collective bargaining agreements. The seller corporation faced financial difficulties and sold its assets to the purchaser. The pension fund’s administrator claimed that the purchaser was a successor to the seller and as such is responsible for making the payments. The court determined that an asset purchaser may be liable for the seller’s delinquent E.R.I.S.A. fund contributions when the purchaser had notice of the delinquent payments prior to the sale, and evidence of the continuity of the seller’s operations between the seller and the purchaser exists. The lesson learned from this case is that purchasers must determine
all of the sellers’ liabilities during the negotiation process and
provide in their agreement for the disposition of the liabilities. If you have any questions about any of the issues raised in this Business Law Practice Group or have any issue or concern, please call Thomas Ryan, Esq., Richard T. Sweeney, Esq., or Angelo J. Bulcato Esq., Lawrence J. Supp, Esq., or Timothy E. Dinan, Esq., of Laddey, Clark & Ryan’s Business Law Practice Group at (973) 729-1880.
The Business Law Practice Group
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