Under the Federal Family and Medical Leave Act (“FMLA”), employees who have worked at least 1,250 hours in the preceding 12 months and have been employed for at least 12 months at a job site with at least 50 employees within a 75-mile radius are entitled to up to 12 weeks of job-protected unpaid leave to attend to a serious medical condition or to care for certain family members. When an employer goes out of business or sells a portion of its business, employees losing their jobs will also necessarily lose their FMLA rights. Essentially, there will be no job to come back to following leave. However, in some circumstances where one company purchases all or a portion of an existing business, FMLA rights of employees who go to the new employer may also transfer. The Department of Labor has set out regulations that provide the standard for such successor liability. See 29 CFR § 825.107.

The factors considered include: “(1) Substantial continuity of the same business operations; (2) Use of the same plant; (3) Continuity of the work force; (4) Similarity of jobs and working conditions; (5) Similarity of supervisory personnel; (6) Similarity in machinery, equipment, and production methods; (7) Similarity of products or services; and (8) The ability of the predecessor to provide relief.” It is not any one of these factors that governs. Rather, a court will consider the “entire circumstance  . . . viewed in their totality.” Unlike under Title VII of the Civil Rights Act of 1964, whether the successor company has notice of a possible FMLA claim is not considered.

Relying on these regulations, courts have held that the purchasing company who employs an employee from the seller company must continue to provide FMLA rights to the employee. For example, in Cobb v. Contract Transport, Inc., 452 F.3d 543 (6th Cir. 2006), the federal Sixth Circuit Court of Appeals held that a trucking company that has purchased a delivery route of a competitor and hired a driver who drove the route was obligated to provide the driver with FMLA leave. This means that the fact that the employee has not worked for the new employer for at least 12 months does not foreclose the possibility that he or she will have FMLA job protection.

Some commentators have even suggested that employers with less than 50 employees at a job site may be required to continue to provide FMLA protection to an employee who began leave or gave notice of the need for FMLA leave prior to the job transfer. The regulations appear to support this result providing that “the successor, whether or not it meets FMLA coverage criteria, [e.g. having at least 50 employees] must grant leave for eligible employees who had provided appropriate notice to the predecessor, or continue leave begun while employed by the predecessor, including maintenance of group health benefits during the leave and job restoration at the conclusion of the leave.” 29 CFR § 825.107(c) (emphasis added). However, the new employer only has to accommodate new FMLA leave requests if it meets the FMLA coverage requirements. 29 CFR § 825.107(c) (“A successor which meets FMLA’s coverage criteria must count periods of employment and hours worked for the predecessor for purposes of determining employee eligibility for FMLA leave.”)

The possibility of being considered a successor in interest for FMLA purposes should not necessarily derail an otherwise-beneficial business transaction. FMLA responsibilities are just another form of liability that should be contemplated and valued in the sale of all or part of a business. Whenever contemplating such a transaction, it is important to consider these implications and to analyze the risks with regard to each employee who may join the new company.