Resilient Floor Covering PTF v. Michael's Floor Covering

Successors may be liable for its predecessors’ unlawful employer discrimination, so long as the successor took over the business with notice of the unfair labor practice liability, including withdrawal liability pursuant to the Multiemployer Pension Plan Amendments Act.

Studer’s Floor Covering, Inc. (Studer’s) sold and installed floor-covering materials. Studer’s contributed to the Resilient Floor Covering Pension Trust Fund (Resilient), a multiemployer benefit pension plan pursuant to the Multiemployer Pension Plan Amendments Act (MPPAA), 29 U.S.C. § 1381-1453. When Studer’s president informed its staff that Studer’s would be closing, one staff member announced his intention to start his own company, Michael’s Floor Covering, LLC (Michaels); Michaels would perform similar duties and sell similar products as did Studer’s. In fact Michaels began operating the day after Studer’s lease terminated, and most of Michael’s employees were former Studer’s employees. The district court found that Michaels was not liable as a successor employer to Studer’s and thus was not subject to withdrawal liability pursuant to the MPPAA. On appeal, the Ninth Circuit resolved the issue of whether a successor employee was subject to withdrawal liability under the MPPAA as applied generally and specifically to the construction industry, after deciding the district court abused its discretion in its narrow interpretation of a “succesor.” MPPAA § 1383(b) aims to preclude employers continuing to work in the same area covered by the plan but who do not contribute monetarily to the plan, from receiving plan benefits. If however the employer-successor is a successor of the initial company, the successor inherits its predecessor’s liabilities – including withdrawal liability. A successor may be liable for its predecessors’ unlawful employer discrimination if the successor (1) inherited substantial assets of the predecessor; (2) sufficient evidence suggests a substantial continuity of the business operations; and (3) the successor took over with notice of the unfair labor practice liability. The panel held that successors, including those in the construction industry could be subject to MPPAA withdrawal liability if the successor took over with notice of the liability. REVERSED AND REMANDED.