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Successor liability attaches to satellite-TV provider for unpaid overtime claims of installation technicians

March 19th, 2013  |  Ron Miller

March 19, 2013| Ronald Miller

Cable and satellite-TV providers frequently use independent contractors tp  provide installation and repair services to large portions of their service areas. The business relationships between these entities are understandably close. This is an industry that has seen more than its fair share of litigation attacking its business model..

A DirecTV satellite installer went belly-up. To avoid any interruption in service to its customers, the satellite provider stepped in and took control of the defunct company. Satellite installers filed a collective action suit seeking unpaid overtime owed by the contractor. Their claim presents the question of whether successor liability exists under the Fair Labor Standards Act (FLSA). This question is important because it affects whether DirectTV’s coffers may eventually be tapped to satisfy any judgment in this action. However, the Sixth Circuit, where the federal district court hearing the matter, has not answered this question.

In Thompson v Bruister and Associates, Inc, a federal district court in Tennessee found that successor liability was appropriate under the FLSA, and further found that DirectTV was a successor employer to a satellite installer Bruister and Associates (BAI) for purposes of this litigation. Here, the court noted that the undisputed evidence established that DirectTV continued to use the same facilities as BAI; continued to employ the majority of its rank-and-file employees in the same jobs and under substantially the same working conditions; continued to use the same equipment and infrastructure; and continued to provide the same service to the same customer base.

Financial difficulties. DirecTV entered in home service provider agreements pursuant to which BAI, an independent installation contractor, installed and serviced satellite systems for DirecTV customers. After BAI encountered financial difficulties, DirecTV advanced payments to the contractor and began investigating taking control of the business to avoid disruptions of service to its customers. Ultimately, DirecTV worked with BAI and its bank to work out a loan compromise, and took over the BAI’s assets in a foreclosure sale.

After the foreclosure sale, DirecTV subsidiaries conducted business out of the former BAI locations, and the former BAI employees were subsequently hired by DirecTV. Most of BAI’s satellite installers where hired by DirecTV and continued to perform substantially the same jobs. Further, DirecTV honored vacation time and other benefits employees had accrued during their employment, and retained their hire dates for tenure and benefit purposes.

By separate contract, DirecTV assumed leases for BAI’s vehicle fleet, and continued to use the same installation equipment. It also assumed various service contracts, including inventory and personnel services, and security monitoring, among others. BAI also assigned to DirecTV its rights under various insurance policies. Following the foreclosure, there was no interruption of the installation and repair services to DirecTV customers.

Successor liability. Although the Sixth Circuit has not decided the precise issue before the district court, it has adopted the federal common law of successor liability in employment law cases. Consequently, the appeal court’s silence on this issue hardly speaks volumes about its position with respect to successor liability under the FLSA, as suggested by DirecTV. Rather, Sixth Circuit’s ruling in EEOC v MacMillan Bloedel Containers, Inc, laid the framework for a multi-factor approach that was subsequently adopted by several other circuits and codified in the FMLA’s regulations. The court rejected DirecTV’s assertion that if Congress thought successor liability was appropriate under the FLSA, it would have adopted implementing regulations along that line. However, the court noted that the Sixth Circuit has repeatedly observed that Congress intended similar remedies for both the FLSA and the FMLA.

Most the cases that have found successor liability under the FLSA have relied upon the Ninth Circuit’s decision in Steinbach v Hubbard, which appears to be the only circuit court to have directly addressed the issue. Interestingly, the Ninth Circuit cited MacMillan for the proposition that the extension of liability to successors may be necessary to fulfill a statute’s intention to protect employees.

Given that the Sixth Circuit has recognized successor liability in the employment context, that courts that have directly addressed the issue unanimously appear to hold that successor liability can be appropriate in FLSA cases, the fact that the remedial purposes of the FLSA require the courts to define ‘employer’ more broadly than the term would be interpreted in traditional common law applications, and given the absence of any convincing arguments or authority to the contrary, the court found that the doctrine of successor liability should be applied in FLSA cases.