ERISA-Ninth Circuit Rules That A Succesor Employer Can Be Responsible For Predecessor’s Withdrawal Liability Under ERISA

In Resilient Floor Covering Pension Trust Fund Board of Trustees v. Michael’s Floor Covering, Inc., No. 12-17675 (9th Cir. 2015), the Ninth Circuit Court of Appeals (the “Court”) was asked to decide two issues: (1) whether a successor employer, both generally and in the construction industry in particular, can be subject to withdrawal liability owed to a multiemployer pension plan under ERISA, and if so (2) what factors are most relevant to determining whether a construction industry employer is a successor for purposes of imposing such liability.

As to issue (1), the Court concluded that a bona fide successor employer, and in particular a bona fide construction industry successor employer, can be subject to withdrawal liability, so long as the successor took over the predecessor’s business with notice of the liability.

As to issue (2), the Court held that the most important factor in assessing whether an employer is a successor, for purposes of imposing withdrawal liability, is whether there is substantial continuity in the business operations between the predecessor and the successor, as determined in large part by whether the new employer has taken over the economically critical bulk of the prior employer’s customer base (and not the continuity of workforce).

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