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In June 2016, AmSurg Corp. and Envision Healthcare Holdings, Inc. (Envision) announced they have signed a definitive merger agreement pursuant to which the companies will combine in an all-stock transaction. Upon completion of the merger, which is expected to be tax-free to the shareholders of both organizations, the combined company will be named Envision Healthcare Corporation and co-headquartered in Nashville, Tennessee and Greenwood Village, Colorado. The company's common stock is expected to trade on the New York Stock Exchange under the ticker symbol: EVHC. Bass, Berry & Sims served as lead counsel on the transaction, led by Jim Jenkins. Read more.

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Inside the FCA blogInside the FCA blog features ongoing updates related to the False Claims Act (FCA), including insight on the latest legal decisions, regulatory developments and FCA settlements. The blog provides timely updates for corporate boards, directors, compliance managers, general counsel and other parties interested in the organizational impact and legal developments stemming from issues potentially giving rise to FCA liability.

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Labor Talk Blog: Successor Liability in "Asset Deal" Extends to Wage/Hour Liability

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April 11, 2013

The Seventh Circuit recently held that a purchaser in an "asset deal" of a business in receivership was found to be a successor employer for the purposes of a $500,000 wage/hour settlement. The liability was imposed on the purchaser even though the contract formalizing the asset deal expressly excluded that liability. Teed v. Thomas & Betts Power Solutions, LLC. Found here.

Savvy deal attorneys have long been aware of the "successor employer" doctrine as it relates to unionized employers. This doctrine means that even in an "asset deal," Newco likely will be subject to a duty to bargain with the incumbent union at the very least. The Seventh Circuit has applied that same "federal common law doctrine" to a wage/hour settlement. In this instance, Newco knew of the wage/hour settlement, had expressly excluded that liability in the purchase documents, but yet acquired an ongoing business (albeit in receivership), continued to operate in the same manner, with the same equipment and with most of the same employees. Thus, the Seventh Circuit reasoned, even though the bid in receivership by the purchaser was expressly contingent on the sale being "free and clear of all liabilities," the wage/hour settlement by the predecessor employer was the responsibility of the buyer.

The reach of this decision could be significant, particularly if the liability that could attach is not merely a wage/hour settlement (it was a liquidated sum and the violation had been established) but a wage/hour violation (or even an alleged violation).

So what does this mean?

  1. Not surprisingly, due diligence is even more critical, particularly for possible wage/hour (and other federal law) claims. The Seventh Circuit, in its reasoning, did not limit the reach of the federal common law doctrine to only wage/hour claims but, in dicta, mentioned other federal statutes, including discrimination claims.
  2. Recognize in pricing and in structuring the deal that potential federal violations may attach to the asset deal.
  3. Note that this occurred even in a receivership and thus an asset purchase even in a reorganization could be impacted.

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