This post uses hypothetical scenarios for illustrative purposes only. It does not describe any actual client, transaction, or representation, and is not legal advice.
Consider a Florida asset deal structured the way asset deals are supposed to be structured. New buyer entity, defined schedule of acquired assets, an assumed liabilities schedule that names four contracts and nothing else, and an express disclaimer of every liability not listed. The seller entity survives closing on paper. Eight months later the buyer is served in a collective action under the Fair Labor Standards Act for unpaid overtime the seller owed to a crew of installers — the same installers who now work for the buyer, in the same trucks, out of the same yard.
The buyer’s first reaction is that this is obviously wrong, because the agreement says so. That reaction is correct under Florida law and incorrect under federal law, and the gap between those two answers is where a lot of money gets lost.
Florida’s successor liability rule is narrow, and buyers plan around it correctly
Florida follows the traditional corporate rule. In Bernard v. Kee Manufacturing Co., 409 So. 2d 1047 (Fla. 1982), the Florida Supreme Court held that an asset purchaser does not inherit the seller’s liabilities unless one of four exceptions applies: the successor expressly or impliedly assumes the obligations, the transaction is a de facto merger, the successor is a mere continuation of the predecessor, or the transaction is a fraudulent effort to avoid liabilities.
Bernard is notable for how much continuity it tolerated. The buyer there acquired the plant, inventory, goodwill, and the right to use the trade name; kept manufacturing the same lawn mowers; kept the same facility and the same people. The court still found no successor liability, because the buyer had not assumed the obligations and the ownership was genuinely different. Florida’s mere-continuation exception looks for continuity of ownership — common identity of stockholders, directors, and officers — not merely continuity of operations.
That is a defendant-friendly rule, and structuring around it is standard practice. The framework is well understood, and the drafting that flows from it — a tight assumed liabilities schedule, no name carryover, arm’s-length pricing supported by a valuation — genuinely works. It works, that is, for the claims Florida law governs. This is the same analysis that drives the mere-continuation exception in Florida asset sales, and it does real work in products liability, contract, and general tort exposure.
Federal employment claims run on a different test, and it does not care about ownership
Federal courts developed their own common law of successorship for employment and labor claims, and it is broader by design. The doctrine traces to Golden State Bottling Co. v. NLRB, 414 U.S. 168 (1973), where the Supreme Court held that a bona fide purchaser acquiring with knowledge of a pending unfair labor practice claim could be ordered to reinstate and make whole an employee its predecessor had discharged. The Court’s reasoning was remedial: allowing a corporate transfer to extinguish the obligation would frustrate the statute’s purpose.
Applied in the employment context, the test that emerged asks three core questions. First, did the successor have notice of the claim before acquiring the business or the assets. Second, can the predecessor provide the relief sought — before and after the sale. Third, is there substantial continuity in the business operations before and after the transaction. Courts working from the nine-factor framework of EEOC v. MacMillan Bloedel Containers, Inc., 503 F.2d 1086 (6th Cir. 1974), also look at whether the same jobs exist under substantially the same working conditions, whether the same supervisors and employees carry over, and whether the same machinery, equipment, and production methods continue.
Notice what is absent from that list. Continuity of ownership — the linchpin of Florida’s mere-continuation exception — is not required. A completely unrelated buyer, with no overlap in shareholders or directors, can be a successor under the federal test purely because the operations continued in substantially the same form and the buyer knew about the claim. An asset purchase agreement that expressly disclaims the liability does not defeat the analysis; if anything, an explicit disclaimer paired with actual knowledge of a pending wage claim is evidence on the notice element rather than a defense to it.
Where the Eleventh Circuit actually stands
The doctrine is well established in this circuit for Title VII. In In re National Airlines, Inc., 700 F.2d 695 (11th Cir. 1983), arising from National’s maternity leave practices and flight attendant weight program, the court addressed Pan American’s exposure as National’s successor for damages in the underlying employment discrimination litigation. Title VII successor liability in the Eleventh Circuit is not an open question.
The FLSA picture is more nuanced and worth stating precisely. The Eleventh Circuit has not squarely resolved FLSA successor liability under the federal substantial continuity standard in a published, controlling holding. District courts in Florida, however, have repeatedly predicted that it would — reasoning that the FLSA’s remedial purpose is no less compelling than Title VII’s, and that the Third, Seventh, and Ninth Circuits have applied the federal standard to wage claims. A buyer relying on the absence of controlling circuit authority as a defense is relying on a thin reed, and one that gets thinner each year.
The doctrine has also been extended to FMLA claims and, in the multiemployer pension context, to withdrawal liability, where several circuits have applied successorship principles to reach an asset buyer. The FLSA’s remedies provision at 29 U.S.C. § 216(b) — liquidated damages equal to the unpaid wages, plus mandatory fee-shifting to a prevailing plaintiff — is what makes this exposure disproportionate to the underlying wage number. A $180,000 overtime shortfall is not a $180,000 problem once liquidated damages and plaintiff’s fees are layered on.
The diligence that actually surfaces this
The claims that generate successor exposure are rarely on the balance sheet, because unasserted wage claims are not accruals. Four requests do most of the diagnostic work.
First, pull the litigation and agency history: PACER for the seller entity and its principals, Florida state dockets, EEOC and Florida Commission on Human Relations charge history, and any Wage and Hour Division investigation file. The FLSA’s two-year limitations period stretches to three years for willful violations, so the lookback should be three years, not two.
Second, test the classification structure rather than accepting it. Exempt-status misclassification and independent contractor misclassification are the two engines of wage exposure in Florida service businesses, and both are visible from a payroll register and a handful of job descriptions. Related exposure sits in workers’ compensation class code assignment, where the same misclassification often shows up first.
Third, ask what the buyer will actually do with the workforce. The substantial continuity factors are largely about post-closing conduct. A buyer that rehires the same crews into the same roles under the same supervisors, at the same location, using the same equipment, has satisfied most of the test through its own operating decisions after the ink dried.
Fourth, treat the immigration and eligibility file as part of the same workstream, since Florida’s E-Verify obligations under § 448.095 attach to the successor employer and the same records tend to reveal the same classification problems.
What to do about it in the agreement
The realistic posture is that federal successor liability cannot be drafted away, so the agreement should be built to fund it rather than to deny it. That means a specific indemnity for pre-closing employment claims, carved out of the general cap and basket, with a survival period matched to the three-year FLSA willfulness window rather than the eighteen-month default. It means an escrow or holdback sized to the identified exposure and released on that longer clock. It means a representation that names the specific statutes — FLSA, Title VII, FMLA, and the Florida Minimum Wage Act — rather than a general compliance-with-laws rep, so that a breach is provable without a fight about scope.
Where the exposure is quantified and material, the cleaner structural answer is often a purchase price reduction rather than an indemnity, because the indemnity is only worth the seller’s solvency two years after the seller distributed the proceeds. Operationally, a buyer with genuine flexibility can also weaken the continuity factors — different supervisory structure, materially changed job duties, a real gap in operations — though those changes cost something in retention and should be weighed against the exposure rather than adopted reflexively. And where the workforce reduction is large enough, the WARN Act notice analysis becomes its own workstream.
None of this makes the exposure disappear, and courts weigh the continuity factors case by case rather than mechanically. But the buyer who priced a known wage claim into the LOI is in a materially better position than the buyer who assumed the asset structure had already solved it.
If you are structuring a Florida asset acquisition where the target carries wage-and-hour or discrimination exposure, feel free to reach out to our firm manager, Magda, at Magda@montague.law, or fill out our contact form. Mention you read this post.
