HR Management & Compliance

Court Clarifies Successor Liability Rule for Wages Owed by Predecessor

By David M. Stevens, Whiteford, Taylor & Preston LLP

A business that purchases the assets of another entity is often concerned about whether it will be held liable for the seller’s debts, including any claims involving employees. In a recent case, Maryland’s Court of Special Appeals examined the standard to be applied in determining whether such liability will be imposed. Let’s take a closer look at this interesting case.

Phillip Martin was a minority owner who helped found lumber manufacturer Best & Brady Components, LLC, with the aid of TWP Enterprises, a lumber and hardware retailer. At the time Best & Brady was formed, Martin signed an offer letter guaranteeing his employment for a 2-year period. Best & Brady quickly proved to be unprofitable, however, and the company was unable to pay Martin’s salary for the full 2 years.

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