Successor corporations may be liable for employment discrimination claims against their predecessor corporations under Illinois law. Department of Human Rights v. Oakridge Nursing & Rehab Center, 2019 IL App 170806 (First Dist. March 11, 2019). An employee filed a charge of age and disability discrimination under the Illinois Human Rights Act against her employer. After receiving notice of the charge, the employer transferred substantially all of its assets for no consideration to another related business entity. The employee obtained a money judgment against the employer, which it failed to satisfy. The State filed a complaint against the successor entity to enforce compliance with the judgment. The circuit granted granted summary judgment in favor of the successor entity. The State appealed. The Illinois Appellate Court, First District, reversed, holding, in a case of first impression, that Illinois courts shall recognize successor liability for violations of the Illinois Human Rights Act.
Liability of a successor corporation for employment discrimination claims against the predecessor corporation is not automatic and must be determined on a case-by-case basis with the primary goal of providing the employee with full relief. The are nine factors a court may consider in imposing liability on a successor corporation: (1) whether the successor company had notice of the charge; (2) whether the predecessor was able to provide relief; (3) whether there has been a substantial continuity of business operations; (4) whether the new employer uses the same plant; (5) whether it uses the same or substantially the same work force; (6) whether it uses the same or substantially the same supervisory personnel; (7) whether the same jobs exist under substantially the same working conditions; (8) whether it uses the same machinery, equipment, and methods of production; and (9) whether it produces the same product.
The Seventh Circuit, which also imposes successor liability in employment discrimination cases, has found that the first two factors are critical to the imposition of successor liability. Notice is required so that the successor has some time to negotiate a change in the purchase agreement to reflect the potential liability of a lawsuit. However, the burden is on the successor to find out from the predecessor all potential and actual liabilities. The ability of the predecessor to provide relief is also critical because it would be grossly unfair to impose successor liability on an innocent purchaser when the predecessor is fully capable of providing relief. Both factors were met in this case. The successor entity had notice of the discrimination claims, and the predecessor entity did not have the ability to satisfy the judgment. The third factor, which subsumes the remaining factors into the continuity of operations factor, was also met because the successor continued to operate the same business, using the same workforce, at the same location. All of the business operations remained the same. Thus, the First District found that the transfer met all of the relevant factors, and the employee’s judgment may be imposed on the successor company. The First District also held that Illinois courts shall rely on the federal doctrine of successor corporate liability in successor liability actions where the underlying claim stems from a charge of employment discrimination in violation of the Illinois Human Rights Act.