Ore. Court rules on unpaid wages case

Barran Liebman
Oregon Law Firm

Employer Can Be Liable for Prior Business’s Unpaid Wage Claims As a “Successor to the Business

The Oregon Supreme Court recently sided with BOLI in finding that a business which operated a bar in the same location as a prior bar was liable for the prior bar’s unpaid wages as a “successor to the business.” The case is Blachana LLC v. BOLI.

CP Underhill, LLC (CPU) owned a building in North Portland. Five businesses had operated a bar in that location, all referred to as the “Portsmouth Club.” CPU leased the building and sold the Portsmouth Club’s assets and goodwill to NW Sportsbar Inc. in early 2005. NW Sportsbar operated under the name “Portsmouth Club” and “Anchor Grill.” NW Sportsbar stopped paying its employees wages in 2006 (as well as other bills and obligations), and ultimately entered into a Surrender and Release Agreement with CPU, the owners of the building, wherein the business name, goodwill, and assets were surrendered to CPU. The members of CPU created a new company, Blachana, LLC, and opened a business in the same location called “Penner’s Portsmouth Club.” Blachana obtained a new liquor license and other permits, hired new workers (and did not employ any of NW Sportsbar’s former employees), and used a different food vendor. Blachana did, however, use the same bar equipment and beer vendor as NW Sportsbar.

The former NW Sportsbar employees filed clams with BOLI, and BOLI determined that Blachana was liable for the unpaid wages of the NW Sportsbar employees as a “successor to the business,” even though they had never worked for Blachana.

Under the applicable Oregon statute, “any successor to the business of an employer” is liable to reimburse BOLI for funds disbursed to the original employer’s former employees from the Wage Security Fund. BOLI has adjudicated a definition of “successor” to be one that conducts “essentially the same business as conducted by the predecessor.” In evaluating whether an employer conducts “essentially the same business,” the following factors are considered: the name and identity of the business; the location(s); the lapse in time between the two operations; whether the new business employed substantially the same workforce as the old; whether the same products or services are offered; and whether the machinery, equipment, or other methods of production used by the old are also used by the new entity. No factor is dispositive, nor do all factors need to be present in each situation.

In the present case, the Court found that the names and location were similar, only 47 days had elapsed between the closing of the first business and the reopening of the second, and both business offered the same products and services using the same equipment. Consequently, the new employer was found to be a successor, and therefore liable for the unpaid wages of the predecessor.

Employers who purchase a business or lease a building intending to run a similar business as the prior tenant should do their due diligence and check to see if there are any outstanding unpaid wages for which the employer may find itself on the hook as a “successor.”

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