Labor & Employment Law Daily Wrap Up, COVERAGE, LIABILITY—M.D. Ala.: Employee may pursue discrimination and wage claims against successor entity, (Jul 18, 2025)

By Ursula Furi-Perry, J.D., MBA

Employer failed to show that there were no material facts at issue regarding successor liability, and the court allowed the federal claims to proceed to trial.

A former employee sued his employer for racial discrimination, wage violations under the FLSA, and various torts stemming from an incident in which the company’s founder, while allegedly intoxicated, berated him and others while brandishing a firearm. He later amended his complaint to include another company which he alleged was a successor. An Alabama federal district court held that summary judgment was not appropriate on the employee’s federal law claims, as the employer failed to show that there were no material facts at issue regarding successor liability. Under state law, however, the court granted summary judgment and found no continuation of ownership interest (Branch v. Encore, LLC, No. 1:23-cv-99-ECM (M.D. Ala. July 15, 2025)).

Brandishing firearm. The employee worked at a concrete pumping company, Encore, LLC, and alleged racial discrimination, wage violations under the FLSA, and various torts stemming from an incident in which the company’s founder, while allegedly intoxicated, berated him and others while brandishing a firearm. The employee filed suit asserting both federal and state claims, and later amended his complaint to include APEX Concrete Plumbing, LLC (“APEX”), asserting it was a successor to Encore and thus liable for Encore’s actions.

Around 2012, the founder hired a supervisor to oversee the company’s operations, who ran Encore’s day-to-day operations during the founder’s frequent absences due to substance abuse and legal troubles. By March 2023, the supervisor and others had left Encore to form APEX, which operated out of the same building Encore had used, leased some of Encore’s equipment, and initially used Encore’s USDOT number. The employee argued that APEX was created shortly after the defendants learned of this lawsuit and functioned as a successor to Encore, attempting to evade liability. APEX moved for summary judgment, claiming it was a distinct entity and not liable for Encore’s actions.

The court addressed the procedural issue under Rule 56, reviewing whether there were no material facts at issue, so that the employer was entitled to judgment as a matter of law.

Federal law claims.The court held that summary judgment was not appropriate on the employee’s federal law claims. The federal district court referenced two cases where the Eleventh Circuit addressed this issue, with two different factor tests, but declined to resolve which specific standard applied in this case because no party referenced the federal-common-law standard or either test. The court noted the significant factual overlap between APEX and Encore, including shared personnel, location, equipment, and the nearly seamless transition, and also noted that APEX relied solely on asserting that it was a distinct legal entity, without analyzing the relevant federal factors. Because APEX failed to meet its initial burden under Rule 56, the Court allowed the federal claims to proceed to trial.

State law claims. The court noted that Alabama law has carved out only a few circumstances under which successor liability existed in tort cases: “(1) there is an express agreement to assume the obligations of the transferor, (2) the transaction amounts to a de facto merger or consolidation of the two companies, (3) the transaction is a fraudulent attempt to escape liability, or (4) the transferee corporation is a mere continuation of the transferor.”

In this case, the federal district court found no continuation of ownership interest, noting that APEX never transferred any assets to Encore or its founder and has different members than Encore. The employee cited no case law that suggests employees of a company who start their own separate company as owners should be liable for the actions taken by their previous employer.

The court granted the employer’s motion for summary judgment on the state law claims but denied it on the federal law claims.

The case is No. 1:23-cv-99-ECM.

Judge: Marks, E.

Attorneys: Reginald Daryl McDaniel (Reginald D. McDaniel, Attorney at Law LLC) for Lee Anthony Branch. Encore, LLC, pro se.

Companies: Encore, LLC

Cases: CoverageLiability Procedure Discrimination RaceDiscrimination WageHour StateLawClaims AlabamaNews