The Successor in Interest Guide to FMLA Compliance

When Your Employer Changes Hands, Your FMLA Rights Don't Disappear

FMLA leave successor employer rules determine whether a new employer must honor your Family and Medical Leave Act rights after a merger, acquisition, or business transition. Here's the quick answer:

Key FMLA Successor Employer Rules At a Glance:

• A new employer may be a "successor in interest" if it continues substantially the same business operations as the prior employer
• If it qualifies as a successor, your prior months and hours worked count toward FMLA eligibility — even if you just started with the new company
• The successor must honor any FMLA leave already requested or in progress
• It must maintain your health benefits and restore your job after leave ends
• The test uses eight factors from 29 CFR § 825.107 — no single factor is decisive; the whole picture matters
• Successor liability can apply even without a formal merger or asset transfer

Business transitions happen every day — companies are bought, sold, merged, and restructured. But what happens to your FMLA rights when your employer changes hands?

Many workers assume their protections reset when a new company takes over. That assumption can be costly.

Since its passage in 1993, the FMLA has been used more than 100 million times by workers balancing serious health needs with job demands. The law was designed to make sure those protections can't simply be erased by a corporate transaction.

Consider a real-world scenario that reached federal court: a truck driver worked for a company on a mail delivery route for three years. A new contractor underbid his employer, took over the same route, hired the same drivers, and used the same equipment — then fired the driver when he requested medical leave. The court had to decide: did the new company inherit FMLA obligations from the old one?

That question is exactly what FMLA successor employer rules are built to answer. And the answer isn't always obvious.

If you're a Michigan worker whose employer recently changed ownership — or an employer who just acquired a business — understanding these rules is critical.

What is a Successor in Interest Under the FMLA?

To understand how FMLA leave successor employer rules work, we must first look at what a "successor in interest" actually is under federal law.

In standard corporate transactions, when one business buys another, the buyer often tries to structure the deal to avoid taking on the seller’s liabilities. However, federal employment and labor laws operate differently. The FMLA explicitly defines a "covered employer" to include "any successor in interest of an employer" under 29 U.S.C. § 2611(4)(A)(ii)(II).

A successor in interest is a new employer that has taken over the business operations of a previous ("predecessor") employer to such an extent that, for legal purposes, they are treated as the same entity regarding employee rights.

Standard Employer vs. Successor in Interest

When a standard employer hires a new worker, that worker starts from scratch. They have no accumulated hours of service or months of employment toward FMLA eligibility.

However, when an employer is deemed a successor in interest, the transition is legally seamless for the employees. The new employer inherits the FMLA history of the workforce. If you were eligible for FMLA leave under your old boss, you remain eligible under your new boss, provided the successor is a covered employer.

To learn more about how the FMLA functions generally in our home state, review our guide on The Family and Medical Leave Act (FMLA) and How It Applies in Michigan.

Corporate Restructuring: Asset Sales vs. Stock Sales

The way a business transition is structured plays a massive role in traditional corporate liability, but its impact on FMLA rules is unique:

• Stock Sales: In a stock sale, the corporate entity itself does not change; only the ownership of the stock changes. The company remains the exact same legal person. In these cases, successor-liability analysis is generally unnecessary because the employer remains directly liable for all existing FMLA obligations.
• Asset Purchases: In an asset purchase, the buyer purchases specific assets (such as equipment, customer lists, or real estate) but typically leaves the corporate entity and its liabilities behind. Under traditional common law, the buyer does not inherit the seller's liabilities. However, under the FMLA, corporate formalities do not shield the buyer. If there is "substantial continuity" of the business operations, the asset purchaser will still be held to be a successor in interest.

Understanding FMLA Leave Successor Employer Rules

The Department of Labor (DOL) has established clear rules to determine when a new business must assume the FMLA responsibilities of a predecessor. These rules are codified under 29 CFR § 825.107.

To help visualize how responsibilities shift, consider this comparison of employer obligations during a transition:

For a deeper regulatory dive, you can read the official government text via the Wage and Hour Division, Labor § 825.107 PDF.

The Department of Labor's Eight-Factor Test

Determining whether an employer is a successor in interest is not based on a single factor. Instead, the DOL and courts look at the "totality of the circumstances" using an eight-factor test. Under 29 CFR § 825.107, these eight factors include:

1. Substantial continuity of the same business operations: Does the new company do the same basic work as the old one?
2. Use of the same plant (worksite): Are operations running out of the same physical building or office?
3. Continuity of the work force: Did the new employer hire the predecessor's employees?
4. Similarity of jobs and working conditions: Do the employees perform the same tasks under similar conditions and supervisors?
5. Similarity of supervisory personnel: Did the managers, foremen, and supervisors keep their jobs under the new ownership?
6. Similarity in machinery, equipment, and production methods: Are they using the same tools, software, assembly lines, or operational procedures?
7. Similarity of products or services: Is the new company selling the same products or providing the same services?
8. The predecessor’s ability to provide relief: Is the old employer completely out of business and unable to provide jobs or financial relief, making it necessary to hold the successor responsible?

According to the Family and Medical Leave Act | U.S. Department of Labor, no single criterion determines successor status. Rather, the entire circumstances must be considered together. However, courts have noted that the eighth factor—the predecessor's ability to provide relief—is generally the least compelling when determining whether a successor relationship exists for coverage and eligibility purposes.

How FMLA Leave Successor Employer Rules Affect Employee Eligibility

To qualify for FMLA leave under normal circumstances, an employee must meet three strict eligibility criteria:

• Have worked for the employer for at least 12 months (which do not need to be consecutive).
• Have worked at least 1,250 hours of service during the 12 months immediately preceding the start of the leave.
• Work at a location where the employer has at least 50 employees within a 75-mile radius.

When a business transition occurs, FMLA leave successor employer rules dictate that the employee's service history is not wiped clean.

If the new employer is a successor in interest, employment is treated as continuous. The successor must count all hours of service and months of employment completed with the predecessor when calculating whether an employee meets the 12-month and 1,250-hour thresholds.

Example: If an employee worked for Predecessor Company for 11 months and accumulated 1,200 hours, and then worked for Successor Company for just 1 month and accumulated 100 hours, they are fully eligible for FMLA leave. The successor cannot deny their leave request by claiming "you’ve only worked here for a month."

If you are a worker in Michigan trying to calculate your eligibility, you can find a breakdown of how these rules protect you in our comprehensive guide, FMLA Rights for Michigan Workers: Your Guide to Medical Leave.

Successor Obligations: Ongoing Leave, Benefits, and Job Restoration

If a new employer is deemed a successor in interest, their obligations are identical to those of the predecessor. They must act as if the employee had been continuously employed by a single entity. This results in several immediate, non-negotiable legal duties:

• Honoring Ongoing Leave: If an employee is already on FMLA leave when the business transition occurs, the successor must allow the employee to complete their leave.
• Honoring Pending Requests: If an employee gave notice of a need for foreseeable FMLA leave to the predecessor, the successor must honor that notice and grant the leave when the time comes.
• Maintaining Health Benefits: Just like the previous employer, the successor must maintain the employee’s group health insurance benefits during the leave on the same terms as if they had continued working.
• Job Restoration: When the employee returns from leave, the successor is obligated to restore them to the same position they held before taking leave, or to an "equivalent position" with equivalent pay, benefits, and working conditions.

To better understand what types of medical or family events qualify for these protections, see our detailed FAQ on What Types of Leave Are Covered Under the FMLA.

Joint Employment vs. Successor in Interest Under the FMLA

It is easy to confuse "successor in interest" status with "joint employment," but they are distinct legal concepts under the FMLA.

• Successor in Interest: Occurs when one employer replaces another through a business transition (like an acquisition or contract takeover). Only one employer exists at a time for the employee.
• Joint Employment: Occurs when two or more employers simultaneously share control or benefit from the employee's work. A classic example is a staffing agency or Professional Employer Organization (PEO) working with a client employer.

Under the [PDF] Employer's Guide to the Family and Medical Leave Act, in a joint employment relationship, only the primary employer is responsible for giving FMLA notices, providing FMLA leave, and maintaining health benefits. The primary employer is typically determined by looking at who has the authority to hire and fire, make payroll, and provide benefits.

However, a PEO is not considered a joint employer if it only performs administrative functions (like processing payroll). Joint employment only arises if the PEO has direct control over hiring, firing, or work assignments.

In joint employment, the secondary employer (the client company) must still count the jointly employed workers when determining if they meet the 50-employee threshold for FMLA coverage. Furthermore, if an employee returns from FMLA leave, the secondary employer is required to accept them back if it continues to use temporary workers from the same agency.

Judicial Applications: Cobb and Sullivan Precedents

Because the FMLA does not explicitly define "successor in interest" in its statutory text, federal courts have had to step in. They look to the DOL's regulatory factors and apply them to real-world disputes.

Two landmark cases illustrate the boundaries of FMLA successor liability: one expanding the doctrine, and the other showing its limits.

Cobb v. Contract Transport: Broad Labor-Law Continuity

In Cobb v. Contract Transport, Inc. (6th Circuit, 2006), a truck driver had worked for a company delivering mail for the U.S. Postal Service (USPS) for three years. A competitor, Contract Transport, underbid the driver's employer and took over the USPS contract.

Contract Transport hired the same drivers, assigned them the same routes, and used the same equipment. When the driver needed gallbladder surgery shortly after the transition, Contract Transport fired him, claiming he was ineligible for FMLA because he had only worked for them for a few months.

The Sixth Circuit ruled in favor of the driver. Crucially, the court held that a formal merger or transfer of assets is not required for successor liability to attach under the FMLA.

The court emphasized federal policy: allowing new contractors to avoid FMLA obligations simply by taking over a contract and rehiring the same staff would undermine the entire purpose of the law. Because there was "substantial continuity" of the work, Contract Transport was deemed a successor in interest, and the driver's prior three years of service counted toward his eligibility.

Sullivan v. Dollar Tree Stores: Limits of Successor Liability

In contrast, Sullivan v. Dollar Tree Stores, Inc. (9th Circuit, 2010) demonstrated that successor liability has strict limits.

Dollar Tree purchased the lease of a bankrupt retail store formerly operated by "Factory 2-U." Dollar Tree renovated the interior, required all applicants to go through their standard hiring process, and ultimately hired only two former Factory 2-U employees.

An employee who had worked for Factory 2-U and was hired by Dollar Tree later filed an FMLA claim, arguing Dollar Tree was a successor in interest.

The Ninth Circuit rejected this argument. The court applied the eight-factor test and found that Dollar Tree did not continue the predecessor's business operations. They merely took over a physical lease, changed the branding, restructured the jobs, and did not maintain workforce continuity. This case illustrates that simply buying assets or real estate in a bankruptcy sale does not automatically trigger successor liability.

Risk Mitigation and Compliance for Acquiring Employers

For businesses involved in mergers, acquisitions, or contract takeovers in Michigan or Illinois, ignoring FMLA successor liability can lead to costly lawsuits and federal investigations.

FMLA Leave Successor Employer Rules for Mergers and Acquisitions

When preparing for a corporate transaction, acquiring employers must perform thorough due diligence. Under FMLA leave successor employer rules, you are not just buying assets or stock; you may also be inheriting FMLA compliance issues.

• Conduct an Employee FMLA Audit: Review the predecessor's personnel files. Identify which employees are currently on FMLA leave, who has pending requests, and who has taken leave in the last 12 months.
• Analyze Workforce Continuity: If you plan to hire the predecessor’s workforce and run the business out of the same location, prepare to act as a successor in interest. Ensure your HR department is ready to credit these employees with their prior service hours.
• Allocate Liability in Purchase Agreements: Work with employment counsel to draft indemnity clauses in your purchase agreements. If the seller violated the FMLA prior to the sale, make sure the agreement clearly states who is financially responsible for those past violations.

For additional compliance strategies, consult the FMLA Can Be an Inherited Compliance Issue – Successor Employers Beware blog post.

Recordkeeping and Notice Requirements

Successor employers must also satisfy strict administrative requirements. Failure to do so can result in significant legal and financial penalties.

• The FMLA Poster Requirement: All covered employers must display a poster explaining FMLA rights in a conspicuous place where employees and applicants can see it. Employers who willfully violate this requirement may be assessed a civil money penalty for each separate offense.
• General Written Notice: If a successor employer has an employee handbook, it must include a detailed explanation of FMLA policies. If no handbook exists, this written notice must be distributed to each new hire.
• Maintaining Records: Under the elaws - Family and Medical Leave Act Advisor, employers must keep detailed payroll and FMLA records for at least three years. This includes records of hours worked, leave dates, and premium payments for employee benefits.

Note for Chicago Employers: If your transaction involves employees in Chicago, IL, you must also ensure compliance with local paid leave ordinances, which have their own strict transition rules. Review our resources on Understanding Employer Obligations under Chicago's Updated Paid... for localized compliance.

Frequently Asked Questions about FMLA Successor Rules

Does an asset purchase shield an employer from FMLA successor liability?

No. While an asset purchase generally protects a buyer from traditional corporate liabilities under state law, federal courts apply the broader "substantial continuity" test for FMLA claims. If you buy a business's assets and continue running the same operation with the same workforce, you will likely be deemed a successor in interest and must honor FMLA protections.

How do you calculate the 1,250-hour requirement after a business transition?

If the new employer is a successor in interest, you must combine the hours the employee worked for the predecessor with the hours they worked for the successor during the 12 months preceding the leave. If the combined total is 1,250 hours or more, the employee meets the hours-of-service requirement.

Is notice of a pending FMLA claim required for successor liability to attach?

No. Unlike Title VII discrimination claims—where a successor must typically have notice of an existing claim to be held liable—notice of an FMLA claim is not a requirement for successor in interest status under 29 CFR § 825.107. The successor inherits FMLA eligibility and leave obligations automatically if the substantial continuity factors are met, regardless of whether they knew about a specific employee's leave status beforehand.

Protect Your Rights with Marko Law

Navigating the intersection of corporate transactions and employment law can be incredibly complex. Whether you are an employee whose hard-earned FMLA rights are being ignored after a corporate merger, or a business owner trying to manage compliance during an acquisition, you do not have to figure this out alone.

At Marko Law, we have spent years fighting for workers and business owners across Michigan and Illinois. With convenient office locations in Detroit, MI, Mount Pleasant, MI, and Chicago, IL, our team is uniquely positioned to handle complex employment law disputes. We have a proven track record of securing over $500 million in client recoveries.

We offer free consultations, and we work on a contingency fee basis — meaning you do not pay us a dime unless we win your case.

If you have questions about how FMLA leave successor employer rules apply to your situation, contact us today to schedule your free consultation. Let us help you protect your rights, your health, and your livelihood.

To learn more about your rights under Michigan law, read our detailed article on The Family and Medical Leave Act (FMLA) and How It Applies in Michigan.