An entrepreneur buys a business or invests in a franchise, assuming that he or she is starting with a clean slate when it comes to payroll processing, employee benefits administration and other basic duties. The federal appeals court says differently, according to the outcome of a recent case that was covered by XpertHR.

The 7th Circuit Court of Appeals ruled that a person who purchases a company can also be held liable for any prior Fair Labor Standards Act (FLSA) violations in the Teed v. Thomas & Betts Power case. The decision holds purchasers accountable for pending lawsuits under a term called successor liability.

Therefore, employers must practice due diligence when it comes to payroll records before investing in any organizations. While performing audits of employee attendance records, individuals should ensure the firm is not in violation of minimum wage, overtime, youth labor or recordkeeping provisions.

Additionally, the Department of Labor (DOL) lists the most common compliance issues as failures to adjust minimum wage rates after an increase goes into effect, count all hours worked, pay applicable fringe benefits to contract workers and round employee attendance totals correctly.

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