When a company is sold in an asset sale as opposed to a stock sale, the buyer acquires the company's assets but not necessarily its liabilities. Whether or not the buyer acquires the liabilities is the issue of successor liability. Most states (including Wisconsin) limit such liability. However, federal common law standard of successor liability is more favorable to plaintiffs than most state-law standards.
The Court held that federal standard of successor liability is appropriate in suits to enforce federal labor or employment laws. Further, successor liability was properly applied to the successor even though the assets were purchased under the condition that purchasing company would be free of all employer’s FSLA liabilities.