Let’s say you are the HR Manager for Lightweight Limited Liability Company (“Lightweight”). Edward Employee (we’ll call him “Ed”) tells you he needs four weeks’ time off major surgery and that he believes he is entitled to FMLA leave time. You are not going to be fooled though. You decide you are going to show Ed clearly why your company is not subject to FMLA leave. You go down the list of all the employees in the building. The total is 30. That settles that. You allow Ed to use his two weeks’ accrued vacation and you tell him he has to return after two weeks or he will not have a job. You’re not worried about FMLA, because your company is too small. But is it? FMLA only applies to employers with 50 or more employees. You can find the actual text for that point in 29 USC Sec 2611(4)(A) and (B). What’s the problem then? Well, it’s not that simple. (Is it ever?) Read on to find out why.
(image from theworkingcaregiver.org)
Why might a company with only 30 employees be subject to the FMLA? Let me first point out that one company can have more than one location, and under FMLA if those two locations are within a 75 mile radius of each other, then employees of both locations are counted. So if both those locations have more than 50 employees within a 75-mile radius then employees at both locations are counted and the totals combined. But what about the company in our example with one location? What could the H.R. Manager have been missing here?
It so happens that Lightweight’s owner owns 2 other companies. One of them, Moderate Merchandising Inc., (“Moderate”) has 100 employees and is located 50 miles away. The other, Capital Corp (“Capital”) has 300 employees and is 65 miles away. The three companies produce and sell unrelated products. Why would Lightweight’s H.R. Manager need to consider these other two companies? The short answer: The Single Employer Rule (sometimes also known as the “Integrated Employer” Test) which you can find at 29 CFR Sec. 825.104 (c)(2).
What is the Single Employer Rule and how might it apply here? In general, two or more related companies with more than 50 employees between them might be considered a single employer (or integrated employer) for FMLA purposes. Does that apply to Lightweight, Moderate and Capital. Can they be related entities if each company if their products are very different? Yes. Wait. How can that be? The issue is not whether the company’s goods or services are related. Here are the factors to consider under the Integrated Employer Test:
- Common management demonstrated by the companies sharing the managers, Human Resources staff, etc.;
- Interrelation between operations: such as shared offices, recordkeeping, bank accounts and equipment. At the same time though, administrative overlap without more, usually will not indicate a single employer.
- Common ownership and financial control: Since this particular factor is true in a typical parent-subsidiary relationship, courts tend to give it the least weight.
How do courts analyze these factors? Generally presence of one factor alone will not trigger application of the the Single Employer Rule. Here are just a few brief examples:
In Swallows v Barnes & Noble, 128 F.3d 990, 994 (6th Cir. 1997 the court found no integration of operations between Tennessee Technological University and Barnes & Noble, who operated the University’s bookstore, where the two entities had separate records, bank accounts and offices. In Hukill v. Auto Care Incorporated 192 F.3d 437,443 (4th Cir 1999) the court found that the mere purchasing by a subsidiary company of administrative services from a parent company along with evidence that each entity otherwise operates separately and distinctly would not render the two companies an integrated employer.
In contrast, however, in Armbruster v Quinn 711 F.2d 1332, 1338 (6th Cir 1983) the court found that when a subsidiary corporation has the parent company’s credit cards, and the parent company’s managing its receivables, payrolls and cash accounting, providing administrative support and coordinating shipping of the subsidiary’s products that’s enough for them to be an integrated employer. Given that the FMLA came about in 1993 and this case is from 10 years earlier I feel compelled to point out that while the Integrated Employer Test is codified in FMLA regulations, it did not first come into being with the FMLA. You could find this test applying with respect to other employment laws and in other contexts as well.
Let’s go back to our example for a minute. We don’t have enough facts to know if these separate companies could be an integrated employer. If there is enough overlap in management and control, if, despite them producing different goods, presumably with different target markets their operations are otherwise sufficiently intertwined, then yes, two or more of them could be an integrated employer for FMLA purposes. The only way to tell though is to look further, and that’s what the H.R. Manager needed to do in our example.
One more point: I’ve written about the FMLA and joint employment (specifically here). What’s the difference between being joint employers versus integrated employers. In a word: focus. Joint employment focuses on control over and interaction with the employee(s) in question. Integrated employment focuses on interaction between the entities in question.
OK, let’s stop there for now. See you next week!
To learn about how to deal with Employee Leave Abuse, catch my live webinar at 1 p.m. EST on May 16.
Contents of this post are for educational/informational purposes only, are not legal advice, and do not create an attorney-client relationship. Consult with competent employment counsel in the state(s) in which you employ people with your specific questions.
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