Opinion ID: 629075
Heading Depth: 2
Heading Rank: 1

Heading: Federal Employment Discrimination Claims

Text: 9 To establish a prima facie case for their Title VII and ADEA claims, Plaintiffs were required to prove, inter alia, that Defendant was their employer. 42 U.S.C. Sec. 2000e-2; 28 U.S.C. Sec. 623. Whether Defendant was Plaintiffs' employer depends upon whether Defendant is liable for the acts of its subsidiary, Northwestern Bell. 10 The law allows businesses to incorporate to limit liability and isolate liabilities among separate entities. See Cascade Energy & Metals Corp. v. Banks, 896 F.2d 1557, 1576 (10th Cir.), cert. denied, 498 U.S. 849, 111 S.Ct. 138, 112 L.Ed.2d 105 (1990). One way liability is limited in corporations is that shareholders generally are not liable for the acts of the corporation. NLRB v. Deena Artware, Inc., 361 U.S. 398, 402-03, 80 S.Ct. 441, 443-44, 4 L.Ed.2d 400 (1960). The doctrine of limited liability creates a strong presumption that a parent company is not the employer of its subsidiary's employees, and the courts have found otherwise only in extraordinary circumstances. Johnson v. Flowers Indus., Inc., 814 F.2d 978, 980-81 (4th Cir.1987). 11 Depending on the facts of the case before them, the courts have applied four different tests to determine whether a parent corporation is liable for the acts of its subsidiary. 2 While we decline to adopt any one of these tests as the exclusive test for use in all employment discrimination cases, we today apply the integrated enterprise test because Plaintiffs and Defendant concede that this test best applies to the facts of this case. Under the integrated enterprise test, the following four factors are considered: (1) interrelation of operations, (2) centralized control of labor relations, (3) common management, and (4) common ownership or financial control. Evans v. McDonald's Corp., 936 F.2d 1087, 1089 (10th Cir.1991). We apply these factors and conclude that, as a matter of law, Defendant is not liable as an employer for the acts of Northwestern Bell because Plaintiffs have failed to present evidence that the two companies were integrated.
12 Plaintiffs presented no evidence that Northwestern Bell's operations were interrelated with those of Defendant, but instead asserted that interrelated operations could be inferred from the interrelation of operations between Northwestern Bell, Mountain Bell and PNB. The interrelated nature of the three subsidiaries is, however, irrelevant to the interrelation of operations inquiry. See McKenzie v. Davenport-Harris Funeral Home, 834 F.2d 930, 933-34 (11th Cir.1987) (considering only interrelation of parent and subsidiary operations); Baker v. Stuart Broadcasting Co., 560 F.2d 389, 392 (8th Cir.1977) (same); Perry v. Manocherian, 675 F.Supp. 1417 (S.D.N.Y.1987) (same); EEOC v. Financial Assurance, Inc., 624 F.Supp. 686 (W.D.Mo.1985) (same); Smith v. Jones Warehouse, Inc., 590 F.Supp. 1206 (N.D.Ill.1984) (same). 13 Plaintiffs also assert that because the chain of command over Plaintiffs on their DNA/DIS project crossed subsidiary lines and led ultimately to Defendant's president, Richard D. McCormick, Defendant's operations were interrelated with Northwestern Bell's operations. However, merely because the project supervisors ultimately reported to officers in the parent company is not enough to present a material factual dispute, because this exercise of control is not to a degree that exceeds the control normally exercised by a parent corporation. See Johnson, 814 F.2d at 981; Armbruster v. Quinn, 711 F.2d 1332, 1338 (6th Cir.1983). To hold otherwise would mean that there would always be a material factual dispute as to this prong because the top officer of a subsidiary is, at some point, always held accountable to an officer of the parent corporation. Furthermore, merely because a parent corporation eventually benefits from the work of its subsidiaries is not evidence of interrelated operations nor is the fact that one of parent's employees is an occasional consultant on the project. Thus, Plaintiffs have failed to produce the type of evidence routinely used to show interrelated operations. See McKenzie, 834 F.2d at 933-34 (parent's operations were interrelated with those of subsidiary when parent kept subsidiary's books, issued its paychecks, and paid its bills); Perry, 675 F.Supp. at 1426 (operations interrelated when parent and subsidiary had common employees, the same headquarters, common advertising, and the parent rented its properties to the subsidiary); Financial Assurance, 624 F.Supp. at 689-90 (operations interrelated when parent and subsidiary shared services, equipment, employees and office space, and parent controlled subsidiary's payroll and benefit programs).
14 Whether the parent controls labor relations is an important factor in the four-part integrated enterprise test. Evans, 936 F.2d at 1090. Cf. Trevino v. Celanese Corp., 701 F.2d 397, 404 (5th Cir.1983) (control of labor relations is most important factor). The critical question is, [w]hat entity made the final decisions regarding employment matters related to the person claiming discrimination? Trevino, 701 F.2d at 404. A parent's broad general policy statements regarding employment matters are not enough to satisfy this prong. See Wood v. Southern Bell Tel. & Tel. Co., 725 F.Supp. 1244, 1249 (N.D.Ga.1989). To satisfy the control prong, a parent must control the day-to-day employment decisions of the subsidiary. See Armbruster, 711 F.2d at 1338-39 (common officer in parent and subsidiary approved all of subsidiary's hiring decisions); Baker, 560 F.2d at 392 (parent issued regimented rules regarding employment practices which subsidiaries were required to follow); Smith, 590 F.Supp. at 1208 (parent issued personnel policies, paid subsidiary's non-union employees, was listed as employer on the W-2 forms of subsidiary's non-union employees, and terminated a subsidiary employee on one occasion). 15 Because Plaintiffs' proffered evidence included only broad policies established by Defendant, they failed to create a material factual dispute with regard to the control prong. Of the policies offered as evidence by Plaintiffs, only Defendant's equal opportunity policies, its identity statement--which set out general guidelines for fair treatment of subsidiary employees--and its Force Imbalance Guidelines could possibly impact Northwestern Bell's employment practices. 3 The first two are broad, general policies that in no way evidence an attempt by Defendant to exercise day-to-day control over employment decisions. The Force Imbalance Guidelines, which were issued by Defendant in its capacity as ERISA 4 Plan Administrator, establish the employee's transition allowance and other severance benefits after an employee has been terminated by one company owned by Defendant and is unable to find a job within that same company or another company owned by Defendant. Because it is not beyond the normal parent-subsidiary relationship for the parent to serve as ERISA Plan Administrator for the subsidiary, we do not think that this policy evidences excessive control by Defendant over Northwestern Bell's employment practices. 5 See Bogue v. Ampex Corp., 976 F.2d 1319, 1323-24 (9th Cir.1992) (permissible under ERISA for parent corporation to control subsidiary's plan even though separate corporate structure exists), cert. denied, --- U.S. ----, 113 S.Ct. 1847, 123 L.Ed.2d 471 (1993); Reichelt v. Emhart Corp., 921 F.2d 425, 427-28 (2d Cir.1990) (parent corporation providing benefits for subsidiary's employees under ERISA), cert. denied, --- U.S. ----, 111 S.Ct. 2854, 115 L.Ed.2d 1022 (1991).3. Common Management 16 Defendant and Northwestern Bell have no common officers and have only one common manager, an officer of Defendant who manages the marketing operations for all three subsidiaries--Northwestern Bell, Mountain Bell and PNB. One common manager is insufficient to establish a disputed material fact under this prong of the integrated enterprise test. See McKenzie, 834 F.2d at 933-34 (common management found where there was common president, who controlled personnel management of both companies, as well as other common officers); Baker, 560 F.2d at 392 (common management found where parent and subsidiary had same officers and directors, same president); Financial Assurance, 624 F.Supp. at 689 (common management found where there was same family, consulting often on business matters, heading both parent and subsidiary); Smith, 590 F.Supp. at 1208 (common management found where parent and subsidiary had identical list of officers and directors). 6 4. Common Ownership 17 It is undisputed that Defendant is the sole shareholder of Northwestern Bell. However, this factor, standing alone, can never be sufficient to establish parent liability. See Wood, 725 F.Supp. at 1249 (mere existence of a parent-subsidiary relationship is not enough to impose liability on the parent). 18 Considering all four factors together, see Financial Assurance, 624 F.Supp. at 689, Plaintiffs have failed to establish a genuine issue of material fact to dispute the presumption that Defendant was not Plaintiffs' employer. See Johnson, 814 F.2d at 980-81 (strong presumption that parent company is not employer of its subsidiary's employees). Thus, the district court's grant of summary judgment on the Title VII and ADEA claims is affirmed.