Opinion ID: 1301294
Heading Depth: 1
Heading Rank: 1

Heading: The integrated employers test

Text: According to the integrated employment theory elaborated by the Department of Labor, [s]eparate entities will be deemed to be parts of a single employer for purposes of FMLA. 29 C.F.R. § 825.104(c)(2). The regulations provide the following four factors for helping to determine if two entities should be treated as an integrated employer: (1) common management, (2) interrelation between operations, (3) centralized control of labor relations, and (4) degree of common ownership/financial control. 29 C.F.R. § 825.104(c)(2)(i-iv). Accordingly, the factors seek to illuminate whether two putatively distinct businesses should be viewed as one corporate entity. Where this test is met, the employees of all entities making up the integrated employer will be counted in determining employer coverage and employee eligibility. 29 C.F.R. § 825.104(c)(2). Thus, the integrated employer test is a mechanism to ensure that the appropriate employees are aggregated for the numerosity test of the FMLA. As the First Circuit describes, the test appreciates that small businesses  i.e. those with less than 50 employees  are not subject to the FMLA's onerous requirement of keeping an unproductive employee on the payroll, while simultaneously preventing companies from structuring their business to avoid labor laws. Engelhardt, 472 F.3d at 6. Limited case law applying the integrated employer test exists, but other circuits that have addressed the issue have generally found that the test was not met. See, e.g., Engelhardt, 472 F.3d 1 (finding that a wholly-owned subsidiary and the parent were not integrated employers); Morrison v. Magic Carpet Aviation, 383 F.3d 1253, 1257 (11th Cir.2004) (As a matter of law, we do not believe that common ownership of two corporations is enough for a jury to conclude that there were integrated into one operation for FMLA purposes.); see also Arculeo v. On-Site Sales & Mktg., L.L. C, 425 F.3d 193, 196 (2d Cir.2005) (finding no integrated employment for the purposes of Title VII); but see Schubert, 319 F.Supp.2d 963 (finding sufficient evidence of integrated employment where two putatively distinct health care companies had the same officers, nearly identical officers, similar corporate purpose, and principal place of business at the same address). The First Circuit's Engelhardt decision is particularly instructive. In Engelhardt, an individual appealed the district court's determination that she was not an employee under the FMLA because her employer did not satisfy FMLA's numerosity requirement. The plaintiff worked for S.P. Richards Co. (SPR), a wholly-owned subsidiary of Genuine Parts Co. (GPC). On appeal, the plaintiff argued that SPR and GPC were integrated employers and that, together, they satisfied the FMLA numerosity requirement. In support of her claim, the plaintiff offered, inter alia, the following evidence: that SPR adopted many of GPC's personnel policies, that many of SPR's personnel-related documents carried the GPC letterhead or logo, and that GPC issued SPR's payroll checks. Engelhardt, 472 F.3d at 2-3. In concluding that this arm's length relationship did not constitute integrated employment for purposes of the FMLA, the Engelhardt Court focused on the fact that none of the four enumerated factors supported the plaintiffs argument. Id. at 8. First, the court noted that there was no evidence suggesting that the two companies were under the same management. Id. at 6. Second, the operations of the two entities were not interrelated, for the two maintained separate headquarters, human resource departments, records, and worksites; additionally, the court noted that the nature of the businesses (office-supply vs. car parts) was different. Id. at 7. Applying the third factor  centralized control of labor relations  the court found that the two entities each made independent decisions with respect to labor relation ( e.g. only SPR had the power to determine the number of employees it needed). Id. And finally, the opinion reasoned that the overlap in administrative services was irrelevant to the fourth factor, the degree of common ownership and financial control. Id. at 7-8. In the instant case the integrated employer framework is similarly inapposite. Under the first factor, there is no evidence of common management  at least insofar as the core responsibilities and operations of each business  between USCAR and Bartech. Although the two companies certainly had a shared relationship with Grace, USCAR did not oversee any of Bartech's corporate decision or facilities, or vice versa. But see Armbruster v. Quinn, 711 F.2d 1332, 1339 (6th Cir.1983) (finding at least some evidence of common management where one person was the president of one entity and the director of another in a Title VII integrated employer case). The second prong, whether the entities have interrelated operations, militates even more strongly against a finding of integrated employment in this case. USCAR and Bartech maintain separate offices; moreover, the nature of the work is completely different: one is dedicated to research and design for the car industry while the other is a staffing agency. At first blush, the third factor  centralized control of labor relations  appears more favorable to a finding that USCAR and Bartech are integrated employers. For example, Grace reported directly to Flaherty (at USCAR), but also maintained a close relationship with Shimon at Bartech. But the mere fact that two entities both communicated with a single employee does not mean that their employment relations, as a whole, are interrelated, as the regulations contemplate. Indeed, USCAR made its own decisions with regards to securing an additional employee to replace Grace and to restructuring its IT department. The fact that it asked Bartech to provide an additional employee does not indicate that Bartech exercised any control over this employment decision. Nor, obviously, did USCAR have any influence on Bartech's decision to loan employees to other client employers. And finally, no evidence exists that the two entities were subject to common ownership or financial control. Because none of the four factors are met, the interrelated employer test is inapplicable.