When Do Related Companies Get Combined for Purposes of FMLA?

Bob WerkheiserHuman Resources

Consider this example: Company A has 30 employees in Lancaster and Company B has 30 employees in Bethlehem. Family Medical Leave Act (FMLA) analysis is easy, right? Neither company has 50 employees, and, therefore, neither is covered under FMLA. Not so fast! Related corporations may have their employee counts aggregated for purposes of determining whether they have 50 or more employees under the FMLA through the “single integrated employer” test. The FMLA requires an employer to comply with its regulations if it employs 50 or more workers within a 75-mile radius. Under the single integrated employer test, Company A and Company B may be regarded as a single employer for FMLA coverage (and have their employee counts aggregated) depending on the nature of their corporate operations.

While no one factor determines coverage, entities are more likely to be deemed a single integrated employer if they share:

  • Common management
  • Interrelation between operations
  • Centralized control of labor relations
  • A degree of common ownership and financial control

Common management
Courts have said that significant overlap between management and human resources functions at the different entities tends to demonstrate common management.

Interrelation between operations
Factors that tend to demonstrate interrelation of operations include those that go beyond a typical parent-subsidiary relationship, such as common offices, common record keeping, shared bank accounts, and shared equipment. However, mere administrative overlap between two companies is not indicative of a single integrated employer.

Centralized control of labor relations
Courts have found centralized control of labor when business entities share policies regarding hiring, firing, and training employees, and in developing and implementing personnel procedures.

A degree of common ownership and financial control
The common ownership and financial control factor is usually considered the least relevant because it is a typical feature in a parent subsidiary relationship.

Notably, courts do not rely on a single criterion when determining the applicability of the single integrated employer. Instead, courts take into account the entire relationship in its totality, including the economic realities of the entities. As such, courts have found a single integrated employer to exist when they considered the following evidence: (a) where separate entities in Pennsylvania shared common ownership, financial control and centralized management, including centralized human resources management; or (b) where separate entities conducted joint advertising and had centralized checks and bill payments.

Given that the circumstances of each company vary, any company with questions or concerns regarding its potential FMLA obligations under these scenarios are encouraged to contact Bob Werkheiser, FMLA Account Executive, for more information.

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