Session Overview Affiliated Company Liability

Transcript:Session Overview Affiliated Company Liability:
Session Overview Affiliated Company Liability Single Employer NLRA, Alter Ego FLSA, WARN Act, ERISA Hypothetical Scenarios Mitigating Risks Questions Affiliated Company Liability Shareholders generally not liable for the acts of the corporation and same principle is equally applicable when shareholder is another corporation. Exceptions to this rule under the labor and employment laws. Depending on the claims and legal theories being advanced, separate corporate status will be disregarded to impose liability on the parent or affiliated entity. 2 Implications and Risks Separate entities treated as one employer for purposes of labor and employment liability. Responsible parties, and sources of remedy expanded. Commonly owned entities have potential liability under almost all of the labor and employment laws (e.g. CBAs, NLRA, Discrimination laws, FMLA, WARN, ERISA, OSHA, etc.) 3 Relationships at Risk of an Expanded Definition of “Employer” Parent/Subsidiary Holding Company/Operating Company Brother Sister Company Double-Breasted Contractors Private Equity/Portfolio Company Joint Employer * * Typically not a matter of commonly owned company liability and not the focus here, but many such relationships implicated due to the connection between two concededly separate entities. (e.g. Horizontal Joint Employer, User/Contractor and Franchisor/Franchisee). 4 Legal Standards Used to Impose Liability Single employer, sometimes called integrated enterprise; Alter-ego; Special definitions: e.g. FLSA, WARN and ERISA among others. 5 Single Employer Four factors considered when determining whether two or more separate corporations are a single employer: Common ownership; Common management; Interrelations of operations; and Common control of labor and employee relations. This test, or slight variations applied under numerous statutes such as, NLRA, the Discrimination Laws, FMLA and OSHA. Not all factors must exist and no one factor is dispositive. Common ownership alone is not enough to result in a single employer finding. Rather, the other three factors have been deemed most important, with the greatest weight typically placed on the degree of centralized control over labor and employment matters. 6 Single Employer Factors Common Ownership Least important. Does one company hold an interest in the other? Are companies under common ownership, either directly or indirectly? Common Management Both higher level management (officers, directors, key managers) and lower level management (regional managers, plant managers, supervisor, etc.) considered. Is there any overlap of directors, officers or managers? Evidence that one company exercises control (actual or potential) over the other’s day-to-day operations. 7 Single Employer Factors Interrelation of Operations Second most important factor. Functional integration: extent to which one facility