CITE AS Energy & Min. L. Inst. Chapter 2 If We Do This ... Examination of Enterprise Liability and Protection ... — National Labor Relations — Alter Ego Test ... — Alter Ego

Chapter 2

If We Do This, Will It Make Us a Single Employer? An Examination of Enterprise Liability

and Protection

David J. LaurentEmilie R. Hammerstein

Buchanan Ingersoll & Rooney, P.C.Pittsburgh, Pennsylvania

Synopsis§ 2.01. Introduction ......................................................................................... 36§ 2.02. Applicable Tests ....................................................................................37

[1] — National Labor Relations Act — Single Employer Test ...............................................................................37 [a] — Case Supporting a Single Employer Finding.....................39

[b] — Cases Rejecting a Single Employer Finding .....................43[2] — National Labor Relations — Alter Ego Test .............................. 44[3] — Federal Discrimination Laws — Single Employer Test .............................................................................. 46

[a] — Case Supporting a Single Employer Finding ...............................................................................47[b] — Cases Rejecting a Single Employer Finding ...............................................................................49[c] — Seventh Circuit’s Unique Approach .................................. 50

[4] — WARN Act — Single Employer Test ..........................................52[a] — Case Supporting a Single Employer Finding ....................54[b] — Cases Rejecting a Single Employer Finding ....................56

[5] — Family and Medical Leave Act — Integrated Employer Test ...............................................................................57[6] — Fair Labor Standards Act — Single Enterprise and Joint Employer Tests .............................................................59[7] — Office of Federal Contract Compliance Programs — Single Entity Test .........................................................................62[8] — Employment Retirement Income Security Act (ERISA) — Controlled Group and Alter Ego Tests ....................................... 64

[a] — Controlled Group Tests .....................................................65 [b] — Single Employer and Alter Ego Tests ..............................68

[i] — Single Employer/Single Unit Test ..........................68[ii] — Alter Ego ...............................................................70

[9] — Federal Mine Safety and Health Act — Unitary Operator Test .................................................................71

CITE AS33 Energy & Min. L. Inst. 2 (2012)

ENERGY & MINERAL LAW INSTITUTE

36

§ 2.03. Information/Discovery Requests ........................................................73[1] — National Labor Relations Board (NLRA) — Requests for Information .............................................................................73[2] — Employment Retirement Income Security Act (ERISA) Request for Information ..............................................................77[3] — Office of Federal Contract Compliance Programs (OFCCP) Questionnaire ...............................................................79

§ 2.04. Key Points ..............................................................................................81§ 2.05. Twenty Practical Suggestions ............................................................. 82

§ 2.01. Introduction. Incorporating to limit liability is a cornerstone of American business.

“It is a general principle of corporate law ‘deeply ingrained in our economic and legal systems that a parent corporation . . . is not liable for the acts of its subsidiaries.’ ”1 “The corporate form was created to allow shareholders to invest without incurring personal liability for the acts of the corporation. These principles are equally applicable when the shareholder is, in fact, another corporation, and hence, mere ownership of a subsidiary does not justify the imposition of liability on the parent.”2 Indeed, “[t]he insulation of a stockholder from the debts and obligations of his corporation is the norm, not the exception.”3

Nonetheless, many laws, especially those affecting employees, permit courts and agencies to treat nominally separate, but highly integrated companies as a single employer. In such situations, protections otherwise available under general corporate law can be lost.

Courts and agencies use a variety of tests to determine single employer status; however, each test generally involves a fact-intensive consideration of at least four key factors: common ownership, common management, interrelated operations, and centralized control of labor relations. In this analysis, no one fact or factor determines the outcome and the decision typically turns on how each court or agency weighs the evidence.

1 Blair v. Infineon Tech. AG, 720 F. Supp. 2d 462, 469 (D. Del. 2010) (quoting U.S. v. Bestfoods, 524 U.S. 51, 61 (1998)). 2 Pearson v. Component Tech. Corp., 247 F.3d 471, 484 (3d Cir. 2001). 3 NLRB v. Deena Artware, Inc., 361 U.S. 398, 403 (1960).

§ 2.01

ENTERPRISE LIABILITY AND PROTECTION

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While certain strategies can be used to avoid becoming a single employer, they frequently conflict with efficiency goals. The simplest way to avoid single employer status is for each affiliated entity to operate on a separate, stand-alone basis; however, that approach typically adds costs and reduces efficiencies, especially with larger organizations. Therefore, the goal is to find an appropriate balance between efficiency and protection.

When trying to find the appropriate balance, a good analogy for the analysis is to treat each element of commonality as a stick, with the question being whether the pile of sticks is large enough that a court or agency would likely rule that the companies constitute a single employer, i.e., how many sticks can be put on the pile without crossing the line and what logs should be keep away from the pile?

This chapter will examine the various tests that are used to determine whether nominally separate entities should be treated as a single employer with respect to employee-related matters, and will offer practical suggestions for trying to balance the tension between efficiency and protection.4

§ 2.02. Applicable Tests. [1] — National Labor Relations Act — Single Employer Test.The single employer test most frequently used to determine whether

nominally separate companies can be treated as one was first developed for use under the National Labor Relations Act (NLRA),5 which provides employees with a variety of rights and regulates the relationship between employers and unions.

The single employer test is used for a variety of purposes under the NLRA. For example, the test is used to determine whether companies are subject to the NLRA’s jurisdiction,6 whether they can be held jointly liable

4 This chapter will not address when the corporate veil can be pierced under state law; however, many of the factors discussed in this chapter also would be considered as part of such an evaluation. Likewise, this chapter will not address the joint employer theory, in which two companies both actually exercise some degree of control over a group of employees, except in certain limited contexts where it is applied in lieu of a single employer test.5 29 U.S.C. § 151 et seq.6 Spurlino Materials, LLC, 357 N.L.R.B. No. 126, 21 (2011).

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for an unfair labor practice,7 and whether one entity is neutral in a labor dispute and, as such, cannot be picketed.8

The test also is used to impose a collective bargaining agreement signed by one entity on an affiliated entity; however, to impose a labor agreement on another company, the evidence also must show that their collective employees form a single, compatible bargaining unit — the mere fact that the companies constitute a single employer will not suffice.9 The compatible bargaining unit analysis considers bargaining history, operational integration, geographic proximity, common supervision, similarity of job functions and degree of employee interchange.10

The NLRA’s single employer test analyzes the following four factors: common ownership, common management, interrelationship of operations, and centralized control over labor relations.11 Of these factors, common ownership is relatively unimportant, whereas centralized control over labor relations typically is the most significant.12 Nonetheless, “no single aspect is controlling, and all four factors need not be present to find single-employer status. The ultimate determination turns on the totality of the evidence in a given case.”13

Generally, the degree of day-to-day control one company exerts over another is highly relevant, though not dispositive. “Common ownership by itself indicates only potential control over the subsidiary by the parent entity; a single employer relationship will be found only if one of the companies exercises actual or active control over the day-to-day operations or labor

7 NLRB v. Rockwood Energy and Min. Corp., 942 F.2d 169, 174 (3d Cir. 1991).8 Boich Mining Co. v. NLRB, 955 F.2d 431, 432 (6th Cir. 1992). 9 South Prairie Const. Co. v. Local No. 627, Int’l Union of Operating Eng’gs, 425 U.S. 800 (1976); Brown v. Sandimo Materials, 250 F.3d 120, 128 n.2 (2d Cir. 2001); NLRB v. Al Bryant, 711 F. 2d 543, 553 (3d Cir. 1983).10 Lihli Fashions Corp. v. NLRB, 80 F.3d 743, 747 (2d Cir. 1996).11 Radio & Television Broadcast Technicians Local Union 1264 v. Broadcast Serv. of Mobile, Inc., 380 U.S. 255, 256 (1965). In the Second Circuit, the test also considers the use of common office facilities and equipment and family connections. Lihli Fashions Corp., Inc., 80 F.3d 743.12 Bolivar-Trees, Inc., 349 N.L.R.B. 720, 722 (2007), enf’d, 551 F.3d 722 (8th Cir. 2008).13 Id. at 720.

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relations of the other.”14 Nonetheless, the presence of some local day-to-day control is not necessarily determinative. “If there is overall control of critical matters at the policy level, the fact that there are variances in local management decisions will not defeat application of the ‘single employer’ principle.”15

Ultimately, [s]ingle employer status depends on all the circumstances of the case and is characterized as an absence of an “arm’s length relationship found among unintegrated companies.”16 Indeed, “[t]he hallmark of a single employer is the absence of an arm’s-length relationship among seemingly independent companies.”17

There are literally hundreds of cases dealing with single employer issues under the NLRA, each of which turns on the facts presented. The following discussion uses several cases to illustrate how the test factors have been applied.

[a] — Cases Supporting a Single Employer Finding.In Rockwood Energy,18 the National Labor Relations Board (NLRB)

and the Third Circuit found that a parent holding company (“RHC”) and two of its subsidiaries — REMCO and Harmony — was a single employer. The NLRB and the court reasoned that (1) common management existed because RHC’s assistant to the treasurer also served as Harmony’s President, the superintendent of REMCO also was responsible for daily operations at the Harmony mine site, and all financial decisions regarding Harmony were subject to RHC’s President’s final approval; (2) operations were interrelated because RHC and REMCO handled all administrative matters for Harmony;

14 The Dow Chem. Co., 326 N.L.R.B. 288, 288 (1998).15 Bolivar-Trees, Inc., 349 N.L.R.B. at 721, n.4. See also Emsing’s Supermarket, Inc., 284 N.L.R.B. 302 (1987), enf’d, 872 F.2d 1279 (7th Cir. 1989); Spurlino Materials, 357 N.L.R.B. at *10.16 NLRB v. Browning-Ferris Indus. of Pennsylvania, Inc., 691 F.2d 1117, 1121-22 & 1121 n.1 (3d Cir. 1982).17 Bolivar-Trees, Inc., 349 N.L.R.B. at 720. See also Covanta Energy, 356 N.L.R.B. No. 98 at *35.18 Rockwood Energy, 942 F.2d 169 (3d Cir. 1991).

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and (3) labor relations were centralized because RHC and REMCO employees made personnel decisions for Harmony and, when Harmony’s board of directors decided to lease the mining operations, the board consisted entirely of officers and directors from RHC and REMCO.

Similarly, in Southern Council of Industrial Workers,19 the NLRB ruled that Missoula White Pine Sash Company, and its parent, Hutrig Sash & Door Company, was a single employer. The NLRB’s determination hinged principally on the parent company’s vice president’s active participation in the subsidiary’s management and labor relations. The NLRB noted that while an employee of a parent company can have an advisory role in the subsidiary’s labor relations, the vice president’s role here was active and ongoing.

Likewise, in Northern Montana Health Care Center,20 the NLRB found that several hospitals and their parent company were a single employer. The NLRB emphasized that the companies shared many of the same officers, the parent company’s president was also the president of each subsidiary, and the parent company handled all labor relations matters (pursuant to a contract) for the subsidiaries. The NLRB noted in particular that the parent’s vice president of Human Resources was personally involved in labor relations for the subsidiaries.

Further, in AG Communications Systems Corporation,21 the NLRB found that a parent and its subsidiary were a single employer because the parent (1) assumed operational and budgetary responsibility for many of the subsidiary’s departments, and (2) made critical decisions regarding the subsidiary’s collective bargaining relationship, including telling the subsidiary’s manager of labor relations not to inform the union of certain facts, not to negotiate with the union over a merger of bargaining units, and to adjust staffing levels.

As mentioned above, while the single employer analysis considers the degree of local control, it also considers overall control. For example, in

19 Southern Counc. of Indus. Workers, 301 N.L.R.B. 410 (1991).20 Northern Montana Health Care Center, 324 N.L.R.B. 752 (1997).21 AG Commc’ns Sys. Corp., 350 N.L.R.B. 168 (2007).

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Spurlino Materials,22 NLRB ruled that even though two companies each had separate operations managers who exercised significant authority over the entity’s daily operations, including hiring, directing and supervising the employees of the respective companies, other facts weighed heavily in favor of a single employer finding: (1) they held themselves out as the same business on their common website, business cards, and trucks; (2) there was a significant history of employee interchange between the two companies; (3) financial transaction were not at arm’s length;23 and (4) their common President and majority owner determined initial wages and benefits for both companies and although a local manager handled the union negotiations, the common President also met with the Union.

Likewise, in Asher Candy, Inc.,24 the subsidiary’s human resources director made all of the day-to-day decisions for the subsidiary. Nonetheless, the NLRB ruled that the subsidiary and its parent were a single employer because the parent company’s President or its board of directors made all major labor relations decisions for the subsidiary.25

Finally, in Covanta Energy,26 the Administrative Law Judge, whose decision was adopted by the NLRB, found that the companies were a single employer despite certain local control and despite the fact that the subsidiary

22 Spurlino Materials, 357 N.L.R.B. 1 (2011).23 Although the companies booked a cost for shared equipment, labor, and services, they did not invoice each other and the cost was allocated based on a percentage of sales, rather than actual cost, loans were not documented, and one company frequently paid bills sent to the other company. Id. at *12. 24 Asher Candy, Inc., 348 N.L.R.B. 993 (2006), enf’d, 258 Fed. Appx. 334 (D.C. Cir. 2007).25 Id. at 994 n.1 (“Although the Respondents contend that Asher Candy’s general manager and human resources director made day-to-day personnel decision, Uziel Frydman, Sherwood Brands’ President, chief executive officer, and chairman of the board made major decisions concerning labor relations for Asher Candy. Frydman admitted that either he or the Sherwood Brands board had to approve collective-bargaining agreements, the wage terms of the parties’ memorandum of agreement, and nonemergency overtime, severance, layoff, and plant closure decisions for Asher Candy. In addition, the Respondents admitted that Sherwood Brands made pension contributions, paid health insurance, deducted union dues, and funded the payroll for Asher Candy [from a Sherwood corporate account].”).26 Covanta Energy, 356 N.L.R.B. No. 98 (2011).

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paid for certain services it received from the parent company. The Judge reasoned in pertinent part as follows:

The insistent assertion through trial that Davis is in charge of SEMASS may have some truth: he is the facility manager. But it is demonstrably false to suggest that he operates SEMASS without the ubiquitous involvement, oversight, and control, of Covanta Energy . . . . He was hired by Walker of Covanta Energy, he forthrightly admits that he reports to Walker of Covanta Energy . . . and he was unaware that he reported to anyone but Walker of Covanta Energy. . . .

The fact that Davis was unaware that SEMASS, even formally, had a board of directors, speaks volumes about the lack of independence of SEMASS from Covanta Energy . . . . On top of this, SEMASS is the office for a number of Covanta Energy supervisors and employees, including Walker’s administrative assistant, who works primarily for Walker of Covanta Energy, but is paid by SEMASS, and is considered by SEMASS Supervisor Paula St. Louis to be a “local HR” official who can answer questions about Covanta Energy-sponsored benefit plans.

This is what managerial and operational integration looks like. . . .

SEMASS’ labor relations is deeply intertwined with Covanta Energy’s. Its collective bargaining team is dominated by Covanta Energy. Covanta Holding, which is Covanta Energy’s publicly traded 100-percent owner, openly assumes responsibility in its 10(k) for the bargaining agreement [‘’We are engaged in good faith bargaining] . . . . Ancherio [a Covanta employee] provides the guiding hand, not only to the union avoidance efforts at SEMASS, but plays a unique insider role in the peer review disciplinary process which is used at SEMASS and the other Covanta Energy subsidiaries. He signs offers of employment to SEMASS employees. It is also highly relevant to the single-employer inquiry that SEMASS’ compensation for employees is largely composed of Covanta Energy

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administered and designed programs. Even the employee handbook is a Covanta Energy document. Most importantly, Covanta Energy communicated directly with SEMASS employees regarding their compensation and benefits . . . and holds itself out as the source of compensation, benefits, and most other employment-related services. . . .

The Respondents also claim that a lack of single employer relationship between these two corporate entities should be found based on the assertion that SEMASS is charged for and pays for the panoply of services provided to it by Covanta Energy. This may be correct, as a budgeting matter, but of course, SEMASS’ budget is one more item approved by Covanta Energy. The fact that Covanta Energy chooses to run its “network” (as Covanta Holding’s 10(k) refers to its subsidiary operations) by making sure that SEMASS costs “hit the SEMASS books” proves nothing about SEMASS’ independence from, lack of control by, or lack of integration with Covanta Energy.27 (Emphasis added.)

[b] — Cases Rejecting a Single Employer Finding.In Local 2208, International Brotherhood of Electrical Workers,28 the

NLRB concluded that Simplex Wire and Cable, and its parent company, Tyco Laboratories, were not a single employer. Although Tyco provided centralized banking services and benefits programs, three of Tyco’s officers were on and controlled Simplex’s board of directors, and Tyco selected Simplex’s President, the NLRB relied on facts showing that Simplex’s officers ran Simplex on a day-to-day basis without any involvement by Tyco and the companies each produced different, unrelated products. Similarly, in The Dow Chemical Company,29 the NLRB concluded that Dow Chemical and its subsidiary, DowBrands, Inc., were not a single

27 Id. at *35-36. 28 Local 2208, Int’l Bhd. of Elec. Workers, 285 N.L.R.B. 834 (1987).29 The Dow Chem. Co., 326 N.L.R.B. 288 (1998).

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employer. The NLRB focused on the following facts: (1) the companies did not share any officers; (2) although Dow Chemical’s officers served on DowBrand’s board of directors, there was no indication that they exercised any day-to-day control over DowBrand’s operations; (3) each company separately handled its own labor relations, and (4) the companies were involved in different lines of business.30

Likewise, in Los Angeles Newspaper Guild, Local 69,31 the NLRB ruled that two divisions of a newspaper publisher were not a single employer. While the company made benefit programs available to each division, the divisions were free to accept or reject the programs. Additionally, each division manager had substantial authority over the operation of his or her division, and each division was permitted to retain a certain amount of cash as its “operating profit.” Based on these facts, the NLRB concluded that each division operated as an autonomous enterprise and was not part of a single employer.

[2] — National Labor Relations — Alter Ego Test.The NLRA also uses an alter ego test to treat nominally separate

companies as one and the same under certain circumstances. “The focus of the alter ego doctrine, unlike that of the single employer doctrine, is on the existence of a disguised continuance or an attempt to avoid the obligations of a collective bargaining agreement through a sham transaction or a technical change in operations.”32 The alter ego test considers the whether there is a substantial identity of management, business purpose, operation, equipment, customers, supervision and ownership between the old and new corporations.33

30 Id. at 289.31 Los Angeles Newspaper Guild, Local 69, 185 N.L.R.B. 303 (1970), enf’d, 443 F. 2d 1173 (9th Cir. 1971), cert. denied, 404 U.S. 1018 (1972).32 Carpenters Local Union No. 1846 v. Pratt-Farnsworth, Inc., 690 F.2d 489, 508 (5th Cir. 1982).33 Al Bryant, 711 F.2d at 553-54.

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In Al Bryant,34 the Third Circuit found that the employer was the alter ego of a prior unionized company, reasoning in pertinent part:

Associates was created to perform the same kind of work as ABI and Harrisburg Drywall. It occupied the same building, and shared some areas of its office and warehouse. It assumed the utility bills previously paid by ABI, rented ABI’s office furniture, equipment and scaffolding, and employed substantially unchanged ABI staff. Five of the six nonmanagerial headquarters employees who had worked for ABI were transferred to Associates’ payroll in the first week of its operation and the sixth was transferred shortly thereafter. Associates took its initial field staff from the other companies. ABI’s three managers were transferred to Associates’ payroll and continued to perform similar managerial functions in that capacity. Furthermore, it is significant, if not crucial, that Associates was created after the filing of unfair labor practice charges against ABI and Harrisburg Drywall.35

If the NLRB or a court determines that a signatory employer and another entity are alter egos, then the signatory’s collective bargaining agreement automatically applies to the alter ego — there is no need for the additional compatible bargaining unit analysis that applies when the entities are found to be a single employer.36 For example, in Mining Specialties, Inc.,37 the signatory employer closed a mine and a commonly owned employer opened a new mine approximately three miles away, using most of the same supervisors and employees and some of the same equipment. The NLRB found that the two employers were alter egos. The NLRB reasoned that, based on the foregoing facts, the subject mine was a relocation of the closed mine, and,

34 Id. at 554.35 Id. at 553-54.36 Id. at 550.37 Mining Specialties, Inc., 314 N.L.R.B. 268 (1994).

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therefore, Article 1A, Section (f) of the Wage Agreement automatically extended the labor agreement to that new location.38

[3] — Federal Discrimination Laws — Single Employer Test.Courts and agencies applying federal discrimination laws, including the

Age Discrimination in Employment Act,39 Title VII of the Civil Rights Act (Title VII),40 the Americans with Disabilities Act,41 and Section 1981,42 generally use the NLRA four-part single employer test to determine whether nominally separate companies can be treated as one for purposes of meeting employee-related jurisdictional thresholds, imposing liability on a joint and several basis,43 and determining the appropriate limits on damages under Title VII, which depend on the number of employees.44 As with the NLRA test, “[a]ll four factors, however, are not necessary for single-employer status. [Citation omitted.] Rather, the test should be applied flexibly, placing special emphasis on the control of employment decisions.”45

38 Article 1A, Section (f) of the National Bituminous Coal Wage Agreement states that, “the terms of this Agreement shall be applied without evidence of Union representation of the Employee involved to any relocation of an operation already covered by the terms of this Agreement.”39 29 U.S.C. § 621 et seq.40 42 U.S.C. § 2000e et seq.41 42 U.S.C. § 12111 et seq.42 42 U.S.C. § 1981.43 Torres-Negron v. Merck & Co., 488 F. 3d 34, 42 n.7 (1st Cir. 2007). See also Lusk v. Foxmeyer Health Corp., 129 F.3d 773, 777 (5th Cir. 1977) (“To determine whether a parent corporation and its subsidiary may be regarded as a ‘single employer’ under the ADEA, we apply the four-part analysis originally adopted by the Supreme Court in the context of labor disputes . . . . The four factors to consider include: (1) interrelations of operations, (2) centralized control of labor or employment decisions; (3) common management, and (4) common ownership or financial control. This analysis ultimately focuses on the question of whether the parent corporation was a final decision-maker in connection with the employment matters underlying the litigation.”) (citations omitted).44 42 U.S.C. § 1981a sets monetary limits on compensatory and punitive damages based on the number of employees who work for the defendant. Therefore, a single employer finding can be used to increase the number of employees and the corresponding liability. EEOC v. Custom Companies, Inc., 2007 WL 734395 (N.D. Ill. March 8, 2007).45 Torres-Negron, 488 F.3d at 42. See also Bohannon v. Baptist Mem’l Hospital-Tipton, 2010 WL 1856547, at *3 (W.D. Tenn. May 7, 2010).

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[a] — Cases Supporting a Single Employer Finding.In Torres-Negron, the court applied the four-factor test to a claim of

harassment under Title VII. The court found that there was a material question of disputed fact as to whether a parent company and two of its subsidiaries constituted a single employer based on the following key facts: (1) there was frequent interchange of employees among the companies; (2) the parent company required its subsidiaries to adopt its human resources and personnel policies; (3) the plaintiff was terminated for violating the parent company’s ethics policy; and (4) a representative of the parent company discussed and approved the subsidiary’s recommendation to terminate the plaintiff’s employment.46

Similarly, in Bagwell v. Peachtree Doors and Windows, Inc.,47 the court denied the employers’ motion for summary judgment under Title VII and Section 1981 regarding their status as a single employer. The court relied on the following facts: (1) of the 14 members of the parent company’s executive team, nine served dual roles with the subsidiaries; (2) parent company employees performed work for the subsidiaries, but were paid by and accounted for only as parent company employees; (3) all employees participated in the same benefit plans; (4) a subsidiary’s handbook referred to it as a “Schield Family Company”; and (5) a parent company human resource manager supervised employees at two of the subsidiaries. The court recognized that, while there was also evidence supporting the employers’ position, including evidence that that the critical employment decisions were made at the subsidiary level, material questions of fact precluded summary judgment.

Likewise, in Bohannon v. Baptist Memorial Hospital,48 the court denied the employers’ motion for summary judgment in a Title VII case. Although the court acknowledged that the two companies’ operations were not interrelated in that they occupied separate locations and each entity had

46 Torres-Negron, 488 F.3d at 42-43.47 Bagwell v. Peachtree Doors and Windows, Inc., 2011 WL 1497831 (N.D. Ga. Feb. 8, 2011).48 Bohannon v. Baptist Mem’l Hosp., 2010 WL 1856547.

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its own finance and human resource functions, and there was no evidence of common management, there was a material issue of disputed fact regarding the parent company’s role in the critical employment decision. The court observed that, while the subsidiary’s officials all stated that the subsidiary made the decision, there was an e-mail exchange showing that the subsidiary sought the parent’s approval for the termination.49 The court reasoned that this e-mail exchange evidenced a joint decision to terminate the plaintiff. Accordingly, despite the absence of common management and interrelated operations, the court found sufficient evidence of common ownership and centralized labor relations to support a single employer finding.

Finally, in Cook v. Arrowsmith Shelburne, Inc.,50 the Second Circuit, applying the NLRA test in a Title VII case, determined that the evidence was sufficient to show a single employer relationship:

We believe that the appropriate test under Title VII for determining when parent companies may be considered employers of a subsidiary’s employees is the four-part test adopted by the Fifth, Sixth, and Eighth circuits. We focus our inquiry, as those circuits do, on the second factor, centralized control of labor relations. Applying this test, we conclude that KDT is not entitled to summary judgment because all four factors weigh powerfully in favor of allowing the action against KDT to continue. ASI is a wholly owned subsidiary of KDT. In addition, there is substantial evidence of an interrelation of operations between KDT and ASI. KDT ran ASI in a direct, hands-on fashion, establishing the operating practices and management practices of ASI. Moreover, KDT clearly maintained control of labor relations at ASI. For example, applications for employment with ASI went through KDT; all personnel status reports were approved by KDT; and ASI cleared all major employment decisions with KDT. Indeed, Mary Cook was herself hired as an ASI purchaser by Scott Zinnecker, the vice president of Human Resources at KDT, and was

49 Id. at *5.50 Cook v. Arrowsmith Shelburne, Inc., 69 F.3d 1235 (2d Cir. 1995).

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fired at the direction of Lind, who was paid directly by KDT. Finally, KDT and ASI maintained a common management structure. The President of ASI, Gordon Graves, operated out of the Texas office of KDT. There is thus sufficient evidence in the record to preclude summary judgment for KDT.51

[b] — Cases Rejecting a Single Employer Finding.In contrast, the court in Lusk v. Foxmeyer Health Corporation52 ruled

in an age discrimination claim that a parent corporation and its subsidiary were not a single employer. The court initially observed that, simply showing common ownership and common management was not sufficient:

The doctrine of limited liability creates a strong presumption that a parent corporation is not the employer of its subsidiary’s employees. Only evidence of control suggesting a significant departure from the ordinary relationship between a parent and its subsidiary — dominion similar to that which justifies piercing the corporate veil — is sufficient to rebut this presumption and to permit an inference that the parent corporation was a final decision-maker in its subsidiary’s employment decisions.53

In Lusk, the court also rejected the argument that the operations of the parent and subsidiary were interrelated, emphasizing that attention to detail, not general oversight, is the hallmark of interrelated operations. The court explained that, the interrelated operations factor “focuses on whether the parent corporation excessively influenced or interfered with the business operations of its subsidiary, that is, whether the parent actually exercised a degree of control beyond that found in the typical parent-subsidiary relationship.”54 In that regard, although three highly ranked employees of the parent who also held positions with the subsidiary approved the RIF plan,

51 Cook, 69 F.3d at 1241.52 Lusk v Foxmeyer Health Corp., 129 F.3d at 777-78.53 Id. at 778 (citations omitted).54 Id.

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the evidence failed to show that they were acting as officers of the parent when they approved it. 55

Likewise, in Johnson v. Crown Enterprises, Inc.,56 the Fifth Circuit adopted the NLRA test for Section 1981 claims, but found that the plaintiff had failed to establish that the companies were a single employer. The court reasoned that, although the family members owned the two companies and the plaintiff showed that the companies had interrelated operations and some common management, the plaintiff failed to establish centralized control over labor relations: “[i]n this case, the other evidence cannot override Crown’s lack of involvement with Dixie’s personnel decisions.”57

Similarly, in Meng v. Ipanema Shoe Corporation,58 the court applied the NLRA test in a Title VII case, and found that the companies were not a single employer. The court observed that (1) although parent company employees made certain employment-related decisions, they were on loan to the subsidiary and acting as officers of the subsidiary (the subsidiary reimbursed the parent for their salaries), and (2) although the plaintiff participated in benefit plans the parent company sponsored, “a common benefits package speaks only to economies of scale . . . and not centralized control of labor relations.”59

[c] — Seventh Circuit’s Unique Approach.Unlike many most circuit courts of appeal, the Seventh Circuit has

rejected the NLRA test in discrimination cases involving a parent and

55 The court also found notable that there was no evidence that the parent: (1) was involved directly in the subsidiary’s daily decisions relating to production, distribution, marketing, and advertising; (2) shared employees, services, records, and equipment with the subsidiary; (3) commingled bank accounts, accounts receivable, inventories, and credit lines; (4) maintained the subsidiary’s books; (5) issued the subsidiary’s paycheck; or (6) prepared and filed the subsidiary’s tax returns. Id. 56 Johnson v. Crown Enter., Inc., 398 F.3d 339 (5th Cir. 2005).57 Crown Enter., 398 F.3d at 344.58 Meng v. Ipanema Shoe Corp., 73 F. Supp. 2d 392, 405 (S.D.N.Y. 1999).59 Id.

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subsidiary. Instead, in Papa v. Katy Industries, Inc.,60 the court opted to apply the single employer doctrine only when (1) the corporate veil can be pierced, (2) companies split themselves into small entities to avoid statutory minimum threshold requirements, or (3) the parent company directed the discriminatory acts in question. The court observed that, simply being integrated, including having the parent set the subsidiaries’ salaries, provide benefit plans in which the subsidiaries’ employees participate, and approve checks over $50,000.00, did not warrant treatment as a single employer for purposes of subjecting them to federal discrimination laws.61

In EEOC v. Custom Companies, Inc.,62 the Northern District of Illinois extended the Papa rationale to include commonly owned affiliates and found that they constituted a single employer because one entity effectively directed the discriminatory acts of the other and, therefore, the court used the combined number of employees to determine what compensatory and punitive damage caps applied.63 The court reasoned in pertinent part as follows:

CEG and Custom share an owner, a President, Vice-Presidents of Operations and Sales, and human resource officers . . . . Plaintiffs must demonstrate that CEG directed the complained of act, policy, and procedure. CEG employed all executives and management-level personnel at Custom, including harassers. . . . Klonowski, who is responsible for Custom’s compliance with Title VII, is a CEG employee. Mandera, who was involved in the decisions to retaliatory terminate Copello and Kennedy and to sue Fritkin, is an employee of CEG. Thus, the court finds that CEG is properly a single employer with Custom.64

60 Papa v. Katy Indus., Inc., 166 F.3d 937 (7th Cir. 1999).61 Id. at 942.62 Custom Companies, Inc., 2007 WL 734395 (N.D. Ill. March 8, 2007).63 See footnote 44 for the statutory reference to the caps.64 Custom Companies, Inc., 2007 WL 734395, at *1, *5 (citations omitted).

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[4] —WARN Act — Single Employer Test.The Worker Adjustment and Retraining Notification Act (WARN

Act),65 which requires employers with at least 100 employees to provide advance notice before implementing a plant closing or a mass layoff, and establishes certain minimum employment loss thresholds (generally at least 50 employees), uses a variation of the NLRA single employer test to determine whether nominally separate companies can be treated as one and the same. The U.S. Department of Labor (DOL) adopted the following single employer test in the WARN Act’s implementing regulations:

[S]ubsidiaries which are wholly or partially owned by a parent company are treated as separate employers or as part of the parent … depending upon the degree of their independence from the parent. Some of the factors to be considered in making this determination are (i) common ownership, (ii) common directors and/or officers, (iii) de facto exercise of control, (iv) unity of personnel policies emanating from a common source, and (v) the dependency of operations.66

Of these factors, common ownership “is of limited significance to the inquiry at hand, since it is well established that stock ownership alone is not grounds for holding a parent company liable for its subsidiary’s actions.”67 Additionally, while a finding of common officers and directors favors parent liability, that fact also is of limited importance: “it is entirely appropriate for directors of a parent corporation to serve as directors of its subsidiary . . . . Since courts generally presume that directors are wearing their subsidiary hats and not their parent hats when acting for the subsidiary, it cannot be enough to establish liability . . . that dual officers and directors made policy decisions and supervised activities at the [subsidiary].”68

65 29 U.S.C. § 2101 et seq.66 20 C.F.R. § 639.3(a) (2).67 Austen v. Catterton Partners V, LP, 709 F. Supp. 2d 168, 174 (D. Conn. 2010); Guippone v. BH S & B Holdings, LLC, 2011 WL 6288396 (S.D.N.Y. Dec. 15, 2011).68 Id. at 175. See also Guippone, 2011 WL 6288396 at *5 (finding that common officers and directors are of limited importance because “directors and officers holding positions with a parent and its subsidiary can and do ‘change hats’ to represent the two corporations separately despite their common ownership.”); Vogt v. Greenmarine Holding, LLC, 318 F. Supp. 2d 136, 142 (S.D.N.Y. 2004) (same).

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In Pearson v. Component Technology Corporation, the Third Circuit explained that, “[a]ffiliated liability under the WARN Act is ultimately an inquiry into whether the two nominally separate entities operated at arm’s length.”69 Applying the DOL factors, the court ruled that a lender was not a single employer with the company that directly employed the workers. In so doing, the court offered several pertinent observations regarding the applicable criteria:

This [second] factor, which may be analogized to the integrated enterprise test’s “common management” factor, ordinarily looks to whether the two nominally separate corporations: (1) actually have the same people occupying officer or director positions with both companies, (2) repeatedly transfer management-level personnel between companies; or (3) have officer and directors of one company occupying some sort of formal management position with respect to the second company. . . .

[The third factor requires] the fact finder to focus the inquiry . . . on whether the companies actually functioned as a single entity with regard to its relationship with employees . . . .

We consider the “dependency of operations” factor to be virtually identical to the integrated enterprise test’s “interrelation of operations” factors, and will consider it in that light. When examining the “interrelation of operations” factor, courts generally consider the existence of arrangements such as the sharing of administrative or purchasing services, interchanges of employees or equipment, and comingled finances. . . .

. . . However, the mere fact that the subsidiary’s chain-of-command ultimately results in the top officers of the subsidiary reporting to the parent corporation does not establish the kind of day-to-day control necessary to establish an interrelations of operations. [Citations omitted.]

69 Pearson, 247 F.3d at 495.

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Moreover, dependency of operations cannot be established by the parent corporation’s exercise of its ordinary powers of ownership, i.e., to vote in directors and set general policies. . . .

. . . [T]he “de facto exercise of control factor” is not intended to impose liability based on a parent’s exercise of control pursuant to the ordinary incidents of stock ownership. . . . The factor is appropriately used, however, if the parent or lender was the decisionmaker responsible for the employment practice giving rise to the litigation . . . .

The DOL factors, like the integrated enterprise test, require that the two corporations be “highly integrated with respect to ownership and operations” before they will be considered a single employer for WARN Act purposes.70

[a] — Cases Supporting a Single Employer Finding.Applying the DOL factors, the court in Blair v. Infineon Technologies

AG71 ruled that the plaintiff adequately pled that a subsidiary and its parent corporation were a single employer for purposes of the WARN Act. Among other things, the plaintiff alleged that (1) the companies shared common ownership and at least three common officers, (2) the parent made the decision to force the subsidiary out of business and close the facility, (3) the parent included the subsidiary’s employees in its annual report, (4) the subsidiary’s employees participated in the parent’s benefit plans, (5) the parent provided general support services, such as purchasing, human resources, legal, and accounting, (6) the subsidiary was dependent on the parent for financing, and (7) the subsidiary was dependent on the parent for financing and the parent siphoned funds from the subsidiary by forcing the subsidiary to give the parent 87 percent of its revenue.

70 Id. at 498-505.71 Blair v. Infineon Tech. AG, 720 F. Supp. 2d 462 (D. Del. 2010).

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Similarly, in Austen v. Catterton Partners V, LP,72 the court denied the defendant’s motion to dismiss, finding a group of companies referred to as Catterton, which owned or controlled the stock of three other companies (“the Archway Entities”), and Insight, a management company Catterton hired to manage the Archway Entities, were a single employer. The court ruled that the plaintiffs adequately pled a single employer relationship by alleging that, (1) Catterton owned the Archway Entities (Insight, which owned no stock in the Archway Entities, did not meet this criterion, but that did not defeat the plaintiff’s claim), (2) the boards of directors of the Archway Entities were composed entirely of individuals from Catterton and Insight, (3) Catterton and Insight directly managed and ran the day-to-day operations of the Archway Entities, and (4) Catterton and Insight made the decision to close and terminate the Archway Entities’ employees.

Likewise, in Hollowell v. Orleans Regional Hospital, LLC,73 the court upheld a jury verdict finding that a hospital, the companies that owned the hospital, and a management company were a single employer. Significantly, the court observed that the common management factor was satisfied because the management company was created for that very purpose and the hospital’s administrator also served as the vice-president of the management company. The court added that there were unified employment polices because the employees of the various entities were all covered by the same benefits plans and employees who moved from one entity to the other did not lose coverage or have to wait the normal 90-day period to receive their benefits. Finally, in Vogt v. Greenmarine Holding, LLC, the court denied the defendants’ motion to dismiss, finding that the complaint adequately alleged a single employer relationship among the bankrupt employer that laid off the employees and certain investment companies that owned or controlled its stock. Despite finding that most of the factors did not weigh conclusively in favor of a single employer finding, the court ruled that the alleged facts regarding de facto control tipped the balance in favor of such a finding. The

72 Austen, 709 F. Supp. 2d 168.73 Hollowell v. Orleans Reg’l Hosp., LLC, 217 F. 3d 379 (5th Cir. 2000).

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court cited allegations that the investment companies hired the employer’s CEO and signed his employment agreement, caused the employer to prepare the resolution authorizing it to file for bankruptcy, and made the decision to close the plant.74

[b] — Cases Rejecting a Single Employer Finding.In contrast, the court granted summary judgment in favor of the

defendants in Guippone v. BH S&B Holdings, LLC. Significantly, the court ruled that the mere fact that the parent corporation’s board of managers resolved to authorize the subsidiary to implement a reduction in force did not establish de facto exercise of control. The court reasoned in pertinent part as follows:

[O]n November 10, 2008, Holdco’s Board of Managers resolved “in good faith that it is in the best interest of the Company to authorize Holdings to effectuate the Reduction in Force.”

At that time, it is undisputed that RAS has been retained by Holdings to serves as Holdings’ Chief Restructuring Officer. [Citation omitted.] In that capacity, RAS had “full responsibility for all of [Holdings’] operations, including, but not limited to, day to day management of all aspects of [Holdings] and its personnel and [would] report to [Holdings’] board of Directors . . . .

. . . Indeed, the fact that both the Holdco board and RAS, as Holdings’ CRO, ultimately concluded that layoffs would be necessary is insufficient to impose single employer liability on the parent company.

. . . [The] testimony plainly shows that RAS merely sought authorization from Holdco’s board to carry out actions that RAS [himself] had concluded were appropriate. Whether Holdco came to that conclusion independently — either before or after retaining

74 Id.

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RAS — is irrelevant, since there is no evidence to suggest that Holdco ordered anyone to do anything with regard to the layoffs.75

[5] — Family and Medical Leave Act — Integrated Employer Test.The Family and Medical Leave Act (FMLA),76 which requires

employers who employ at least 50 workers to grant certain leave benefits, also uses a regulatory test derived from the NLRA test to treat nominally separate companies as a single employer, in which case their employees can be aggregated to meet the jurisdictional threshold, periods of employment with one company can be credited towards periods of employment with another company for purposes of establishing eligibility, and the companies can be held jointly and severally responsible for violations. The FMLA’s implementing regulations provide in this regard as follows:

Separate entities will be deemed to be parts of a single employer for purposes of the FMLA if they meet the “integrated employer” test. Where this test is met, all employees of all entities making up the integrated employer will be counted in determining employer coverage and employee eligibility. A determination of whether or not separate entities are an integrated employer is not determined by the application of any single criterion, but rather the entire relationship is to be reviewed in its totality. Factors considered include:

(i) Common management;

(ii) Interrelation between operations;

(iii) Centralized control of labor relations; and

(iv) Common ownership.77

Under this test, no single factor is conclusive and the question ultimately turns on whether the parent “controls enough facets of the [subsidiary’s]

75 Guippone, 2011 WL 6288396 at *7-8.76 29 U.S.C. § 2601, et seq.77 29 C.F.R. § 825.104(c).

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business and operations, such that it has not maintained its economic distinctness.”78

In Edwards v. Branson Development,79 the court denied a motion to dismiss, finding disputed issues of material fact regarding the companies’ status as a single employer under the foregoing test. The court relied on evidence showing that (1) the companies shared office space, (2) they shared the same accountant, (3) their employees were on the same workers’ compensation policy, (4) they had the same President, who managed day-to-day operations of both companies, and (5) one company administered the payroll for both companies.

Conversely, in Englehardt v. S.P. Richards, the First Circuit ruled that the plaintiff’s employer (SPR) and its parent, a publically traded company (GPC), were not a single employer. The court relied on the following facts: (1) there was no common manager between the two companies, no SPR manager answered to a GPC employee, and they only shared two independent directors, neither of whom was involved in running either business; (2) the companies maintained separate headquarters, human resources departments, business records, and business functions; and (3) SPR makes all of its own employee-related decisions and, although SPR adopted GPC’s employment forms, benefit programs, and payroll services, GPC did not mandate this conduct and, in any event, the adoptions of such things simply demonstrated “SPR’s desire to capitalize on certain economies of scale.”80 Notably, with respect to the latter issue, the court made the following pertinent observations:

[Other courts have] rejected arguments similar to Engelhardt’s. They recognized that whether a subsidiary obtains services at arm’s length from its parent, for which it would otherwise have to go to more expensive outside vendors, is irrelevant to the goal of imposing liability on affiliated corporations; moreover, it is antithetical to the purpose for excepting smaller business from liability to impose liability on the parent.81

78 Engelhardt v. S.P. Richards Co., 472 F.3d 1, 5 (1st Cir. 2006).79 Edwards v. Branson Dev., LLC, 2010 WL 1878101 (W.D. Mo. May 10, 2010).80 Englehardt, 472 F.3d at 7.81 Id.

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Similarly, in Hukill v. Auto Care, Inc.,82 the court overturned a jury verdict in favor of the plaintiff, finding that it did not have jurisdiction over the claim because the plaintiff’s employer employed fewer than 50 workers and it was not part of a single employer. The court emphasized the following facts: (1) while an employee of one company acted as the general manager for each of the other companies, and the same person served as the President of each company, each such company had its own local manager who alone controlled day-to-day operations and had the authority to hire and fire, and (2) while there were some interrelated operations, including purchased administrative services and employee transfers, they were outweighed by the evidence showing that each company operated independently, including operating from separate locations, filing separate tax returns, holding their own board meetings, and conducting separate banking operations.

[6] — Fair Labor Standards Act — Single Enterprise and Joint Employer Tests.The Fair Labor Standards Act (FLSA),83 which mandates certain

minimum wages and overtime payments for employees employed by an enterprise engaged in commerce, does not use the traditional NLRA single employer test to aggregate companies. Instead, the FLSA uses a single enterprise test to determine whether two or more entities can be combined to meet the FLSA’s jurisdictional requirements,84 and then uses a joint employer test to determine if the companies can be held collectively responsible for any FLSA violations.85

For example, in Chao v. A-One Medical Services, Inc., supra, the Ninth Circuit explained that, to be covered by the FLSA as a single enterprise, the companies must engage in related activities (defined as the same or similar), have unified operations or common control (i.e., controlled by

82 Hukill v. Auto Care, Inc., 192 F.3d 437 (4th Cir. 1999).83 29 U.S.C. § 206, et seq.84 The FLSA applies to employees who are employed in “an enterprise engaged in commerce,” 29 U.S.C. § 207(a) (1), which turn, is defined as an enterprise that, inter alia, has annual gross revenue of at least $500,000. 29 U.S.C. § 203(s). 85 Chao v. A-One Med. Serv., Inc., 346 F.3d 908, 917 (9th Cir. 2003).

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one or more persons or corporations acting together), and have a common business purpose (usually found if the companies share related activities and common control). 86

For purposes of the joint employer inquiry, the court turned to the FLSA’s regulations, which provide that, “[a] determination of whether the employment by the employers is to be considered joint employment or separate and distinct employment for purposes of the act depends upon all of the facts in the particular case.”87 The regulations add that, where the employee performs work that simultaneously benefits two or more employers, or works for two or more employers during the same workweek, a joint employer relationship generally will be found to exist when the following facts are present:

(1) Where there is an arrangement between the employers to share the employee’s services; or

(2) Where one employer is acting directly or indirectly in the interest of the other employer (or employers) in relation to the employee; or

(3) Where the employers are not completely disassociated with respect to the employment of a particular employee and may be deemed to share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer.88

Applying these regulations, the court found that the companies were a joint employer, principally because one individual effectively controlled both companies and managed both groups of employees.89

In Cornell v. CF Center, LLC,90 the Eleventh Circuit confirmed the validity of this two-step approach. For purposes of the first inquiry, the court ruled that the companies were a single enterprise because they functioned as a single unit selling and installing floors. The court relied on evidence

86 Id. at 915–16.87 29 C.F.R. § 791.2(a).88 29 C.F.R. § 791.2(b) (footnotes omitted).89 A-One Med. Serv., Inc., 346 F.3d at 918.90 Cornell v. CF Center, LLC, 410 Fed. Appx. 265, 267 (11th Cir. 2011).

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showing that (1) the companies used business cards with the same company name and same location, (2) the companies shared a website, (3) each company used a liability release that covered both companies, (4) employees of one company had to sign a safety policy that identified the other company as their employer, and (5) both groups of employees participated in one company’s health plan. With respect to the joint employer inquiry, the court found that the same evidence satisfied that test as well, observing that “the multiple corporate defendants were acting in one purpose, a purpose that the employment of Cornell and Harp furthered. Appellants often conflated what corporation conducted what activity. This confusion included matters of employment . . . .”91

Further, in Chao v. Barbeque Ventures, LLC,92 the court applied the same test and found that the companies were both a single enterprise and a joint employer. The court relied on facts showing that (1) they shared common ownership and business purposes, (2) they were overseen by the same Area Director, and (3) the same individual served as the manager of each company.

Finally, in In re Enterprise Rent-A-Car,93 the Third Circuit considered the appropriate joint employer test in the context of a parent company that owned 38 subsidiaries (because the companies clearly fell within the FLS’’s jurisdiction, the court did not consider the integrated enterprise issue). The district court found that Enterprise Holdings, Inc. (the parent company) and its 38 subsidiaries were not a joint employer of the subsidiaries’ employees because, even though the parent company offered business guidelines, benefit plans, rental reservation tools, human resources, and other services, the subsidiaries’ participation and/or use of those guidelines and services was not mandatory, but rather up to the subsidiaries’ discretion.

Although the Third Circuit affirmed the district court’s finding that the parent company was not a joint employer with its 38 subsidiaries, the Third Circuit developed its own joint employer test:

When faced with a question requiring examination of a potential joint employment relationship under the FLSA, we conclude that

91 Id. at 268.92 Chao v. Barbeque Ventures, LLC, 2007 WL 5971772, *5–6 (D. Neb. Dec. 12, 2007).93 In re Enterprise Rent-A-Car, 683 D.3d 462, 467 (3d Cir. June 28, 2012).

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courts should consider: 1) the alleged employer’s authority to hire and fire the relevant employees; 2) the alleged employer’s authority to promulgate work rules and assignments and to set the employee’s conditions of employment: compensation, benefits, and work schedules, including the rate and method of payment: 3) the alleged employer’s involvement in day-to-day employee supervision, including employee discipline; and 4) the alleged employer’s actual control of employee records, such as payroll, insurance, or taxes. As we have noted, however, this list in not exhaustive and cannot be “blindly applied” as the sole considerations necessary to determine joint employment. [Citation omitted.] If a court concludes that other indicia of “significant control” are present to suggest that a given employer was a joint employer of an employee, that determination may be persuasive, when incorporated with the individual factors we have set forth.94

Applying this test, the Third Circuit concluded that the record supported the district court’s findings that the parent company was not a joint employer with its 38 subsidiaries. The Third Circuit observed that the parent did not have any authority to hire, fire, discipline, supervise, or set the compensation of the subsidiaries’ employees. Additionally, the Third Circuit agreed with the district court’s finding that the parent company’s suggested policies and practices did not rise to the level of mandatory directions, but instead, constituted recommendations and, therefore, the parent “had no more authority over the conditions of the assistant managers’ employment than would a third-party consultant who made suggestions for improvements to the subsidiaries’ business practices.”95

[7] — Office of Federal Contract Compliance Programs — Single Entity Test.Under a variety of federal statutes and regulations, companies that

supply goods and services to the federal government are considered to be

94 Id at 469–70.95 Id.

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government contractors and must comply with a variety of equal employment opportunity requirements, some of which apply only if the company employs more than 50 employees.96

The Office of Federal Contract Compliance Programs (OFCCP) has developed its own test for determining if companies can be treated as one and the same for purposes of federal contactor compliance obligations. The OFCCP describes this test in the following question and answer posted on its website:

We don’t do any government work here. Federal Government work is performed in some other division in another state. Are we subject to the equal employment laws enforced by OFCCP?

Yes. Generally speaking, once it has been determined that a business or organization is subject to the civil rights requirements enforced by OFCCP, all of the business’s or organization’s establishments or facilities will be subject to the same regulatory requirements, regardless of where the Federal contract is to be performed.

In addition, some businesses or organizations that do not independently hold Government contracts/subcontracts may still be covered under the laws enforced by OFCCP if they are considered a “single entity” with a related business or organization that holds such contracts. In such instances, OFCCP uses a “single entity”

test to determine whether the businesses or organizations are so closely related that they may constitute a single entity for purposes of OFCCP jurisdiction. The test requires OFCCP to consider whether:

the entities have common ownership;

the entities have common directors and/or officers;

one entity has de facto day-to-day control over the other through policies, management or supervision of the entity’s operations;

96 See Executive Order 11246, as amended; Section 503 of the Rehabilitation Act of 1973, 29 U.S.C. § 793; the Vietnam Veterans Readjustment Assistance Act of 1974, 38 U.S.C. § 4212; and the implementing regulations found at 41 C.F.R. Part 60 et seq.

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the personnel policies of the entities emanate from a common or centralized source; and

the operations of the entities are dependent on each other, e.g., services are provided principally for the benefit of one entity by another and/or both entities share management, offices, or other services.

The test focuses primarily on whether the ownership, management, and operations of the separate entities are, in fact, sufficiently interrelated to warrant treating them as an integrated enterprise or a single entity. A business or organization need not meet all five factors to be considered a single entity with a covered Federal contractor. However, there is growing recognition that centralized control over labor relations and personnel functions is the most important factor (emphasis added). By way of example, say that two entities are under common ownership, with a common board of directors, and have a central corporate office that determines and issues personnel policy for both entities, and generally manages most personnel-related issues for both entities. At the same time, the operations of the two entities are not particularly dependent on each other. Despite the fact that one of the factors did not apply, the four factors that did outweigh the one that did not, so that the two entities being analyzed will most likely be considered a single entity.97 (Emphasis added.)

[8] — Employee Retirement Income Security Act (ERISA) — Controlled Group and Alter Ego Tests.The Employee Retirement Income Security Act (ERISA),98 which

regulates the treatment and administration of pension and welfare benefit plans, uses two approaches for treating nominally separate companies as a single employer. First, for a variety of purposes including, most notably, responsibility for terminating a defined benefit pension plan, liability for a withdrawal from a multiemployer pension plan, and discrimination testing for self-insured medical plans, ERISA treats members of a controlled group as a

97 http://www.dol.gov/ofccp/regs/compliance/faqs/emprfaqs.htm.98 29 U.S.C. § 1001, et seq.

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single employer.99 Controlled group determinations are made in accordance with IRS regulations that focus exclusively on ownership percentages.100 Second, even if companies are not part of a controlled group, courts frequently will consider whether they can be held jointly and severally liable for ERISA obligations under a single employer or alter ego analysis.

[a] — Controlled Group Tests.Under the most frequently used IRS regulations, there are three types

of controlled groups: (1) a parent-subsidiary controlled group, (2) a brother-sister controlled group, and (3) a combined group of trades or business under common control.

A parent-subsidiary controlled group consists of one or more chains of trades or businesses with a common parent organization, where the parent, directly or indirectly, owns a controlling interest (at least 80 percent) of each such entity.101 For example, if Parent Company A owns 100 percent of the stock of Subsidiary B, which in turn, owns 100 percent of the stock of Subsidiary C, then A, B, and C are in a parent-subsidiary controlled group and all three can be held responsible for Subsidiary C’s multiemployer pension plan withdrawal liability. If, however, Subsidiary B also owns 50 percent of the stock of Subsidiary D and the balance is owned by an unrelated third party, then Subsidiary D would not be part of the controlled group and could not be held liable for Subsidiary C’s pension plan withdrawal liability.

99 29 U.S.C. § 1301(b) & 26 U.S.C. §105(h) (8). Note that all members of the controlled group as of the date of the withdrawal are jointly and severally responsible for withdrawal liability assessed against any member of the group. IUE AFL-CIO Pension Fund v. Barker & Williamson, Inc., 788 F.2d 118, 123 (3d Cir. 1986) (holding that company with an option to buy the signatory as of the date of withdrawal was in the controlled group and could be held jointly liable); Teamsters Pension Trust Fund of Philadelphia v. Brigadier Leasing Assoc., 880 F. Supp. 388, 396 (E.D. Pa. 1995) (holding that companies that joined the controlled group after the date of the withdrawal could not be held responsible for the withdrawal liability); Connors v. Incoal Inc., 699 F. Supp. 3 (D.D.C. 1988), aff’d, 907 F. 2d 1227 (D.C. Cir. 1990) (holding partnership that dissolved before the signatory ceased covered operations was not under common control at the time of the withdrawal and, therefore, could not be held liable). 100 26 C.F.R. § 1.414(c).101 26 C.F.R. § 1.414(c)-2(b).

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A brother-sister controlled group consists of trades or businesses in which (1) the same five or fewer persons (companies or individuals) collectively own a “controlling interest” (at least 80 percent) of each trade or business, and (2) taking into account only the ownership of each person to the extent the ownership is identical in each trade or business, the same five or fewer persons are in “effective control” (own more than 50 percent) of each such trade or business.102

A combined group of trades or businesses under common control is a controlled group that consists of a combination of a parent-subsidiary controlled group and a brother-sister controlled group.103

For purposes of controlled group determinations, the IRS regulations include complicated constructive ownership rules that attribute ownership from one person or entity to another person or entity in certain circumstances and exclude certain ownership interests in other circumstances. For example, subject to a few exceptions, stock owned by a spouse will be attributed to the other spouse, stock owned by a minor child will be imputed to a parent (and vice versa), and stock owned by an adult child will be imputed to the parent if the parent owns more than 50 percent of the company.104 Additionally, under certain circumstances, ownership interests or stock held by employees that include limitations on the employees’ rights to dispose of the stock or interests will be treated as not outstanding omitted from the calculation.105

The controlled group rules can be illustrated by the following examples:

Individuals Company A Company B Company C Company D Company E

Father 100 percent 60 percent 60 percent 50 percent

Mother 10 percentAdult Son 1 10 percent 20 percent 50 percentAdult Son 2 10 percent

Minor Son 10 percent

Other 40 percent 30 percent 50 percent

102 26 C.F.R. § 1.414(c)-2(c).103 26 C.F.R. § 1.414(c)-2(d).104 26 C.F.R. § 1.414(c)-4.105 26 C.F.R. § 1.414(c)-3.

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Companies A and B would be in a controlled group because the Father owns 100 percent of Company A and 100 percent of Company B (the wife’s interest and the Minor Son’s interests in Company B would be imputed to the Father and, because the father owned more than 50 percent of Company B, the Adult Sons’ interests also would be imputed to the Father).

Companies C and D would be in a separate controlled group because the Father and Other would collectively own a controlling interest in each company (at least 80 percent) and would be in effective control of each company (own at least 50 percent of each company, using only the amounts that are identical — 50 percent for Father and 30 percent for Other). Companies A and B would not be part of this controlled group because, considering only those with common ownership (the Father), he does not own at least 80 percent of Companies C and D.

Company E would not be in a controlled group with any other Company. Companies D and E are not in a controlled group because the only common owners (Adult Son 1 and Other) do not collectively own a controlling interest (at least 80 percent) of each Company. Likewise, Companies A, B and E are not in a controlled group because the only common owner (Adult Son 1) does not own a controlling interest (at least 80 percent) of each Company. Finally, Companies C and E are not in a controlled group because the only common owner (Other) does not own a controlling interest (at least 80 percent) of each Company.

[b] — Single Employer and Alter Ego Tests.Even if companies are not part of a controlled group, courts frequently

consider whether they can be treated as one entity and held jointly and severally responsible for ERISA violations under two additional tests - the single employer/single bargaining unit test and the alter ego test. As the court explained in Duffy v. Modern Waste Services Corp.,106 “[al]though these two doctrines are ‘conceptually distinct,’ that distinction has proven difficult to articulate. The case law attempting to define the contours of each doctrine seems to hold that the single employer/single bargaining unit

106 Duffy v. Modern Waste Serv. Corp., 2011 WL 573564 (E.D.N.Y. Feb. 14, 2011).

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doctrine is available where the entities operate concurrently and that the alter ego doctrine typically applies if one entity effectively replaced the other in an attempt to evade the latter’s obligations under a collective bargaining agreement.”107 Therefore, the “focus of the alter ego doctrine . . . is on the existence of a disguised continuance or an attempt to avoid the obligations of a collective bargaining agreement through a sham transaction or technical change in ownership.”108 Nonetheless, avoidance of a collective bargaining agreement is not essential to an alter ego finding,109 and the alter ego doctrine can apply even to companies that exist concurrently.110

[i] — Single Employer/Single Unit Test.Under the single employer/single unit test, courts first consider the

traditional NLRA factors — common ownership, common management, interrelated operations, and centralized control over labor relations, with a focus on whether there is “an absence of an arm’s length relationship found among integrated companies.”111 Next, courts consider whether the companies’ respective employees also comprise a compatible bargaining unit. If so, then courts will treat the respective entities as being a single employer, as jointly bound by a collective bargaining agreement only one of them may have signed, and as jointly responsible for each entity’s respective ERISA obligations.112

107 Id. at *4 (citations omitted).108 LaBarbera v. Cretty Enter., 2007 WL 4232765 (E.D.N.Y. Nov. 28, 2007).109 Gov’t Dev. Bank for Puerto Rico v. Holt Marine, 2011 WL 1135944, at *21(E.D. Pa. March 24, 2011).110 LaBarbera v. R. Rio Trucking, 2010 WL 3928553, at *9 (E.D.N.Y. Sept. 30, 2010).111 Cretty Enter., 2007 WL 4232765, at *5. The court in Holt Marine, supra, added that, “[i]n determining whether two entities have interrelated operations, courts within this circuit have considered such factors as whether the entities share equipment, funds, personnel, and office space,” and that “[i]n analyzing whether entities share common control over labor relations, courts have examined whether labor and employment decisions are controlled by the same entity or the same individuals [footnote omitted], whether the work forces at each company have separate identities or whether there is frequent interchange of employees between the entities; and whether the employees of one entity work for the other without compensation.” 2011 WL 1135944, at *22–28. 112 Brown v. Sandimo Metals, 250 F. 3d 120, 128 n.2 (2d Cir. 2001). But see Moriarity v. Svec, 164 F. 3d 323, 334 (7th Cir. 1999) (single employer finding alone is enough to require

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For example, in LaBarbera v. Cretty Enterprises, the court found that the companies (one union and one non-union) constituted a single employer/single bargaining unit because (1) they shared office space, (2) they used the same office staff and exchanged drivers, (3) the same individual owned both companies at all relevant times, and (4) that individual was involved in the day-to-day operations of both companies. As a result, the court held that the companies were jointly bound by the same collective bargaining agreement and jointly liable for delinquent contributions due under that agreement. Additionally, the court ordered the non-union company to submit to an audit of its records so that the plaintiffs could determine the amount of its delinquent contributions.113

Similarly, in Duffy v. Modern Waste Services Corp., the court applied these tests and ruled that the companies were bound by a collective bargaining agreement that only one of them had signed. The court focused on facts showing that the companies were commonly owned by a husband and wife and that they shared employees, offices, equipment, and professional and administrative services.114

In Finkel v. S.I. Associates Co.,115 the court used the same tests, but found that the companies were not a single employer. The court relied on facts showing that, although two brothers owned the respective companies, they did not share ownership of the companies, they separately managed the two companies, and each company hired and paid its own employees.

Finally, in Government Development Bank for Puerto Rico v. Holt Marine, the court faced an unusual situation in which companies who were part of a controlled group and held responsible for a bankrupt member company’s withdrawal liability tried to recover the payments from other related companies that they alleged were a single employer with the bankrupt employer. The court found that the other companies did not constitute a single

contributions for all employees who fall within the terms of the applicable collective bargaining agreement). 113 Cretty Enterprises, 2007 WL 4232765 at *7.114 Duffy, 2011 WL 573564, at *5.115 Finkel v. S.I. Assoc. Co., 2008 WL 2630297 (E.D.N.Y. June 30, 2008).

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employer because (1) although SLS provided accounting services for NRP, it was consistent with normal outsourcing and SLS did not use NRP’s funds for its own purposes, (2) NRP decided on its own to lay off employees as part of its strategy to cut costs and outsource, (3) there was no common ownership or financial control, and (4) while the companies shared one overlapping officer, that fact “cannot support an inference of common management, where the facts suggest that fundamental decision at each entity were largely made by internal, non-overlapping personnel.”116

[ii] — Alter Ego.In New York State Teamsters Conference Pension and Retirement Fund

v. Express Services, the court described the alter ego inquiry as focusing “on commonality of (i) management, (ii) business purpose, (iii) operations, (iv) equipment, (v) customers, and (vi) supervision and ownership.”117 Relying on these factors, the court found that three commonly owned companies were not alter egos. The court observed that, although the companies were involved in different, but related lines of business within the freight transportation industry, they did not share any customers or equipment, and the Fund’s allegations of a common mailing address and shared management, by themselves, did not raise a disputed issue of material fact.118

Nonetheless, in Brown v. Astro Holdings, Inc.119 and Holt Marine,120 the courts addressed a unique issue — whether the alter ego doctrine could be used to impose liability on a controlled group member’s alleged alter ego. The courts ruled that, while the alter ego theory can be used to hold the signatory employer’s alter ego(s) liable under ERISA, that theory cannot also be used to impose liability on the alleged alter egos of the signatory employer’s controlled group members. For example, if A is the signatory employer and B is in its controlled group, the alter ego theory can be used

116 Gov’t Dev. Bank for Puerto Rico v. Holt Marine, 2011 WL 1135944, at *24.117 New York State Teamsters Conference Pension and Retirement Fund v. Express Serv., 426 F.3d 640, 649 (2d Cir. 2005).118 Express Services, 426 F.3d at 650.119 Brown v. Astro Holdings, Inc., 385 F. Supp. 2d 519, 532 (E.D. Pa. 2005).120 Holt Marine, 2011 WL 1135944.

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to hold C liable as A’s alter ego, but it cannot be used to hold C liable as B’s alter ego. The courts reasoned that, while extending liability to the alleged alter ego of the signatory employer is consistent with ERISA because the alter ego is one and the same as the signatory employer, extending the liability to the alleged alter egos of a controlled group member would conflict with ERISA’s detailed controlled group rules.

[9] — Federal Mine Safety and Health Act — Unitary Operator Test.The Federal Mine Safety and Health Act of 1977 (Mine Act),121 which

imposes mandatory safety standards on the operation of coal and other mines, uses the traditional NLRA approach to determine whether nominally separate but integrated companies can be treated as a “unitary operator” and held responsible for compliance with the Mine Act, but substitutes centralized control over mine safety and health for centralized control over labor relations.

The Federal Mine Safety and Health Review Commission adopted the unitary operator theory in Secretary of Labor v. Berwind Resources Corp.122 Relying on the single employer case law developed under the NLRA and Title VII, the Commission ruled that nominally separate companies could be treated as a “unitary operator” and held jointly and severally responsible for compliance with the Mine Act. Under this analysis, the Commissions will consider “(1) interrelation of operations, (2) common management, (3) centralized control over mine health and safety, and (4) common ownership.”123 As with the NLRA test, no single factor is controlling. Instead, the Commission “will weigh the totality of the circumstances to determine whether one corporate entity exercised such pervasive control over the other that the two entities should be treated as one.”124

In Berwind, the Secretary argued that Berwind Natural Resources Corp. (Berwind Corp.) and its wholly owned subsidiaries, Kentucky Berwind

121 30 U.S.C. § 801, et seq.122 Secretary of Labor v. Berwind Res. Corp., 21 F.M.S.H.R.C. 1284 (1999).123 Id. at 1317.124 Id.

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Land Company (Berwind Land), Kyber Coal Company (Kyber), and Jesse Branch Coal Company (Jesse), should be held jointly liable for an explosion that occurred at a mine being operated by a contractor, AA&W Coals, Inc. (“AA”). Berwind Land leased the subject coal reserves to Kyber, which in turn, retained AA to mine the coal. Jesse provided engineering services at the mine.

Initially, the Commission determined that Kyber could be treated as an operator under the Mine Act given its control over AA’s mining operations. Next, the Commission considered whether the other related entities could be held jointly responsible with Kyber under the unity operator theory. The Commission determined that, while Berwind Corp. was not part of a unitary operator, Kyber and Jesse were sufficiently integrated to be treated as a unitary operator. Among other things, the Commission relied on facts showing that (1) their officers and directors were essentially identical, (2) their operations were highly integrated in connection with the mine in question in that they used the same office, shared machinery and equipment, and sometime shared employees, (3) AA, the contractor, viewed the companies as interchangeable, and (4) they jointly exercised control over safety at the mine in question in that Jesse incorporated Kyber’s determinations regarding mine projections into the mine maps that were submitted to federal and state authorities, and that the same person, serving in the capacity as Vice President for both companies, supervised Jesse’s engineering work.125

More recently, in Secretary of Labor v. Armstrong Coal Company,126 Administrative Law Judge Jerold Feldman applied the unitary operator theory to hold two subsidiaries responsible for temporarily reinstating a miner. Citing Berwind, Judge Feldman ruled that the two subsidiaries could be treated as a unitary operator because (1) they shared common ownership, (2) their operations were interrelated in that one company provided services to the other company and shared the same business address, (3) the

125 Despite determining that Kyber and Jesse constituted a unitary operator, a majority of the Commission refused to hold them jointly liable for any violations because it would violate their due process rights to apply this newly adopted theory of liability retroactively. Id. at 1324.126 Secretary of Labor v. Armstrong Coal Co., KENT 2012-655-D (April 20, 2012).

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Director of Human Resources for one of the companies, which was not the employee’s nominal employer, actually notified the employee that he was being terminated.

§ 2.03. Information/Discovery Requests.As a practical matter, single employer claims present two problems for

companies. First, they create obvious liability risks. Second, they typically include extremely burdensome and probing information and/or discovery requests. Although companies can object to the requests, the objections are difficult to sustain given the fact intensive nature of the single employer test criterion. To illustrate this problem, and to help the reader appreciate areas of vulnerability, the following sections include several typical information/discovery requests.

[1] — National Labor Relations Board (NRLA) — Requests for Information. Section 8(a) (5) of the National Labor Relations Act (NLRA)127 requires

that companies whose employees are represented by unions to bargain with the unions bargain in good faith over the terms and conditions of employment. This duty includes an obligation to provide, upon request, information relevant to the union’s efforts to fulfill its role as the employees’ bargaining representative. While information regarding the unionized employer is treated as presumptively relevant, requests for information regarding other companies is not relevant unless and until the union has an objective basis for believing that a single employer relationship exists.128

Under the NLRA, the union generally need not inform the employer of the grounds for its belief that the entities constitute a single employer. Instead, if the company with the bargaining obligation fails to provide requested information and the union files an unfair labor practice charge, the union must inform the NLRB’s General Counsel of the grounds for its belief that the companies constitute a single employer. In the event the matter goes to hearing, the General Counsel must prove that the union had an objectively

127 National Labor Relations Act, 29 U.S.C. § 158(a) (5).128 Cannelton Indus., Inc., 339 N.L.R.B. 996, 997 (2003).

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reasonable basis for believing that the companies were a single employer when it requested the information.129 Nonetheless, in the Third Circuit, the union must inform the employer of the grounds for its reasonable belief that a single employer exists before the employer can be compelled to provide the information.130

In any event, the burden of demonstrating an objectively reasonable belief is relatively light and can be satisfied with hearsay or other evidence that may turn out to have been inaccurate.131 Assuming this burden has been met, the NLRB generally will order the employer to provide the requested information, subject to any confidentiality or burdensome objections the employer raises and bargains over with the union.132 Indeed, the NLRB does not appear to be troubled by the fact that an information request may require a non-signatory member of the putative single employer to provide information to the union even before the NLRB has ruled that it is a single employer.133

The Cannelton decision demonstrates the breadth of the single employer information a union may request and the NLRB may enforce. A complete copy of the Cannelton request is attached to the decision; however, the following text highlights a few of the requests to illustrate this point:

129 Piggly Wiggly Midwest, LLC, 357 N.L.R.B. No. 191 (2012); Cannelton, 339 N.L.R.B. at 997.130 Hertz Corp. v. NLRB, 105 F.3d 868, 874 (3d Cir. 1997).131 Racetrack Food Serv., Inc., 353 N.L.R.B. No. 76 (2008); Dodger Theatricals Holdings, Inc., 347 N.L.R.B. 953 (2006). For example, in Cannelton, the NLRB ordered the employer to provide the requested information based on evidence the Union produced showing that (1) the respondents shared a common address, some common officers, and some other personnel and equipment, and (2) radio communications the union intercepted indicating that coal mined by one company was being shipped to and blended by the other company. 339 N.L.R.B. at 997.132 H&R Indus. Serv., Inc., 351 N.L.R.B. 1222 (2007) (holding that employer waived burdensomeness defense by not first raising it with the union).133 See Cannelton, 339 N.L.R.B. at 1006 (“To the extent that they answered some requests based on their understanding of the relationship between CC Coal and them was irrelevant, or directing the Union to another company to provide the information, or denying the relevance of the Union’s request, Respondents shall answer those requests again, based on the findings in this decision that the relationships are relevant, as are the questions.”).

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Please provide all documents which contain any organizational charts, bulletins, or explanations of “corporate trees” which concern the corporate relationship between CC Coal, the UMWA signatory companies, and any and all commonly related companies.

For CC Coal / Cannelton / Princess Beverly, identify (or in the alternative provide documents which reflect) the person or persons responsible for performing duties and making management decisions in connection with

a. Coal sales;b. Accounting and payroll;c. Hourly and/or salaried employee benefit plans, including,

but not limited to, pension plans, health plans, disability plans, sickness and accident plans, insurance plans, and profit sharing or financial bonus plans in which officers, managers, supervisors, or employees may or do participate.

d. Grievance handling;e. Collective bargaining;f. Labor relations;g. Human resources or personnel;h. Preparation of federal and state income tax returns;i. Engineering;j. Coal production;k. Purchasing, leasing, contracting or any other manner of

conveying or transferring mining supplies and equipment;l. Liability insurance;m. Laboratory services;n. Legal representation or legal counsel;o. Auditing;p. Credit;q. Purchasing of equipment;r. Estimating;s. Land or mineral right acquisition, sale, transfer or other

conveyance;t. Transportation services;

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u. Obtaining bonds, permits, and other licenses;v. Contracting for services and administration of commercial

contracts;w. Maintenance;x. Secretarial duties.

Identify the officers and/or directors of CC Coal, Cannelton, and Princess Beverly. Identify any positions each individual holds with any related companies.

Please provide a list of all equipment used by CC Coal in its mining operation, including the serial number, name of manufacturer, model description, class description, model year, and AEI equipment number.

Produce all documents concerning the sale, transfer, leasing, lending, or transport of personal property, including but not limited to equipment, supplies, and spare parts, between UMWA signatories [and] CC Coal.

If coal from either CC Coal or a UMWA signatory is sold or transferred to a related corporate entity or person prior to being sold or transferred to an unrelated company or person, provide all contracts, sales or brokerage agreements, or similar instruments which reflect the terms and conditions for the sale, production, delivery, or brokerage of coal by and between all related companies.

Identify all persons employed by CC Coal, Cannelton and Princess Beverly, that perform work or provide services for another related company. For each, state the companies worked for, the functions and services performed for each company, and the company who pays each person, pays social security, handles taxes and benefits.

Identify the bank account(s) by bank account number, holder, and name of account from which CC Coal and each signatory company presently pay their expenses of operation, including, but not limited to the payments of employees’ wages and benefits. Identify the person(s) who opened the account(s) and the persons authorized to make deposits and/or withdrawal funds from each account.

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[2] — Employee Retirement Income Security Act (ERISA) Request for Information.Many multiemployer trust agreements authorize the trustees to audit

contributing employers and, as part of the audit process, the trustees may review a host of information, including information regarding the employer’s employees who are outside of the bargaining unit.134 If the trustees believe a signatory employer and another entity are a single employer or alter egos, the trustees may claim that they need to audit the other entity to determine whether the other entity performed any work for which contributions should have been paid.135 To enforce any such demands, trustees can file a lawsuit in federal court under ERISA and use the discovery process to help prove that the entities constitute a single employer or alter ego.136

As with cases under the National Labor Relations Act, the following excerpts from a discovery request in a federal court case where a trust fund was alleging that the signatory employer and several other companies were a single employer illustrates the breadth of the possible inquiry in such cases:

All Articles of Incorporation, corporate registration documents, bylaws, stock certificates and/or shareholder agreements, including all riders and/or amendments, issued by or concerning [the signatory company].

All documents identifying any person or entity that has or had any ownership interest in each company.

All documents identifying any person as being a manager or supervisor for the Affiliates, whether or not an employee of the Affiliates, at any time.

All leases, agreements and/or contracts of any kind between or among the Companies (or any of them), including, without limitation, any factoring or other financing agreement or arrangement among or

134 Central States, Southeast and Southwest Area Pension Fund v. Central Transport, Inc., 472 U.S. 559, 562-63 (1985).135 See, e.g., Cretty Enterprises, 2007 WL 4232765.136 29 U.S.C. §§ 1132 & 1145.

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between any of them, and all documents that refer, reflect or relate to any oral leases or contracts between or among the Companies, including, without limitation, any oral factoring or other financing agreement or arrangement among the Companies.

All documents concerning vehicles and equipment owned, operated, rented, leased, or used by the Companies, including Title, Registration and Insurance Certificates, and documents pertaining to the sale, transfer or disposition of any permit or license.

Any and all records reflecting any employee benefits, including, but not limited to, health or deferred salary plan/401(k) benefits, provided by the Affiliates to any employees who performed any work for the Affiliates.

All leases, rental agreements, and/or occupancy agreements concerning any real property used or occupied by the Companies (whether owned, controlled and/or managed individually, jointly or in common) including all documents reflecting any oral agreement concerning the use or occupancy of any real property.

Any and all records of any financial transactions among and between the Companies, including documents where refer, reflect or relate to any ownership or interest by or on behalf of the Companies in any partnership, corporation, business, proprietorship, limited liability company or any other business organization.

All contracts between or among any customer and the Companies.

All invoices sent by the Companies to any customer.

Any print, electronic, or on-line advertisements or announcements regarding the services provided by or available from the Companies.

All documents which refer, reflect or relate to any personnel action taken, including, but not limited to disciplinary action, discharge, promotion, or transfer, with respect to any employee, owner operator, temporary employee or independent contractor of the Companies.

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All employee handbooks, employee work rules, codes of conduct, employment policies (such as anti-discrimination or harassment policies) applicable to the employees of the Companies.

All written service or performance contracts or invoice, and any documents reflecting such contracts or invoices, and/or any documents reflecting any oral contracts or arrangements, for any services or performance between or among the Companies.

Any telephone, mailing or e-mail directories listing any officers, directors or employees of the Companies.

[3] — Office of Federal Contract Compliance Programs (OFCCP) Questionnaire.To determine whether companies constitute a single employer for

purposes of government contractor obligations, the OFCCP uses a 27-Point Questionnaire,137 which reads as follows:

The following question relates to factor 1: Common ownership 1. What percentage of stock of the subsidiary or affiliate is owned by the

parent corporation?

The following questions relate to factor 2: Common directors and/or officers 2. What are the names of the directors on the Board of the parent

corporation? 3. What are the names of the directors on the Board of the subsidiary or

affiliate corporation? 4. What are the names of the directors on the Board of both the parent and

the subsidiary corporation? 5. What are the names of the officers of both the parent and the subsidiary

corporation? 6. What positions do the individuals in No. 5 hold in each corporation?

137 http://www.dol.gov/elaws/esa/ofccp/assessment.asp.

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The following questions relate to factor 3: De facto exercise of control 7. Does the parent corporation pay the wages of any of the subsidiary’s

employees? 8. Does the parent corporation pay any other expenses of the subsidiary?

If yes, which expenses are paid? 9. Does the parent corporation negotiate and/or provide health insurance,

pension or any other employment-related benefits of the subsidiary corporation?

10. In advertising, is the subsidiary referred to as part of the parent corporation?

11. In financial statements of either corporation, is the subsidiary described as a department or division of the parent corporation?

12. Does the same in-house legal staff serve both the parent and the subsidiary corporation?

13. Are any services provided by the parent corporation for the subsidiary corporation or vice versa? If yes, what services?

14. Are the books and/or financial records of the parent and subsidiary kept separately?

The following questions relate to factor 4: Unity of personnel policies emanating from a common source 15. Does the parent corporation control the hiring and/or compensation

practices and procedures of the subsidiary? For example: a. Does the parent corporation establish hiring standards for the

subsidiary? b. Does the parent corporation establish any compensation ranges or

criteria for the subsidiary? c. Does the parent corporation establish equal employment opportunity

policy for the subsidiary? 16. Does the parent review and/or control the labor practices of the

subsidiary? For example: a. Does the parent negotiate and/or take part in the negotiation of

collective bargaining agreements of the subsidiary?

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b. Does the parent sign the collective bargaining agreements of the subsidiary?

17. Is there ever an exchange of personnel between parent and subsidiary? If yes, does the individual who transfers retain the same seniority date used at the transferor corporation for the purposes of benefits, promotions, layoffs and/or recall?

18. Does the parent recruit personnel for the subsidiary or vice versa? 19. Does the parent hire the subsidiary’s top management officials or vice

versa? 20. Are minority employees of the subsidiary listed on the EEO-1 reports

of the parent?

The following questions relate to factor 5: Dependency of operations 21. Has there ever been an infusion of capital from the parent to the

subsidiary or vice versa? If yes, list dates and amount. 22. What percentage of the subsidiary’s business is with the parent? 23. What percentage of the parent’s business is with the subsidiary? 24. Does either the parent or the subsidiary use any of the property of the

other? If so, what property? 25. Is the product or service of either the parent or the subsidiary essential to

the conduct or operation of the other’s business? If yes, list the product(s) or service(s).

26. Does either the parent or the subsidiary provide any marketing service for the other?

27. Would either the parent or the subsidiary be unable to function if the other ceases operation?

§ 2.04. Key Points.While there are a variety of single employer tests, the critical criteria in

nearly every test are common ownership, common management, interrelated operations, and centralized control over labor relations. Despite the relatively straightforward nature of the test criteria, the devil is in the details: (1) the analysis is very fact intensive; (2) there is no universal standard regarding what facts will result in a single employer finding, or will insulate companies

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from such a finding; and (3) the decision often turns on how the court or agency chooses to weigh all of the evidence.

The most effective way to avoid being treated as a single employer is to keep each company completely separate and distinct, with each one having its own managers, operations, and administrative staffs; however, such an approach necessarily sacrifices potential efficiencies and adds costs. Given the fact-intensive nature of the test and the inevitable tension between efficiency and liability protection, a reasonable goal should be to find a balance that maintains certain efficiencies, but includes sufficient arm’s length attributes to keep the “pile of sticks” from getting to be too large.

§ 2.05. Twenty Practical Suggestions.1. Centralize employees who provide specialized services, such as

purchasing, engineering, and environmental, into a service company. Require each affiliate that will receive the services to sign an agreement with the service company, documenting the terms and conditions under which the services will be provided and the fee they will pay for the services. Do not use this approach to provide general management services.

2. Set the service fee at a fair market rate that generates a reasonable profit for the service company. Simply providing services at or below cost, or based on a pro rata allocation, will undermine the “arm’s length” nature of the relationship.

3. Account for ERISA’s controlled group rules and take steps to avoid creating or continuing controlled groups, which arise based simply on having met certain common ownership percentages (generally at least 80 percent).

4. Limit the commonality of officers and directors in a substantive manner (not just different secretaries). Where possible, have those who manage affiliates also serve as the affiliate’s officers.

5. Avoid having employees of one affiliate report to an employee of another affiliate, including so-called “dotted-line” reporting, unless the person who receives the reports works for and is compensated by a service

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company or a parent company that naturally would receive such reports. If the person receiving the reports holds positions with more than one company, ensure that the person receiving the reports does so in his or her capacity as an employee or officer of the parent company.

6. Confine the scope of a parent company’s control to broad issues, rather than specific matters. For example, a parent company can inform a subsidiary that its production goal is X, but the parent company should not make day-to-day operational decisions to help the subsidiary achieve that objective. Likewise, a parent company can authorize a subsidiary to spend up to X without parent company approval, but the parent company should not, in practice, review and “informally” approve purchases below that threshold.

7. Sell, lease, and loan equipment and supplies among affiliates only pursuant to written agreements and at fair market value rates; avoid simply providing equipment and supplies without charge or at book value.

8. Limit the movement of employees between or among affiliated companies. When it occurs, characterize it as a termination and a new hire, rather than a “transfer.” Have each affiliate’s benefit plans expressly provide service credit to employees who previously worked for another affiliate; don’t simply provide it as a matter of course.

9. Loan money to or among affiliates only pursuant to written agreements that provide adequate security and interest for the loaning company. Make sure that all earned interest is timely paid.

10. Use separate bank accounts, with actual payments to and from each affiliate’s account, rather than book entries.

11. Use separate payroll accounts for each company.

12. Have all human resources matters decided by each affiliate without any “approval” from a parent company or other entity. For example, have the parent approve a budget that includes three new positions, but do not have the parent interview candidates or approve who will be hired. Likewise, a parent company can authorize a subsidiary to spend up to X

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dollars in a new collective bargaining agreement, but the parent company should not be involved in developing bargaining strategy, participating in the negotiations, or approving the final agreement (unless it exceeds the dollar value of original authority).

13. Consider how the respective companies are held out to the public. Avoid characterizing subsidiaries and a parent company as one and the same in websites, advertising literature, public disclosures, business cards, etc. Likewise, take steps to insure that public comments regarding a subsidiary’s actions, such as collective bargaining, plant closures, and employee terminations, are clearly attributed to the subsidiary. For example, do not have the parent company say, “We continue to bargain with the union and hope to achieve a contract soon,” or “We are closing our plant in West Virginia.”

14. Avoid using overbroad terms in employee separation agreements. For example, do not define the “employer” as including the parent company and all of its affiliates, none of whom will sign the agreement. Instead, identify the employer properly and draft the release section broadly enough to include the parent company and the affiliates.

15. Where several affiliates use a single office location, assign different floor or suite addresses and telephone numbers to each company and have them work in physically separate areas.

16. Have each affiliate sign its own vendor agreements or, if a “master” agreement is to be used, have each affiliate sign an agreement that mirrors or incorporates the “master” terms.

17. Have each affiliate pay its own bills; do not have one affiliate pay bills for another affiliate, especially if it does not also, at a minimum, charge back the costs.

18. Make it clear that subsidiaries who participate in a parent company’s benefit plans must formally adopt those arrangements and can reject the arrangements in favor of other benefits. For example, a parent company’s benefit plan can provide that affiliates may elect to participate in the plan, but each such affiliate should formally resolve to adopt the plan or

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withdraw from the plan. Also, summary plan descriptions should reflect these facts.

19. Use appropriate letterhead; do not have an employee of one company, acting in his or her capacity as an officer of one affiliate, send letters on another affiliate’s stationary.

20. Avoid the use of common handbooks and personnel policies, especially those that reference a parent company. Each affiliate should issue its own employee-relations documents, with its own name and contact information, even if they mirror, in whole or in part, policies used by other affiliates.

§ 2.05

Documents

CITE AS Energy & Min. L. Inst. Chapter 2 If We Do This ... Examination of Enterprise Liability and Protection ... — National Labor Relations — Alter Ego Test ... — Alter Ego