“How many employees do you have?”
That seems like a fairly easy and straightforward question. It’s one we ask employers everyday so we can provide appropriate guidance on a variety of HR issues. The number of employees dictates what employment laws apply and what obligations the employer has to their employees. Whether we are talking about Title VII of the Civil Rights Act, the Americans with Disabilities Act (ADA), Family Medical Leave Act (FMLA), or state employment laws, the numbers matter.
As businesses grow and become affiliated with other businesses, the answer to this question becomes less clear and straightforward. While your business may only have 15 employees, you are affiliated with multiple other similarly sized businesses, do those employees count when determining coverage for laws like FMLA, which has a much higher threshold? When do separate entities get treated as one entity?
The answer is it depends.
Are you an integrated employer?
Whether two or more entities constitute an integrated employer will depend on four factors: (1) interrelation of operations, (2) centralized control of labor relations, (3) common management, and (4) common ownership or financial control. No one factor is determinative. The circumstances of the relationship of and between the entities will be important in making this determination. However, entities are more likely to be seen as one integrated employer if they share these four factors.
Interrelation of Operations
Things that tend to demonstrate interrelation of operations between two or more entities include having common offices/headquarters, centralized record keeping, shared accounts and/or equipment. Meaning the more the entities share resources, the more likely they are to be considered interrelated.
Centralized Control of Labor Relations
Factors that frequently determine whether two or more entities have centralized control of labor relations include the extent to which the entities maintain separate human resource departments, whether each entity makes their own hiring, firing, and disciplinary decisions, whether the companies use the same employee handbook or have the same/similar policies, and if the employees move between the different entities.
Common Management
A substantial overlap in management between two or more entities — meaning the same individuals are overseeing the different entities — is evidence of common management. However, the fact that a single individual holds roles in two or more entities does not, in and of itself, show common management.
Common Ownership or Financial Control
Ownership can take different forms. Often when talking about common ownership we are talking about a parent-subsidiary relationship. However, there can also be common ownership between sister organizations. Entities with common ownership would need to show financial autonomy or independence (i.e. filing separate tax returns, making independent decisions regarding finance, etc.) to overcome this factor.
Where two or more entities are determined to be an integrated employer based on the above factors, the employees from all entities would be counted in determining employer coverage. That could mean an increase in your obligations as an employer (like providing 12 weeks of FMLA leave to employees if they were otherwise qualified). To make sure you are not inadvertently out of compliance, it’s important to understand how your business is structured and how many employees you actually have for purposes of Title VII, FMLA, or even the new Families First Coronavirus Response Act (FFCRA).
