A WARNing for Related Entities

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When are related entities part of one “employer” under the WARN Act? When they function as one employer. In Guippone v. BH S&B Holdings LLC et al., No. 12.183-cv, 2013 WL 6439354 (2nd Cir. Dec. 10, 2013), the 2nd Circuit Court had to decide whether an employer and the holding company that had sole responsibility for managing the employer would be liable together for failure to notify workers of a mass layoff. The court applied a five factor test, derived from the Department of Labor: (1) common ownership, (2) common directors and/or officers, (3) de facto exercise of control, (4) unity of personnel policies emanating from a common source, and (5) the dependency of operations. The evidence showed that the employer had no board of directors. Instead, the holding company chose the employer’s management and negotiated the employer’s financing, and—most importantly—there was evidence that the holding company actually made the layoff decision. A jury will ultimately have to decide the issue, but the decision is a reminder that separate incorporation does not separate the corporation.