On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (the “Act”), requiring employers with less than 500 employees to provide Public Health Emergency Leave and Paid Sick Time to employees impacted by the Coronavirus pandemic. The details of the Act are set out in our earlier Blog post here.
Since the Act was passed, there has been much discussion about how employees across related companies should be counted for purposes of coverage. In evaluating this issue, it is important to note that the two leave requirements arise in different portions of the Act. The right to Public Health Emergency Leave is set forth in Division C of the Act, which amends the existing statutory text of the Family and Medical Leave Act (“FMLA”). The right to Paid Sick Time is set forth in Division E of the Act, which creates a new statute known as the Emergency Paid Sick Leave Act.
While both of these Divisions of the Act set the threshold for covered employers at “less than 500 employees,” neither provides express direction on how this number should be calculated across related entities. However, since Public Health Emergency Leave is incorporated into the FMLA, we believe that calculation is likely to be governed by existing regulations addressing the issue. We believe it is also likely the calculations under the Emergency Paid Sick Leave Act will follow the same model if for no other reason than ease of administration.
Under the FMLA, the general rule is that the legal entity which employs the employee is the “employer.” For example, a corporation is a single employer rather than its separate establishments or divisions[i]. Where one corporation has an ownership interest in another corporation, it is a separate employer unless it is an “Integrated Employer” or a “Joint Employer.”[ii]
To determine whether separate entities are considered an “Integrated Employer” for purposes of the FMLA, the Department of Labor considers “the entire relationship” between the parties “reviewed in its totality” based on the following four factors:
(i) Whether there is common management;
(ii) Whether the entities’ operations are interrelated;
(iii) Whether there is centralized control of labor relations; and
(iv) The degree of common ownership/financial control of the entities.
If the factors indicate the entities are an Integrated Employer, the employees of all entities making up the Integrated Employer are counted to determine employer coverage and eligibility under the FMLA.[iii]
Even if separate entities are not considered an Integrated Employer, the Department of Labor may consider separate entities a “Joint Employer” if the entities each or all exercise some control over the work or working conditions of an employee. Notably, the joint employer test does not require common ownership. Joint employers may be separate and distinct entities with separate owners, managers, and facilities. Nevertheless, if an employee performs work that simultaneously benefits two or more employers, or works for two or more employers at different times during the workweek, the separate entities will generally be considered a Joint Employer. Examples of Joint Employment relationships include situations where:[iv]
(i) There is an arrangement between employers to share an employee's services or to interchange employees;
(ii) One employer acts directly or indirectly in the interest of the other employer in relation to the employee; or
(iii) The employers are not completely disassociated with respect to the employee's employment and may be deemed to share control of the employee, directly or indirectly, because one employer controls, is controlled by, or is under common control with the other employer.
Employers should exercise caution in oversimplifying the Integrated Employer and Joint Employer analyses to avoid coverage under the Act. An employer who takes the position that they are an Integrated Employer or Joint Employer for purposes of avoiding coverage under the Act may later find they waived their ability to assert they are separate entities in litigation or other disputes. Employers are encouraged to consult with counsel to determine coverage under the Act.
[i] 29 CFR 825.104(c).
[ii] 29 CFR 825.104(c)(1).
[iii] 29 CFR 825.104 (c)(2).
[iv] 29 CFR 825.106(a).
