Monday, 20 May 2013 08:00
By Sean McLean
The U. S. Court of Appeals for the Third Circuit recently upheld a National Labor Relations Board (NLRB or Board) determination that a employer was considered the same entity as its parent company. The case involved a nursing home that was purchased by the parent company but continued to be operated by the employer. Prior to the acquisition, employees at the nursing home had been represented by two unions. Nevertheless, the parent company and employer refused to recognize these unions. They also refused to offer employment to several union members that were previously employed at the facility.
As a result of these refusals, the unions filed unfair labor practice charges against the parent company and the employer. The NLRB investigated the matter and issued a complaint alleging that the parent company and employer were jointly and individually liability as a “single employer” for unfair labor practices. The NLRB adopted the administrative law judge’s decision and issued an order holding the parent company and employer jointly and individually liable for violating the National Labor Relations Act (NLRA).
The parent company challenged the “single employer” determination arguing that the employer, and not the parent company, controlled the day to day labor relations at the facility. Therefore, the parent company contended it could not be held liable with the employer under a “single employer” theory.
Single Employer Status
The single employer doctrine is a creation of the NLRB which allows it to treat two or more related entities as one employer. Single employer status ultimately depends on all the circumstances of the case and is characterized as an absence of an arm’s length relationship found among un-integrated companies.
The Board considers four factors in determining whether separate entities are a single employer: (1) functional integration of operations, (2) centralized control of labor relations, (3) common management, and (4) common ownership. No one factor is controlling, although the first three factors, particularly centralized control over labor relations, are generally considered more compelling than the fourth.
Third Circuit’s Determination
The Third Circuit noted that no challenge was made to the finding that parent company and employer have common ownership, common management and interrelated operations (three of the four factors considered in the single employer determination). Instead, the parent company’s challenge rested solely upon the claim that there was no centralized control of labor relations. Unfortunately for the parent company, the Third Circuit found that this claim was unsubstantiated by evidence in the record.
Although a representative of the employer testified that he controlled day-to-day operations at the facility, further questioning revealed that the representative was unfamiliar with much of the facility’s operations, including important aspects of the facility’s financial dealings. Evidence suggested that the parent company’s vice-president actually made many, if not most, of the important decisions at the facility. In addition, the no-hire decisions that were at issue in the case were all made by representatives of the parent company, and not the employer. Accordingly, the Third Circuit agreed with the Board’s determination that the parent company and employer were a single employer, and thus jointly and individually liable for violations of the NLRA.
Read the case here.