United States Court of Appeals
For the First Circuit
No. 06-1232
LEANNE ENGELHARDT,
Plaintiff, Appellant,
v.
S.P. RICHARDS COMPANY, INC.,
GENUINE PARTS COMPANY,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Paul J. Barbadoro, U.S. District Judge]
Before
Torruella, Circuit Judge,
Siler,* Senior Circuit Judge,
and Howard, Circuit Judge.
James W.Donchess, with whom Donchess & Notinger, P.C., were on
brief, for appellant.
Lisa M. Szanfranic, with whom Patricia E. Simon, Martenson,
Hasbruck & Simon, LLP, Debra W. Ford, and Devine, Millimet &
Branch, P.A., were on brief, for appellees.
December 22, 2006
*
Of the Sixth Circuit, sitting by designation.
SILER, Senior Circuit Judge. Plaintiff Leanne Engelhardt
appeals the dismissal of her claim for wrongful termination under
the Family Medical Leave Act, 29 U.S.C. § 2601, et seq. (the
“FMLA”). We AFFIRM because defendant S.P Richards Co. (“SPR”)
employed fewer than 50 people within 75 miles of its Nashua
facility, and defendants Genuine Parts Co. (“GPC”) and SPR
(together, “Defendants”) are not integrated entities under the
FMLA. Thus, Engelhardt was not an eligible employee under 29
C.F.R. § 825.110(a)(3).
I.
SPR, a wholly-owned subsidiary of GPC, is an office supplies
wholesaler headquartered in Smyrna, Georgia. GPC is a publicly-
traded corporation, and operates an auto parts retailing business
under the name Genuine Parts Co. d/b/a NAPA Auto Parts, based in
Atlanta, Georgia.
SPR adopted GPC’s personnel policies on attendance, sexual
harassment, substance abuse, corporate conduct and network
security. Many of SPR’s handbooks, benefits brochures, information
sheets, registration forms and paycheck stubs carry the GPC logo or
letterhead instead of, or in addition to, SPR’s logo. SPR’s
employees are eligible to participate in GPC-administered employee
health insurance, life insurance, 401(k), and pension plans. GPC
also issues SPR’s payroll checks. SPR pays an administrative fee
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and reimburses GPC for all benefits and wages paid to SPR’s
employees.
SPR hired Engelhardt as a customer service representative at
its Nashua distribution facility in February 2000 and terminated
her on December 17, 2002. She had missed work the previous day and
a half without authorization to care for her daughter who had
attempted suicide. This was the third time that she had missed
work for that reason.
Engelhardt filed this lawsuit in the district court claiming
that her termination, among other things, was in violation of the
FMLA. The district court granted summary judgment on the basis
that, pursuant to 29 C.F.R. § 825.110(a)(3), Englehardt was
ineligible for FMLA benefits because SPR did not employ the
requisite number of people at its Nashua facility.1 See Engelhardt
v. S.P. Richards Co., No. 04-CV-120-PB, 2005 U.S. Dist. LEXIS
37118, at *5-9 (D.N.H. Dec. 29, 2005). Engelhardt argued that GPC
and SPR ought to be considered a single, integrated employer under
29 C.F.R. § 825.104(c)(2) because of the overlap in the substance
and administration of their employment policies, and the
implication suggested by SPR’s documents that GPC controlled SPR’s
human resource and labor practices. The district court rejected
1
29 C.F.R. § 825.110(a)(3) sets forth the requirement that to
be eligible for FMLA benefits, an employee must work for an
employer that employs 50 or more people within 75 miles of the
employee’s worksite.
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the argument, which otherwise would have counted GPC’s 50-plus
Nashua employees toward FMLA eligibility. See id. Englehardt
appeals this determination.
II.
The only issue before us is whether the district court erred
in granting Defendants’ summary judgment motion on the basis that
SPR and GPC are not integrated employers within the meaning of 29
C.F.R. § 825.104(c)(2). We review the grant of summary judgment de
novo. See Velez-Rivera v. Agosto-Alicea, 437 F.3d 145, 150 (1st
Cir. 2006). We will affirm the dismissal if, after construing all
reasonable inferences in Engelhardt’s favor, “there is no genuine
issue as to any material fact and . . . [GPC and SPR are] entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(c). The
parties agreed at oral argument there were no disputes of material
fact. Thus, the question is strictly a legal one: whether, based
upon the record, SPR and GPC are integrated entities.
A.
The FMLA provides eligible employees of covered employers up
to twelve workweeks of unpaid leave in any twelve-month period in
order to tend to certain familial obligations, such as caring for
a loved one who has a serious health condition. See 29 U.S.C. §§
2612, 2615(a)(2). It is “unlawful for any employer to interfere
with, restrain, or deny the exercise of or the attempt to exercise,
any right provided under [the FMLA],” 29 U.S.C. § 2615, and the act
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provides for a private right of enforcement, see 29 U.S.C. §
2617(a). The parties agree, at least arguendo, that Engelhardt’s
daughter’s depression and suicide attempt amount to a serious
enough condition to qualify for FMLA protection.
Pursuant to its authority under the FMLA, see 29 U.S.C. §
2654, the Department of Labor (the “DOL”) has promulgated
regulations which set forth the eligibility requirements for both
employers and employees. 29 C.F.R. § 825.110(a) defines “eligible
employees” and requires that the employee
(3) [be] employed at a worksite where 50 or more
employees are employed by the employer within 75 miles of
that worksite.
29 C.F.R. 825.104(a) defines “covered employers,” i.e.,
any person engaged in commerce or in any industry or
activity affecting commerce, who employs 50 or more
employees for each working day during each of 20 or more
calendar workweeks in the current or preceding calendar
year.
“Normally the legal entity which employs the employee is the
employer under FMLA. . . . [A] corporation is a single employer
rather than its separate establishments or divisions.” 29 C.F.R. §
825.104(c). However, a subsidiary is treated differently, as there
is a “strong presumption that a parent corporation is not the
employer of its subsidiary’s employees.” Lusk v. Foxmeyer Health
Corp., 129 F.3d 773, 778 (5th Cir. 1997) (citation omitted). Our
task is to clarify how to distinguish between an entity that is a
division of, and therefore part of a corporation, and one that is
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a subsidiary and therefore a separate entity. In Radio &
Television Broadcast Technicians Local 1264 v. Broadcast Service of
Mobile, Inc., 380 U.S. 255, 256 (1965) (per curiam), the Supreme
Court articulated the “integrated employer” (also, the “single
employer”) test in the labor relations context to determine when an
entity is sufficiently related to one’s legal employer to subject
it to liability. The DOL subsequently codified the above general
rule and the exception in its FMLA regulations:
Where one corporation has an ownership interest in
another corporation, it is a separate employer unless it
meets the “joint employment” test discussed in § 825.106,
or the “integrated employer” test contained in paragraph
(c)(2) of this section.2
Separate entities will be deemed to be parts of a single
employer for purposes of FMLA if they meet the
“integrated employer” test. Where this test is met, the
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 in determining whether
two or more entities are an integrated employer include:
2
The difference between the “joint employer” and the
“integrated employer” tests turns on whether the plaintiff seeks to
impose liability on her legal employer or another entity. Compare
29 C.F.R. § 825.106 with § 825.104(c)(2). The former looks to
whether there are sufficient indicia of an employer/employee
relationship to justify imposing liability on the plaintiff’s non-
legal employer. The latter applies where, as here, liability is
sought to be imposed on the legal employer by arguing that another
entity is sufficiently related such that its actions, or in this
case, size, can be attributable to the legal employer. See Arculeo
v. On-Site Sales & Mktg., L.L.C., 425 F.3d 193, 197-98 (2d Cir.
2005) (citing Clinton’s Ditch Cooperative Co. v. NLRB, 778 F.2d 132
(2d Cir. 1985)).
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(i) Common Management;
(ii) Interrelation between operations;
(iii) Centralized control of labor relations; and
(iv) Common Ownership.
29 C.F.R. § 825.104(c)(1) and (2) (footnote added).
Engelhardt contends that the integrated employer test is met
because SPR admits having adopted some of GPC’s employment policies
and GPC administers SPR’s employee benefits programs. She also
points to documentary evidence which are purported to be GPC forms.
It includes, for example, the separation notice she signed before
her termination; the employee attendance policy forms; the code of
corporate conduct form; the sexual harassment policy form; and the
employee benefits packages, along with the accompanying brochures,
information sheets, and election and acknowledgment forms.3 Many
of these documents were on GPC letterhead or were stamped with the
GPC logo and the cover letter for the benefits forms even addressed
Engelhardt generically as “Dear GPC Employee.” Moreover,
Englehardt’s paychecks were processed through GPC and bore GPC’s
and SPR’s logos.
3
Engelhardt signed a “Genuine Parts Company Applicant
Acknowledgment of Substance Abuse Policy.” She signed an
acknowledgment that she had received and agreed to abide by the
“Genuine Parts Company Code of Corporate Conduct,” and also one
bearing the “S.P. Richards Co.” name and stating that she had
received and agreed to abide by the “Genuine Parts Company Employee
Attendance Policy.”
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B.
In Romano v. U-Haul International, 233 F.3d 655, 666 (1st Cir.
2000), a Title VII case, we determined that a “flexible approach”
which considered all four “integrated employer” factors was
appropriate, with special emphasis on whether “the parent exerts
‘an amount of participation [that] is sufficient and necessary to
the total employment process, even absent total control or ultimate
authority over hiring decisions.’” Id. (citing Armbruster v.
Quinn, 711 F.2d 1332, 1338 (6th Cir. 1983)).
While placing emphasis on the centrality of control over labor
relations makes sense for imposing liability on affiliated entities
in an employment discrimination case, cf. Romano, 233 F.2d at 666,
we think that, here, the four factors merit equal consideration
given the plain language of 29 C.F.R. § 825.104(c)(2). However,
our analysis of the four factors should be informed by certain
economic concerns. This is because the 50-employee exception is an
economic one rooted in protecting small businesses, and the purpose
of the “integrated employer” test is to ensure that a defendant has
not structured itself to avoid labor laws. See Papa v. Katy Indus.,
166 F.3d 937, 942 (7th Cir. 1999).
While we do not doubt that GPC’s relationship with SPR extends
beyond mere absentee ownership, the issue is whether GPC controls
enough facets of SPR’s business and operations, such that it has
not maintained its economic distinctness.
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We find support for our framing of the issue in the FMLA. The
general purpose of the FMLA is to satisfy the “needs of the
American workforce and the development of high-performance
organizations,” 29 C.F.R. § 825.101, by “balanc[ing] the demands of
the workplace with the needs of families. . . in a manner that
accommodates the legitimate interests of employers,” 29 U.S.C. §
2601(b)(1), (3). With that in mind, we view the 50-employee
exception as a threshold protecting smaller businesses from the
onerous requirement of keeping an unproductive employee on the
payroll in the form of redundant or absent employees, going without
an employee for up to twelve weeks, or both. Cf. Papa, 166 F.3d at
942 (observing that minimum employee requirements protect small
businesses from the financial costs of compliance with employment
laws).4 Similarly, we note that “[t]he 75-mile distance is
measured by surface miles, using surface transportation . . . by
the shortest route from the facility where the eligible employee
needing leave is employed.” 29 C.F.R. § 111(b). Thus, the 75-mile
rule protects those employers (and their employees) whose
businesses require separate worksites from the cumbersome
requirement of relocating or commuting over large distances to
cover for an employee on leave. Moreover, the 75-mile requirement
4
We are, however, equally mindful of the potential for the
requirement to have jurisdictional implications to the extent that
a smaller employer’s business may be too attenuated to interstate
commerce. Cf. Papa, 166 F.3d at 942.
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prevents companies from establishing separate worksites in order to
circumvent obligations under the FMLA and other labor rules. This
is analogous to the determination that a multi-building or multi-
facility campus is a single worksite if the facilities “are in
reasonable proximity, are used for the same purpose and share the
same staff and equipment.” 29 C.F.R. § 111(a)(1).
Therefore, one purpose of the 50-employee and 75-mile
requirements is to exempt businesses like SPR which choose, or
must, operate at lower costs from the costs of compliance. For
example, in order to stave off disruption in its operations, SPR
would have to maintain a troop of redundant employees to cover for
absent employees. When combined with the costs of maintaining
absent employees on the payroll for up to twelve weeks, this is a
potentially significant cost in terms of employee non-productivity.
The FMLA excepts smaller companies who would unlikely be able to
shoulder the burden.5 Moreover, a small company that would
otherwise be exempt from the FMLA should not be deprived of the
exception just because it is a subsidiary of larger company. See
Papa, 166 F.3d at 942. It should have the benefit of the exception
if it maintains its economic identity as a small business. Cf.
Hukill v. Auto Care, Inc., 192 F.3d 437, 442 (4th Cir. 1999)
5
SPR already had in place an FMLA compliance system in case
the Nashua worksite exceeded 50 employees. Therefore, the major
cost confronting it would be labor-related.
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(observing that parent domination over operations, management, and
employment decisions is a critical factor).
C.
Turning back to Engelhardt’s evidence, the documents fail to
demonstrate that GPC and SPR are an integrated employer, per the §
825.104(c)(2) test. Going to the first factor, there is no
indication that SPR is under the same management as GPC. There is
no common manager between them and no SPR manager answers to any
GPC employee. The one person who had been a manager at SPR prior
to becoming one at GPC had to resign his SPR position and apply
through normal channels at GPC. All facets of SPR’s operations,
from corporate to facilities management are entirely dictated by
SPR employees. And unlike in Armbruster, 711 F.2d at 1339, where
one person was president of one entity and a director of the other,
here, the two companies share two independent directors who are not
involved in running either business. Moreover, there is little, if
any, evidence to suggest any interrelation between operations of
the two companies, the integrated employer test’s second factor.
SPR has a separate headquarters, human resource department, records
and record keeping, and separate worksites which fulfilled wholly
distinct functions. The nature of their businesses is also
distinct – GPC is in the auto-parts retailing business whereas SPR
is in the office-supply wholesaling business. Thus, SPR is not a
GPC “division” whereby upper echelons of control are centralized
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and efficiencies are realized through consolidation of redundant
administrative, human resource, and management functions.
Furthermore, the third factor also weighs against finding that
the two companies are an integrated employer as the facts reveal
that SPR made its own, independent decisions with respect to labor
relations. Only SPR had the power to determine how many employees
it needs, and whether, when and whom to hire and fire to meet those
needs. Cf. Baker v. Stuart Broadcast. Co., 560 F.2d 389, 392 (8th
Cir. 1977). There is no evidence to suggest that SPR deferred to
GPC in making hiring, firing, assignment, scheduling, or
compensation decisions. See Swallows, 128 F.3d at 995. Because the
evidence does not demonstrate that GPC controlled SPR’s operations
with regard to the deployment or redeployment of human resources,
see Romano, 233 F.3d at 666, there is no basis for the inference
that GPC employees could be asked to cover for SPR employees, even
though they may be less than 75 miles apart. Nor is there evidence
that Engelhardt’s function would be within the sphere of competency
of a GPC customer service representative.
We disagree with Engelhardt’s assertion that SPR’s adoption of
GPC’s employment policies, by use of its employment documents,
forms and payroll services, create an inference that Defendants
centrally determined both companies’ employment policies. As
Defendants contend, the above issues are irrelevant because there
is no evidence that GPC required SPR to adopt the same policies and
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programs, nor could it prevent SPR from later adopting different
ones. See Hukill, 192 F.3d at 444.
SPR’s use of GPC’s forms, employee benefits programs and
payroll services are reflective of SPR’s desire to capitalize on
certain economies of scale. That is, it was cheaper, and therefore
economically advantageous, for SPR to subscribe to GPC’s programs.
The courts in Papa and Hukill rejected arguments similar to
Engelhardt’s. They recognized that whether a subsidiary obtains
services at an 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 businesses from liability to impose liability on
the parent. Judge Posner explains in Papa:
Firms too tiny to achieve the realizable economies of
scale or scope in their industry will go under unless
they can integrate some of their operations with those of
other companies, whether by contract or by ownership.
The choice between the two modes of integration is
unrelated to the exception. Take contractual integration
first. A firm too small to have its own pension plan will
join in a multi employer pension plan or will in effect
pool with other employers by buying an insurance policy.
. . . It will hire an accounting firm to do its payroll
rather than having its own payroll department. It may
ask the Small Business Administration for advice on how
to maximize its profits by pruning its least profitable
operations. None of these forms of contractual
integration would subject tiny employers to [liability],
because the integration is not of affiliated firms. Why
should it make a difference if the integration takes the
form of common ownership, so that the tiny employer gets
his pension plan, his legal and financial advice, and his
payroll function from his parent corporation without
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contractual formalities, rather than from independent
contractors?
Papa, 166 F.3d at 942; see also Hukill, 193 F.3d at 443-44 (noting
that the practice of subsidiaries purchasing certain services from
the parent corporation is “not unusual in today’s marketplace”).
Following Papa’s logic, SPR’s capitalization on cost efficiencies
through GPC is irrelevant because those efficiencies do not come
from common management and common operations. It is the latter
that would collapse the distinct economic identity of each entity,
which is the basis for the exception to FMLA liability.
Furthermore, it is evident that SPR’s use of GPC’s
administrative services is irrelevant to the type of operations in
question. Compare Swallows, 128 F.3d at 994 (finding no
interrelation of operations where there were separate records, bank
accounts, and offices), and Hukill,192 F.3d at 443 (finding as
insignificant the fact that subsidiary purchased administrative
services from parent as compared with the evidence that each
company otherwise operates distinctly) (citing Papa, 166 F.3d at
942 (same)), with Armbruster, 711 F.2d at 1338 (finding
interrelation of operations where subsidiary’s management were
armed with parent’s corporate credit cards, and parent managed
subsidiary’s receivables, payroll and cash accounting, provided
administrative support, and coordinated shipping of subsidiary’s
products).
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Thus, the evidence Engelhardt presents does not overcome the
presumption that a parent is a “separate employer,” 29 C.F.R. §
825.104(c)(1), and is “not the employer of [SPR’s] employees,”
Lusk, 129 F.3d at 778. Rather, Defendants conclusively demonstrate
that theirs is nothing less than an “arm’s length relationship
[that exists] among unintegrated companies,” South Prairie Constr.
Co. v. Int’l Union of Operating Engineers, 425 U.S. 800, 803 (1976)
(citation omitted), because SPR paid administrative fees and
reimbursed GPC for all benefits paid to SPR employees. Cf. McKenzie
v. Davenport-Harris Funeral Home, 834 F.2d 930, 933-934 (11th Cir.
1987) (finding common operations where one entity paid the other
entity’s payroll without compensation for wages). This fact
distinguishes this parent/subsidiary relationship from a
corporation/division relationship which would be treated as a
single employer under 29 C.F.R. § 825.104(c). Therefore, though
SPR is wholly-owned by GPC, that fact alone is insufficient to
overcome the balance of the first three factors in this case. See
Morrison v. Magic Carpet Aviation, 383 F.3d 1253, 1257 (11th Cir.
2004) (“As a matter of law, we do not believe that common ownership
of two corporations is enough for a jury to conclude that they were
integrated into one operation for FMLA purposes.”).
Affirmed.
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Engelhardt v. S.P. Richards Co.
Court: Court of Appeals for the First Circuit
Date filed: 2006-12-22
Citations: 472 F.3d 1
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