Monday, October 24, 2011

The Employment Relationship Matters

A recent FMLA case here in Illinois shows why it's important for companies to carefully manage, or in this case, to at least understand, their own workforce relationships, or else find themselves wrapped up in lawsuits that they cannot defend.

Plaintiff worked as a manager for a regional air service that conducted flight operations in conjunction with United and United Express in Chicago. His paycheck and W-2 listed his employer as Trans-State Holdings, Inc ("TSH"). But his business card bore the logo of Trans-State Airlines ("TSA"), the improbably named (at least in affiliation with United) GoJet Airlines, and TSH. Company internal directories identified plaintiff as the O'Hare Airport contact for all three entities. He participated in employee meetings with both TSA and GoJet, drafted policies and procedures for both airlines, and represented both airlines in meetings with United Airlines and United Express operations. Company management determined that the plaintiff was only employed by Trans State Airlines, which had 33 employees within 75 miles of O'Hare. Note that the payroll employer, Trans-State Holdings had no employees at O'Hare at the time.

This becomes important because plaintiff tried to exercise FMLA leave rights as a result of a psychiatric disorder. The company denied plaintiff's request for FMLA leave, and terminated him when he failed to return from a 2 week personal leave.
The company's initial argument was that the FMLA was not applicable because it did not have the required number of employees  - 50 - within 75 miles from the work site. The court rejected the company's defense, finding that while TSA and GoJet had different labor representations and different seniority lists, the company shared the same upper level management - the president, the vice president, and chief financial officer were the same for all three. The company with no employees in the area, TSH, maintained the personnel files for TSA and GoJet and TSH's recruitment department performed services for all three companies. Apparently, employees moved seamlessly between the three companies on occasion.

Looking at this confusing and irregular factual background, the court tried to impose some type of order.  It noted that the US Department of Labor allows employees from one company to be considered employees of another for purposes of an FMLA headcount either under a "joint employment" or "integrated employer" test. Each test looks to see whether there are significant links between the employee and the various companies at issue such that each company can be considered an employer.  If the employment circumstances meet the test, the workforces are merged for purposes of counting towards the FMLA threshold of 50 employees.

In this case, the court had little difficulty in finding that the three companies, individually and jointly, had control over plaintiff's employment. He was named as their representative at O'Hare, he represented them in dealings with the airlines and the Department of Homeland Security, they were listed on his business card as his employer, and all three benefited from his services.  The court did not bother to check the application of the integrated employer test.

Once it determined that TSH, TSA and GoJet met the joint employment test, the Court found that plaintiff's medical condition qualified him for FMLA. The employer tried to defeat the FMLA entitlement with a novel argument--that plaintiff made his medical condition worse (i.e. he turned it into an FMLA qualifying condition), by not following his doctor's advice. The Court rejected this "plaintiff should have been a better patient" defense, determining that there was no case law for that proposition, and no authority for it in the regulations. The Court granted summary judgment for the ex-employee, ruling that the companies were liable for terminating him without granting him the FMLA leave he requested.

This case is noteworthy because of the confusion evidenced on part of the companies as to exactly who was employing plaintiff. Prior to the irrevocable decision to deny plaintiff his FMLA leave and terminate him, it would have been prudent for someone in charge to sit down and look at the nature of the employment relationship between the three entities. A situation where an employee is being used as a representative of multiple entities should raise a red flag as to how court will look at the employment relationship for headcount and ultimate legal liability purposes.

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