Family Medical Leave Act Coverage - How Many Employees Do You Really Have?
The Family and Medical Leave Act (“FMLA”) is a United States Federal law administered by the U.S. Department of Labor that requires covered employers to provide employees with job-protected and unpaid leave for qualified medical and family reasons. The corresponding state law providing similar protections is the California Family Rights Act (“CFRA”), which is administered by the Department of Fair Employment and Housing. Both the FMLA and the CFRA apply to employers with 50 or more employees in at least 20 or more calendar workweeks in the current or preceding calendar year. 29 C.F.R. § 825.104(a); 2 Cal. Code Regs. § 11087(d)(1). Because the applicability of these Acts depend in part on the number of employees, business owners who are involved in multiple ventures wonder how the number of employees is calculated. What if you have 40 employees, but your related side business employs 15? Are either of your businesses subject to the FMLA or CFRA?
The Federal Regulations directly address this issue, while the California Regulations do not. When looking at two related businesses, the U.S. Department of Labor applies what is called the “integrated employer test” to determine if employees of two separate businesses will be combined for purposes of the FMLA. The factors examined under the FMLA’s integrated employer test include: (1) common management; (2) interrelation between operations; (3) centralized control of labor relations; and (4) degree of common ownership/financial control. 29 C.F.R. § 825.104(c)(2). The result of the test is not determined by the application of any single criterion, but rather the entire relationship of the two entities is to be reviewed in its totality.
If the U.S. Department of Labor believes this test is met, the entities in question will be considered one employer for purposes of counting employees under FMLA. For example, say the owner of a car repair shop employs 30 persons. He owns 100% of the car repair shop, but also owns 75% of and is a manager at the car parts store next door, which employs 25. The repair shop gets its supplies exclusively from the car parts store, and employees at both stores are paid from the same bank account. In applying the integrated employer test, the U.S. Department of Labor would likely consider the two entities one “integrated” employer because they share common management, the operations are interrelated, and there is a high degree of common ownership and financial control. Therefore the total number of employees would be 55, and both entities would be subject to the FMLA requirements.
The CFRA does not have a test identical to the integrated employer test, but the CFRA incorporates all FMLA definitions that are not inconsistent with the CFRA. Therefore the California Department of Fair Employment and Housing enforcing the CFRA would likely come to the same conclusion. If you are involved in two separate but related entities and are unsure about whether you are required to comply with the FMLA or CFRA, our firm can analyze and consult with you on this issue. Please contact Ross Schwartz, Dick Semerdjian, Sarah Evans, Sierra Spitzer, or Alison Adelman with any questions.