Court Decision Highlights Potential for “Successor Liability” under FMLA
- United States
- 07/17/2006
- Arent Fox PLLC
Contract Transport Inc. took over a mail transport contract with the U.S. Postal Service from Byrd Trucking in June 2003. Shortly thereafter, Ronald Cobb, a truck driver who worked for Byrd for three years before being hired by Contract Transport in June 2003, became ill and needed leave. Contract Transport fired Cobb, because he was unable to work. Cobb filed suit claiming that his termination violated the Family & Medical Leave Act (“FMLA”).
Contract Transport responded by claiming that Cobb was not eligible for FMLA leave because he had not worked for Contract Transport for the minimum of 12 months required by the FMLA. The lower court granted judgment in favor of Contract Transport, refusing to count the three years Cobb had worked for Byrd toward the 12-month minimum required by the FMLA. In June 2006, the U.S. Court of Appeals for the Sixth Circuit (No. 05-6196) reversed the lower court, held that Cobb was an eligible employee for FMLA purposes and deemed Contract Transport potentially liable for violating the FMLA.
As the court noted, an employee is only eligible for FMLA leave after working for a covered employer for at least 12 months. However, work for a covered employer includes work performed for the employer from which leave is requested and any previous employer to whom the current employer is a “successor in interest.” 29 USC §2611(4)(ii)(II). Whether a “successor in interest” relationship exists is determined based upon the totality of the circumstances. However, among the key factors examined are:
- Substantial continuity of the same business operation
- Use of the same plant
- Continuity of the work force
- Similarity of jobs and working conditions
- Similarity of supervisory personnel
- Similarity of machines and equipment
- Similarity of products and services
- Ability of the predecessor to provide relief.
The court reviewed in some detail how successorship analysis has been applied in other labor and employment law contexts to support its finding that Cobb was covered by the FMLA based upon his tenure with Byrd. Significantly, the Sixth Circuit rejected the argument that successorship liability could only apply following a merger or transfer of assets. The court ruled that successorship was applicable even in the absence of a merger or asset transfer and in the case of a successor contractor.
This decision should serve as a clear reminder for employers that acquire on-going businesses, or succeed other companies on contracts, that newly hired employees may be eligible for FMLA benefits based upon service to a predecessor employer. Attorneys working with such employers must properly address these issues in contract negotiations and human resource professionals must remember to consider whether past service to another employer may qualify a new employee for FMLA benefits.
Samuel Charnoff, Esq.
202.857.6221
[email protected]
