COVID-19 & Your Business: Frequent Questions

Are separate but related entities to be combined to measure whether the 500-employee threshold applies? (29 CFR 826.40)

Generally, a corporation (including its separate establishments or divisions) is considered to be a single employer, and its employees must each be counted towards the 500-employee threshold. The Department of Labor requires employers to use two tests to determine whether separate entities must combine employees to calculate the number of employees they have as it relates to the applicability of the FFCRA. The DOL’s regulations direct employers to use the FMLA’s test for integrated employer status to determine who is an integrated employer under the FFCRA, and the FLSA’s test for joint employer status to determine who is a joint employer for purposes of coverage of the FFCRA.

Separate businesses may be part of a single employer for FMLA purposes if they are an “integrated employer.” The FMLA’s test for determining whether separate businesses are an integrated employer considers the following four factors:

  • Common management;
  • Interrelation between operations;
  • Centralized control of labor; and
  • Degree of common ownership or financial control.

A determination of whether or not separate entities are an integrated employer is not made based on any single factor but, instead, on the entire relationship reviewed in its totality. If separate entities are found to be an integrated employer, then the employees of all entities making up the integrated employer must be counted.

Joint employer relationships may also have an impact on the number of employees an employer is considered to have. The DOL’s Final Rule on Joint Employer Status Under the FLSA clarifies that, where an employee performs work for the employer that simultaneously benefits another individual or entity, there is a four-factor balancing test to determine whether the potential joint employer is directly or indirectly controlling the employee. The factors to be considered in assessing direct or indirect control include whether the potential joint employer:

  • hires or fires the employees;
  • supervises and controls the employees’ work schedule or conditions of employment to a substantial degree;
  • determines the employees’ rate and method of payment; and
  • maintains the employees’ employment records.

Similar to the integrated employer test, the analysis of whether an entity is a joint employer will depend on all the facts in the particular case, and the appropriate weight to give to each factor will vary depending on the circumstances. All common employees of joint employers must be counted by each of the entities who are part of the joint employer relationship.

Last updated June 22

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