Do FMLA guidelines count a subsidiary’s employees?

Employee counts under FMLA regulations

“So with my back messed up like this, I’m gonna need that government sick leave,” Arnie Potts said. “You know, the whatchacallit – FLMA.”

“FMLA,” HR manager Melinda Kazinski corrected. “Family and Medical Leave Act.”

“Yeah,” Arnie asked. “How much time can I take off, anyway? Is it paid?”

“Whoa,” Melinda said. “Not so fast. We can arrange some time off for you, but not the 12 weeks you’d get under FMLA. We’re a small company, and we don’t have to offer leave under FMLA guidelines.”

“What?” Arnie said, looking puzzled. “The guys on the shop floor told me anybody can get that… uh… FMLA.”

“They’re wrong,” Melinda said. “You have to have 50 employees. We’ve got 32, at last count.”

Which head count counts under FMLA guidelines?

“Wait,” Arnie said. “If you count the people over at MaxFlow, there’s gotta be 100 of us. That means I can get it.”

“I don’t think so,” Melinda said. “I’m 99% percent sure you can’t count MaxFlow’s employees along with ours, as far as FMLA is concerned.”
“Why not?” Arnie asked suspiciously.

“Because we’re just a subsidiary of MaxFlow, and we’re not even in the same business,” Melinda said. “They make pipes, and we make drywall.”

“What’s the difference?” Arnie growled. “You’re making excuses so you don’t have to do right by me.”

“Not at all,” Melinda said. “I’m following the law. If you have unused personal days, you can take them while your back is recovering.”

“I only have a week. It’s not enough,” Arnie said. “I’m gonna talk to a lawyer.”

Arnie sued for a violation under FMLA guidelines. Did he win?

The decision

No, Arnie didn’t win.

The court said Melinda was right: The company was small enough that it didn’t have to offer FMLA leave.

FMLA guidelines say a company must have 50 or more workers at a single site, or within 75 miles of the site, before it’s obliged to follow the FMLA.

But in this case, why didn’t the workers at the parent company and the subsidiary count together toward the 50-employee threshold?

After all, the parent, MaxFlow, was only 20 miles away.

Looking behind the FMLA guidelines

To answer the question, the court looked at the underlying purpose of the exemption for smaller companies.

The idea behind the rule is that a small firm won’t have enough people to fill in for those out on FMLA leave. In a case like this one – where a subsidiary is run as a free-standing company – the parent isn’t likely to furnish replacement employees to fill in for the subsidiary’s FMLA absentees.

It’s different when you’re talking about an integrated division of a larger firm, with common administrative functions like HR and payroll.

Then, the employee pool includes the whole company, as long as everybody is less than 75 miles apart.

If you’re uncertain about your situation, ask yourself whether you could count on an associated company to replace people out on FMLA leave.

Cite: Engelhardt v. S.P. Richards Co., No. 06-1232, 1st Cir., 12/22/06. Fictionalized for dramatic effect.