19 May Family and Medical Leave Act: Common Ownership
The Family and Medical Leave Act (FMLA) is a federal law that allows eligible employees to take up to 12 weeks of unpaid leave per year for certain family and medical reasons. Because the FMLA applies to employers with 50 or more employees within a 75-mile radius, I generally tell business owners to not worry about it until you get 45 employees, but that is not always true. What happens when an employer has multiple entities with common ownership? That is where the Common Ownership doctrine comes into play. The most common way this may happen for small businesses is if a person owns multiple franchise locations of a single franchise (say three McDonald’s restaurants) or if a person owns multiple different businesses but has many employees.
The FMLA and Employer Coverage
Under the FMLA, covered employers are required to provide eligible employees with up to 12 weeks of unpaid leave per year for certain family and medical reasons. The law applies to private employers with 50 or more employees within a 75-mile radius, as well as all public agencies and schools, regardless of the number of employees. An eligible employee is someone who has worked for the employer for at least 12 months and has worked at least 1,250 hours during the previous 12 months.
Common Ownership and FMLA Coverage
Employers with common ownership are treated as a single employer for the purposes of determining whether they meet the 50-employee threshold under the FMLA. Common ownership exists when one or more individuals or entities own at least 50% of each entity or when a group of individuals or entities own at least 50% of each entity and have effective control over each entity. This means that if multiple entities have common ownership, they are considered a single employer and must count all of their employees together to determine whether they meet the FMLA coverage threshold.
For example, let’s say that Bubba owns two companies, Company A (a Chic-Fil-A franchise) and Company B (a computer repair company), and each company has 30 employees. If John owns at least 50% of each company, he has common ownership, and the two companies are considered a single employer for FMLA purposes. Therefore, John must count all 60 employees together to determine whether he meets the 50-employee threshold under the FMLA. The 75-mile radius still applies.
The Significance of Common Ownership
The significance of common ownership is that it can impact whether an employer is covered by the FMLA and how it is required to administer FMLA leave. For example, if two entities have common ownership, they may be required to combine their employee counts and provide FMLA leave to eligible employees across both entities. This means that employees of one entity may be entitled to FMLA leave from the other entity if they meet the eligibility criteria.
Common ownership can also impact the calculation of the 12-month period during which eligible employees are entitled to up to 12 weeks of FMLA leave. Under the FMLA, the 12-month period can be calculated in one of two ways: (1) a rolling 12-month period measured backward from the date an employee uses any FMLA leave, or (2) a fixed 12-month period, such as a calendar year. If multiple entities have common ownership, they must use the same 12-month period for all employees who are eligible for FMLA leave.
Conclusion
Employers with common ownership must count all employees in multiple entities as if they were one entity for the purposes of determining whether they meet the 50-employee threshold under the FMLA. This means that if the combined employee count is 50 or more, the employer is covered by the FMLA and must provide eligible employees with up to 12 weeks of unpaid leave for certain family and medical reasons. Employers with common ownership must also ensure that they use the same 12-month period for all employees who are eligible for FMLA leave. If you have questions about how common ownership impacts your obligations under the FMLA, it is best to consult with an experienced employment law attorney.
If you own multiple businesses, FMLA is not the only law impacted by common ownership. You should contact counsel (hi, there!) to discuss the implications. You can contact us or schedule a consultation.