- A law firm in Nevada with fewer than 15 employees may have to defend an associate's Americans with Disabilities Act lawsuit due to Title VII's "integrated enterprise" doctrine, the 9th U.S. Circuit Court of Appeals held (Buchanan v. Watkins & Letofsky, LLP, No. 21-15633 (9th Cir. April 7, 2022)).
- Two partners own the Nevada firm (W&L Nevada). They also own and run a law firm in California (W&L California). The associate worked in the Nevada firm and alleged the company failed to accommodate her medical condition by requiring her to work more than 20 hours a week. A federal district court found that W&L Nevada was not covered by the ADA because it had fewer than 15 employees, the threshold for coverage, and the associate failed to show it should be treated as a single employer with W&L California.
- On appeal, the 9th Circuit reversed. In a case of first impression for the court, the 9th Circuit held that Title VII's "integrated enterprise" doctrine also applies to ADA claims. The two statutes have the same 15-employee threshold and statutory enforcement schemes, and the court has long analyzed the two statutes along similar lines, the panel said. Based on four factors — including interrelated operations — the evidence raised a question about whether W&L Nevada and W&L California were, in fact, an integrated enterprise and could be treated as a single employer for purposes of coverage under the ADA, the 9th Circuit held. It sent the case back to the district court to resolve the question and to determine, if the W&L Nevada and W&L California were an integrated enterprise, whether they collectively had 15 employees.
To be subject to Title VII of the Civil Rights Act of 1964 and the ADA, an employer must have 15 or more employees who worked for it for at least 20 calendar weeks (in the current or previous year). Under the "integrated enterprise" doctrine, even if an employer doesn't meet this threshold, it could still be subject to a claim if it is "so interconnected with another employer" that the two employers form a single "integrated enterprise" and collectively have at least 15 employees.
The 9th Circuit uses a four-factor test to determine whether an integrated enterprise exists. In the law firm case, it said there was evidence the two firms met the first factor, interrelation of operations. The two offices shared a website, toll-free numbers, operational and administrative work, an IRS taxpayer identification number and an employee roster.
That the two partners are the sole partners of both offices and manage both supported the second factor — common management — the panel said.
The evidence also suggested that the third factor, centralized control of labor relations, was met. A jury could infer from it that the two partners managed all significant employment matters for both offices, including hiring and firing, discipline, performance evaluations, scheduling and compensation.
As to the fourth factor, a jury could infer that because the two partners owned both firms, there was common financial control, the 9th Circuit said.
In another example, an ADA failure-to-accommodate case considered last year in the 1st Circuit, evidence of the four factors supported a jury finding that a call center company and a property company were a single "integrated" employer, the court held on appeal. The companies had different names, but call center employees booked reservations for the property company's hotels and resorts, the court noted. Also, the call center's payroll administrator handled some of property company's HR functions, including hiring reservation agents for the property company to work at the call center, and the two companies shared logos, an email address and documents, such as an employee handbook and department policies.
The "integrated enterprise" doctrine — the concept that two nominally separate employers are so interrelated they constitute a single integrated employer — is different from a joint employer relationship, the 1st Circuit pointed out. The joint employer concept, which often comes up in charges of unfair labor practices under the National Labor Relations Act, recognizes that the business entities involved are, in fact, separate entities but share or co-determine certain conditions of employment, the court explained.
HR pros serving multiple offices or entities — or those at employers aiming to expand — may need to review rulings on "integrated enterprise" and the minimum-employee coverage requirements of state and local laws, which may be lower than their federal counterparts.