Single employer doctrine raises concerns for nonunion employers

published in Oklahoma Employment Law Letter | October 21, 2013

By Barbara Klepper

Under what is known as the “single employer doctrine,” the 7th Circuit ruled in August that three corporations essentially functioned as one and were all subject to the same union contract—even though only one of the corporations actually entered into the agreement. Consequently, Oklahoma employers should be cautious of the implications accompanying this doctrine or else be armed and ready to comply with union agreements.

Integrated companies

The single employer doctrine provides that when two or more companies are sufficiently integrated, they will be treated as a single entity for some employment law purposes. Whether entities are “sufficiently integrated” to be a single employer depends on four factors:

  1. The interrelation of day-to-day operations;
  2. Common management;
  3. Centralized control of labor relations; and
  4. Common ownership.

In the recent 7th Circuit case, one management company maintained business records, processed payroll, handled billing, and managed bank accounts for a tile installation company with union workers and for another company with nonunion workers. That relationship weighed in favor of the three corporations being “sufficiently integrated.”

More important, the management company’s leaders made the critical decision of whether the union or nonunion worker company would bid on particular projects as if all three companies were part of the same organizational chart. The three companies were cozy enough to share the same warehouse space, and all three were under common control, which, together with all the other facts, ultimately caused the court to treat the three companies as a single employer. Lippert Tile Company, Inc. v. International Union of Bricklayers and Allied Craftsmen.

The effect of being a single employer

So what does it mean to be a single employer in Oklahoma? In this case, the three corporations were subject to the parent corporation’s collective bargaining agreement (CBA). As a result, all three employers were required to participate in arbitration with representatives of the union to decide whether the nonunion installation company’s employees would enjoy union employee benefits. Although the less formal setting of arbitration is sometimes a more favorable alternative to litigation, it’s often costly and may not afford the right to appeal.

As this case shows, companies subject to CBAs often engage in transactions or corporate structuring with other companies that aren’t subject to such agreements, which raises concerns for employers seeking to keep nonunion employee benefits and other employee considerations separate from those of union employees. Once an employer is part of a union contract, choices in hiring, firing, healthcare coverage options, retirement options, and wages—just to name a few—are all subject to negotiation.