Successor Liability Under The Family And Medical Leave Act
The Family and Medical Leave Act (the “FMLA”), 29 U.S.C. §§ 2601 et seq., provides that “eligible employees” are entitled to a total of twelve workweeks of leave per year to care for a newborn or newly-adopted child or an ill relative, or in the case of the employee’s own serious illness. However, an employee becomes eligible for FMLA leave only after working for a covered employer for a period of at least 12 months. On June 28, 2006, the U.S. Court of Appeals for the Sixth Circuit issued an important decision expanding the circumstances in which employees may qualify for FMLA leave. The court ruled that, for purposes of determining an employee’s FMLA eligibility, an employer may be required to count an employee’s period of employment with a predecessor company, even if the new employer did not come about as a result of a merger with or transfer of assets from the predecessor. Cobb v. Contract Transport, Inc., 452 F.3d 543 (6th Cir. 2006).
Plaintiff Ronald Cobb began working as a truck driver for Byrd Trucking in July 2000. At that time, Byrd had a contract with the United States Postal Service to deliver mail between Denver and Philadelphia. Cobb was assigned to the portion of this route between his home in Mt. Sterling, Kentucky, Philadelphia, and Mt. Vernon, Illinois. In June 2003, defendant Contract Transport, Inc. underbid Byrd for the new contract on the Denver-Philadelphia route. To service this route, Contract Transport hired Cobb and other Byrd truck drivers, maintaining precisely the same route, relay stops, and equipment. In the fall of 2003, Cobb began experiencing stomach pain and on December 19, 2003 it was determined that he required immediate gallbladder surgery. Cobb promptly informed his dispatchers of his need for medical leave, but was instructed to call Human Resources to make the arrangements. Cobb, however, failed to inform Human Resources until December 29, 2003, six days after his surgery. Cobb’s employment was subsequently terminated on the grounds that he had “voluntarily resigned…because he [had] made himself unavailable for work.”
Cobb brought suit, alleging that Contract Transport violated the FMLA by denying him leave to attend to his medical condition and by terminating his employment. In due course, Contract Transport moved for summary judgment, arguing that: (1) Cobb was not an “eligible employee” under the FMLA because he had not worked for Contract Transport for the requisite twelve months; and (2) alternatively, Cobb was not entitled to FMLA leave because fewer than 50 employees (the minimum number required to trigger FMLA coverage) were employed at his “worksite.”
The district court granted the motion and dismissed the lawsuit. The court found that Byrd was not eligible for FMLA leave because he had been employed by Contract Transport for less than 12 months. In that regard, the court declined to apply a theory of successor liability to count the three years Cobb worked for Byrd towards his FMLA eligibility. The court reasoned that because there had been no merger of or transfer of assets between Byrd and Contract Transport, there was no “continuity of ownership or control” and therefore no basis for applying successor liability.
Cobb appealed and the Court of Appeals reversed the district court’s ruling. The Sixth Circuit rejected the district court’s conclusion that a merger or transfer of assets was a prerequisite to the imposition of successor liability under the FMLA and reasoned that “the FMLA and its implementing regulations evidence a congressional intent to adopt the doctrine of successor liability developed in federal labor law cases.” Inasmuch as cases under other federal labor laws do not require a merger or transfer of assets as a precondition to the imposition of successor liability, the Sixth Circuit declined to adopt such a requirement under the FMLA.
To reach this conclusion, the court first referred to the relevant provision of the FMLA which states that work for a covered employer includes work performed for both the employer from which leave is requested and any previous employer to which the current employer is a “successor in interest.” 29 U.S.C. § 2611(4)(ii)(II). The court also observed that Department of Labor regulations implementing the FMLA instruct courts to consider the eight factors used under Title VII of the Civil Rights Act of 1964 in determining whether a covered employer is a “successor in interest.” 29 C.F.R. § 825.107. The enumerated factors include:
(1) Substantial continuity of the same business operations;
(2) Use of the same plant;
(3) Continuity of work force;
(4) Similarity of jobs and working conditions;
(5) Similarity of supervisory personnel;
(6) Similarity of machinery, equipment, and production materials;
(7) Similarity of products and services; and
(8) The ability of the predecessor to provide relief.
These factors, according to the regulation, are “to be viewed in their totality” and applied in a flexible case-by-case manner.
The court further emphasized that these factors should not be rigidly applied but that a reviewing court should also balance: (1) the interests of the defendant-employer, (2) the interests of the plaintiff-employee, and (3) the goals of federal policy, in light of the particular facts of a case and the particular legal obligation at issue. According to the Sixth Circuit, the ultimate inquiry remains “whether the imposition of the particular legal obligation would be equitable and in keeping with federal policy.”
Applying these standards to the facts of the Cobb case, the court concluded that the balance of equities, in light of federal policy, weighed in favor of considering Contract Transport a successor in interest, thereby making Cobb eligible for FMLA leave. The court concluded that Cobb was not the type of employee that Congress would have intended to exclude from FMLA eligibility, because his employment was entirely without interruption or alteration for over three years; only the management, not the job, changed. The court further reasoned that, as a matter of policy, allowing Contract Transport to avoid FMLA responsibility in such circumstances would seriously undercut the utility and protection of the statute.
The court also rejected Contract Transport’s alternative defense that it did not meet the statutory criterion for FMLA coverage because fewer than 50 employees were employed at Cobb’s “worksite.” Contract Transport argued that Cobb’s worksite was the truck stop in Mt. Sterling, Kentucky were he picked up his truck to begin his route. However, the Department of Labor’s regulation 29 C.F.R. § 825.111(a)(2) defines the term “worksite” as used in the FMLA to mean “the office to which the [employee] report[s] and from which assignment[s] are made.” Accordingly, Cobb’s worksite was determined to be Des Moines, Iowa, the location from which he received assignments and to which he reported, rather than the Mt. Sterling truck stop, which was little more than a gas station. Because more than 50 employees were employed at Cobb’s Des Moines worksite, he was eligible for FMLA leave.
As a case of first impression, the Sixth Circuit’s Cobb decision is an important precedent for other federal courts faced with FMLA cases presenting issues of successor liability. It remains to be seen whether other courts will adopt a similar analysis. But, in the meantime, the flexible approach adopted by the Cobb court, with its emphasis on balancing of the employer’s and employee’s interests in light of federal policy goals and consideration of the facts as a whole, will make it difficult for employers to know with certainty in advance whether successor liability will attach in any particular situation. Accordingly, a successor employer should proceed with care in evaluating the FMLA rights of employees who were also employed by the predecessor employer.