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Successor Liability Under Family and Medical Leave Act

December 5, 2010
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Related Topics: Employee Leave, Miscellaneous Legal Issues, Featured Article
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Christina Sullivan was a former store manager of discount retailer Factory 2-U. During the company’s 2004 bankruptcy proceedings, Dollar Tree purchased 40 store leaseholds, including Factory 2-U’s Pasco, Washington, location, where Sullivan worked.

After Dollar Tree took over the location, the store shut down for four weeks to remodel, restock inventory and hire a staff of 15 to 25 employees, including Sullivan, who was employed as assistant manager continuously during the ownership transition. About eight months later, Sullivan requested an unpaid leave of absence from Dollar Tree to care for her sick mother. Dollar Tree approved some time off but not the full 12 weeks that Sullivan had requested.

In December 2006, Sullivan filed a federal lawsuit alleging violations of her Family and Medical Leave Act rights. The district court granted summary judgment in favor of Dollar Tree and found that Sullivan’s FMLA claim failed because she had not completed one year of service with the company.

The district court reasoned that because Dollar Tree was not a “successor in interest” under the FMLA to Factory 2-U, Sullivan could not add her length of service with Factory 2-U to her Dollar Tree service to satisfy the FMLA’s requirement that an employee have 12 months of service. (A “successor in interest” is a subsequent owner of a corporation that is carried on and controlled substantially as it was before the transfer of ownership.) Sullivan appealed to the 9th Circuit Court in San Francisco, which upheld the district court’s ruling. The 9th Circuit Court reviewed the Labor Department regulatory factors, including substantial continuity of the same business operations and workforce.

The 9th Circuit Court concluded that Dollar Tree was not a successor in interest to Factory 2-U because of dissimilarities in the core business and operations of the two entities. The court relied on the fact that Sullivan had not been continuously employed by the two entities. Sullivan v. Dollar Tree Stores Inc., 9th Cir., No. 08-35413, (Sept. 27, 2010).

Impact: An individual who has worked for an employer for less than 12 months may still be eligible for FMLA protection if that company is considered a successor in interest to the employee’s former employer and the employee’s combined length of service for both employers is 12 months or more.

Workforce Management, December 2010, p. 10 -- Subscribe Now!

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