Keefe, Campbell & Associates, LLC

Editor’s comment: The court looked at the employment situation as a whole and analyzed the amount of control to make the determination. The decision again notes small employers with less than 50 employees do not fall under FMLA guidelines. For a joint-employer relationship to exist, each alleged employer must exercise control over the working conditions of the employee.

In Moldenhauer v. Tazewell-Pekin Consolidated Communications Center (No. 07-1118 July 31, 2008), the Seventh Circuit Court of Appeals on appeal from the United States District Court for the Central District of Illinois was faced with a claim where a worker who was terminated for absenteeism sued for being retaliated against for exercising her rights under the FMLA. The district court granted summary judgment for the defendants, finding that there were not joint employers and that FMLA did not apply due to the small employer exception.

Moldenhauer began working at Tazcom in August 1983 as a dispatch telecommunicator. In 1991 she was diagnosed with chronic pancreatitis. As her illness progressed so did the amount of work she was forced to miss. A Tazcom manager first voiced concern regarding Moldenhauer’s absenteeism in 1998. In May of 2002 Moldenhauer advised she wished to invoke her rights under the FMLA. Moldenhauer claims the manager denied her request for FMLA leave, and she then filed a complaint with the U.S. DOL. An investigation culminated in a preliminary letter from the U.S. DOL labeling Tazcom, Pekin, and Tazewell joint employers under FMLA. In January 2003 the manager suspended Moldenhauer for twenty days due to her absenteeism, her third suspension for missing work. After returning from her suspension, she again missed work, and the company fired her in April 2003. Moldenhauer brought suit in district court for multiple claims including that Tazcom, Pekin, and Tazewell retaliated against her for trying to exercise her rights under the FMLA. The district court granted summary judgment in favor of Defendants, reasoning that Pekin and Tazewell did not have control over Tazcom employees and therefore were not joint employers of Moldenhauer.

Summary judgment was appropriate in favor of Tazcom, the court reasoned, because it had fewer than fifty employees and was therefore exempt from the FMLA. Because the court’s decision turned on the amount of control Pekin and Tazewell exercised over Moldenhauer, it is important to understand the relationship between Pekin, Tazewell, and Tazcom. Pekin and Tazewell created Tazcom in 1976 as a non-profit corporation in Illinois to provide emergency 911 communications at a more affordable rate. Tazcom serves thirty-eight public and private entities. Tazcom was established as an independent entity, but, as its name suggests, it does a great deal of business with Pekin and Tazewell. All of Tazcom’s clients pay for their emergency services, however the bulk of Tazcom’s operating budget was derived from the largest users, Pekin and Tazewell. Tazcom also rents office space from Pekin, and in order to enter the building, Tazcom’s employees were issued Pekin identification badges. Tazcom also contracted with Pekin for the provision of various services including Payroll, Health Care Insurance, Workers Compensation Insurance, and Illinois Municipal Retirement. Tazcom paid Pekin in exchange for payroll services. According to Pekin, technological limitations required all Tazcom employees be labeled as Pekin employees to provide payroll services. Pekin was also listed as Moldenhauer’s employer on many of her employment forms, including her W-2s, wage garnishment form, and direct deposit form. The Tazcom sexual harassment policy listed a Pekin city employee as the reporting official for potential claims. Finally, prior to 2002, Tazcom contracted with Pekin for health and life insurance providers, although it has since procured its own providers. As for the day-to-day operations of Tazcom, the parties dispute what level of control Pekin and Tazewell exercised over Tazcom. The Tazcom bylaws stipulate that a board of directors be appointed consisting of four individuals: the Sheriff of Tazewell, the Chairperson of the Tazewell Board of Supervisors, the Mayor of Pekin, and the Pekin Chief of Police, all of whom have the choice of serving personally or designating an alternate to serve in their place. But the board appoints a separate Executive Director to manage the day-to-day operations, including the hiring and firing of employees and creation of a preliminary budget. Steven Thompson served as Executive Director for all periods relevant to this claim and Thompson is not affiliated with Pekin or Tazewell in any way and is only employed by Tazcom.

In making their decision, the Court reviewed the guidelines for determining joint employment, it was noted this circuit had yet to address joint-employer liability under the FMLA, but had addressed a question of joint employers under the Fair Labor Standards Act. The Court noted the joint employer regulation in the FLSA mirrors that in the FMLA, and thus it makes sense to use this standard to govern the FMLA.

The test was noted as:

(1) Where there is an arrangement between employers to share an employee’s services or to interchange employees;

(2) Where one employer acts directly or indirectly in the interest of the other employer in relation to the employee; or,

(3) Where the employers are not completely disassociated with respect to the employee’s employment and may be deemed to share control of the employee, directly or indirectly, because one employer controls, is controlled by, or is under common control with the other employer.

The court also noted Congress exempted “small employers,” defined as employers with fewer than fifty employees. They strongly noted that it would not be tolerated if an organization divided itself into smaller entities with fewer than the statutory minimum number of employees for the express purpose of avoiding FMLA obligations. And where such evidence exists, they will not hesitate to deem these entities joint employers for purposes of the FMLA.

In this case, the Court found absolutely no evidence that Pekin and Tazewell created Tazcom in order to avoid their FMLA responsibilities. Indeed, Tazcom was created in 1976, seven years before the FMLA was enacted. Moldenhauer stresses that Tazcom’s board of directors was filled with officials from Pekin and Tazewell. But never does Moldenhauer point to any evidence these individuals acted as representatives of Pekin or Tazewell. There were no allegations that any of the directors, when acting in their capacity as a Tazcom director, sought to advocate for Pekin or Tazewell. Moldenhauer seems to suggest that because these leaders sat on the Tazcom board, it is implicit that Pekin and Tazewell were joint employers of Tazcom. But many government officials sit on many boards, and this fact alone cannot suffice to justify the extension of joint-employer liability. The Court also pointed out Moldenhauer cannot point to one instance of either Pekin or Tazewell hiring a Tazcom employee, determining the working conditions of the dispatchers (such as by specifying the number of dispatchers working at any given time and thus affecting the workload of each dispatcher), or deciding the compensation for a Tazcom dispatcher.

This case is the initial look into this particular issue by the Seventh Circuit and highlights the guidelines for FMLA requirements in relation to joint employers. This article was researched and written by Shawn R. Biery, J.D. If you have thoughts and comments or need the case citation, please send a reply to sbiery@keefe-law.com.