When are sister corporations considered a “single employer” under the Worker Adjustment and Retraining Notification Act (WARN Act)? And when are their worksites considered a “single site of employment”?
On March 2, 2016, a U.S. District Court in West Virginia addressed both questions in Ray v. Mechel Bluestone, Inc. The case involved two sister corporations—Double-Bonus and Dynamic—which operated three mines on the western side of the state. Both companies instituted reductions in force (RIF), within a 30-day period, impacting employees in each of the three mines. Neither corporation provided a WARN Act notice to its employees.
If the RIFs at the three mines are aggregated, the resulting employment losses would meet the 33 percent threshold sufficient to trigger application of the WARN Act, and both corporations would be required to provide notice to all affected employees from all three mines. However, if the employment losses from all three sites are not aggregated together, then at least one of the sites would remain under the 33 percent threshold, and the employers would not be required to provide notice to the affected employees.
The court’s opinion is divided into two sections. In the first, the court analyzed whether the two corporations should be considered a “single employer” for WARN Act purposes. The second section focused on whether the three sites together constitute a “single site of employment” under the WARN Act, thereby triggering coverage across all three sites.
Even though the two corporations were independent in many ways, the court nevertheless found them to be a “single employer,” at least for purposes of deciding the plaintiff’s class certification motion. The court applied a five-part test to reach this conclusion, focusing on whether:
- the two entities had common ownership;
- the two entities had common directors and officers;
- there was de facto control by a parent corporation over the two entities;
- the two entities had the same personnel policies;
- there is a “dependence of operations” between the affiliated companies in question.
The court found that the plaintiffs satisfied the first four elements of this test: the sister corporations were owned by the same parent; had two common directors; implemented the RIF pursuant to a directive from the parent company; and applied personnel policies and offered benefits in coordination with the parent company. This was sufficient for the court to conclude that the sister corporations were a “single employer” under the WARN Act.
“Single Site of Employment”
Should the employees from all three mines be counted and analyzed together as a “single site of employment” or should they be viewed in isolation? Here, a three-part test applies:
- whether the mines are in reasonable geographic proximity;
- whether they share in the same operational purpose; and
- whether they share the same staff and equipment.
This test was loosely taken from the WARN Act’s regulations, which provide that “non-contiguous sites in the same geographic area which do not share the same staff or operational purpose should not be considered a single site.” 20 CFR Sec. 639.3(i)(4).
- Geographic Proximity
With respect to geographic proximity, the court’s decision did not state the actual distance between the mines but noted that “all three mines were located in the western part of Wyoming County and nearby McDowell County, West Virginia.” It also pointed to a Securities and Exchange Commission filing that noted that “the mines are organized around three mining complexes . . . all of which are located in close proximity to each other.” Without further analysis, the court held that “[c]learly, the mines in this case are in adjacent counties and not within the same geographic area.”
- Operational Purpose
As to the second prong of the test—operational purpose—the court quickly found that all three mines had the same operational purpose of fulfilling interchangeable coal orders received from the parent company. The parent company coordinated production between all three mines for the purpose of fulfilling the same coal sales contracts. Because the mines produced the same product for the same purpose for the same orders for a common parent, the court concluded that the three mines shared a unified operational purpose.
- Staff and Equipment
The third prong of the test was whether the mines shared the same staff and equipment. The plaintiff was able to show that (i) one of the superintendents regularly rotated between the mines, (ii) the same group of survey personnel visited each of the three mines, and (iii) a single safety auditor filed disclosures for all three mines. However, the court was unimpressed with this evidence. It held that “[T]he [p]laintiff’s evidence, at best, indicates that only a few employees were shared across the relevant mines.” According to the court, the law requires much more, such as “rotat[ing] the same employees from one building to another.” 20 CFR Sec. 639.3(i)(iii). The court further noted that the sister corporations did not rotate equipment through the mines.
The court’s decision in Ray v. Mechel Bluestone, Inc. does not materially change the state of existing WARN Act precedent but reinforces the presumption that non-contiguous work sites will ordinarily be treated as separate sites of employment unless the sites share employees and equipment in a way that is operationally significant.