The Ninth Circuit Court of Appeals in San Francisco recently addressed the question of whether and under what circumstances a new employer qualifies as a "successor in interest" to an old employer under the Family Medical Leave Act ("FLMA"). The distinction matters because an employee is not eligible for the protections of the FMLA until he or she has worked for a specific employer (including the employer's "successor in interest") for at least 12 months. In Sullivan v. Dollar Tree Stores, the court applied a list of eight factors and ultimately concluded that defendant Dollar Tree was not a successor in interest to the former employer, Factory 2-U, because there were not enough similarities between the two entities. Based on that finding, the Court held that a former employee of Factory 2-U who had been working for Dollar Tree for less than 12 months was not entitled to FMLA benefits.
Plaintiff Christina Sullivan was the full-time manager of a Factory 2-U store for approximately four years until Factory 2-U filed for bankruptcy in 2004. Dollar Tree purchased Factory 2-U's leaseholds and opened for business in Factory 2-U's former location. Sullivan applied for and was hired as an assistant manager for Dollar Tree, and she was employed continuously throughout the ownership transition. After eight months of working as an assistant manager for Dollar Tree, Sullivan requested, but did not receive, unpaid leave to care for her sick mother. After she filed a complaint with the Department of Labor ("DOL"), the DOL concluded that Dollar Tree was a successor in interest to Factory 2-U, and Sullivan was eligible for leave under the FMLA even though she had been employed by Dollar Tree for less than twelve months. After Sullivan quit several months later, she commenced a lawsuit in federal court claiming interference with her FMLA rights and seeking lost wages.
The federal district court dismissed Sullivan's case on summary judgment, finding that Dollar Tree was not a successor in interest to Factory 2-U. The Ninth Circuit agreed, relying on the application of DOL regulations identifying a set of factors to determine whether a company is a successor-in-interest under the law. These factors are: (1) substantial continuity of the same business operation; (2) use of the same plant; (3) continuity of the work force; (4) similarity of jobs and working conditions; (5) similarity of supervisory personnel; (6) similarity in machinery, equipment, and production methods; (7) similarity of products or services; and (8) the ability of the predecessor to provide relief. Applying these factors to this case, the court concluded that successorship had not been established, emphasizing that Dollar Tree had not purchased any of Factory 2-U's assets beyond the leaseholds; Dollar Tree had not absorbed most of Factory 2-U's former employees (the plaintiff was one of only two persons hired from Factory 2-U); and Dollar Tree changed her job title and responsibilities and required her to undergo new training. Whether a business qualifies as a successor in interest to an employee's former employer for purposes of the FMLA will ultimately be a case-by-case factual determination, but the Ninth Circuit's decision in Dollar Tree clarifies that such analysis should be guided by the eight DOL factors listed above.