Closely-Related Small Companies May Be Integrated Under the ADA

Although companies with fewer than 15 employees are not covered by federal anti-discrimination laws, including the Americans with Disabilities Act, the U.S. Court of Appeals for the Ninth Circuit found those that are sufficiently related may be combined to trigger ADA coverage.

In Buchanan v. Watkins & Letofsky, LLP, the employee worked for a law firm with fewer than 15 employees. When she brought a lawsuit for violations of the ADA, her employer argued that the ADA did not apply because of its size. However, the Ninth Circuit has previously recognized the “integrated enterprise doctrine” in the context of Title VII and the Age Discrimination in Employment Act, under which an employee can bring suit if they can establish that their employer is “so interconnected with another employer that the two form an integrated enterprise” and the integrated enterprise has at least the threshold number of employees (15 for Title VII, 20 for the ADEA). Ruling on this question for the first time, the Ninth Circuit found that the integrated enterprise doctrine equally applies to the ADA, which shares the same 15-employee threshold and statutory enforcement scheme as Title VII. (We note, however, that the Equal Employment Opportunity Commission has long taken this approach).

In determining whether two employers are sufficiently interrelated, the court considers the following factors:  interrelation of operations; common management; centralized control of labor relations; and common ownership or financial control. In this case, the employee alleged that her employer was part of an integrated enterprise with another firm. There was evidence that both firms shared a website and toll-free number, employees of both used the same email template footer with both offices, and both offices shared operational and administrative work, an IRS taxpayer ID number, and an employee roster. Moreover the same two individuals own both firms, are the only partners of both firms and manage both offices, including all significant employment matters. Based on this evidence, the Ninth Circuit held that a jury could find an integrated enterprise that could be held liable for violations of the ADA.

Thus, owners of multiple small companies should be aware of the possibility that their companies could be combined for purposes of triggering coverage under federal anti-discrimination laws. If they wish to keep the companies truly separate, they will need to take appropriate steps to establish each company’s independence from the other(s).