The court emphasized that the first two factors articulated by the DOL test—common ownership and common directors and/or officers—are of limited importance due to the separate legal personalities that corporations are traditionally accorded under law. The court found common ownership existed by reviewing disclosures on the defendants’ websites, which stated that Fortis was a wholly owned subsidiary of the private equity parent.
The third prong—de facto exercise of control—was upheld by the Indiana court as “perhaps the most important prong of the DOL test,” so important that “if the de facto exercise of control was particularly striking . . . then liability might be warranted even in the absence of other factors.” In probing this factor, the court looks to whether the private equity parent was the decision maker responsible for the employment practice giving rise to the litigation. Here, the plaintiff alleged (i) the existence of weekly calls between the parent and portfolio company concerning the operation, financial condition and management of the company, (ii) payment of management fees to the private equity parent, and (iii) the deployment of partners and personnel by the private equity firm to supervise the management of the facility, including oversight of personnel decisions and the ultimate decision to close the facility.
In this case, plaintiff’s successful allegation of two of the five prongs of the DOL multi-factor test—common control based on ownership and de facto control—proved sufficient to consider the private equity parent and its wholly owned subsidiary as a “single employer” for purposes of liability under the WARN Act and withstand defendant’s motion to dismiss the claim.
1 http://dockets.justia.com/docket/indiana/inndce/3:2012cv00364/69802/