Closely related small businesses can be incorporated under the ADA

Although businesses with fewer than 15 employees are not covered by federal anti-discrimination laws, including the Americans with Disabilities Act, the United States Court of Appeals for the Ninth Circuit has found that those who are sufficiently linked can be combined to trigger ADA coverage.

In Buchanan vs. Watkins & Letofsky, LLP, the employee worked for a law firm with fewer than 15 employees. When she sued for violation of the ADA, her employer argued that the ADA did not apply because of her size. However, the Ninth Circuit has previously recognized the “integrated business doctrine” in the context of Title VII and the Employment Age Discrimination Act, under which an employee may sue if he can establish that his employer is “so interconnected with another employer that the two form an integrated business” and the integrated business has at least the threshold number of employees (15 for Title VII, 20 for ADEA) . Ruling on this issue for the first time, the Ninth Circuit concluded that the integrated business doctrine also applies to the ADA, which shares the same 15-employee threshold and statutory enforcement regime as the title VII. (We note, however, that the Equal Employment Opportunity Commission has long taken this approach).

To determine whether two employers are sufficiently interrelated, the court considers the following factors: interrelationship of transactions; joint 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 company with another company. There was evidence that the two companies shared a website and toll-free number, that employees of both used the same email template footer with both offices, and that the two offices shared work operational and administrative, an IRS tax identification number and a list of employees. Additionally, the same two people own both firms, are the sole partners of both firms, and manage both offices, including all major employment matters. Based on this evidence, the Ninth Circuit ruled that a jury could find an integrated company that could be held responsible for the ADA violations.

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

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