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Corporate branding can provide a basis for liability as a joint or integrated employer

October 30th, 2012  |  Lorene Park

Larger companies often engage in corporate branding across subsidiaries and other related companies as a strategy to promote name recognition. Examples include using a logo, specific letterhead or stationery, common website, or packaging. Although corporate branding is a valuable marketing tool, the practice can come at a cost when an employee for a subsidiary or other related company alleges that it engaged in an unlawful employment practice and argues that the larger corporation was so interrelated with the employer (as evidenced by the subsidiary using the parent logo) that the two companies were a single, joint, or integrated employer. If a court agrees, then both could be subject to liability under federal and state employment laws.

Threshold coverage and document branding

For example, in Tasciyan v Medical Numerics (DMd, October 9, 2012), an employee asserting a Title VII retaliation claim against her small employer argued that two larger companies, Textron and Overwatch, were integrated employers with the small company such that: (1) there were more than fifteen employees so Title VII applied and (2) both larger companies should be liable for the unlawful retaliation. The court performed a fact-sensitive inquiry into common management; interrelation between operations; centralized control; and degree of common ownership and financial control. In the court’s view, it could be inferred that Textron and Overwatch exercised control over the discipline and termination of the employee based in part on the following facts: the HR manager for Overwatch served her with a disciplinary report with the header “Textron Systems;” the termination letter was on Textron letterhead and signed by Textron’s HR manager; Overwatch sent her a letter demanding the return of office keys; and the employee had an earnings statement bearing the Textron logo.

In Harrell v Delaware North Companies (EDMich, October 3, 2012), a female employee filed gender bias and reprisal claims against two companies which argued they were not her employer. She defeated their summary judgment motions by establishing issues of fact under Title VII’s “integrated enterprise,” and “joint employer” tests, as well as the Michigan Elliott-Larsen Civil Rights Act’s and the FLSA’s “economic reality” tests. Although the HR manager for a subsidiary of one of the companies testified that the employee worked for that entity and was not employed by either of the defendant companies, the employee submitted employment documents containing the two companies’ names and logos. These included her employment application, authorization for direct deposit of pay, an interoffice memo on bonuses, a pay stub, a wage notification form, and a record of associate counseling. In the court’s view, these documents created triable issues of fact on the identity of the entity that controlled her employment opportunities and the terms and conditions of her employment.

Proactive strategy: internal versus external branding

As these cases illustrate, it might be wise when employing a corporate branding marketing strategy to carefully choose which documents will contain the corporate umbrella logo (sometimes referred to as the masterbrand) rather than adopting the logo across the board. For example, it makes sense to use the logo on documents sent out to customers and potential customers but perhaps less sense to use it on subsidiaries’ interoffice memoranda or personnel forms. Refraining from using the masterbrand on subsidiaries’ personnel forms is not a guarantee of avoiding liability as a joint or integrated employer in lawsuits against a subsidiary. However, given the fact-sensitive inquiry undertaken by courts, it does reduce the potential bases upon which plaintiffs can assert that the corporate parent should be liable for the unlawful practices of the subsidiary employer.