Labor & Employment Law Daily Joint employer liability found where parent company employed worker’s supervisor
Thursday, February 8, 2018

Joint employer liability found where parent company employed worker’s supervisor

By Nicole D. Prysby, J.D.

The claims of a U.S. corporation’s employee could go forward against the corporation’s parent company located in Israel, held a federal district court in Pennsylvania. Although the employee did not name the parent company on his EEOC charge, the Israeli company had a shared commonality of interest with its U.S. subsidiary because the Israeli company had control over the subsidiary and was not prejudiced by the employee’s failure to include it on the EEOC filing. The employee also established that the corporations could be liable under the joint employer theory because of the level of control provided by the Israeli company over the subsidiary—the employee’s direct supervisor was an employee of the Israeli parent company (Middlebrooks v. Teva Pharmaceuticals USA, Inc., February 5, 2018, Stengel, L.).

Alleged discrimination. The employee brought claims against his former employers, Teva USA and Teva Israel, alleging violations of the ADEA, Title VII, and the Pennsylvania Human Rights Relations Act. The employee worked in Pennsylvania as a senior level director, overseeing 70 employees. In 2014, he began reporting to a supervisor based in Teva’s global headquarters in Israel. In 2016, he was terminated. The stated reason was his performance, but the employee alleged that he was discriminated against because of his age and national origin. The employee’s EEOC charge named Teva USA only, not Teva Israel, but it included allegations against the supervisor who worked for Teva Israel. Teva Israel moved to dismiss all claims against it for failure to exhaust administrative remedies and lack of subject matter jurisdiction.

Exhaustion of administrative remedies. The court noted that as a general rule, a civil action may only be brought against entities named in the EEOC complaint. However, there is an exception to the requirement when the unnamed party receives notice and has a shared commonality of interest with a named party. The court discussed the relevant factors under the test to determine whether the exception exists. It found that the role of Teva Israel could have been ascertained by the employee at the time he filed his EEOC complaint, therefore this factor weighed in Teva Israel’s favor.

However, the court found that the next factor weighed in favor of the employee: that interests of the named party are so similar to the unnamed party that for purposes of obtaining voluntary conciliation and compliance it would be unnecessary to include the unnamed party in the EEOC proceedings. Although Teva USA and Teva Israel have separate corporate forms and assets/liabilities, Teva USA is 100% owned by Teva Israel. In addition, the employee’s supervisor was an employee of Teva Israel, demonstrating that Teva Israel had control over the business operations of Teva USA.

The court found that the third factor, actual prejudice to the unnamed party, weighed in favor of the employee. Teva Israel presented no evidence of prejudice and because the EEOC proceedings were resolved in Teva USA’s favor, there were no cause findings, which was further evidence of a lack of prejudice to Teva Israel.

Finally, the court noted that the fourth factor, whether Teva Israel has in some way represented to plaintiff that its relationship with the plaintiff was through Teva USA, weighed in favor of the employee. The employee worked for Teva USA for 14 years and only began reporting to a supervisor from Teva Israel in 2014; therefore, it would be reasonable for him to conclude that his employment relationship was with his direct employer, Teva USA.

The court also pointed out that Teva Israel had actual notice of the EEOC complaint, because the employee had provided copies of the complaint to various members of management at Teva Israel, including his supervisor who was a member of the senior management team. Because Teva Israel shared commonality of interest with Teva USA, the exhaustion requirement was excused.

Joint employer liability. Teva Israel also asserted that the claims against it had to be dismissed because it did not meet the definition of “employer” under the ADEA, Title VII, or PHRA. The court noted that because Teva Israel is a foreign corporation, not controlled by a U.S. entity, there would be no subject matter jurisdiction over Teva Israel unless the single or joint employer exception applies. The court found that the single employer exception did not apply, because Teva USA and Teva Israel were not entangled to the degree required; the entities maintain separate corporate forms, hold separate board meetings, keep separate books and records, and have separate headquarters. They have a traditional parent-subsidiary relationship, not a single employer relationship.

However, the court found that the joint employer exception did apply. Teva USA and Teva Israel exercised significant control over the same employees. The employee’s supervisor was an employee of Teva Israel, and had the authority to directly supervise, discipline, conduct performance reviews, demote, and terminate the employee. Although Teva Israel did not pay the employee’s salary, the level of control was sufficient to demonstrate joint employer liability.

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