If a company has 30 employees in each of its five franchises in Connecticut, does it pass the 50-employee threshold under the new Connecticut paid sick-leave law? What if they are not franchises but separate divisions or subsidiaries of a company? The Connecticut Department of Labor recently announced a simple answer ”“ if the employers have separate unemployment insurance registration numbers, they are separate employers.
Such a simple analysis is unique in this field.
Most of us are now familiar with the basic requirements of the new sick-leave law, which is effective Jan. 1, 2012. It requires employers with 50 or more employees in Connecticut to allow certain service workers to accrue and use paid sick leave. (The statute offers an extensive exemplary list of which job titles are covered.) But for someone with several locations, or several companies in the state, the definition of “employer” is key. We recently received an opinion letter from the DOL that clarifies this definition.
We posed a scenario to the DOL in which there were two companies, each with 30 employees and each run by a separate limited liability company (LLC), but which both utilize some of the same business operations tools. We further noted that each LLC uses the same payroll agent, participates in the same health insurance plan and/or uses the same accountant and human resources consultant. The DOL was unimpressed by these factors. As long as each company had fewer than 50 employees and had separate unemployment insurance registration numbers they were considered separate employers.
Under this statute, an employer”™s headcount is based upon the wage information submitted to the labor commissioner by the employer pursuant to its reporting of employees on its quarterly earnings report for unemployment insurance purposes. This is a form every employer ”“ or its payroll company ”“ must submit to the state. Therefore, as long as a company has a separate unemployment insurance registration number, it is considered a separate “employer” under the statute.
Despite issuing this decisive opinion letter, the DOL waivered by warning it is still reviewing the law. In other words, it may change its mind. The DOL”™s definition of employer is surprising since in other areas, such as labor law and the Employee Retirement Income Security Act, the test for determining the employer is usually complicated and convoluted. The analysis often requires a multifactor assessment of the business. Time will tell if this direct approach will prevail.
Over the next few months, companies must decide if they believe they are covered by the law and if so, implement policies that comply with the law”™s requirements. Hopefully soon the DOL will issue regulations that will assist employers.
For now, if you have questions, the DOL is responding quickly to requests for opinions on this topic.
Robert G. Brody, rbrody@brodyandassociates.com, is founder and managing member of Brody and Associates L.L.C. and Allison E. Smith, asmith@brodyandassociates.com, is an associate at the Westport law firm.
