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The mere existence of a parent company does not automatically mean that the company is subject to liability for the sins of a subsidiary under the Fair Labor Standards Act ("FLSA"). In a recent case the Third Circuit Court of Appeals established a new test for determining whether a joint employment relationship exists.
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Sep 23, 2014 · September 23, 2014. 9:42 am. Can a parent company avoid liability for unlawful employment policies at its wholly-owned subsidiaries? This week, a California Court of Appeal issued an important decision on that question, holding that a corporate parent could be found liable for its subsidiary’s failure to pay overtime and minimum wages.
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Can a parent company have liability for its subsidiaries?
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What happens if a parent company omits a subsidiary?
- Case Law Update
- Aaa V Unilever Plc and Unilever Tea Kenya Limited – The Facts
- The High Court’S Decision
- The Court of Appeal’s View
- Practical Points
- Where Next For The Law on Parent Company Liability?
- How Can Burges Salmon Help?
A parent company and its subsidiary are separate in the eyes of the law, with separate legal liability for their acts and omissions. However, if a parent company is too closely involved in the affairs of its subsidiary, it risks owing a direct duty of care to the employees of, and third parties affected by, the subsidiary. The Court of Appeal’s dec...
In December 2007, violence broke out across Kenya following the announcement of the Kenyan presidential election results. A tea plantation owned and operated by Unilever Tea Kenya Limited (UTKL) in Kenya's Rift Valley was invaded by ‘criminal rioters’ during the violence. The claimants – 218 Kenyan nationals who were employed by UTKL or otherwise l...
In February 2017, the High Court found that a duty of care had not arisen, because two of the three criteria required to establish such a duty had not been met: 1. While some post-election violence was foreseeable, it was ‘inconceivable’ that a parent company ‘based thousands of miles away’ should have foreseen the damage which occurred to the clai...
The Court of Appeal upheld the decision that Unilever plc owed no duty of care to the claimants, but took the opposite view on proximity. They considered that a parent company may have sufficient proximity to its subsidiary to owe a duty of care to those affected by the actions of that subsidiary in the following two scenarios: 1. Where the parent ...
Parent companies attempting to minimise their risk of liability for a subsidiary’s actions should note the following key points which assisted the Court of Appeal to find that Unilever plc was insufficiently proximate to UTKL to assume a duty of care: 1. UTKL genuinely managed its own business. 2. UTKL had prepared and carried out its own crisis ma...
The recent cases on parent company liability are particularly helpful because they examine the nuanced challenges facing complex businesses which must balance the advantages of operating (or requirements of the local jurisdiction to operate) via subsidiaries with the need to implement policies to maintain a uniformly positive and cohesive group ide...
The law on parent company liability is particularly relevant in the context of health and safety and environmental incidents; the substantial damages potentially available to claimants can make it attractive to pursue a wealthier parent company. Further, in respect of subsidiaries in the UK, there is a risk that a parent company exposes itself to c...
Jul 2, 2012 · The Court of Appeals for the Third Circuit has rejected one such sweeping allegation, upholding a District Court finding that the corporate parent of Enterprise Rent-A-Car’s operating companies (Enterprise Holdings, Inc.) was not a “joint employer” of assistant managers employed by the 38 operating subsidiaries. In re Enter.
Aug 1, 2012 · A parent company within the Third Circuit will be better positioned to avoid a determination of joint employer liability if its policies ensure a measure of distance between the parent and...
Oct 31, 2019 · How each company is managed and who is in control of its affairs will be important elements in assuming whether the parent is liable for the actions of the subsidiary. Parent company liability may go further than expected if such separation is not clear.
Feb 26, 2021 · Irish courts have applied ordinary negligence principles to hold an owner of a company liable for injury caused to an employee of the company where the owner placed himself in a relationship of proximity to the employee (by engaging an untrained person to operate a potentially dangerous machine and issuing inadequate instructions as to how to ...
