Circuit Court Affirms Healthcare Facilities’ Single Employer Status Under NLRA

The Third Circuit recently upheld the National Labor Relations Board’s finding that a separately organized nursing home facility is properly considered a single employer with its parent company. The case, Grane Health Care v. NLRB, involved a nursing home that was purchased by Grane Healthcare Co. Grane subsequently established a new entity called Cambria Care Center to operate the facility. The facility’s employees had been represented by two unions. Grane refused to recognize those unions after it purchased the nursing home. Grane also extended employment offers to most of the facility’s employees, but did not offer employment to four out of the five officers of one union and an employee represented by the other union who was active in an earlier strike.

The unions filed unfair labor practice charges over Grane’s decision not to recognize the unions as the exclusive bargaining representatives and not to hire the five individuals. Perhaps unsurprisingly, the Board found in favor of the unions. Notably, the Board found that Grane and Cambria were single employers and were therefore jointly and severally liable for the violations. Under the “single employer” doctrine, the Board may treat two different corporate entities as one employer for liability purposes under the National Labor Relations Act.

Grane and Cambria sought relief from the Third Circuit, but found none. The Third Circuit held that the Board properly applied its familiar four-part test for determining single employer status. Specifically, the factors it considers are: (1) functional integration of operations; (2) centralized control of labor relations; (3) common management; and (4) common ownership.

The finding that the healthcare facilities were a single employer under the NLRA is not a shocking result, as the Third Circuit identified a number of factors pointing to single employer status, such as: the fact that Grane owned 99.5% of Cambria; the existence of a management agreement between Grane and Cambria; significant overlap between officers of the two corporations; and the fact that the Cambria administrator reported directly to a Grane vice president.

The employers’ appeal of the single employer determination was based largely on the argument that Grane did not control labor relations at Cambria – the most important factor in the Board’s four-part test. However, the Third Circuit swatted this argument aside, noting that the administrator who purportedly did control labor relations lacked knowledge regarding much of the facility’s operations.

Based on the facts recounted by the Third Circuit, this is not a terribly close case. However, it does serve as a useful reminder that simply maintaining corporate formalities will not guarantee that distinct corporate entities cannot be reached for liability purposes.

Photo credit: Sohl