Weigh liability limits when structuring company

by on
in Employment Law,FMLA Guidelines,Human Resources

Think you can split your business into separate entities to avoid being covered by some laws like the FMLA—and maybe limit the amount employees can collect if they sue under Title VII? Think again.

That won’t work if the entities retain a centralized management structure.

Recent case: Tammy Hughes-Brown works for a company that manages a Charlotte area block of alternative campus housing. Her employer is part of a larger group of limited liability corporations that each runs similar alternative housing projects in other areas.

Hughes-Brown claimed she had been sexually harassed and paid less than a man doing the same job. She sued her employer and all the related companies and added up the total number of employees in order to reach the threshold for larger damages under Title VII.

The employer protested, but the court said she could get discovery on whether the companies operate as one. If they do, she stands to potentially receive a larger award. (Hughes-Brown v. Campus Crest Group, No. 3:10-CV-366, WD NC, 2011)

Final notes: When considering whether to expand the number of employees on your staff, consider whether doing so puts you into the next category for damages under Title VII. Damages are capped at $50,000 for employers with 15 to 100 employees; there is a $100,000 cap for those with 101 to 200 employees. But the cap increases to $200,000 for those with 201 to 500 employees, and $300,000 for those with 501 or more.

Note that the caps do not limit awards for back pay or lost future wages. They only apply to other damages such as emotional pain and suffering.

Also, consider if expanding your workforce requires you to provide FMLA leave. The FMLA applies to employers with 50 or more employees within 75 miles, and the employee count includes both full- and part-time workers.

Leave a Comment