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Sept. 20 — A former employee of an Ohio car dealership that is a subsidiary of Penske Automotive Group Inc. can’t pursue discrimination claims against Penske, a federal district court decided ( Divney v. Penske Auto. Grp., Inc. , 2016 BL 308206, N.D. Ohio, No. 15-2358, 9/19/16 ).
The decision reaffirms that a parent company isn’t automatically the “employer” of those working for its subsidiaries.
The parent can’t be sued over employment disputes unless it controls the subsidiary’s labor relations, they share common management and the maintenance of separate corporate entities is a “sham.”
The court Sept. 19 dismissed the age and disability bias claims of Eugene Divney, who worked as a service manager for Stoddard Imported Cars Inc., which Penske purchased in 2011.
Divney named Penske as the sole defendant in his lawsuit under the Age Discrimination in Employment Act and Ohio state law.
But the court said Penske and the dealership, now operated as Audi Mentor by a company called PAG Mentor A1, can’t be deemed a “single employer” under the relevant legal test.
A parent company generally isn’t liable for its subsidiary’s acts, even if it wholly owns the subsidiary, Judge Patricia A. Gaughan wrote.
Courts in “extraordinary cases” will “pierce the corporate veil” and treat the parent and subsidiary as one entity for legal purposes, the court said.
But Divney doesn’t present evidence that would support piercing the corporate veil, the court said.
A four-part test for deciding if two related entities are a single employer considers: the interrelation of operations; shared management, such as common directors and boards; centralized control of labor relations and personnel; and common ownership and financial control.
Divney’s evidence that Penske maintained the payroll records for its various Cleveland subsidiary dealerships doesn’t show interrelated daily operations, the court said.
Rather, an employee handbook makes clear that each Penske-owned subsidiary managed its own shop, the court said.
Divney contended there was a “significant overlap of management,” but he produced no evidence that Penske and PAG Mentor A1 shared officers or board members, the court said.
A parent company must exert “actual and active control” of a subsidiary’s “day-to-day labor practices” to satisfy the single-employer test, the court said.
Penske argued it played no role in Divney’s alleged demotion or termination. Again, the employee handbook makes clear the Penske-owned dealerships are “managed and operated locally” on a daily basis by the respective subsidiaries, the court said.
Divney argued he satisfied the common ownership and financial control factor because PAG Mentor A1 is a wholly owned Penske subsidiary.
But deeming two related companies a single employer requires proof that “one of the entities is a sham,” the court said.
Divney offered no evidence that such an arrangement is the case, so his single-employer argument fails, the court said.
Joseph A. Dubyak and Paul V. Wolf in Cleveland represented Divney. Haber Polk Kabat represented Penske Automotive Group.
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The opinion is available at http://www.bloomberglaw.com/public/document/Divney_v_Penske_Auto_Grp_Inc_No_115_CV_2358_2016_BL_308206_ND_Ohi.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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