Ninth Circuit Court of Appeals Examines Criteria for Determining Whether an Employer Is a Successor in Interest for Purposes of the Family and Medical Leave Act

In Sullivan v. Dollar Tree Stores, Inc., (— F.3d —-, C.A.9 (Wash.), September 27, 2010), the United States Court of Appeals for the Ninth Circuit considered whether a new employer was a successor in interest to an employee’s previous employer so that the employee satisfied the Family and Medical Leave Act’s 12-month employment requirement. The court of appeals held that the new employer was not a successor in interest and therefore the employee was not entitled to the protections of the Act.


Cristina Sullivan (“Sullivan”) worked for Factory 2-U in Pasco, Washington, prior to the company filing Chapter 11 bankruptcy. Factory 2-U sold discount clothing, had more than 200 stores, and employed more than 4,000 people. In September 2004, the bankruptcy court approved the sale of Factory 2-U’s leasehold on 39 stores, including the Pasco store, to Dollar Tree Stores, Inc. Dollar Tree, also a chain retail store, sells items for one dollar. Dollar Tree did not purchase any assets of Factory 2-U. The Factory 2-U store in Pasco closed its doors at the end of September 2004. Dollar Tree reconfigured and remodeled the Pasco store. After a construction team finished the remodel, a set-up team prepared the inventory and stocked the shelves. The Dollar Tree in Pasco opened on October 30, 2004, with 15 to 25 employees.

Dollar Tree hired Sullivan as an assistant manager in September 2004 and her employment was continuous from the time the Factory 2-U store closed and the Dollar Tree store opened. Sullivan trained for two weeks at a nearby Dollar Tree store and then assisted at the Pasco store for two weeks before it opened. Although Dollar Tree hired some Factory 2-U employees to help with the work to prepare for the opening of the Dollar Tree store, only Sullivan and one other former Factory 2-U employee worked at the Pasco Dollar Tree after it opened.

Sullivan worked at the Dollar Tree store from September 2004 until May 2005 without incident. In May 2005, Sullivan’s mother began experiencing serious health problems. Sullivan sought leave to help care for her mother. Dollar Tree granted Sullivan some unpaid leave, but that leave was not adequate for Sullivan’s needs. In late May or June 2005, Sullivan either quit or was fired from her employment with Dollar Tree.

The Department of Labor (“DOL”) concluded Dollar Tree violated the Family and Medical Leave Act of 1993 (“FMLA”) by failing to provide Sullivan with leave. After Dollar Tree reinstated Sullivan’s employment, Sullivan filed a lawsuit against Dollar Tree to recover the full amount of her lost wages. The trial court held that Dollar Tree was not a successor in interest to Factory 2-U and therefore, Sullivan did not meet the FMLA’s requirement that an employee work for an employer for at least 12 months in order to be eligible for leave under the FMLA.


The court of appeals affirmed the trial court’s decision. The FMLA gives an “eligible employee” the right to take leave for many reasons including to care for a close relative. Pursuant to the FMLA, an employee is not eligible for leave under the Act “until he or she has worked for a particular employer for at least 12 months.” Included within the definition of employer is “any successor in interest of an employer.” The court of appeals adopted the reasoning of the Sixth Circuit Court of Appeals and concluded that regulations promulgated by the DOL should be applied to determine whether an employer is a successor in interest.

Sullivan challenged Dollar Tree’s denial of her request for leave after she had been employed for Dollar Tree for less than one year. The issue before the court of appeals was whether Dollar Tree was a successor in interest to Factory 2-U. The court of appeals held Dollar Tree was not a successor in interest.

The FMLA does not define “successor in interest” but the DOL does give factors that should be considered when addressing the issue. The regulation, which can be found at 29 C.F.R. § 825.107, lists the following eight factors to be considered when determining whether an employer is a successor in interest: “(1) Substantial continuity of the same business operations; (2) Use of the same plant; (3) Continuity of the work force; (4) Similarity of jobs and working conditions; (5) Similarity of supervisory personnel; (5) Similarity in machinery, equipment, and production methods; (7) Similarity of products or services; and (8) The ability of the predecessor to provide relief.”

The court analyzed the factors and balanced the equities and determined that Dollar Tree was not a successor in interest. The court concluded there was no substantial continuity of business operations. Although both employers operated a discount retail business, the similarities ended there. Factory 2-U sold clothing only and sold its items at many different prices. Dollar Tree sold a wide variety of merchandise for $1 per item. Furthermore, the transition period of one month between the closing of Factory 2-U and opening of Dollar Tree is evidence that there was no continuity of business operations. Although the new employer did continue to use the same physical location as the previous employer, that location was substantially renovated. Only Sullivan and one other Factory 2-U employee continued to work at Dollar Tree after the store opened. The court found that “[t]here is almost no continuity of work force when only two former employees are hired from a much larger pool of former employees.”

The court, however, found that the jobs and working conditions were similar because both employers operated retail stores and the employees probably worked similar schedules during regular business hours. There was no overlap of upper management between the two retail operations. The equipment used in both businesses was probably the same equipment that is common to most retail businesses such as cash registers and hand trucks. The products were not similar because Factory 2-U sold clothing only and Dollar Tree sells gifts, personal and household items. Dollar Tree did not purchase any of Factory 2-U’s inventory. The court found the final factor is not applicable because a former employer cannot provide relief under the FMLA to a person it no longer employs.

After considering all of the factors set out in the DOL regulation and then balancing the equities, the court concluded that Dollar Tree was not a successor in interest to Factory 2-U. Therefore, Sullivan was not entitled to protection under the FMLA because she did not work for Dollar Tree for 12 months before requesting leave.


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