- How does a federal contractor that has acquired multiple companies determine whether each acquired company is subject to OFCCP jurisdiction?
- What factors does OFCCP apply when determining whether a separate business or organization and/or acquired company is so closely related to the acquiring federal contractor that it would constitute a single entity subject to OFCCP’s jurisdiction?
- When applying the single entity test, does OFCCP consider one factor determinative?
- Can the single entity test also be applied to determine whether separate buildings in a campus-like setting are distinct establishments requiring separate AAPs?
How does a federal contractor that has acquired multiple companies determine whether each acquired company is subject to OFCCP jurisdiction?
Each acquired company assumes the status of a covered federal contractor, and the obligation to prepare its own AAP, if either of the following two scenarios applies: (1) an acquired company holds its own covered federal contract(s), in which case it will remain subject to OFCCP jurisdiction; or (2) an acquired company does not hold its own federal contract(s), in which case it would be subject to OFCCP jurisdiction only if it is so closely related to the acquiring federal contractor that it would constitute a single entity for the purposes of OFCCP jurisdiction.
What factors does OFCCP apply when determining whether a separate business or organization and/or acquired company is so closely related to the acquiring federal contractor that it would constitute a single entity subject to OFCCP’s jurisdiction?
OFCCP applies the following factors, derived from case law, when determining whether a separate business or organization constitutes a single entity for the purposes of OFCCP jurisdiction. The test requires OFCCP to consider whether:
- The entities have common ownership;
- The entities have common directors and/or officers;
- One entity has de facto day-to-day control over the other through policies, management or supervision of the entity’s operations;
- The personnel policies of the entities emanate from a common or centralized source; and
- The operations of the entities are dependent on each other, e.g., services are provided principally for the benefit of one entity by another and/or both entities share management, offices or other services.
See Brennan v. Goose Creek Consol. Indus. Sch. Dist., 519 F.2d 53, 58 (5th Cir. 1975) (holding that, for the purposes of the Fair Labor Standards Act, a school district, and not each elementary school it encompasses, was one establishment due to a central administrator, rather than the principal of each school, determining the wages and daily duties of employees for each elementary school within the district); Beverly Enters., Inc. v. Herman, 130 F. Supp. 2d 1, 22 (D.D.C. 2000) (accepting application of the five-factor test to determine if a corporation and its subsidiaries were one entity).
When applying the single entity test, does OFCCP consider one factor determinative?
No. The test is a fact-specific analysis that focuses primarily on whether the ownership, management and operations of the separate entities are, in fact, sufficiently interrelated to warrant treating them as a single entity. All factors are evaluated when determining whether a separately acquired company or a subsidiary of the parent company constitutes a federal contractor subject to OFCCP jurisdiction. A business or organization need not meet all five factors to be considered a single entity. Though no single criterion is determinative under the single entity test, there is growing recognition that centralized control of employment decisions is the most important factor. See OFCCP v. MBNA, 1999-OFC-2, ALJ Order (Sept. 7, 1999).
Can the single entity test also be applied to determine whether separate buildings in a campus-like setting are distinct establishments requiring separate AAPs?
No. The single entity test applies only when determining whether OFCCP has jurisdiction over a separate business or organization without a federal contract that is sufficiently related to a federal contractor. The question of whether a federal contractor with multiple locations in close geographic proximity to each other is required to label those entities distinct establishments requiring their own AAPs is a separate inquiry. OFCCP allows companies some discretion in structuring their internal establishments and AAP programs, assuming the contractor meets the requirements of law. However, it is possible that a contractor with multiple locations, each requiring its own AAP, is so closely related to a separate business or organization without a federal contract that the two could be considered a single entity, necessitating application of both the AAP factors and the single entity test. For guidance on these topics, please consult OFCCP’s FAQs on Campus-Like Settings and AAPs at https://www.dol.gov/agencies/ofccp/faqs/campus-settings.
Last Updated: November 13, 2020
The contents of this document do not have the force and effect of law and are not meant to bind the public in any way. This document is intended only to provide clarity to the public regarding existing requirements under the law or agency policies.