3 minutes | March.22.2017
With some exceptions, the ADEA applies to the U.S.-incorporated subsidiaries of foreign corporations. It remains unsettled whether employees can sue foreign parent companies of U.S. subsidiaries for age discrimination under the ADEA. Recently, in Downey v. Adloox Inc., Case No. 16-CV-1689 (JMF) (S.D.N.Y. Feb. 28, 2017), the U.S. District Court, Southern District of New York, found that the plaintiff plausibly alleged age discrimination under the ADEA against both his United States employer and its French parent company on a “single-employer” theory.
In 1984, Congress amended the ADEA’s definition of “employee” to clarify that the statute applies to U.S. citizens employed by American corporations who work outside the United States (for example, at a foreign branch). At the same time, Congress added § 623(h)(2), which provides that “[t]he prohibitions of [the ADEA] shall not apply where the employer is a foreign person not controlled by an American employer.”
Some courts have interpreted § 623(h)(2) to expressly preclude a foreign business’s liability under the ADEA. In Johnson v. Aramco Servs. Co., 164 Fed. App’x 469 (5th Cir. 2006), the plaintiff sued both a Saudi oil company and its wholly-owned subsidiary incorporated in Delaware. The subsidiary provided recruiting services to the Saudi company. Plaintiff, a 57-year-old man, attended a career fair in Houston hosted by the subsidiary, where he applied for a position with the parent company that was to be based in Saudi Arabia. He was not selected for the position and sued the parent and subsidiary under the ADEA. The court held that the language of § 623(h)(2) made clear that the parent company was not an “employer” under the ADEA. It further held that the subsidiary was not liable, either, because a recruiting organization cannot be considered an employment agency under the ADEA if the foreign corporation is not itself a covered employer.
Other courts have read § 623(h) differently and have permitted ADEA lawsuits against foreign companies with U.S. subsidiaries. In Downey v. Adloox Inc., supra, a French parent company hired Plaintiff, then 51 years old, to build up the New York office of its fledgling U.S. subsidiary. Two months into the plaintiff’s employment, he was terminated, and he sued both companies under the ADEA.
In denying the defendants’ motion to dismiss the ADEA claim, the court quoted the Second Circuit’s decision in Morelli v. Cedel, 141 F.3d 39, 42 (2d Cir. 1998), where the court observed that “the plain language of § 623(h)(2) is not necessarily decisive [of a foreign company’s liability] if it is inconsistent with Congress’ clearly expressed legislative purpose.” Relying in part on the Second Circuit’s holding in the Title VII case Brown v. Daikin America Inc., 756 F.3d 219 (2d Cir. 2014), the court held that the foreign company’s liability under the ADEA depended on whether it could be treated as the plaintiff’s employer pursuant to the single-employer doctrine. The factors of the single-employer doctrine include (1) interrelation of operations between the parent company and subsidiary; (2) whether there is a centralized control of labor relations; (3) common management; and (4) common ownership or financial control.
Ultimately, Downey, if it withstands appeal, and similar cases suggest that a foreign company’s liability under the ADEA is increasingly unpredictable. If courts continue to apply the fact-intensive single-employer test to decide ADEA liability on a case-by-case basis, it will be more difficult for foreign companies to assess their liability based on their ties to U.S. subsidiaries.