PARENT COMPANY LIABLE FOR SUBSIDIARY HARASSMENT

A recent 8th Circuit case reversed a Minnesota District Court that found
that a parent company did not need to defend a harassment action against its
subsidiary, holding that the parent’s involvement in the operations of the
subsidiary were sufficient to potentially find liability.

The 8th Circuit, following other cases, suggested that the service agreement between the
parent company and the subsidiary required the providing of services by the
parent to include accounting services, administrative services, electronic
services, employee benefits, human resources, insurance, legal services,
safety advice, and treasury services.

Although the subsidiary’s employees were supervised by persons not employed by the parent,
the executive officers were generally all the same, and the Court noted most importantly
that the parent owned all of the issues of outstanding stock of the
subsidiary. Employers who desire to use subsidiaries to limit liability
should keep this case and discrimination statutes in mind. Sandoval, et al,
v. American Building Maintenance Industries, Inc. (8th Cir. 2009)

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