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Parent and Subsidiary Companies

When is a Parent responsible for the activities of a Subsidiary or associated company?

The question relates to the closeness of the companies activities and whether one can determine that it is essentially one employer. The bottom line relates to control and there is a particular focus on Employee Relations control.

The basic test is as follows:

1. Is the subsidiary a sham entity formed to commit fraud or other misdeeds?

2. Is there strong and robust evidence of parental control over the subsidiary?

3. Is there interrelation of operations?

4. Is there common Management?

5. Is there centralized control of Employee Relations?

6. Is there common ownership?

In Williams vs. Massachusetts Mutual Life Insurance Company (Mass Mutual), the court decided that Williams was an employee of David L Babson and Company not Mass Mutual. However in Merck Sharp & Dhome, the Parent was responsible for the actions of its Subsidiary Merck-Mexico.

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