Corporate Governance - Business Policies

Legal Employer 

It is the policy of Pepco Holdings, Inc. and its affiliates (collectively, “PHI” or the “Company”) for employees to be employed by an appropriate legal entity, to ensure that the costs associated with employing that employee are charged to the correct business entity.

Some basic facts:

1. The legal entity that employs the employee will not always match the business or group for which the employee does work. For instance, service company employees may spend all or most of their time working for one of the Company’s Power Delivery businesses.

2. Compensation and benefit policies and programs may differ, so assigning an employee to the correct legal entity is necessary to ensure costs are appropriately tracked.

3. Who works for what legal entity may be controlled by legal and regulatory requirements -- so deciding which entity should be the legal employer for a particular employee will not always be obvious.

Here are the basic principles to follow in deciding which entity should be the legal employer for a particular employee:

I. Employees doing work primarily for one legal entity should be employed by that entity.

II. Employees regularly performing services for more than one legal entity, where one of those companies is a “utility” as defined by the Securities & Exchange Commission (i.e., DP&L, ACE, or Pepco) should be employed by the service company. There are three types of service company employees:

  1. Corporate Services - these employees provide services for the operating (i.e., utility) companies (such as Legal, Human Resources, Treasury and Accounting).
  2. Line of Business Support - these employees provide direct support for a specific line of business that crosses legal entities, such as the common management staff for Conectiv Power Delivery, which is comprised of two entities, DP&L and ACE.
  3. Convenience - employees providing services for a legal entity that is small or newly-formed.

III. Employees regularly performing services for more than one legal entity, none of which is a “utility” as defined by the SEC, should be employed by the legal entity for which they perform the majority of their services.