Davenport Insulation, Inc.

908 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Davenport Insulation, Incorporated and Carpenters' District Council of Washington, D.C. affiliated with the United Brotherhood of Carpenters and Joiners of America, AFL,--CIO. Case 5-CA-4319 August 18, 1970 DECISION AND ORDER BY MEMBERS MCCULLOCH, BROWN, AND JENKINS On February 4, 1970, Trial Examiner Paul E. Weil issued his Decision in the above-entitled proceeding, finding that Respondent had not en- gaged in the complaint and recommending that the complaint be dismissed in its entirety, as set forth in the attached Trial Examiner's Decision. Thereafter, the General Counsel and Respondent filed excep- tions to the Trial Examiner's Decision with support- ing briefs. Pursuant to the provisions of Section 3(b) of the National Labor Relations Act, as amended, the Na- tional Labor Relations Board has delegated its powers in connection with this case to a three- member panel. The Board has reviewed the rulings of the Trial Examiner made at the hearing and finds that no prejudicial error was committed. The rulings are hereby affirmed. The Board has considered the Trial Examiner's Decision, the exceptions and briefs, and the entire record in this case, and hereby adopts the findings,' conclusions, and recommendations of the Trial Examiner, as herein modified. We agree with the Trial Examiner's ultimate con- clusion that Respondent did not violate Section 8(a)(5) of the Act. We note that the Charging Par- ty's contract with Bilton Insulation and Supply, Inc., hereinafter called Bilton, the predecessor of Respondent, was entered into pursuant to Section 8(f) of the Act, which reads in part: It shall not be an unfair labor practice under subsections (a) and (b) of this section for an employer engaged primarily in the building and construction industry to make an agreement covering employees engaged (or who, upon their employment, will be engaged) in the building and construction industry with a labor organization of which building and construc- tion employees are members (not established, maintained, or assisted by any action defined in section 8(a) of this Act as an unfair labor practice) because (1) the majority status of such labor organization has not been established under the provisions of section 9 of this Act prior to the making of such agree- ment.... It is clear that Section 8(f)(1) was intended to permit an employer in the construction industry to negotiate a contract with a union which has not established its majority status without either party running the risk of committing an unfair labor prac- tice.' But when a collective-bargaining agreement is entered into pursuant to that section, the contract can give rise to no presumption of continuing majority status. The situation in this case is thus clearly distinguishable from that in Burns 3 or in Ranch-Way, ' where the union's contract with the predecessor employer created a valid presumption of continuing majority which carried over to the successor employer.' We hold, therefore, that where, as here, a contract with the predecessor em- ployer has been entered into pursuant to Section 8(f), no duty is imposed upon the successor em- ployer to honor its predecessor's bargaining obliga- tion unless there is independent proof of the union's actual majority and of the successor em- ployer's unlawful refusal to bargain. As the uncon- troverted evidence in this case reveals that the Charging Party at no time represented a majority of the employees employed by Respondent, we will not require Respondent to bargain with the Union or to assume and be bound by the contract between the Charging Party and Bilton. ORDER Pursuant to Section 10(c) of the National Labor Relations Act, as amended, the National Labor Relations Board adopts as its Order the Recom- mended Order of the Trial Examiner and hereby orders that the complaint be, and it hereby is dismissed. 'In the absence of exceptions, we adopt proforma the Trial Examiner's finding that Respondent did not violate Sec 8(a)(3) of the Act See Bricklayers, Local No 3, 162 NLRB 476. The William J Burns International Detective Agency, Inc, 182 NLRB 348 'Ranch-Way Inc., 183 NLRB No 116. Member Jenkins does not subscribe to this distinction of Burns, but ad- heres to his dissent in that case TRIAL EXAMINER'S DECISION Statement of the Case PAUL E. WEIL, Trial Examiner: On a charge filed February 20, 1969, by Carpenters' District Council of Washington, D.C. affiliated with The United Brotherhood of Carpenters and Joiners of America, AFL-CIO, hereinafter called the Union, the 184 NLRB No. 114 DAVENPORT INSULATION, INCORPORATED General Counsel of the National Labor Relations Board, by the Regional Director for Region 5 (Bal- timore, Maryland), issued a complaint on August 26, 1969, against Davenport Insulation, Incor- porated, hereinafter called Respondent, alleging that by various acts and conduct Respondent vio- lated Section 8(a)(1), (3), and (5) of the National Labor Relations Act, as amended. By its duly filed answer Respondent denied the commission of any unfair labor practice although admitting certain facts alleged in the complaint including jurisdic- tional facts. On the issues thus joined the matter came on for hearing before me in Washington, D.C., on November 4, 1969. All parties were represented by counsel and had an opportunity to examine and cross-examine witnesses, to introduce evidence relevant and material to the issues and to argue orally and file briefs with the Trial Examiner. At the close of the hearing the parties declined to argue orally but the General Counsel and Respon- dent elected to file briefs which have been duly received. Upon the entire record in the case, and in con- templation of the briefs, I hereby make the follow- ing: FINDINGS AND CONCLUSIONS 1. JURISDICTION Respondent is and at all times material herein has been a Virginia corporation with its principal office and place of business in Falls Church, Virginia, en- gaged in the business of residential insulation in the States of Virginia and Maryland and in the District of Columbia . Respondent anticipates that it will during the year 1969 receive directly from outside the Commonwealth of Virginia materials valued in excess of $50,000. Respondent is and at all times material herein has been engaged in commerce within the meaning of Section 2 ( 6) of the Act. II. THE LABOR ORGANIZATION INVOLVED 909 cal material and selling insulation and related products . Apparently as the business of Bilton ex- panded it was administratively broken down into six separate divisions : the commercial division, which installed acoustical tile, ceilings, partitions and drywall ; the residential division , which installed in- sulation in any structure and performed termite proofing; the pipe covering division , which, as its name implies, covered pipes for insulation pur- poses; the spray products division , which sprayed chemical foam and other acoustical products; the supply division, which warehoused and sold insula- tion and related products and the Texas division, which handled Bilton's business in the State of Tex- as. The first five of these divisions were located in a building in Arlington County, Virginia. In January 1969 at a monthly departmental meet- ing it was disclosed that Bilton 's residential division had lost approximately $83,000 in the preceding year. The following Monday Davenport informed the president of Bilton, Adolph Bilton , of his intention to resign. Thereafter Bilton and Davenport engaged in negotiations which resulted in a memorandum of agreement dated January 271 which provides, inter alia, that Bilton desires to go out of the "residential division" business and agrees to relinquish to Davenport all accounts and contracts and assist him in an orderly transition of its accounts and con- tracts to Davenport. The agreement additionally establishes the value of Davenport 's interest in Bil- ton at $30,000 and provides "to assist in setting up a workable solution for a continuing unhampered insulation business ... and to aid employer [ Bilton] in disposal of unneeded equipment or merchandise because of this transition" Bilton agreed to transfer various equipment including 15 trucks, some blow- ing machines , miscellaneous parts and equipment, and certain unspecified merchandise all of which were to be valued and the total value thereof to be set off against the $30,000 . The agreement goes on to state "for the best interest of employee [Daven- port] and employer [Bilton ] it is stressed that a continuing working relationship be maintained" but provides that merchandise terms may be The Union is now and at all times material herein renegotiated in 2 years. The agreement also pro- has been a labor organization within the meaning of vides that Bilton will refer "residential division" Section 2(5) of the Act. ' type leads as much as possible to Davenport and III. THE UNFAIR LABOR PRACTICES A. Background Bilton Insulation and Supply, Inc., hereinafter called Bilton, was incorporated in 1952. One of its organizers, Carol V. Davenport, owner of 10 per- cent of its stock, became its executive vice pres- ident and general manager . Bilton was engaged in the business of installing acoustical tile, ceiling and dry wall products, insulation of buildings , covering of pipes, spraying chemical foam and other acousti- that Davenport will not engage in acoustical spray urathane forming, partitions or drywall commercial contracting for a period of 2 years without prior written approval of Bilton . In these fields it was agreed that Davenport could continue to act as a sales agent for Bilton with a commission of 25 per- cent of the net profit. In anticipation of the forthcoming transaction Bilton commenced rehabilitating the 15 trucks and removing its name therefrom while Davenport com- menced the necessary action to form a corporation of which he became majority stockholder with 75- ' All dates hereinafter are m the year 1969 unless otherwise specified 910 DECISIONS OF NATIONAL LABOR RELATIONS BOARD percent interest and Tom Clohisy, who had been_ manager of Bilton's residential division, became the owner of 25 percent. On Friday, February 14, Davenport's resignation became effective at the close of the normal workday. Earlier that week on Tuesday or Wednesday Davenport offered a job to William Marion who had been Bilton's residential division superintendent. On the evening of Febru- ary 14 Edward Alfred, who had been assistant foreman for Bilton, was hired by Davenport as assistant foreman at the new corporation. Other than these two men, according to Davenport's testimony, he informed none of the employees that he was going into business for himself. After 5 o'- clock on the 14th he told some of the employees that he was going to be in business at a new address the next day and they said that they would like to come to work for him. The next day, Saturday, the 15th of February, five or six of the employees of the residential division, several of the employees from the spray products division, Davenport and some of his relatives moved the trucks, equipment, and supplies secured from Bilton to Davenport's new place of business some 3 miles away in Fairfax County. On the morning of Monday, February 17, Daven- port commenced operations from his own plant with 12 employees who had prior thereto been em- ployed by Bilton's residential division, and four who had been employed by Bilton's spray products divi- sion. The term residential division applied to Bilton is misleading. In fact the so-called residential division was engaged in all types of insulation work (other than that done in the "space forming division") whether done in residences or commercial or indus- trial establishments. According to the testimony of Mr. Bilton 80 percent of the work of the residential division was residential insulation work, in in- dividual homes, primarily new construction. A very small percentage of his work was concerned with adding insulation to preexisting homes. The other 20 percent was concerned with schools, churches and industrial and commercial establishments as well as office buildings. In early 1968 Davenport as Bilton's vice pres- ident, signed a contract with the Union for the em- ployees of the industrial division after 1 day of picketing by the Union.' The agreement between the Union and Bilton terminated by its own terms on April 30, 1969. Bilton's residential division employed 46 em- ployees of whom 30-35 were in the unit. On February 17, the Monday after the transition, Bil- ton stopped the residential division employees who appeared to work before they checked in and gathered them together. He told them that he was going out of the residential insulation business. He told the employees to turn in their uniforms, for which they would get a refund, distributed checks to all but three of them, and sent the rest home. Prior to that time there had been 17 or 18 non- union employees in the division and 10 to 15 who were union members. All of the employees who went to work for Davenport were among the nonunion employees of Bilton's residential division. After February 15 Bilton completed certain res- idential insulation jobs which had either been started or to which Bilton was previously com- mitted. Adolph Bilton identified a group of 19 documents consisting of contracts and proposals that according to his testimony revealed that Bilton continued to do insulating work. It is notable that all of the 19 had to do with nonresidential construc- tion; in 15 of them the insulation work appears to be connected with other types of work such as drywall, acoustical ceiling, tiling or the like. Bilton also identified the personnel records of eight employees each of whom worked in the res- idential division. The records reveal that two of them worked only until March 11, the others sporadically through April or May, and only one of them appears to have worked full time until July 15. He testified that after the residential division contract with the Union expired the Union declined to renew it or enter into a new contract and insula- tors employed by Bilton thereafter were placed in the commercial division and paid under the com- mercial contract with the Union. B. The Issues The General Counsel contends that Respondent is a successor to Bilton with regard to Bilton's res- idential division work and that as such the contract between Bilton and the Union continued in full force and effect with regard to Davenport until its expiration. In accordance with this theory the General Counsel contends that it is unnecessary for him to show that the Union at any time represented a majority of Davenport's employees doing insula- ting work. Additionally the General Counsel con- tends that Respondent is guilty of unilaterally changing rates of pay and refusing to pay into the Union's health and welfare fund and bargain collec- tively after February 14 with the Union, all in viola- tion of Section 8(a)(5) of the Act. With regard to 16 employees who were not employed by Respond- ent, the General Counsel contends that Respond- ent violated Section 8(a)(3). Respondent contends that it is not a successor to Bilton and that in fact Bilton has continued in the same field of activity in competition with Respond- ent. Accordingly in the absence of any showing by the Union that it represents a majority of Respond- s The General Counsel characterizes the recognition as being pursuant to Section 8(f) of the Act, the Respondent characterizes the recognition as having been coerced by blackmail picketing It appears that at no time has the Union represented a majority of the employees of the residential divi- sion. DAVENPORT INSULATION, INCORPORATED ent's employees Respondent denies that it has any liability to bargain with the Union. With regard to the employees who were laid off by Bilton and not hired by Respondent, Respondent contends that with the exception of one who in fact was hired and worked for several weeks for Respondent none of the other employees made an application for em- ployment to Davenport, the only officer of Re- spondent empowered to hire employees. Ac- cordingly Respondent contends that it is guilty of no unfair labor practices. The issues resulting from the contentions of the parties are first, whether Respondent is a successor to Bilton's residential division; second, whether Respondent violated Section 8(a)(5) by its refusal to recognize and bargain with the Union; and third, whether Respondent's failure to employ the in- dividuals named in the complaint violated Section 8(a)(3) of the Act. C. The Successorship Issue In the first place it is clear and I find that Bilton has not continued in the same business activity in its residential division as that undertaken by Respondent. The memorandum of agreement between Bilton and Davenport clearly recites that Bilton desired to dispose of or go out of the busi- ness. His speech to the employees on February 17 reiterated his acknowledgement that this phase of his business was discontinued and the fact that his work force was reduced from about 35 employees prior to February 15 to 6 to 8 employees thereafter and none after July clearly reveals that Bilton no longer is actively pursuing this line of business. While contrary to the terms of the memorandum of agreement it does not appear that Bilton has referred residential type leads to Respondent or that Respondent has acted as a sales agent for Bil- ton in the commercial fields which it pledged not to engage in, nevertheless, it is noteworthy that Respondent commenced with 12 employees, and more thereafter, doing the work that Bilton's res- idential division had been doing on the projects in which Bilton previously had contracts. With regard to residential insulation which had comprised some 80 percent of the residential division's business prior to February 15, after the completion of pro- jects to which Bilton was already committed, none has been performed. This type of work now com- prises 80 percent of Respondent's contracts. Mr. Bilton's attempt to characterize himself as a com- petitor is not supported. There is no evidence that 3 Marian Simcox, Trustee, etc , 178 NLRB 516 4 Royal Brand Cutlery Company, 122 NLRB 901, cf. Northwest Gal- vanizing Co , 168 NLRB 26, Lloyd A Fry Roofing Co , Inc , 176 NLRB 1024 ' John Stepp's Friendly Ford, Inc., 141 NLRB 1065, N L R B v Armato, 199 F.2d 800 (C.A 7), Lloyd A FryRoofing Co., Inc, supra. 6 The use of machinery and equipment is relatively unimportant in the consideration of this case as distinguished from cases such as Northwest 911 he has bid since February 15 on any residential work. The contracts pursuant to which Bilton has engaged in insulating work in most cases required the insulating work to be done in connection with the installation of drywall, acoustical tile, ceilings or other commercial work of Bilton. The basic test of successorship is whether the "employing industry" remains substantially the same after the transfer.3 It is not necessary that the purported successor purchase all of the predeces- sor's business' or that the successor shall take over the entire employee complement of the predeces- sor.5 The basis of the decisions of the Board and the courts is the "substantial continuity in the employ- ing enterprise." In the instant case such substan- tial continuity is clearly discernible. The agree- ment between Bilton and Davenport makes it clear that Bilton is going out of the business con- ducted by his residential division and that Daven- port is assuming this business. The fact that Bilton continued to do some insulating work previously contracted for and thereafter continued to bid on insulating work as a concomitant of the other work which it continued to do does not neces- sarily militate against the conclusion that Bil- ton went out of the specific business of an insula- tion contractor. The record is clear that Davenport commenced work as an insulation contractor with 12 employees all of whom were formerly employed by Bilton using the same equipment that Bilton had used.' The employee complement from which Respon- dent drew its employees was in effect wiped out by the transfer of the business to it. Those few em- ployees of Bilton who continued doing insulation work became a part of another division and ap- parently of another unit represented by the Carpen- ters Union. The predecessor division comprised a separate collective-bargaining unit under a separate contract which immediately after the transfer was permitted by the Union to expire. In short the em- ploying enterprise appears to have been not Bilton as a whole but Bilton's residential division and Bil- ton's residential division was discontinued, with its work to a great extent taken over by Davenport. It is immaterial that Davenport operated from a plant 3 miles separated from Bilton's.' The employ- ing enterprise remained the same conducted in the same fashion under the same supervision with em- ployees having the same range of skills necessary for all phases of the operation.' In short all of the criteria normally used by the Board and the courts to determine the successorship issue are substan- tially met. Galvanizing Co , Royal Brand Cutlery Company, N L R B v Armato, Lloyd A. Fry Roofing Co., Inc , and most of the cases therein cited The mayor part of the equipment purchased from Bilton by Davenport consisted of trucks, the use of which is as relevant to the insulation business as it is to the other divisions of Bilton or of any other construction contractor. 7 Morgan Products, Inc , 172 NLRB No 15. -sParganient Fuller, Inc., 173 NLRB 696, cited by Respondent is fac- tually distinguishable on this ground. k 912 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Having determined that Davenport is a successor to Bilton we reach the question of Davenport's duty, if such there be, to recognize the Union and to be bound by its contract with the predecessor. The General Counsel's argument particularly with regard to the contract appears to be twofold. First, based on cases such as Oilfield Maintenance Co., Inc. (142 NLRB 1384), the General Counsel ar- gues that Davenport is an alter ego to Bilton bound by the contract between Bilton and the Union and, secondly, based on Wiley v. Livingston, 376 U.S. 543, General Counsel contends that the successor normally is bound by the contract of his predeces- sor. With regard to the "alter ego" argument I see a distinction between an alter ego and a successor such as Davenport, a bona fide purchaser in good faith of the assets of the predecessor but a new em- ployer in the sense that Mr. Davenport had such a small financial interest in Bilton as distinguished from his majority control of Respondent. The alter ego on the other hand is actually the same employer but appears under a different guise. As far as the record is concerned there is no evidence that Mr. Bilton or his company retains any control over Davenport or his company other than that con- tained in the buy-sell agreement between them, limiting Respondent in competing with Bilton's noninsulating activities. With regard to the General Counsel's alternate argument his reliance is placed on the position taken by the General Counsel in four cases argued to the Board on April 15, 1969, which are not yet decided.' However I believe that the General Coun- sel is skipping a step to reach this issue. As I read the cases the finding of a successorship leaves the General Counsel one step short of an order to bar- gain and that is proof or presumption of the Union's continuing majority status. Within the criteria laid down by the Board a successorship may exist in which the union may be shown to have lost its representational status. This is particularly so in the circumstances where the successor's employee complement is less than half of the predecessor's and it is not shown that the fraction who followed the employing enterprise are those who desired representation by the union. Some of the cases on which the General Counsel relies are cases in which a certification existed and under those cases the majority representation of the union is presumed unless respondent is able to come forward with evidence to the contrary after the completion of the certification year.10 In other cases the Board rested its majority find- ing on a presently existing or recently expired con- tract.11 In the instant case we are dealing with a situation where the Union admittedly has never represented a majority of the employees and where the contract was entered into by Bilton in order to relieve itself of the picket line, without any consideration of the Union's status as a representative designated by its employees.12 Under these circumstances no pre- sumption follows from the contract. As the Board said in Ref-Chem Company, etc., 169 NLRB 376, in which if found majority representation based on the presumption attendant to contractual representa- tion, "This is not to say that this presumption of majority status cannot be overcome, but to do so, the record must offer clear and convincing proof that the Union no longer represents a majority of the unit employees." In the instant case the proof could scarcely be more clear and convincing and it stands uncontradicted on the record. Under these circumstances an order to bargain would operate to the contrary of the rationale of the successorship doctrine to protect union members from being deprived of the benefits of their union membership. The employees with whom we are here concerned never sought such benefits and must be presumed not to have desired them. Accordingly, I shall recommend that the complaint be dismissed insofar as it alleges a violation of Section 8(a)(5) in the Respondent's refusal to recognize the Union or to give effect to Bilton's contract with the Union. D. The 8(a)(3) Allegation The General Counsel alleges that by Respond- ent's failure to hire 16 named employees it discouraged membership in a labor organization in violation of Section 8(a)(3). The 16 named in- dividuals are alleged to have been members of the Union. The General Counsel would apparently find support for this allegation in the fact that these in- dividuals appeared on Bilton's residential division payroll and did not appear on Respondent's payroll together with the evidence of Dennis Carter, who was the Union's shop steward at Bilton, that none of the employees appearing on Respondent's payroll belong to the Union and that 10 or 15 of the employees of Bilton's residential division belong to the Local. General Counsel stated that his theory was that nonunion employees were sought out whereas union employees were not sought out. But there is no support in the record for that theory. Davenport testified that Bilton lost money in the in- sulating business by reason of the fact it had to pay employees under the terms of the union contract and that he anticipated that he could make money doing the same work with the same group of em- ployees. This of course gives rise to an inference ° Kota Division of Dura Corp , Case 18-CA-3419, Travelodge Corp , Case 21-CA-7694, Hackney Iron and Steel Co, Cases 23-CA-2505 and 23-C?-2554 ( remanded by C C A. for Board consideration on subject); and William J. Burns International Detective Agency, Inc, Case 3 l-CA-776 10 N L.R B v Arn ato, supra, Downtown Bakery Corp, 139 NLRB 1352 - During the certification year, of course , the presumption is not rebuttable " Tom-A-Hawk Transit, Inc, 174 NLRB 124, Valleydale Packers, Inc., 162 NLRB 1486, Michaud Bus Lines, Inc., 171 NLRB No 21 " Additionally the record reveals that none of the employees hired by Davenport from Bilton were union members. (1 reject the position of the General Counsel that this factor resulted from a violation of Section 8(a)(3) The discussion thereof will be found below ) DAVENPORT INSULATION, INCORPORATED 913 that he anticipated doing it without the benefits of the union contract under which Bilton worked. But this is a far cry from supporting a finding that he discriminated in hiring the employees with whom he has been doing the work. He testified without successful contradiction that he was the only member of Respondent who was authorized to hire employees and that only one of the named alleged discriminatees ever applied for employment to him. He further testified that one individual was hired and worked for Respondent until he voluntarily quit. Of course the evidence raises a suspicion of discrimination. If we accept the contention of the General Counsel that the 16 named employees were union members and the evidence of Carter that none of Respondent 's employees were among the union members, it would appear that under nor- mal circumstances the same ratio would carry over from the predecessor to the successor employer but the suspicion requires the support of some element of solid evidence and I find none in the record. Ac- cordingly, I must conclude that the General Coun- sel has failed to support the 8(a )( 3) allegation and I shall recommend its dismissal. CONCLUSIONS OF LAW 1. Respondent is engaged in commerce within the meaning of Section 2(6) and ( 7) of the Act. 2. The Union is a labor organization within the meaning of Section 2 ( 5) of the Act. 3. The allegations of the complaint that Respond- ent has engaged in unfair labor practices within the meaning of Section 8(a)(1), (3), and ( 5) of the Act have not been supported by substantial evidence. RECOMMENDATION It is recommended that the complaint be dismissed in its entirety.