Western Union Corp.

274 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Western Union Corporation , Teleprocessing Indus- tries, Inc , Western Union Data Services Company, Inc, Western Union Realty Corporation, Gift America, Inc.; The Western Union Telegraph Com- pany and United Telegraph Workers, AFL-CIO Case 5-CA-6142 June 1, 1976 DECISION AND ORDER BY CHAIRMAN MURPHY AND MEMBERS FANNING AND JENKINS On January 10, 1975, Administrative Law Judge Marion C Ladwig issued the attached Decision in this proceeding Thereafter, Respondent The West- ern Union Telegraph Company filed exceptions and a supporting brief, Respondents Western Union Corporation, Teleprocessing Industries, Inc, West- ern Union Data Services Company, Inc, Western Union Realty Corporation, and GiftAmerica, Inc, filed joint exceptions and a supporting brief, the Union and the General Counsel filed briefs in sup- port of the Administrative Law Judge's Decision 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 au- thority in this proceeding to a three-member panel The Board has considered the record and the at- tached Decision in light of the exceptions and briefs and has decided to affirm the rulings, findings, and conclusions of the Administrative Law Judge only to the extent consistent herewith The Administrative Law Judge found that The Western Union Telegraph Company, herein called Western Union, Western Union Corporation, herein called WUC, Teleprocessing Industries, Inc, herein called TII, Western Union Data Services Company, Inc, herein called DSC, Western Union Realty Cor- poration, herein called WURC, and GiftAmerica, Inc, herein called GA, constitute a single employer for purposes of collective bargaining and that their employees are included in the certified bargaining unit of Western Union's employees He concluded, therefore, that by refusing to recognize and bargain with the Union as the exclusive collective-bargaining representative of the employees of the above-named corporations other than Western Union, the Respon- dents violated Section 8(a)(5) and (1) of the Act We do not agree that the Respondents constitute a single employer, rather, we find that each corpora- tion is a separate and independent entity and that, therefore, Western Union's bargaining obligations have no application to WUC or WUC's other four subsidiaries Western Union, the oldest of the Respondents, has traditionally been engaged exclusively in the business of providing record communication services pur- suant to tariff and subject to regulation of the Feder- al Communications Commission (FCC) and state agencies In recent years it has embarked on a mas- sive modernization program and has sought to ex- pand and diversify its activities The New York Transportation Corporations Law, which governs the terms of Western Union's charter, restricts a tele- graph corporation's business to telegraph communi- cations The FCC has also determined that if a regu- lated carrier such as Western Union became involved in unregulated business it would be required sepa- rately to incorporate such unregulated business As a result of state and FCC limitations on Western Union's expansion into unregulated businesses, WUC, a holding company, and four new subsid- iaries, DSC, TII, WURC, and GA were created, without, however, affecting Western Union's busi- ness and without any adverse effect upon Western Union's bargaining unit DSC was created to engage in the unregulated business of leasing terminal equipment for use with computers TII was created to engage in the unregu- lated business of selling information and data pro- cessing systems and services GA was created to en- gage in the unregulated business of selling and delivering gift merchandise through franchised deal- ers, using both over-the-counter sales and a nation- ally advertised telephone order system (GA ceased operations in August 1974), WURC was created to permit development of a professional real estate business selling its services to customers other than Western Union and buying and selling land for in- vestment purposes The record establishes that, while there is some overlap of corporate officers between the holding company and its subsidiaries, excepting Western Union, the rosters of corporate officers of the various corporations are not identical Indeed, each of the six corporations has its own president, who does not hold that office, or (other than the president of the now defunct GA) any office or directorship in any of the corporations other than that over which he pre- sides For example, with the exception of its chair- man of the board, none of DSC's corporate officers holds an office in the other corporations, and six of WURC's nine corporate officers hold no office in the other corporations Similarly, four of TII's seven di- rectors are not officers or directors of either WUC or the other subsidiaries Moreover, although six of WUC's ten directors, including the chairman of the Board, serve as direc- 224 NLRB No 25 WESTERN UNION CORP tors of Western Union (with three other Western Union directors), none of Western Union's 18 offi- cers, including the president and vice presidents with their designated responsibilities, serves in any office or directorship in either WUC or the new subsid- iaries Most importantly, Western Union's vice presi- dent in charge of employee relations holds no office or directorship in either WUC or the other four sub- sidiaries Thus, the few examples of common officers or di- rectors among WUC and the various subsidiaries cit- ed by our dissenting colleague are outweighed by the distinct separateness of Western Union's officers Certainly there is no basis for our dissenting colleague's assumption that Western Union's labor relations are controlled by, or control, the labor rela- tions of either WUC or the other subsidiaries To adopt the approach of our dissenting colleague would result in an automatic finding in every case that a wholly owned subsidiary or the constituent companies of a conglomerate are a single employer, since it can equally be said in every case that "the fact that those policies [i e , control of all aspects of the operations] are carried out by officers who in some cases do not hold similar offices in other corpo- rations does not mean that those officers can or do operate independently of the control of the di- rectors and board chairman of {the parent corpora- tion], the owner of the whole enterprise " But this is contrary to long-established principles followed by this Board See, e g, Royal Typewriter Company, a Division of Litton Business Systems, Inc, 209 NLRB 1006 (1974), enfd 92 LRRM 2013, 78 LC ¶11,369 (CA 8, 1976) The five new companies provide some services and facilities to Western Union, and vice versa, under contractual arrangements on a reimbursed basis In this regard, DSC, with headquarters in Mahwah, New Jersey, began its operations with a group of pro- fessional and management personnel and minimum support staff of nonbargaining unit personnel from Western Union and initially subcontracted a large amount of its installation and maintenance work to Western Union As DSC's capabilities increased, DSC reduced its subcontracting, and now subcon- tracts only about 10 percent of such work to Western Union and other outside contractors Similarly, Western Union at one time leased certain terminals and equipment (not part of DSC's product line) from DSC for 6 months, at which time Western Union purchased the equipment pursuant to its contract op- tion TIl initially rented office space from Western Union in Mahwah, New Jersey, pursuant to a written lease and contracted with Western Union for the 275 support service of 18 individuals at the bargaining unit level This arrangement terminated, and TII hired its own support employees when Western Union relocated its offices to Upper Saddle River, New Jersey At the formation of TII, certain of West- ern Union's professional employees began work as employees of TII, and, pursuant to a contract with Western Union, TII provided Western Union with services, including planning and engineering, pro- gramming, and management of initial operations un- til the systems developed for Western Union were fully functional when management responsibility was assumed by Western Union Pursuant to Western Union's contract with TII, Western Union's bargain- ing unit employees operated and maintained these systems, consistent with industry practice of main- taining continuity of trained personnel when compli- cated engineering systems are involved Upon West- ern Union's assuming management of these systems, TII no longer needed some of the management pro- fessionals, who then returned to work for Western Union to run the systems for which they had been trained GiftAmerica, which contracted with other contrac- tors for services such as market research, computer, and warehouse, contracted with Western Union to provide a telephone answering service which was paid for on a per-call basis All services and facilities furnished Western Union by WURC, whose offices are located in New York City, are also provided pursuant to written leasing agreements on a fully reimbursed basis Unlike our dissenting colleague, we do not find significant the requirement that WURC obtain approval from its client, Western Union, before completing any trans- actions involving that client's operations Indeed, a contrary arrangement would cast doubt on the sepa- rateness of the two corporations The Union and the General Counsel argue that Western Union has merely fragmented itself into separate corporations created from its own previous- ly existing departments and thereby fragmented the established bargaining unit 1 They contend that, as the Administrative Law Judge found, Western Union and the five new companies are, despite this frag- mentation, a single integrated enterprise constituting a single employer for the purposes of collective bar- gaining However, contrary to the assertions of the Union and the findings of the Administrative Law Judge, the creation of the holding company and the four i Both the General Counsel and the Union specifically disavow any con- tention that accretion to the established bargaining unit is in issue , rather, they argue that the Respondents are a single employer and have fragmented the unit 276 DECISIONS OF NATIONAL LABOR RELATIONS BOARD new subsidiaries has not fragmented Western Union's business or had an adverse impact on West- ern Union's bargaining unit While each of these new corporations has some nexus with Western Union, their businesses , which are unregulated, has not ex- isted as part of Western Union and had, therefore, not been performed by Western Union's bargaining unit employees, the traditional bargaining unit has remained intact within Western Union Indeed, the functions of the other subsidiaries could not have been performed by Western Union, since it was lim- ited by its New York charter and FCC regulations to providing record communication services pursuant to tariff and subject to regulation by the FCC The Administrative Law Judge's finding that Western Union did engage in untariffed activities is misleading The various "untariffed services" to which he and our dissenting colleague refer were only incidental to tariffed communications or serv- ices For example, as noted by the Administrative Law Judge, flowers by Western Union involved the placing of tariffed orders with florists who delivered the flowers, Cigargram involved delivery of cigars with the tariffed telegrams, and Dollygram involved delivery of a doll with a tariffed telegram Indeed, in the Candygram service, the only survivor of these services, the candy delivered with the tariffed tele- grams is furnished oy an outside company In each instance, the cost to send the message, the central part of the service, is subject to prior regulatory ap- proval, and in no instances are the "untariffed" por- tions of the services provided independently of the tariffed services Similarly, contract maintenance of terminal equipment is incidental to leasing of West- ern Union's terminals for which the charge is tar- iffed Thus, any reliance by our dissenting colleague on the Administrative Law Judge's finding that Western Union had engaged in unregulated activity is mis- placed Clearly, as set forth above, Western Union was restricted in its operations and did not engage in untariffed services independent of its tariffed opera- tions Accordingly, the functions of the other subsid- iaries, providing untariffed services unconnected with any tariffed service, could not have and did not exist in Western Union It is well settled that a critical factor in determm- ing whether separate legal entities operate as a single employing enterprise is the common control of labor relations policies 2 and that common ownership is 2 N L R B v Condenser Corporation of America 128 F 2d 67, 71 (C A 3, 1942), Gerace Construction, Inc, and Helger Construction Company, Inc, 193 NLRB 645 (1971), AAA Electric, Inc and Simms Electric Co, 190 NLRB 247 (1971), J Howard Jenks, d/b/a Glendora Plumbing 165 NLRB 101 (1967), L & S Construction Company Inc, 155 NLRB 524 (1965) not determinative where such requisite common con- trol is not shown3 Moreover, as noted above, such common control must be actual or active, as distin- guished from potential control,' a distinction ignored by our dissenting colleague No such common con- trol of labor relations is present herein Indeed, of the four key elements essential to a finding of a "single integrated enterprise"-common, ownership and fi- nancial control, common management, interrelation of operations, and centralized control of labor rela- tions 5 -only common ownership is present here Noting that two top officials of WUC are the chairmen of the boards of the four new subsidiaries and that these new subsidiaries' respective boards of directors are elected by WUC directors, the Adminis- trative Law Judge concluded that WUC exercises management control over those four subsidiaries However, the record establishes that each subsidiary has its own board of directors which runs its own meetings and each has its own roster of corporate officers Further, it is also apparent that day-to-day management responsibilities and decisions are han- dled at a level far below the two WUC officials serv- ing as the subsidiaries' board chairmen In Frank N Smith Associates, Inc,' wherein the same four persons held identical offices in each of the involved corporations, which were engaged in the same general line of business, the Board found that each such corporation was a separate and indepen- dent entity Thus, the fact that each of these corpora- tions has its own president and vice presidents with designated responsibilities, would preclude a finding of common management based on the existence of several common directors Our Gerace 7 and Smith decisions establish that there is no interrelation of operations here In Ge- race, some employees of the new company had previ- ously worked for the old company, and the new com- pany used tools, equipment, and even a trailer office belonging to the old company Also in Smith, em- ployees of each company participated on occasion in projects of the other, and the new company used the office, office equipment, and office force of the old company In each of those decisions, the Board did not find integration of the companies and noted the payment for use of such services and facilities 3 Gerace Construction, Inc, supra Joe Robertson & Son Inc and N J Drywall Company Inc, 174 NLRB 1073 (1969), Bel Air Door, Alhambra Metal Products, Inc Tyre Mfg Co Inc, 150 NLRB 481 (1964) 4 Gerace Construction, Inc, supra Miami Newspaper Pressmen s Local No 46 [Knight Newspapers Inc] v N L R B, 322 F 2d 405 (C A D C , 1963), Los Angeles Newspaper Guild, Local 69, et al (Hearst Corporation), 185 NLRB 303 (1970), enfd 443 F 2d 1173 (CA 9, 1971), Royal Typewriter Company, supra 5 Sakrete of Northern California, Inc 140 NLRB 765 (1963), enfd 332 F 2d 902 (C A 9 1964), cert denied 379 U S 961 (1965) 6 194 NLRB 212 (1971) 7 Gerace Construction Inc and Helger Construction Company Inc, supra WESTERN UNION CORP Similarly, Western Umon has provided facilities and services to the other subsidiaries, and vice versa, under written agreements on a fully reimbursed ba- sis Moreover, the record herein does not establish commonality as to additional factors discussed by the Board in considering interrelatedness Among the indicia of interrelatedness not shown to be present herein are combined accounting records, bank ac- counts, lines of credit, payroll preparation, switch- boards, telephone numbers, or offices In such cir- cumstances, we do not find that the mutually convenient arrangements existing between Western Union and the various other Respondents detract from their corporate independence Nor do we discern record evidence to support a finding of central control of labor relations policies of Western Union and the other Respondents-the critical factor in determining whether the Respon- dents constitute a single employer for the purposes of collective bargaining Indeed, Western Union's fringe benefit plans are vastly different from those adopted by the other subsidiaries Additionally, Western Union charges the other companies for use of its claims administration for certain insurance and disability benefits Moreover, while finding WUC's common control of labor relations of the four new subsidiaries through WUC's control over their bud- gets and selection of their officers and directors, the Administrative Law Judge was unable to provide any basis for his conclusion that Western Union exercises any control over the labor relations and personnel policies of other subsidiaries We see no support in the record for such conclusion Further, the separateness of Western Union's la- bor relations from those of the other subsidiaries is established by the fact that Western Union has its own vice president in charge of its labor relations and that he holds no office or directorship in any of the other corporations Inasmuch as the record fails to reveal that Western Union's officer in charge of its labor relations is in any way involved with the labor relations policies of the other subsidiaries, we find that the requisite common control of labor relations by Western Union has not been shown We find, therefore, that inasmuch as the record herein does not support a finding that Western Union and the other Respondents operate as a single employing enterprise, Western Union's bargaining obligations have no application to the other Respon- dents 8 Accordingly, we shall dismiss the complaint in its entirety 8 Frank N Smith Associates Inc supra Gerace Construction Inc supra Peter Kiewit Sons' Co and South Prairie Construction Co, 206 NLRB 562 (1973) enforcement denied 518 F 2d 1040 (C A D C, 1975) ORDER 277 Pursuant to Section 10(c) of the National Labor Relations Act, as amended, the National Labor Re- lations Board hereby orders that the complaint here- in be, and it hereby is, dismissed in its entirety MEMBER FANNING, dissenting For the reasons stated by the Administrative Law Judge, I would adopt his recommended findings, conclusions, and Order The Administrative Law Judge has set forth in great and supporting detail the basis for his ultimate findings of fact that Respon- dent corporations, each and every one of them, formed from the financial and personnel resources of the Western Union Telegraph Company for the pur- pose of performing a function or functions formerly performed by that corporation constitute a single employer The fact that in some cases the functions have expanded in scope after Western Union's reor- ganization and modernization program cannot alter that basic fact Indeed, it was for the express purpose of permitting Western Union to expand these activi- ties, some of which under rulings of the Federal Communications Commission it was required to per- form through separate subsidiary corporations, that Western Union changed its form of organization from a single independent corporation to a multicor- poration form of organization But, in so doing, it did not sell any of its assets, it did not change the owner- ship of its assets, it did not bring in new capital from sources outside of Western Union itself Throughout, control of the operations has re- mained in the hands of the people who controlled Western Union prior to the reorganization Thus, when Western Union, the telegraph company, estab- lished Western Union Corporation which assumed ownership of all of Western Union's stock, all of Western Union's directors and its chairman, though retaining those positions with Western Union, as- sumed the same positions with WUC Acting through those individuals in their WUC capacities, Western Union then proceeded to spin off several of its departments to form Western Union Realty Cor- poration (WURC), Western Union Data Services Company, Inc (DSC), Teleprocessing Industries, Inc (TII), and GiftAmerica, Inc (GA) In every case, the corporations were established as wholly owned subsidiaries of WUC In every case, the exec- utive and management, as well as nonbargaining unit support, personnel were transferred from Western Union to the new corporations In every case, the new corporations depended on Western Union bar- gaining unit production, maintenance, clerical, and 278 DECISIONS OF NATIONAL LABOR RELATIONS BOARD technical employees to perform the production and service work necessary to the successful functioning of the new corporations Although most, if not all, such work was performed pursuant to agreements with Western Union, such agreements were executed in many instances long after work had commenced DSC, for instance was incorporated in June 1970 Lacking "capabilities" for operating a separate busi- ness, it entered into six different agreements with Western Union Five of them were dated July 1, 1970, and the other was dated January 1, 1971 All of them were executed by Western Union between Feb- ruary 23, 1971, and September 15, 1971 Further DSC's own corporate records-minutes of a board of directors meeting of November 11, 1970-indicate that even the executive, management, and nonbar- gaining unit support people were on Western Union's payroll until January 1, 1971 Given these circumstances, it takes a leap of faith to find that DSC operated as an entity separate and apart from Western Union GiftAmerica furnishes another vivid example of the interrelationship of Western Union and its off- spring Prior to its formation, Western Union, itself, had long engaged in furnishing to customers who purchased telegrams a variety of gift services Flow- ers by Wire, Perfume by Wire, Candygram, and Dol- lygram to name a few GiftAmerica was formed for the purpose of providing such gift services without the necessity of the customer purchasing a telegram, this to be done by the use of Western Union person- nel and computer facilities Prior to GiftAmerica's formation, the decision was made to utilize Western Union personnel and computer facilities as well as services of TII Western Union personnel were trained in the necessary techniques and instructed to identify themselves when speaking to customers as "Gift America" and if asked for further clarification to respond that "Gift America is a subsidiary of Western Union which has been in the gift business with Candy Gram, Dolly Gram and flowers by air for many years " Thus when GiftAmerica became operational, Western Union employees rotated be- tween transacting GiftAmerica's business and the business of Western Union Moreover, WURC is the incorporation of Western Union's real estate department It performs the same functions now as it did as a department of Western Union and does so under strict control of Western Union and WUC It must obtain prior approval of Western Union for any transaction involving that corporation's operations WURC must get approval of WUC for all sales or purchases of real estate val- ued over $10,000 About the only additional function it has is the management of some Colorado real es- tate acquired apparently for speculative purposes Similarly, TII is the incorporation of Western Union's planning and engineering operations divi- sion After incorporation it continued to design, de- velop, and implement the introduction of new com- puter hardware and other data processing equipment for Western Union with as much as 90 percent of its business being done for Western Union Many of the people involved in such operations moved from Western Union to TII and back again to Western Union DSC upon its incorporation was assigned different parts of Western Union's business of leasing termi- nals Although it has expanded that business, it has frequently complained to WUC that Western Union remains in that business and is competing with it The foregoing and the findings of the Administra- tive Law Judge demonstrate the interrelationship of the activities of the Respondent corporations They demonstrate further, and contrary to my colleagues findings, that Western Union was not engaged solely in regulated activities prior to the reorganization First there is the commonsense approach to this is- sue They find that the subsidiaries are all engaged in unregulated business If that is so, it follows that Western Union was engaged in the same unregulated activities it severed from its business and created the corporations to perform Second, the Administrative Law Judge has found that Western Union did engage in untariffed activities, such as the various gift by wire services and the leasing and contract mainte- nance of terminals unconnected to Western Union facilities My colleagues cite no record evidence to demonstrate his error in this respect My colleagues concede, as they must, that all these activities are carried out under common ownership They find that the element of common control, gen- erally, and particularly with respect to labor relations is lacking This finding rests on a profound miscon- ception of the operative facts The reorganization of Western Union occurred because of management de- cisions of Western Union's officers and directors It was they who decided to embark on the program and to establish WUC as a holding company of Western Union's stock with the mission of taking over the Tatter's executive and management functions with re- spect to the modernization program These officials became the officials of WUC The directors of West- ern Union became the directors of WUC R H Mc- Fall, board chairman and president of Western Union, and its dominant management personality, assumed the same positions with WUC Thus the sit- uation remained until McFall decided to give up the presidency of Western Union and give it to the vice president of WUC All six of Western Union's pres- WESTERN UNION CORP 279 ent directors are directors of WUC, which has 10 McFall is also board chairman of DSC and TII and is a director of WURC and Gift America C 0 John- son, WUC's vice president of finance, is chairman of WURC and GiftAmerica All of the directors of the subsidiaries are persons who have long worked for Western Union and McFall, and most of whom are directors of more than one of the corporations, in- cluding in many cases WUC or Western Union These are the men who establish and control the policies of the Respondent corporations The fact that those policies are carried out by officers who in some cases do not hold similar offices in other corpo- rations does not mean that those officers can or do operate independently of the control, first of the di- rectors of the corporations and secondly of the direc- tors and board chairman of WUC, the owner of the whole enterprise Moreover, my colleagues' finding that there is no common control of labor relations ignores the Ad- ministrative Law Judge's finding that, upon the es- tablishment of the subsidiaries, Western Union and WUC made the decision that no bargaining unit em- ployees would be transferred to the subsidiaries, but that such work would be done under contract with Western Union It ignores his finding that, with re- spect to nonbargaining unit people transferred, hir- ing and compensation of all employees must be in accordance with a previously approved business plan It ignores as well his finding that fringe benefit plans for the transferred employees were not adopted by the subsidiary corporations but by WUC Finally, their reliance on the fact that Western Union's vice president for labor relations is not an officer or direc- tor of any other corporation necessarily assumes that he is autonomous even in his own sphere But, surely, he like any other management official must follow the policies of the corporate officers I do not read the complaint as alleging that Western Union's vice president for labor relations controls the labor rela- tions policies of the other corporations Rather, I un- derstand the issue to be whether all the corporations before us are controlled by a central management group I believe that has been firmly established Nor do I believe the Gerace and Frank N Smith Associates decisions cited by my colleagues can bear the weight placed upon them Whatever validity they may have for union contractors who wish to operate "double-breasted" shops, part union and part non- union, they simply did not involve fact patterns re- motely similar to the one before us In Gerace, the record showed that Gerace, the principal stockholder in one corporation, had sold his interest in the sec- ond corporation and that actual control of the sec- ond corporation resided in its principal management official In Smith Associates, the record showed that Smith Associates did not own the second corporation and that the second corporation was not part of Smith Associates either as a wholly or partially owned subsidiary Here we have a mammoth na- tionwide corporation which decided to establish sep- arate corporations out of its internal resources and personnel for the purpose of expanding certain of its activities, and which did so through means which re- tained ownership and control over all activities previ- ously engaged in by the corporation in the same hands For all the foregoing reasons, I dissent from my colleagues' refusal to adopt the Administrative Law Judge's findings and conclusions with respect to the single employer issue Further, I would adopt his findings that Respon- dents violated Section 8(a)(5) and (1) of the Act by refusing to recognize and bargain with the Union as the exclusive representative of employees of all the corporations performing work of the kind performed by employees in the Western Union bargaining unit It is true that, initially, the reorganization did not have a severe impact on bargaining unit work be- cause the subsidiaries commonly contracted with Western Union to do the work But as time went by the subsidiaries began to hire employees off the street with the result that much of the work formerly con- tracted out is now being done by employees not in- cluded in the bargaining unit Concomitantly with this there has been a reduction in Western Union's employee complement Inasmuch as the six Respon- dent corporations are now doing essentially what Western Union alone did before the reorganization, it seems reasonably clear that the bargaining unit has been fragmented through Respondent's refusal to transfer bargaining unit employees to the subsidiaries or to even offer such employees work when and if they were laid off by Western Union DECISION STATEMENT OF THE CASE MARION C LADWIG, Administrative Law Judge This case was heard at Newark, New Jersey, on March 18, 20- 21, 28-29, and April 1-4 and 22, 1974 The charge was filed by the Union on June 1, 1973 (amended January 21, 1974), and the complaint was issued on March 5, 1974 The Union has, for many years, represented Western Union's employees in a virtually nationwide, certified bar- gaining unit In recent years, Western Union has engaged in a massive modernization program, updating and compu- terizing its facilities and providing many new services- with the "longterm goal of creating a single integrated elec- tronic data communications (EDC) system for the nation " Despite the addition of these new services, which include 280 DECISIONS OF NATIONAL LABOR RELATIONS BOARD both FCC-regulated and nonregulated activity, there has been a marked decline in the number of bargaining-unit employees During the progress of the modernization program, Western Union began, through corporate restructuring, to divide up its business-transferring some of the expanding nonregulated activity to new nonunion companies-while retaining its goal of an integrated EDC system This was accomplished by first incorporating a new holding compa- ny (WUC), which was formed with Western Union's same officers and directors, and with assets consisting solely of Western Union's stock Western Union then became a sub- sidiary of WUC, which started incorporating a series of wholly owned subsidiaries (the ones to date being WURC, DSC, TII, and GA, further identified below) to provide parts of Western Union's nonregulated services These new companies were staffed primarily by Western Union's non- bargaining-unit (nonunion) managerial, professional, and confidential employees-without the supporting union em- ployees, whose services Western Union provided to the new companies through a variety of contracting arrange- ments In this way, WUC and its four new subsidiaries were able to operate nonunion, while utilizing the contract- ed services of union employees, many of whom were grad- ually replaced with nonunion employees The primary issue is whether the holding company and the various new subsidiaries are, in substance-apart from the corporate veils-merely segments or departments of Western Union, which continues to operate as a single integrated enterprise, with an 8(a)(5) obligation to bargain with the Union for the overall bargaining unit, or whether the bargaining unit is to be confined to employees now on Western Union's direct payroll Upon the entire record,I including my observation of the demeanor of the witnesses, and after due consideration of the briefs filed by the General Counsel and the Union, and the brief filed by all the Respondents (except Western Union, which adopted the other Respondents' brief), I make the following FINDINGS OF FACT I JURISDICTION Western Union, a New York corporation, and WURC (Western Union Realty Corporation), DSC (Western Union Data Services Company, Inc), TII (Teleprocessing Industries, Inc), and GA (GiftAmerica, Inc), each a Del- aware corporation and a wholly owned subsidiary of WUC (Western Union Corporation), have their principal places of business in New Jersey (except for WURC in New York) and each annually receives in excess of $50,000 from sales and services to customers located outside those States WUC, a Delaware corporation, operates as a hold- ing company in New Jersey, where it annually receives in excess of $50,000 for services to firms which make sales and services in excess of $50,000 outside that State The six Respondents each admits, and I find (apart from whether 1 The stipulation for correction of the transcript dated May 14 1974 and the Union s unopposed July I I request to correct and supplement the stipu lation are accepted, granted and received in evidence as G C Exh 265 and the corrections are hereby made in the transcript they together constitute a single employer for collective- bargaining purposes), that each is an employer engaged in commerce within the meaning of Section 2(2), (6), and (7) of the National Labor Relations Act, and that the Union (United Telegraph Workers, AFL-CIO) is a labor organi- zation within the meaning of Section 2(5) of the Act II ALLEGED UNFAIR LABOR PRACTICES A The Bargaining Unit Western Union (The Western Union Telegraph Compa- ny, also referred to in the record as WU, WUTCO, and Telegraph Company) is a large nationwide (48-state) com- munications company with assets over $1 25 billion, and annual revenues approaching a half billion dollars In 1945, the Board certified the Union's predecessor as the exclusive collective-bargaining representative of Western Union's production, operations, maintenance, technical, and clerical employees in an overall nationwide unit-ex- cepting only the Metropolitan Division, in the New York City area, in which another union was certified The Board's decision in Case 17-R-742 directed elections in divisional units, described by department, classification, and in some instances further by employee names, on 64 pages of the printed volume, Western Union Telegraph Company, 58 NLRB 1283, 1289, 1297-6A through 1297- 68A (1944) The Board's certification was amended in 61 NLRB 110 (1945), to consolidate all the divisions-except the Metropolitan-into a single bargaining unit Since 1945, as Western Union has carried on its moder- nization program (and as the number of employees in the bargaining unit has declined by several thousands), West- ern Union and the Union have, by agreement, included in the bargaining unit a number of new classifications forjobs which did not exist at the time of the certification Some examples are the Chief Autodin Microwave Maintainer (who "Directs the work of Autodin Microwave Maintain- ers at Autodin Centers Performs the work he directs must have held a title of Microwave Maintainer, Computer Center Technician, Autodin Microwave Maintainer or the supervisory title associated with these classifications "), the Computer Center Technician (who "Main- tains programmed electronic high speed switching systems and associated data processing equipment and facilities in accordance with prescribed technical procedures Main- tains computer and associated apparatus Tests, regulates and maintains radio beam, radio multiplexing, carrier, re- peaters, electronic and associated telegraph equipment in accordance with prescribed technical procedures "), and the Computer Console Controller (who "Operates programmed electronic high speed data switching, digital computer systems, and associated data processing equip- ment and facilities in accordance with prescribed technical procedures ") B Fragmentation of Western Union 1 Regulated and nonregulated activity In 1958 , Western Union completed "A Decade of Prog- WESTERN UNION CORP 281 Tess," during which its "research and development engi- neers have produced a constant succession of new and bet- ter ways to speed messages in writing " As reported in its 1958 annual report to its stockholders, "More than $35,000,000 was spent by your Company during these years in creating, perfecting and advancing facilities, meth- ods and techniques for the rapid transmission of messages and data by wire, radio beam and cable " By 1962, Western Union's Autodin system became oper- ational as a leased system for the Department of Defense Designed and developed over several years by Western Union as the prime contractor, with RCA as the principal subcontractor, Autodin (automatic digital network) by 1963 was a "data and message transmission system, incor- porating a nucleus of five automatic computer switching centers" (later expanded to nine such centers) By 1966, it was "the world's largest computer-controlled communica- tions system " In 1964, Western Union began applying "the latest tech- niques for handling and transmission of data by comput- ers"-as embodied in Autodin, as well as in Western Union's similar GSA system-to design and install private systems "for a number of important business organiza- tions " Citing "the advanced research and engineering work done by the Company's engineers" in the data field, Western Union's 1964 annual report stated as an example "The heart of the 80-city, data-message network being in- stalled for Dun & Bradstreet is a fully automatic (Western Union Plan 301) switching center and includes a com- puter " The same 1964 annual report cited a number of new, non-FCC-regulated Western Union services, supple- menting the FCC-regulated sending of telegrams They were "Flowers by Western Union" (Western Union offices at the telegram-delivering cities placing orders with the lo- cal florists who deliver the flowers), Cigargram (Western Union offices stocking cigars for delivery with the tele- gram), Dollygram (permitting the telegram sender to select a doll for delivery with the telegram), and a Western Union telephone answering service Also, as stated in the 1964 annual report, "Western Union pioneered in the custom-design of leased communi- cations systems to meet the specific requirements of indi- vidual business firms " (Emphasis supplied) This service included, first, a study of the customer's requirements and development of a total information system, second, "engi- neering of an integrated `hardware' (computer and associ- ated equipment) system," selecting and installing the com- puter and data processing equipment, "using existing equipment where possible, and designing equipment need- ed but not available commercially-and developing the `software' (programs and operating routines) required", and third, "specifications and installation of the communi- cations network and equipment for transmitting informa- tion to and from remote locations," and then servicing the new management information and communications sys- tem Between 1965 and 1969, Western Union greatly acceler- ated its modernization program, spending over $600 mil- lion It assembled at the Western Union Technology Cen- ter in Mahwah, New Jersey, about 400 professionals "in the disciplines of systems design, programming, transmis- sion engineering, and allied fields," and "built-virtually from the ground up-a technological capability successful- ly combining computer hardware, software and communi- cations know-how " By late 1969, phase I of Western Union's information services computer system (ISCS) was operational, with a network of four computer centers, pro- viding store-and-forward message switching and employ- ing shared computer capacity to render a variety of serv- ices One of these services was to interconnect Western Union's 30,000 Telex (teleprinter) subscribers with the ap- proximately 40,000-teleprinter network of TWX, which Western Union was purchasing from AT&T Western Union offered two shared-system computer services Si- com, which interconnected brokerage firms with stock ex- changes, and Info-Com, a system designed to provide pri- vate record communication networks for general operations In addition to Autodin and other government- leased systems, Western Union provided Broadband Ex- change (a fully automatic, alternate voice/data, customer- to-customer, circuit-switched exchange service), and Hot/ Line (a nondial immediate-connection voice service be- tween certain major cities) It continued to offer telegram and money order services, and also offered other (includ- ing a number of untariffed) services, including DollyGram, CandyGram, MelodyGram, Perfume-by-Wire, Flowers- by-Wire, telephone answering service, facsimile service, messenger service, sale of express money orders and travel- ers cheques, sale of facsimile and teleprinter paper, Opera- tor 25 (dealer inquiry), etc (as reported in its 1969 proxy statement) It also maintained a real estate department for handling its many facilities throughout the Nation, and provided contract maintenance of terminal equipment (an- other untariffed activity) 2 FCC rulings As Western Union's modernization program progressed, the FCC was making rulings affecting Western Union's plans for expanded services The Carterfone decision, In the Matter of Use of Carterfone Device in Message Toll Tele- phone Service, 13 FCC 2d 420 (1968), suggested a business opportunity, and the Computer Inquiry, begun in 1966, sug- gested a limitation In Carterfone, which involved a device for connecting a telephone to a mobile radio system, the FCC ruled that AT&T could not lawfully, by tariff, prohibit the use of such interconnecting devices which do not adversely affect the telephone system This ruling suggested that Western Union would have the opportunity of competing with others for the newly nonregulated market of leasing and servicing the widely-used data communication terminals (and later, high-speed models) to private wire customers using telephone circuits In the so-called Computer Inquiry, the FCC issued a "Notice of Inquiry" (7 FCC 2d 11) in 1966, and a "Supple- mental Notice of Inquiry" (7 FCC 2d 19) in 1967, initiating a general investigation into the interdependence of com- puter and communication services On May 9, 1969, the FCC released a "Report and Further Notice of Inquiry" (17 FCC 2d 587), and on April 3, 1970, it issued a "Tenta- 282 DECISIONS OF NATIONAL LABOR RELATIONS BOARD live Decision" (28 FCC 2d 291), followed on March 18, 1971, by its "Final Decision and Order" (28 FCC 2d 267), enforcement of which (after a denial of reconsideration) was granted in part in GTE Service Corporation v Federal Communications Commission, 474 F 2d 724, 728 (C A 2, 1973) The FCC pointed out, as an introduction to its discus- sion of "the problems posed by the provision of data pro- cessing services by common carriers" (par 24 of its "Ten- tative Decision"), that it knew of no provision of law which prohibits or bars common carriers (such as Western Union) to provide nonregulated service "subject to certain safeguards" (citing, in In 3 a November 5, 1964, letter from the FCC Chairman to Congressman James Roosevelt regarding the Western Union "Flowers by Wire" service) It added, "To the contrary, our rules contemplate that other services may be furnished by such carriers and pre- scribe the methods of accounting for the reporting with respect to such services" (stating, in In 4, "For example, communications common carriers with separate depart- ments or divisions [emphasis supplied] for the conduct of common carrier and non-common carrier activities must file with the Commission separate supplemental annual re- ports with respect to each of the activities, 47 C F R 43- 21(b) ") In the 1964letter, the FCC Chairman wrote The Commission, after a careful examination of the flower service, has concluded that it is not a common carrier communication service and therefore, not sub- ject to the Act At the outset it should be emphasized that the Communications Act of 1934 does not pro- hibit a common carrier from engaging in noncommu- mcation services In this regard, Western Union has a long history of providing many various services which are not considered to be common carrier communica- tions services under section 3(h) of the Act Thus, the fact that Western Union holds itself out as a commu- nications common carrier does not preclude it from performing other services in a noncarrier status Elsewhere in the letter, the FCC Chairman stated that "if it were found that such service was a burden upon [Western Union's] regulated services, it appears that the Commission could take appropriate steps to relieve the burden of its common carrier services " Concerning Western Union's "gift or shopping order service" being tariffed whereas the flower service was not, "Western Union's only explanation for these differences was that in 1916, it originally filed its shopping order service as a tariff and all subsequent revi- sions to the service have been filed as tariff material How- ever, in the light of our determinations with respect to its flower order service, the Commission is requesting Western Union to withdraw its shopping order service as tariff ma- terial Western Union has expressed a willingness to do this " (Inasmuch as this letter from the FCC was incorpo- rated by reference in Respondents' exhibit, R W Exh 24A, it is accepted into evidence as R W Exh 24AA) I reject, as unfounded, the contention in Respondents' brief that "the common element from one aspect" of Western Union's "business to another is that all services are gov- erned by tariffs which are subject to the approval" of FCC, and I discredit Western Union General Counsel Richard Hostetler's testimony, at one point, that "All services of the Telegraph Company are tariffed " The FCC made a different decision, however, concern- ing such common carriers as Western Union providing, to nonaffiliated customers, "data processing," defined as the storing, retrieving, sorting, merging, and calculating of data, according to programmed instructions (Data pro- cessing is to be distinguished from "message -switching," which is esentially a "store and forward" function, and which is defined as computer -controlled transmission of message via communications facilities, wherein the content of the message remains unaltered A "hybrid service" com- bines data processing and message switching The FCC has ruled that Western Union's Sicom and Info-Coin are regu- lated hybrid services, in which the data processing is incidental to message switching, as distinguished from nonregulated hybrid services, in which the "message-switching is offered as an integral part of and as an incidental feature of a package offering that is primarily data processing," as stated in sec F of the "Tentative Deci- sion ") The FCC held in substance , as recited in the GTE case, 474 F 2d at 729-730, that no such common carrier shall furnish unregulated data processing services to others except through a separate corporation entity which must maintain its own books of account, have separate officers, employ separate operating personnel, and utilize separate computing equipment and facilities Meanwhile, the New York State Public Service Commission ruled that because of Western Union's limited corporate charter in New York, its stock could not be issued to acquire control of PR Newswire Association, Inc (a company engaged in the news distribution service), which was not a regulated com- munications common carrier 3 Decision to divide up the business As indicated above, Western Union had a "long-term goal of creating a single integrated electronic data commu- nications (EDC) system for the nation" (the words of Rus- sell McFall, president and board chairman for both West- ern Union and WUC, in the Western Union 1969 annual report-issued by WUC, which became operational on January 30, 1970) Leading toward this goal of "one na- tionwide system capable of accepting, handling, trans- mitting, processing and disseminating messages and data," Western Union was engaging in the massive modernization of its transmission facilities and services, and had already acquired, in 1968, a 50-percent interest in the newly- formed WUCU (Western Union Computer Utilities, Inc), a data-processing firm (Following the corporate restruc- turing, WUC acquired additional data-processing firms The Union does not contend that the employees of these and other acquired firms are part of the Western Union bargaining unit) Western Union was also planning to utilize its own per- sonnel to expand further into rapidly growing, nonregu- lated, communications-related activities After considering a number of alternatives, and considering flexibility in fi- nancing and the limited purpose for which Western Union was incorporated in New York, Western Union decided to form WUC, a holding company incorporated in Delaware WESTERN UNION CORP with a broader charter, to make Western Union a subsid- iary, and later to carve out, from Western Union's internal personnel resources "when developments make it advisa- ble," one WUC wholly owned subisidiary after another "to compete more effectively in the communications and com- munications-related markets into which Western Union's activities have been expanding and are expected to contin- ue to expand " As predicted in its 1969 proxy statement, such "non-regulated corporations will be in a position to compete on the same footing with other non-regulated companies offering competitive services " Thus, Western Union intended to implement its plans for a single nationwide EDC system, but it decided to do so by dividing up the business into a number of different corporate entities As discussed later, more was involved in the decision to divide up Western Union than the initially stated reasons, involving FCC and state regulations and restrictions, com- petition, and financing flexibility Moreover the evidence suggests considerable doubt about whether there was any necessity for the first four new subsidiaries (WURC, DSC, TII, and GA) being formed to operate as separate corpo- rate entities Western Union's real estate department, which became WURC, had long operated as a nonregulat- ed activity Western Union, before the formation of DSC, already had an active business of terminal leasing-for use with both telegraph and telephone circuits-and to some extent competed with DSC after its formation When TII was formed, about 90 percent of its functions involved the nonregulated activity of implementing and managing Western Union's modernization program, and it has not operated as a separate corporation to provide data pro- cessing to others GA was formed to provide the latest of many gift services, which have utilized Western Union fa- cilities However, the issue in this case is not whether the decision to divide Western Union into separate corpora- tions was necessary, or a good business practice The issue is whether or not the overall bargaining unit (including some newly hired employees) remained intact I note that the "corporate restructuring" of Western Union has not eliminated all FCC review of nonregulated activities furnished by other WUC subsidiaries Trans- actions between Western Union and WUC or any other WUC subsidiary "may be subject to review from time to time by the FCC " As further recognized in WUC's 1972 prospectus for the exchange of debentures, the Communi- cations Act of 1934 "authorizes the FCC to obtain from persons controlling a common carrier annual reports and such other information concerning the business and opera- tions of such controlling person as it may require in order to enable it to perform its duties under the Act " (The FCC seeks to prevent costs related to the furnishings of nonregu- lated services from being passed on, directly or indirectly, to the users of common carrier services ) 4 The fragmentation a Western Union Corporation WUC, incorporated in 1969, became operative on Janu- ary 30, 1970 Its only assets as a holding company were 283 Western Union's stock, including 100 percent of Western Union's outstanding common stock All 13 of Western Union's directors were elected the di- rectors of WUC Four of Western Union's top officials (Russel McFall, Gerald Hoyt, John Evans, and Charles Johnston), although maintaining their positions with West- ern Union, became WUC's four officers McFall then served as board chairman and president of both corpora- tions WUC began assuming parts of Western Union's corpo- rate management and other executive functions It pub- lished Western Union's 1969 annual report, entitling it, "Western Union Corporation First Annual Re- port-1969 " (Western Union did not become a subsidiary of WUC until January 30, 1970, and Western Union was WUC's only subsidiary at that time) WUC files the Feder- al income tax returns on behalf of Western Union (now filing consolidated returns covering Western Union and other subsidiaries), and performs a wide variety of corpo- rate and executive functions for Western Union-charging Western Union $1,280,000 in 1970 for "various general corporate services" (as revealed in Western Union's March 18, 1971, prospectus for the sale of debentures) On August 25, 1970, after the first two WUC wholly owned subsidiaries were formed from Western Union's re- sources (WURC in May and DSC in July of that year), WUC transferred adaitional management functions to it- self from Western Union WUC Board Chairman and President McFall explained to the WUC directors "that with the increase in the operations of the Corporation [WUC] and the development of its interests and activities outside of the Telegraph Company, it appears appropriate to add some executive officers from the staff of the Tele- graph Company " (Emphasis supplied) McFall also re- ported that he personally was devoting more time to WUC The WUC directors appointed Western Union Treasurer Harry Young to assume the additional duty of WUC trea- surer, and appointed other Western Union officials to serve also as WUC officials The WUC directors approved McFall's resignation as the Western Union president, and authorized the Western Union board of directors' replace- ment of McFall as president with Earl Hilburn, who was an executive vice president of Western Union (and also a director of WURC and DSC) The WUC directors ap- pointed Hilburn to serve also as a WUC vice president "in order to maintain desirable liaison" between WUC and Western Union (McFall still remains the Western Union board chairman, as well as the WUC board chairman and president ) On February 23, 1971 (shortly before a large number of managers, engineers, and other professionals were transfer- red from Western Union to a new WUC wholly owned subsidiary, TII), WUC officials Hoyt, Evans, Johnston, and Young, as well as DSC President Zakar Zakarian, re- signed from their Western Union positions, and Western Union President Hilburn and another official resigned as WUC vice presidents, "to separate the operations " How- ever McFall, the top official of both Western Union and WUC, remained in that dual capacity (as well as board chairman of DSC-and later, of TII), and Charles John- ston (now executive vice president of WUC and board 284 DECISIONS OF NATIONAL LABOR RELATIONS BOARD chairman of WURC and GA) and John Evans (vice presi- dent, general counsel, and secretary of WUC, as well as vice president of WURC and secretary of DSC and TII) remained on Western Union's board of directors In fact, WUC Officials McFall, Johnston, and Evans, along with WUC Directors Harry Figgie, Theodore Kheel, Clarence Linder, Donald Putman, and John Rich, constitute the en- tire Western Union board of directors-with the single ex- ception of Western Union President Earl Hilburn (for- merly a WUC vice president), who is Western Union's remaining director Since WUC's formation, a total of 10 Western Union officials have become WUC corporate officers Between January 30, 1970, and October 1973, a total of 41 other members of the Western Union staff (including 26 profes- sionals and 15 "confidential secretarial and confidential courier") have been transferred from Western Union to WUC It is clear that WUC has taken over a substantial part of Western Union's corporate and executive functions When WUC became operative on January 30, 1970, as a holding company with a broader corporate charter, it had dual offi- cials with Western Union, the same 13 directors, and assets consisting solely of Western Union stock Since then, with other Western Union officials added to its staff, WUC con- tinues to operate under the leadership of Board Chairman and President McFall, who remains in the commanding leadership position over Western Union, as the Western Union board chairman, and he and seven other WUC offi- cials and/or directors occupy all except one of the posi- tions on Western Union's board of directors I find that from the time WUC became operative, it has been the alter ego of Western Union insofar as many cor- porate management and other executive functions are con- cerned (I note that in different contexts since January 30, 1970, the name "Western Union" has been used to designate either the well-known telegraph company, or WUC, or sometimes WUC together with its various subsidiaries For consistency, the name is used in this decision as the name for the large well-known company which continues to use that name in its advertisements-e g, Western Union's Mailgram, Operator 25 Service, Survey Service, and Tele- typewriter Exchange Service, G C Exh 239-242, and which has used that name on its letterhead as recently as the February 4, 1974, letter in evidence as G C Exh 53 ) b Western Union Realty Corporation One of the WUC's first actions as a holding company was to authorize the incorporation of Western Union's real estate department, which handled extensive properties for Western Union throughout the Nation WUC incorporated WURC in March 1970 as a wholly owned subsidiary All of the WURC directors were offi- cials and/or directors of Western Union Russell McFall (board chairman of both Western Union and WUC) be- came the WURC board chairman and chief executive offi- cer, Aiden Redmond, Western Union's general manager of real estate, became the WURC president, Western Union Treasurer Harry Young became the WURC treasurer, and four other Western Union officials (including Western Union Vice President and General Counsel John Evans) were the other initial WURC officers Later, Western Union Vice President and Comptroller Charles Johnston (now the WUC executive vice president) became and re- mained the WURC board chairman, replacing McFall who remained a WURC director Although WURC became operational in May 1970 (President Redmond being transferred to the WURC pay- roll on May 13), the staff remained on the Western Union payroll until January 1, 1971 (G C Exh 152) On that date, 20 members of the staff (including 7 managerial, 4 profes- sional, 5 supervisory, 3 confidential, and 1 clerical) were transferred from the Western Union to the WURC payroll (The evidence does not disclose how the payroll expenses were handled or allocated in the meantime-with one ex- ception The minutes of the September 26, 1972, WURC directors' meeting show that on that date WURC agreed to reimburse Western Union for any costs incurred by West- ern Union from November 24 through December 31, 1970, for WURC's coverage under Western Union's pension and retirement plans ) Western Union's real properties in 1970 (as reported in the WUC September 23, 1970, prospectus for the sale of debentures) inciuded office buildings in Minneapolis, Phil- adelphia, and Albany, a warehouse in Allentown, Pennsyl- vania, and property in Upper Saddle River, New Jersey, long-term leases on office buildings in Atlanta, Boston, Chicago, Los Angeles, Mahwah, New Orleans, New York, St Louis, San Francisco, and Tampa, further long-term lease agreements being negotiated for office buildings in St Louis and McLean, Virginia, and for a computer center in Middletown, Virginia, and about 2,000 other leases for area headquarters, branch offices, warehouses, computer and other technical facilities, storerooms, schools, and ga- rages Since its formation, WURC has continued to operate as the Western Union real estate department, handling real estate transactions primarily involving these and other properties used by Western Union However, the corporate restructuring has resulted in much intercompany account- ing, financing, sales, leasing, re-leasing, and subleasing As an example, the property which Western Union had previ- ously purchased for its new headquarters in Upper Saddle River was sold to WUC, which conveyed it to WURC, which constructed the building and leased it to WUC, which in turn made a sublease to Western Union (G C Exh 118-121) WURC now owns (as reported in WUC's July 24, 1973, prospectus) Western Union's central tele- phone bureaus at Moorestown, New Jersey, Bridgeton, Missouri, and Reno, Nevada WURC also handles the leasing or subleasing of properties for use by WUC and its other subsidiaries (Through 1973, its only charges to the other new subsidiaries were a total of about $30,000 to DSC, and none to TII and GA G C Exh 148 ) Western Union, as well as WUC, maintain a tight con- trol over all leasing of property for Western Union's use All leases involving Western Union require the "prior con- currence" of Western Union, and all leases and all con- tracts for the purchase or sale of real estate exceeding $10,000 in price require prior concurrence by WUC (G C WESTERN UNION CORP Exh 158-159) WURC has purchased, and leased to West- ern Union, some properties which Western Union previ- ously had leased from outsiders WURC now owns some undeveloped land (purchased from Western Union) adja- cent to the Western Union headquarters at Upper Saddle River, and also some undeveloped land adjacent to West- ern Union's Middletown and Bridgeton computer centers In addition, WUC has authorized WURC (which has a broad corporate charter) to "landbank" about 72,000 acres of unimproved land in Colorado and Wyoming (The min- utes of the WUC directors' meeting on November 9, 1971, suggest that the unimproved land is being held strictly for speculative purposes The directors in that meeting ap- proved the acquisition of about 22,900 acres in an area in Colorado where Harper Sibley-director of WUC and for- mer director of Western Union-"owns considerable acre- age in the general vicinity," and about 25 miles from where WUC officials McFall and Johnston have some land hold- ings Sibley expressed his opinion that "the acquisition rep- resented a real opportunity for early profit in the land bank business ") It is clear that WURC is performing much the same ser- vice as it did as a Western Union department, with few additional functions I therefore find that WURC, having taken over the operation of the Western Union real estate department, remains-apart from the corporate veil-pri- marily a department of Western Union c Western Union Data Services Company, Inc (1) The planning Western Union owns and leases, pursuant to tariff, about 115,000 communications terminals According to its general counsel, Hostetler, "less than one percent" of these terminals (or fewer than 1,150 terminals) are not connected to Western Union circuitry They are connected either to telephone or to privately owned circuits When the opportunity arose (as discussed above under "FCC rulings") for Western Union to compete with non- carriers in the newly nonregulated market of leasing termi- nals to private wire customers using telephone circuits, Western Union assigned its vice president and manager of marketing, Zakar Zakarian, to evaluate the opportunity Anticipating that WUC would incorporate a new subsid- iary to enter this market, Western Union did not apply to the FCC either to compete in this nonregulated activity (on a nontanff basis) through a separate department or divi- sion, or to withdraw as tariff material the terminals it was already leasing to customers using telephone circuits In the May 29, 1970, issue of the "Western Union News" (published by Western Union), an announcement was made that WUC was organizing a data services organiza- tion (DSC), and that "a cadre of [Western Union's] com- puter/communications specialists who have successfully designed and marketed some of the most advanced com- munications systems and services available, are being as- sembled " 285 (2) The new subsidiary WUC incorporated DSC in June 1970 as a wholly owned subsidiary, and elected seven Western Union offi- cials as its directors Western Union Board Chairman Mc- Fall became DSC's board chairman, and the Western Union officials, Vice President-Marketing Zakar Zakarian, Vice President and Comptroller Charles Johnston, and As- sociate Counsel Richard Hostetler, became DSC's presi- dent, treasurer, and secretary These top four DSC officials continued, after their selection, to serve as officials of Western Union DSC became "operational" on July 1, 1970 However, as conceded by DSC President Zakarian on the stand, "We didn't have a company" at that time He testified that "we were then in business But we had nothing, it was myself and about 70 or 80 people We didn't have any customers We didn't have any orders We didn't have any organiza- tion We didn't have any facilities except some rented space we had gotten in a hurry We didn't even have, you, know, capabilities at that point " (Emphasis supplied) Al- though claiming to have "about 70 or 80 people," he testi- fied, "In 1970, we installed probably less than 250 terminals " Later, on cross-examination, Zakarian "guessed" that DSC purchased "maybe a couple of hun- dred terminals" from Western Union in 1970 (of the "less than 250 terminals" installed), and "maybe 800 plus termi- nals" from Western Union in the first 3 months of 1971 If a Respondent-prepared exhibit (G C Exh 165) is to be believed, DSC in July 1970 hired President Zakarian and 79 additional Western Union personnel, and Western Union in July 1970 terminated them-indicating that these 80 persons were then transferred from Western Union's payroll to DSC's payroll The exhibit lists them as 29 offi- cials and managers, 15 professionals, 14 sales, 3 "Tech," and 19 office and clerical (Zakarian testified, "I would say most of the management people with whom we started came out of [Western Union's] marketing department, leaving one assignment or one job to go into another " TII President Robert Finney testified that in 1970-before Western Union's planning and engineering operation, P&EO, became TII-the terminal engineering activity in P&EO was divided into three parts One part of the engi- neers-or professionals-stayed with P&EO, another part went to Western Union's national systems operation, NSO, and the third part was hired by DSC) Later, accord- ing to the exhibit, from November 1970 through November 1973, an additional 83 persons were transferred from West- ern Union to DSC (or terminated and hired), including 13 officials and managers, 24 professionals, 7 sales, 22 "Tech," and 17 office and clerical employees But there is another exhibit, minutes of the DSC board of directors' meeting on November 11, 1970 (G C Exh 168), which suggests that the 80 Western Union-terminated and DSC-hired persons were not working full-time for DSC in a "clearly separate and distinct" business (as contended in Respondents' brief) from July through De- cember 1970 The November 11 minutes state that Presi- dent Zakarian "reported on the status of various steps being taken to put the Corporation [DSC] on a fully opera- tional basis he reviewed plans for the transfer of the 286 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Corporation's employees from the payroll of The Western Union Telegraph Company to the payroll of the Corporation to be effective January 1, 1971 " (Emphasis supplied) I note the use of the word "transfer" in these DSC minutes (3) Western Union's "capabilities" provided Despite the change in name (from Western Union to "Western Union Data Services Company , Inc "), Western Union's personnel and facilities continued to be used to develop the various parts of Western Union's terminal- leasing business Lacking the "capabilities" for operating a separate business , DSC entered into six different agree- ments with Western Union for a wide range of goods and services (Five of these agreements were dated July 1, 1970, and the sixth was dated January 1, 1971, although all of them were signed by Western Union after February 23, 1971, when WUC-planning the large-scale transfer of much of Western Union's engineering staff to a new sub- sidiary, TII-eliminated some dual offices "to separate the operations," as discussed above) An EDT (exchange data terminal) agreement, dated July 1, 1970, provided that "DSC and Western Union desire to enter into an arrangement whereby the technical capability of Western Union [emphasis supplied] in the installation and maintenance" of the telephone-circuit EDT equipment "may be made available" to DSC's customers It called for Western Union to provide installation, preventive and remedial maintenance , replacement (using Western Union parts and components), and shop reconditioning of a list of telephone-circuit equipment, plus customer training in the mechanical operation of the equipment The list covered Acoustic Coupled (33 ASR-KSR with integrated acoustic coupled modem), Data-Phone (models 28, 33 and 35 ASR, KSR, RO), and DAA (data access arrangement, including modem, for both manual answering and automatic answer- ing) The work was to be performed by Western Union technicians (bargaining unit employees) A DDS (dedicated data system) agreement, bearing the same date, was a similar agreement (except for training), and covered selectors , models 28, 33, and 35 teleprinters, R/T (recording/transmitting) sets, and auxiliary terminal equipment Both the EDT and the DDS agreements were signed by Western Union on March 29, 1971, after being signed by DSC on July 1, 1970 A separate customer training agreement , also dated July 1, 1970, provided that Western Union would furnish train- ing to customers of DSC upon its request (This also was bargaining unit work) Both DSC and Western Union signed this agreement on March 29, 1971 An engineering support services agreement, dated July 1, 1970, provided that Western Union would evaluate special requirements of DSC customers, develop proposals, and "modify standard product line equipment to meet special re- quirements " (Emphasis supplied) It also provided for ap- plications engineering, industrial design and graphics sup- port, design and drafting support, and graphic reproductions, "including binding, for distribution and for large quantities of engineering drawings and specifica- tions " (Much of this work was to be performed by bar- gaining unit employees) The agreement specifically pro- vided that it shall not preclude Western Union from "de- veloping, producing, using or marketing items which are identical or similar to items produced for DSC " DSC signed it on August 27, 1971, and Western Union, on Sep- tember 15, 1971 The fifth agreement dated July 1, 1970 (when DSC be- came "operational") was the material management agree- ment It covered (a) shop service for DSC at the Allentown, Pennsylvania, and other Western Union facilities, (b) warehousing services (including storage areas), the receiv- ing and shipping of DSC goods , and the maintaining of inventory records, and (c) the purchasing by Western Umon of such items for DSC as high-speed printers, mod- ems, selectors, magnetic tape cassettes and transports, other hardware, office supplies, furniture, and fixtures It was signed about a year later, by DSC on June 25, 1971, and by Western Umon on July 5, 1971 The FAS (facilities and administrative services) agree- ment was dated January 1, 1971 (the date of the DSC board's minutes show that DSC planned to transfer DSC's "employees" from the Western Union to the DSC payroll) The agreement provided that Western Union would lease to DSC office space at 16 McKee Drive, Mahwah, New Jersey (at Western Union's technology center) It also pro- vided that Western Union would furnish DSC the follow- ing 17 "administrative services" (a) installing, removing, repairing, and relocating telephone equipment, (b) install- ing other communications equipment used by DSC, (c) planning office layouts and interior design, (d) mail ser- vices, (e) shipping, receiving, distributing, checking, and keeping records of goods purchased, (f) use of copying ma- chine, (g) furnishing stationery and office supplies "used in common" by Western Union and DSC, (h) ordering and delivering other stationery, (i) furnishing office equipment and furniture , 0) furnishing cashier services, advancing funds to DSC employees for business use, cashing checks, and paying COD carrier charges, (k) making reservations for transportation and lodgings , (1) furnishing moving and relocation services for DSC employees , (m) recruiting and employment services, consisting of "receiving , routing, and processing employment resumes inviting, interviewing, testing, and referring applicants to DSC, contracting for temporary help in the name of Western Union to be used by DSC, and providing wage and salary trend information, (n) medical services, including preemployment physical ex- aminations, and maintaining DSC employee health rec- ords, (o) preparing signs to identify DSC office areas and functions, and (p) other requested services This agree- ment, which was not signed by DSC until July 22, 1971, and by Western Union on July 29, 1971, did not provide specifically for the leasing of the premises or for any of the services for the months of July through December 1970 It provided that most of the services terminate on April 30, 1971 (nearly 3 months before it was signed) April 30 was the day before TII became operational and began furnish- ing many services previously provided by Western Union DSC President Zakarian "estimated" that in 1970 West- ern Union performed "less than 50 percent, maybe 45 to 50 percent of all of our installation and maintenance work " However, he gave this testimony on direct examination, before revealing on cross-examination that about 200 of WESTERN UNION CORP the less than 250 terminals installed in 1970 were pur- chased from Western Union Although manufacturers and others installed some of DSC's terminals, I consider it un- likely that DSC purchased 200 terminals from Western Union in 1970, and over 800 in the first 3 months of 1971, and had them installed by the manufacturer or anybody else (Zakarian did not impress me as being an entirely candid witness) He further testified that "by the end of 1971 we had the beginning of a field organization" to per- form the installation and maintenance work (In this con- nection, I note that during the first 5 months of 1972, Western Union furnished DSC with 5,546 maintenance calls G C Exh 23C) By the end of 1971 (according to the WUC 1971 annual report), there were 12 sales office and service centers in 12 major cities, and by April 10, 1973 (G C Exh 15), there were 66 technicians (called service or senior service engineers) in 33 field offices and service cen- ters (I note that the DSC counsel wrote the Union on December 19, 1972, supplying the information that as of that time, "To the best of our knowledge, DSC has no employees whose job classifications or work is of such na- ture or level as it is or has been covered by a collective bargaining agreement to which the [Union] is a party " Western Union technicians who install and maintain ter- minals are in the bargaining unit) Zakarian testified that by the time of hearing, in 1974, DSC was performing 85 to 90 percent of the installation and service work with its own employees, and Western Union employees were perform- ing only about 9 or 10 percent Western Union's total charges to DSC were $1,407,729 in 1970, $2,846,990 in 1971, $2,935,383 in 1972, and $1,049,430 in 1973 (4) DSC's portion of the terminal leasing DSC-utilizing personnel, facilities, and services ob- tained from Western Union-gradually began developing, on a larger scale, the business of leasing telephone-circuit terminals, which Western Union had been leasing on a smaller scale DSC also took over part of Western Union's other terminal-leasing business, and complained that West- ern Union was competing with it in TWX (telephone-cir- cuit) terminal leasing Western Union had regularly leased terminals to be used in connection with its telegraph-circuit communications services DSC began taking over part of this terminal-leas- ing business As an example, Western Union contracted with Crown Zellerbach Corporation in 1972 to provide the transmission service in a new coast-to-coast Datacom net- work for that customer DSC (instead of Western Union) contracted with the customer to provide 120 leased termi- nals, and arranged (by contract) for Western Union techni- cians to install about half, and to maintain all, of the ter- minals (DSC installed the other half) DSC President Zakarian estimated that at the time of the hearing DSC had 300 other terminals connected to Western Union cir- cuits The problem of competition between these two WUC subsidiaries arose in 1971 and 1972, when both Western Union and DSC wanted to compete in the market of leas- ing terminals to TWX users (after TWX was purchased by 287 Western Union from the telephone company-which had agreed, as a condition of the sale, that it would withdraw from the business of furnishing low-speed terminals to Da- taphone customers, as indicated in the WUC 1971 annual meeting report) On October 25, 1971, DSC President Za- karian reported to the DSC board of directors that DSC's business was "being adversely affected by competition from the offering" by Western Union "of alternate DAA/TWX terminals " (As mentioned above, the July 1, 1970, EDT agreement between Western Union and DSC provided that Western Union would make available to DSC customers Western Union's "technical capability" in installing and maintaining "Data-Phone" and "DAA" tele- phone-circuit EDT equipment) Zakarian repeated this complaint to the DSC directors on March 2, 1972, pointing out that DSC had lost 18 customers involving 350 termi- nals and $315,000 annual revenue to Western Union com- petition in this area and that "20 prospective new accounts involving 500 terminals and $450,000 annual revenue had also been lost " I note that finally, as revealed in the min- utes of Western Union's May 8, 1973, directors' meeting, Western Union reponded to the FCC ruling on terminals As stated in those minutes, Board Chairman McFall "re- viewed the Company's program to permit subscribers to the Telex and TWX Services to provide their own termi- nals if they desire to do so in lieu of leasing terminals from the Company at tariffed rates He said the program had been initiated in response to a requirement therefor with respect to the TWX Service established by the Federal Com- munications Commission in its [1970] Order approving the TWX Acquisition" (Emphasis supplied) However, I also noted that this belated decision by Western Union had not-at least not by the time of the hearing-resulted in DSC taking over part or all of Western Union's business of leasing the TWX terminals DSC President Zakarian posi- tively testified at the hearing that DSC has "no terminals on the Telegraph Company's Telex service, or TWX ser- vice for that matter " The evidence does not disclose whether Western Union or WUC plans to permit DSC in the future to compete for this terminal-leasing business After DSC was formed, Western Union began leasing some of its terminals from DSC, instead of purchasing them directly from the manufacturer Since 1970, DSC has leased to Western Union about 500 or 600 terminals-in addition to 5,000 or 6,000 teleprinter terminals and similar equipment which DSC leased to Western Union in 1973 and later in the year sold to Western Union DSC's total charges to Western Union were $1,366,741 in 1971, and $11,900,251 in 1973 Meanwhile, DSC was developing the business of leasing telephone-circuit terminals The WUC 1971 annual report indicated that DSC was having difficulty with its total-ser- vice concept "because the hardware part of its package (i e, standard Teletype terminal equipment) had been available for years " By the end of 1972 (as indicated in the WUC 1972 annual report), DSC had 8,300 leased terminals in service (as compared to 3,850 at the end of 1971), and the models 33 and 35 teleprinters continued to provide "the bulk of its leasing revenues " DSC was purchasing and, with the part of Western Union's terminal-engineering staff which DSC had hired, was designing and developing 288 DECISIONS OF NATIONAL LABOR RELATIONS BOARD more sophisticated electronic terminal equipment (Both DSC and Western Union purchase components from dif- ferent manufacturers, and fabricate equipment to meet the needs of their customers) By the end of 1973, DSC had more than 13,000 (and over 14,000 by the time of the hear- ing) low-, medium-, and high-speed terminals in service, and had developed a magnetic tape cassette buffer which operates at various speeds About 90 percent of the termi- nals are connected to the telephone company system For terminal maintenance service, DSC provides Termicare, enabling the users to call a single source (DSC's Termicare Center at Western Union's technology center in Mahwah) for service restoration Western Union plant technicians throughout the nation are under contract to make service calls when requested by DSC (5) Finding of division The new corporation, DSC, was formed in 1970 exclu- sively with Western Union officials and directors, and it was initially staffed exclusively with Western Union per- sonnel-assigned primarily from Western Union's mar- keting department (for the managers) and from Western Union's planning and engineering operation (for the pro- fessionals) Western Union retained the DSC staff on its own payroll for a number of months after DSC began op- erations and, as detailed above, provided DSC with facili- ties and a wide range of services, thereby furnishing it with the "capabilities" to operate under the new name Except for the new name and the extensive intercompa- ny contracting, Western Union was, in effect, continuing to engage in the business of leasing communications termi- nals for use with both telegraph and telephone circuitry It was furnishing not only the personnel, facilities, and many services, but it was selling terminals to DSC, and then in- stalling most or a substantial part of them for DSC It was not until the end of 1971 that DSC "had the beginnings of a field organization," as testified by DSC President Zakari- an DSC, as a new WUC subsidiary, was assigned different parts of Western Union's business of leasing terminals It began leasing some telegraph-circuit terminals, as when Western Union contracted to provide Crown Zellerbach with a new transmission service, but DSC (instead of West- ern Union) contracted to lease the 120 telegraph-circuit terminals DSC also leased many terminals to Western Union itself However, most of DSC's terminal leasing was for use with telephone circuits, for which it contracted with Western Union to make available to the DSC customers the "technical capability of Western Union" to install and maintain the acoustic coupled, Dataphone, and DAA equipment (As discussed above, Western Union retained much of the nonregulated telephone-circuit terminal leas- ing business by retaining, over DSC's protests, the alter- nate DAA/TWX terminal business) Meanwhile, more so- phisticated terminal equipment was being designed and developed, by DSC's utilizing the expertise of the Western Union P&EO terminal engineers whom it initially hired, and the expertise of the additional professionals it contin- ued to hire from Western Union In addition, DSC was utilizing the expertise of remaining Western Union person- nel who, under the engineering support services agreement, were to evaluate special requirements of DSC customers, develop proposals, and modify the equipment to meet spe- cial requirements (I note that Western Union's charge to DSC for such "modification" work is specifically listed in Western Union's letter, G C Exh 24, dated February 14, 1973) Contrary to the contention made in Respondent's brief that DSC and Western Union "clearly have separate and distinct businesses," and that "There is between them no interrelationship of operations," the evidence shows that in substance Western Union has provided DSC with person- nel, facilities, services, and expertise to develop parts of the nonregulated terminal-leasing business In reality, DSC has operated much as a department of Western Union (with some outside contracting), although it has gradually added to its staff from sources outside of Western Union Accordingly I find that DSC constitutes a division of Western Union's structure-beginning with 80 transferred members from the Western Union staff, and the later transfer of 83 additional members of the staff-and that DSC took over substantial segments of Western Union's active and growing terminal-leasing business d Teleprocessing Industries, Inc (1) Mass transfer of personnel and functions On May 1, 1971, there was a mass transfer of 476 per- sons (106 managers, 55 supervisors, 268 engineers and other professionals, and 47 support personnel-G C Exh 186) from Western Union's planning and engineering oper- ation (P&EO) department to TII, a new subsidiary which WUC originally incorporated under the name, Western Union Teleprocessing Company, Inc (G C Exh 213 ) An additional 44 persons (5 managers, 15 supervisors, 15 pro- fessionals, and 9 support personnel) were thereafter trans- ferred from Western Union to TII through the end of 1973 (G C Exh 187) Of the 476 initially transferred persons, about 431 (or 90 percent) of them were assigned to the implementation and management of Western Union's modernization program About 341 of them were assigned to TII's Western Union systems division, and about 90 to TII's operations division The remaining persons were assigned to administrative, business planning, and corporate development divisions (TII President Finney gave the estimates of 5 persons in corporate development, 20 in business planning, 20 in ad- ministration, and 90 in operations-leaving a remainder of about 341 persons to be in the Western Union systems division, in which he estimated there were between 300 and 350 persons ) As discussed later, the Respondents contend that none of the 476 (and later 44) persons hired by TII from West- ern Union was performing bargaining unit work Likewise on May 1, 1971, there was a mass transfer of functions from Western Union to TII These functions fell into the following categories WESTERN UNION CORP 289 (a) Western Union design and engineering TII President Finney testified that P&EO's role in West- ern Union's modernization program "ran the total gamut from services planning right through design, implementa- tion, tests, installations and operation of these systems and facilities which carried these new services" This work in- cluded computerizing all switching functions and many new services, including Mailgram, plus interconnecting the many services On May 1, 1971, all of these functions (except the man- agement of computerized operations, discussed below) were transferred from P&EO to TII's Western Union sys- tems division The work was to be performed by the approximately 341 managers, engineers, computer pro- grammers, communications analysts, mathematicians, physicists, and secretaries transferred from the P&EO engi- neering organization These transferred design and engineering functions, which included the furnishing of computer software and the development and production of otherwise unavailable computer hardware, were covered by an engineering and operations agreement, dated May 1, 1971 This agreement provided that TII would furnish Western Union with the engineering and hardware on a cost-plus basis, with TII being paid for direct and indirect costs, plus "fee to be negotiated " The agreement covered "systems engineering, design and development activities, and systems engineering studies and other consultation services " It specifically in- cluded the Mahwah develop lab and the following 5 System Development and Implementation of ISCS- IIA/B, International Inbound Switching System [IISS], combined sending positions of the Central- ized Telephone Bureaus [CTB's], and ISC-IM Aug- mentation 6 Communications Hardware Design and Devel- opment of COLMUX [communication line multi- plexor] II, TWX Computer Interface (ISCS), Time Division Multiplexor/Concentrator, Terminal and Interface Equipment Development and Terminal Selectors 7 ISCS Systems Engineering including Growth Plan- ning and Design and New Services/System Plan- ning and Design 8 Other systems, engineering, and consultation as re- quested Phase I of ISCS (information services computer system- now called InfoMaster) consisted of computer centers in New York, Chicago, Atlanta, and San Francisco, which became operational between early 1968 and September 1969 ISCS-IM augmentation refers to task order 9, which was attached and which provided for the completion of the augmentation program on the four ISCS computer centers by July 1971 ISCS-II refers to Western Union's huge com- puter complex at Middletown, Virginia, and a similar com- plex later in Bridgeton, Missouri, each of which would have more capacity, and be able to carry more types of services, than the entire ISCS-I network P&EO began work on the Middletown computer center in October 1969, and on May 1, 1971, Middletown was "still in the engineer- ing phase," as testified by TII President Finney Three years later, at the time of the hearing, TII was continuing to make improvements, enhancements, and changes in the service features at the operational Middletown center, and was "doing the planning and engineering" at Bridgeton, which was begun in 1973 The continuing magnitude of this transferred engineer- ing work, and TII's fees for performing it, are indicated by the December 21, 1973, amendment entitled "Engineering & Operation Agreement 1973-1974 " Nine of the I I task orders attached to it are dated November 15, 1973, although 6 of them provide from performance by TII from January 1, 1973, through December 31, 1974, and provide for cost (direct and indirect cost), plus a fixed fee The largest four of them are Task order 60, estimated cost of $2,872,100, fee of $213,000, covering management and operation of the Mahwah development lab Task order 61, estimated cost of $2,997,500, fee of $340,100, covering development of the Mailgram system and services, including "definitization of sys- tem requirements, systems design and analysis, pro- gramming, engineering, development lab hardware procurement, testing, implementation, cutover, and documentation," and specifically including Mail- gram II pre-processor software development Task order 62, estimated cost of $4,469,000, fee of $499,000, covering upgrading and enhancement of numerous Western Union systems and services Task order 63, estimated cost of $5,426,700, fee of $505,200, entitled "Second Site Engineering & Soft- ware Development (including Disc System)," which specifically provides for message-processing fall- back capacity for Middletown at the Bridgeton site, and contains some 1975 target dates One of the task orders, dated November 15, 1973 (signed in December 1973), calls for the sale of hardware (C2100's preprocessor/multiplexors, with specified optional equip- ment) for the estimated cost (fee included) of $2,080,000, with approximate delivery dates from October 29, 1973, into 1975 TII's total charges to Western Union were $24,934,000 in 1972, and were estimated to be about $22,000,000 in 1974 (as reported for 1972 in the Western Union March 8, 1973, prospectus, and as estimated for 1974 in the Western Union 1973 annual report) (b) Western Union computer operations Between 1965 and 1967, Western Union had signed PWS (public wire system) computer software maintenance contracts with Dunn & Bradstreet, 3M Company, Trane Company, and Reynolds Metal Company to maintain their software systems In 1967, Western Union had signed a lease and service agreement with Bankers Trust Company covering Western Union's computer-controlled private wire teletype system, called Bank Wire, connecting mem- ber banks In 1968, Sicom (security industry communica- tions) became operational By March 22, 1971 (the date of WUC's prospectus for the sale of common stock), Sicom 290 DECISIONS OF NATIONAL LABOR RELATIONS BOARD (one of Western Union's "hybrid" services) had been ex- panded by P&EO to provide a data-processing "Order Match" service IISS (international inbound switching sys- tem) was a new system being developed by P&EO And as indicated above, ISCS-I was a network of four computer centers which had been operational since 1969 ISCS-IM was an augmentation program scheduled to be completed in July 1971 The ISCS-I computer centers were in New York, Chica- go, Atlanta, and San Francisco The Bank Wire computer centers were in New York and Chicago The computers of Sicom and IISS were located at Western Union's Technol- ogy Center at Mahwah On May 1, 1971, the management of all these functions was transferred from Western Union's P&EO to TII The above-mentioned May 1, 1971, engineering and operations agreement provided that TII would take over the operation of all the computer centers, and specifically listed (1) the Mahwah communications room operation and manage- ment, (2) the operation and management of ISCS-I, ISCS- 0, Bank Wire, and IISS, and (3) the private systems soft- ware maintenance The task orders attached to the agreement specified these transferred functions Task order 3 provided that TII would "manage the operation and maintenance of the Bank Wire computer centers located in New York and Chicago," and would "maintain the software system " Task order 4 provided that TII would "maintain the soft- ware systems" for the four listed companies, pursuant to Western Union contracts dated from 1965 through 1967 Task order 1 provided that TII would "manage the opera- tion and maintenance of the ISCS-IA, ISCS-IM, IISS com- puter centers located at New York, Chicago, San Francis- co, Atlanta, and Mahwah", would provide "Service to Western Union offices (PMS [public message system- such as telegram] Traffic)", and would "maintain the soft- ware system and exercise control over all routine changes which may be necessitated because of operational prob- lems " (Emphasis supplied) These task orders provided that TII would be paid for direct and indirect costs, plus a fee to be negotiated Western Union Assistant Vice Presi- dent Charles Scott, who had been in charge of P&EO's infoimation systems operations, was transferred to TII and made vice president and general manager in charge of TII's operations division He and all the other nonbargain- ing unit members of the P&EO operations staff (about 90 in number) were transferred on May 1, 1971, to TII The contracting for the services of the bargaining unit employ- ees is discussed later (I note that other P&EO department activities, which were to remain in Western Union, were transferred out of P&EO and into NSO-national systems operation-before May 1, 1971, the date of the mass trans- fer to TII ) However, a change in the management of these comput- er functions was made shortly after the Union sent its April 17, 1972, letter to Western Union The letter requested in- formation about the relationship and intercompany con- tracting among the various WUC corporations, and ques- tioned whether the new corporations were "confining themselves to executive or policy functions and personnel" (as discussed hereafter) On May 11, 1972 (less than a month later), TII President Finney issued an organization announcement which began As announced by the Board of Directors of the Western Union Corporation and the Western Union Telegraph Company on May 9, 1972, effective May 14, 1972, Mr Charles R Scott has been appointed Vice President- Operations-National Systems Operation in the West- ern Union Telegraph Company [Emphasis supplied ] Finney also mentioned in the announcement the transfer of the TII operations function to TII's Western Union sys- tems division (later called the engineering and operations division) The announcement was signed by Finney and initialed under the word "Concurred" by WUC Executive Vice President Gerald Holt Concerning TII President Finney's challenged credibili- ty, I note that on cross-examination Finney testified that Charles Scott "was hired away from us [emphasis sup- plied] " (Earlier in the proceeding, Finney had endeavored to give the impression of TII's independent action by em- phasizing that the Western Union personnel had not been "transferred" to TII) However, Finney recognized at the time that Scott's movement back to Western Union was a transfer The minutes of the May 15, 1972, TII directors' meeting show that Finney reported that Scott had been "transferred" to Western Union In addition, I note that Finney was also asked on cross-examination, "Was [the hiring of Scott by Western Union] cleared with the West- ern Union Corporation at alh" Despite Finney's wording of the above-quoted May 11, 1972, organization announce- ment (that both the Western Union and WUC board of directors had announced Scott's appointment to the West- ern Union position), and despite the written concurrence by the WUC official on the announcement, Finney an- swered the question, "Not that I know of " (He impressed me as being less than candid when testifying about this, as well as when testifying about a number of other matters) Shortly after TII Vice President Scott was transferred back to Western Union, all of the above-described opera- tional work and Scott's entire former TII staff, consisting then of 93 persons (including 23 managers, 35 supervi- sors, 3 engineers, 26 professional, and 6 support personnel-G C Exh 186) were also transferred back TII retained the management of Western Union's computer operational function only in connection with the imple- mentation of ISCS-II, until the Middletown and Bridgeton computer centers were "netted and playing together " TII President Finney was not persuasive when he testified that the original plan had been for TII to manage the operation of the computer facilities only until the engineering was completed and the new systems "reached a steady state of operation " When he so testified, he ignored the fact that most of these computer operations (except ISCS-II) had been performed by the Western Union personnel on a rou- tine basis for years The ISCS-IM augmentation program was scheduled for completion in July 1971, and the IISS had not been completed at Mahwah, but that fact obvious- ly did not necessitate Western Union Vice President Scott and the entire P&EO operations staff being transferred to TII for over a year I note that Finney agreed with the suggestion made by Respondents' counsel in a leading WESTERN UNION CORP question that "in a sense" this computer operations func- tion was a training program, and that Finney also claimed that this was true "in a real sense," pointing out that "in the computer services industry it's common to have facility management contracts on a temporary basis which in- volves training people " However, Western Union regu- larly carries on its own training program, and Finney gave no explanation why any further training of the operations personnel required the transfer of the entire nonbargaining unit operations staff (consisting almost entirely of manag- ers, supervisors, engineers, and professionals) from West- ern Union to TII for over a year I find instead that after the Union's April 17, 1972, letter there was a change in plans, reversing the original decision to have TII manage Western Union's computer operations on a regular basis (c) Western Union administrative functions Until April 30, 1971 (the day before TII became opera- tional), Western Union was providing DSC with a wide range of 17 listed "administrative services" at the DSC headquarters in the Western Union technology center at Mahwah, as discussed above On May 1, 1971, Western Union's P&EO personnel (in- cluding 106 managers and 55 supervisors) were transferred from Western Union to TII This transfer included West- ern Union's Mahwah personnel who had been supervising the Western Union bargaining unit employees assigned to furnish both Western Union and DSC with administrative and other services Thus, on May 1, Western Union did not have the supervisory personnel at Mahwah to continue providing these services for itself and DSC, or to begin furnishing such services to TII which, like DSC, became "operational" purportedly without any bargaining unit personnel Bargaining unit employees remained on West- ern Union's payroll, but the supervisors were then on TII's payroll The problem was solved by TII taking over additional functions from Western Union TII signed an FAS (facili- ties and administrative services) agreement, dated May 1, 1971, to provide Western Union with 20 listed administrative and other services, "all in the manner and to the extent that such administrative services shall be of the kind performed by [TII] for its business " These services were quite similar to the above-listed 17 "administrative services" which Western Union had been performing for DSC, and also included building management, payroll, and employee rec- ords services for Western Union (TII likewise furnished administrative services to DSC, and to WUC, whose head- quarters was moved from New York to Western Union's technology center in Mahwah) The May 1, 1971, FAS agreement provided that Western Union would pay TII the basic sum of $83,800 a month for the administrative and other service functions which had been transferred from Western Union to TII, plus addi- tional itemized reimbursements About 20 P&EO manag- ers, compensation and employee relations specialists, building management engineers, and secretaries were in this TII administration division I note that one of the transferred functions-agreed to separately from the FAS 291 agreement-was for TII to handle the first step of the grievances filed by Western Union bargaining unit person- nel at Mahwah (TII's contracting for services of these union employees is discussed later) (d) Developing computer communications systems In 1964, 7 years before Western Union's P&EO became TII, Western Union began providing customers a "custom- design" service of developing computer communications systems As discussed above under "Regulated and non- regulated activity," this service included studying the customer's needs, developing a total information system, se- lecting the hardware (or designing equipment not available commercially), installing the computer and data-processing equipment, developing the software, and servicing the new management information system The Western Union May 6, 1969, prospectus revealed that several of these "custom designed" systems use "advanced digital computer tech- nology in order to provide accounting, production plan- ning and scheduling, inventory control and distribution, and other management functions while satisfying commu- nications requirements " On May 1, 1971, these functions were transferred to TII-plus systems management (which apparently had originally been intended to be performed by TII's then sep- arate operations division) As reported in the WUC July 26, 1972, prospectus, TII "is engaged in the business of designing, developing, installing and managing computer communication systems Included within its services is the supply of all requirements for hardware, software, periph- eral equipment and support services needed for the customer's system TII has absorbed the planning and de- velopment engineering resource capabilities" of Western Union However, for many months after May 1, 1971, TII was to be engaged primarily in completing and managing West- ern Union's computer facilities at Middletown and Bridge- ton As testified by TII President Finney, this moderniza- tion work for Western Union "really requiredjust about all of our resources" and "it just did not make business sense to take significant resources off of that to develop new business " In fact, on the date of the transfer, there were only about 20 engineers, marketing, "business planning type" people, and secretaries in the Western Union P&EO's business planning function who were transferred to TII These constituted only about 4 percent of the 476 transferred P&EO personnel (e) Corporate development The approximately five remaining transferred P&EO persons were in the corporate development operation, whose function was "making investigations and carrying out negotiations for the acquisition of other companies" for WUC This small group constituted about 2 percent of the transferred personnel, as compared to 90 percent who were assigned directly to Western Union's modernization program 292 DECISIONS OF NATIONAL LABOR RELATIONS BOARD (2) The new subsidiary WUC incorporated TII as a wholly owned subisidiary, and elected Russell McFall (board chairman and president of WUC, as well as board chairman of Western Union and DSC) to be TII's board chairman, John Evans, Charles Johnston, and Gerald Hoyt (officials of WUC and former officials of Western Union) as three additional directors, and Western Union Vice President Robert Finney (who had headed Western Union's P&EO) as the remaining di- rector Under McFall as board chairman, the other TIl top officials were Finney and Evans as president and secretary, and WUC Treasurer Young as the TII treasurer (Evans, Johnston, Hoyt, and Young had resigned as Western Union officials in late February 1971, when the activation of this new corporation was being planned) TII, which became operational on May 1, 1971, has not operated as a separate data-processing company, to pro- vide data processing to outside customers (As discussed above under "FCC rulings," the FCC decided in the Com- puter Inquiry that the furnishing of unregulated data-pro- cessing services to others must be through a separate cor- porate entity which-unlike T11-must have separate operating personnel and computer equipment from the common carrier) Before TII was formed, Western Union had already acquired a 50-percent interest in one data-pro- cessing company (WUCU) in 1968, and WUC had ac- quired the stock of another data-processing company, Dis- tronics Corporation, in March 1971 (In par 38 of the above-mentioned "Tentative Decision," dated April 3, 1970,-over a year before TIl was formed-the FCC rec- ognized that Western Union and another carrier already "have organized or acquired separate affiliates for the pro- motion and sale of data processing services ") Distronics, and two other data-processing companies which WUC lat- er acquired, were placed under TII's management control (As previously indicated, the employees of these and other acquired companies are not in issue in this proceeding) Western Union provided TII-like DSC-with the "ca- pabilities" to operate a business without the required bar- gaining unit employees Western Union not only provided TII with the necessary bargaining unit employees (under agreements discussed later), but it provided TII under one of the agreements (the May 1, 1971, general services agree- ment) with purchasing, accounting, engineering support, and shop services In evidence are a large number of 1971 and 1972 TII task orders (G C Exhs 21-N and 21-0) un- der which Western Union provided TII, pursuant to this agreement, with the services of bargaining unit wiremen, fabrication and assembly, electrical installations, design and assembly draftsmen, typing and reproduction services, etc Western Union's total charges to TII were $8,316,542 in 1971, $838,039 in 1972, and $732,145 in 1973 (G C Exh 203) TII President Finney explained at the hearing, "You must remember that when TII was formed it wasn't a full company It started out with a technical resource and it needed to develop all the necessary functions of a compa- ny, finance, purchasing, marketing, and so on " TII's role of providing new computer communications systems was slow in developing In 1971 and 1972, it made three separate offerings, all unsuccessfully, and made few sales of the hardware which it had already developed for Western Union (I note that in the sales brochure, "Data on Demand," TII stated that it had designed and developed software programs for 48 computers supporting Western Union's information networks, and had designed and de- veloped for Western Union such hardware products as the preprocessor/multiplexor (C2000), the system console/line switch (L1000), a terminal controller, and the automatic calling and answering unit (ACAU), "a unit to allow com- puters to call and answer terminals through the telephone, Data-Phone and TWX teleprinter networks " It made fur- ther offerings in 1973, but a large majority of its sale of systems designs, software, and hardware have been after May 22, 1973, when the Union's recognition request was made Meanwhile, TII was contracting with Western Union (apparently on a verbal basis) for Western Union to install and maintain TII equipment , as revealed in Western Union's February 14, 1973, letter (G C Exh 24) listing among its charges to TII the "Installation and maintenance service charges on equipment of affiliate " (3) Profits from Western Union work When questioned on direct examination about the trans- fer of work from Western Union's P&EO to TII, President Finney mentioned "four different factors " He stated, first, WUC's desire to diversify into nonregulated business, sec- ond, "the very excellent technical resource" in P&EO, third, Western Union's diminishing need for this level of expertise as the modernization program would come to an end in the foreseeable future, and fourth, the requirement of the Computer Inquiry (that data processing be in a sepa- rate corporation) However, on cross-examination, TII President Finney revealed a further consideration-which could explain why the mass transfer of personnel and functions occurred when, as discussed above, only about 4 percent of the P&EO staff was available for internal development of out- side business He testified And also the discussion that it would be extremely desirable and valuable all the way around [for this re- source to be retained, and] the completion of this work for the Telegraph Company would give the new company, TII, both the financial base and the capabili- ty base from which to seek new business [Emphasis supplied ] Finney was referring to the sizable fees TII would charge for the system design, engineering, software, and hardware it would furnish Western Union at the Middletown and Bridgeton computer centers-for use by Western Union to provide primarily FCC-regulated services to the public As already noted, four of the November 15, 1973, cost-plus- fixed-fee task orders (apart from many other orders over several years) provided that TII would charge Western Union fees (above direct and indirect costs) of $213,000, $340,100, $499,000, and $505,200-totaling $1,557,300 (It was not an issue in this proceeding whether or not the transfer of Western Union's P&EO department to TII, and the charging of these fees-or, for that matter, whether the many other intercompany charges between Western Union WESTERN UNION CORP 293 and the various new companies-adversely affected the rates on Western Union's tariffed common carrier serv- ices ) (4) Finding of division Whatever were the reasons for Western Union and WUC wanting to place Western Union's P&EO personnel and functions in another WUC subsidiary at a time when 90 percent of the personnel would be working directly on Western Union's modernization program, it is clear that Western Union's work was thereby being fragmented and that TII constituted another division of Western Union's structure e GiftAmerica, Inc (1) The planning For years, Western had offered the public a number of so-called "Instant Gifts" services (see glossary of services in the WUC 1970 annual report), such as the DollyGram, CandyGram, Perfume-by-Wire, and Flowers-by-Western Union (as listed in Western Union's 1969 proxy statement) All of these were non-FCC-regulated services, which were available to persons sending telegrams In 1970, Western Union and WUC began planning the offering of a new "Instant Gifts" service which would uti- lize Western Union's personnel and its new computerized facilities, without the sending of a telegram Market studies were made to determine high-demand items to sell, negoti- ations were conducted with manufacturers to provide the merchandise on a consignment basis to franchised dealers, a logistical study was made of warehousing and shipping, and Western Union personnel were assigned to take part in some of the planning work WUC incorporated a new subsidiary (under the name of Instant Gift Corporation-later renamed GiftAmerica, Inc -herein called GA) on June 24, 1971, to provide the service However, before the first meeting of GA's board of directors, the decision had already been made for the use of Western Union's personnel and facilities, as well as TII's services On February 22, 1972, George Jochum (on the Western Union staff) met with the WUC directors and "discussed the operating aspects of the project," including the use of one of Western Union's central telephone bureaus and TII's "development of the necessary software " Thereafter, in an accounting agreement dated as of March 1, 1972 (and signed in June by the same George Jochum-then serving as GA's vice president of operations), Western Union agreed to provide GA with payroll processing, ad- vancement and disbursement of funds, maintaining per- sonnel records, preparing reports of GA personnel earnings and withholding taxes for government agencies, processing invoices, making monthly computer readout reports, etc (2) The new subsidiary WUC officials Charles Johnston, John Evans, and Harry Young (all former Western Union officials) were selected by WUC to be GA's first directors Russell McFall, who was board chairman of Western Union, WUC, DSC, and TII, became the fourth director in January 1973, several months before GA became operational-on September 1, 1973 On May 25, 1972, the GA directors held their first meet- ing They elected all except one of GA's new officers from the staffs of WUC and Western Umon WUC Vice Presi- dent-Finance Johnson (formerly the Western Union vice president and comptroller) was elected board chairman and president, WUC (and former Western Union) staff members Evans, Young, and Donald Wrobel were elected vice president, treasurer, and comptroller, WUC staff member Edwin Alley became secretary, and Western Union staff member George Jochum (mentioned above) was elected vice president-operations J M Hoffman (ap- parently an outsider) was elected vice president-marketing Beginning in April 1972, members of Western Union's staff, and some of WUC's staff, were transferred to GA These included 27 Western Union personnel (22 managers, 1 professional, and 4 clericals), and 4 WUC personnel (3 managers and 1 professional) One professional was trans- ferred from TII Meanwhile, GA was hiring some outside personnel (including a new president, national sales direc- tor, advertising manager, promotion manager, and elec- tronic data processing manager) GA also hired a staff of district and regional managers who sold dealer franchises primarily to pharmacists with good display areas and deliv- ery capability (WUC guaranteed the refund of dealership fees in the event GA was unsuccessful) Contracts were signed with the manufacturers, and for the warehousing and shipping of the merchandise Beginning in July 1973, Western Union trained between 350 and 400 of its CTB R/T (recording/transmitting) oper- ators and R/T supervisors (members of the bargaining unit) at Western Union's Bridgeton CTB (central tele- phone bureau) to handle GA customers' orders from throughout the nation Although these R/T operators and supervisors (many of whom were newly hired) remained Western Union employees, they were taught when receiv- ing GA calls to identify themselves as "GiftAmerica," to give a fictitious name, and to take the order If asked, "Who is GiftAmerica9" they were told to answer, "Gift- America is a subsidiary of Western Union which has been in the gift business with CandyGram, DollyGram and flowers by air for many years " When GA became opera- tional in September 1973, the R/T supervisors and opera- tors at the Bridgeton CTB rotated between receiving and recording the GA calls (and transmitting the information to the GA service center nearby), and transacting business for Western Union (receiving and recording public mes- sages and transmitting them into the Western Union com- puters at Middletown) In 1973, Western Union charged GA a total of $1,126,542 for its services to the new subsidiary Of this amount, about $1,007,000 (as revealed in Western Union's 1973 annual report) was charged GA for "operator assis- tance services" under a verbal understanding (described in the report as being "on a preliminary non-contractual ba- sis") I note that there is in evidence a service agreement between Western Union and GA, dated as of September 1, 294 DECISIONS OF NATIONAL LABOR RELATIONS BOARD 1973, and that the agreement is signed by GA Vice Presi- dent Jochum and by a Western Union vice president However, unlike other intercompany agreements in evi- dence, the "date" lines at the bottom of the agreement are left blank (I assume that the agreement was signed some- time after 1973 but before it was introduced into evidence in April 1974) The undated services agreement states that in order for Western Union to provide the "order entry service" (for which GA would pay $1 61 a call for the anticipated vol- ume), Western Union would furnish GA the personnel (trained at GA's expense), building space, equipment, "Na- tional INWATS lines" (the wide-area telephone lines which Western Union was using in its public message serv- ices), and the computerized "CRT [cathode ray tube visual display terminal] devices and controllers " The equipment listed in the agreement for Western Union to furnish in- cluded 160 CRT four-phase terminal devices, 5 four-phase CRT controllers, 160 operator recording desks and chairs, and 8 supervisor desks and chairs Meanwhile TII (using personnel transferred earlier from Western Union's P&EO department) was developing the necessary GA software for use by the Western Union oper- ating and maintenance personnel at the Bridgeton CTB and by GA personnel at the nearby service center where GA was leasing a computer (from an outside company) TII charged GA a total of $157,813 in 1972 and $967,746 in 1973 The new GA gift service was announced in the Western Union Telegraph Company News dated September 4, 1973, with a photograph of McFall (board chairman of Western Union and WUC) and Johnston (board chairman of GA and executive vice president of WUC) viewing a display of the 16 GA items for sale The announcement mentioned GA's main offices in Western Union's new headquarters building in Upper Saddle River, GA's com- puterized order centers in St Louis (nearby Bridgeton), and "its nationwide network of nearly 6,000 participating retail outlets across the country " Describing the role of the GA shopper guides (Western Union's R/T supervisors and operators at the Bridgeton CTB), the article stated "By the fingering of a button or two on her console, the shopper guide can obtain almost immediate responses from the computer while the in-calling customer is still on the phone," to determine if the dealer has the item in stock, if the customer's credit card is valid, etc The integration of the new GA service into Western Union's public services is further indicated by the WUC 1973 annual report in which Western Union and GA gift services were alluded to "Within three rings, the American public can now reach Western Union's Central Telephone Bureaus-by far the world's largest telephone answering network Mailgrams, Telegrams, cable-grams, and even gifts are dust a quick toll-free call away, 24 hours a day, seven days a week " (Emphasis supplied) However, I note that GA was not as successful as antici- pated Around the end of 1973, 152 of the specially trained Bridgeton R/T supervisors and operators were laid off (furlough force reductions) by Western Union because the volume of GA calls "has not reached its anticipated level " At the end of 1973, GA had liabilities of $27,860,000, repayment of $19,983,000 of which had been guaranteed by WUC By the time of the hearing, the GA executive positions of president and merchandising manag- er were vacant, as were 9 of the 11 bargaining unit level classifications (such as service operators and computer op- erators) in GA's communications and electronic data pro- cessing divisions at its service center near the Bridgeton CTB (G C Exh 195, 196) Some of the former Western Union and WUC personnel had been transferred back Charles Johnston (executive vice president of WUC and formerly vice president and comptroller of Western Union) remains as board chairman and "chief executive officer" of GA, which shares Western Union's new headquarters building and used the same address as Western Union (One Lake Street, Upper Saddle River) (3) Findings of division It is clear that GA-as WURC, DSC, and TII before it-constituted a division of Western Union's structure Al- though GA provided a new gift service, the service was similar to the earlier Western Union gift services, except that it was handled through Western Union's facilities without a separate telegram Western Union and WUC planned the new service and contributed virtually all of the initial officers and corporate directors, and many members of the managerial staff there- after Western Union provided GA with facilities for its headquarters, furnished GA with various "accounting" services, and shared the use of Western Union's Bridgeton CTB (central telephone bureau), including the use of its nationwide INWATS telephone lines Western Union fur- nished GA with a considerable amount of computerized equipment at the CTB, including 160 CRT terminal de- vices and 5 CRT controllers, plus desks and chairs West- ern Union hired additional R/T employees, and trained them and its other R/T employees to act as GA shopper guides Moreover TII (found above to be a division of Western Union) developed all of GA's computer software for use at Western Union's Bridgeton CTB and at GA's nearby service center In substance-apart from the corporate veil-the new gift service was another service of Western Union, whose facilities and services were essential to GA's operation C Nonunion Transfer Policy I Deliberate decision made As discussed above, the Respondents have given various reasons for the fragmentation of Western Union (called "corporate restructuring") In addition, one of Respon- dents' witnesses revealed at the hearing another consider- ation that it was "extremely desireable" to give TII a "fi- nancial base" (from the fees charged Western Union) "to seek new business " The Respondents deny that there was a further anti- union motivation In their brief, the Respondents insist that there is "no evidence that the unionized status of Tele- graph prompted the structuring of WUC and the new sub- sidiary corporations " At the hearing, Western Union Gen- WESTERN UNION CORP 295 eral Counsel Hostetler was asked, "Was there any discus- sion of labor organizations, collective bargaining with re- spect to the restructuring9" He responded, "Yes There was some discussion in the context of how it would occur and how it would be done after the restructuring But that was not a factor in the restructuring " He added that "regard- less of what the answer might have been on a projected basis regarding the labor union situation, we would have restructured in exactly the same way " He did not explain why union (bargaining unit) employees were not transfer- red along with the nonunion (nonbargammg unit) person- nel When TII President Finney was asked, "In the plan- ning for the formation of TII, was there any discussion of the union contract or supervision of bargaining unit per- sonnel9" he answered "Only peripherally I'm sure it came up We discussed all aspects of the formation of the com- pany And I'm sure it came up, but peripherally " However, whether or not Western Union was originally motivated, at least in part, by a desire to operate certain nonregulated parts of the business on a nonunion basis, the evidence clearly establishes that Western Union and the other Respondents adopted a deliberate policy against transferring Western Union's union employees from the Western Union bargaining unit jobs to bargaining unit lev- el jobs with any of the new corporations Respondents' counsel avoided asking about this non- transfer policy when he asked DSC President Zakarian about a refusal-to-hire policy Q Did you adopt or pursue any policy in your company of refusing to hire any person because they were or had been in the union or bargaining umt9 A Obviously not [Emphasis supplied ] When TII President Finney was asked on cross-examina- tion whether TII's failure to hire any of the bargaining unit personnel, at the time of TII's formation, was "pursuant to a deliberate decision," he gave this answer Q No I think the answer is no Everything we did was pursuant to deliberate decisions But these, I think the deliberate decisions we made involved the kind of business we wanted to get into So, you know, yes, there was a deliberate decision that we did not know our requirements right then for certain types of peo- ple So there was, in that sense, a deliberate decision that we would not hire those kinds of people Or there was another deliberate decision that we would sub- contract or use temporary personnel for certain things, again for the same reason But I don't think that's equivalent to the deliberate decision you mentioned, so I think the answer is no A forthright answer would obviously have been "Yes," that a deliberate decision had been made not to offer to hire or transfer the union employees Otherwise, the 476 P&EO nonbargaining unit personnel would not have been trans- ferred alone to TII, without at least some of Western Union's bargaining unit support personnel 2 The pattern followed The same pattern was followed upon the establishment of each new corporation From the time WUC became operational on January 30, 1970, until October 1973, a total of 41 persons (in addition to corporate officials) were transferred from Western Union to WUC (Twenty-two of these 41 persons remained on the WUC payroll at the time of the hearing G C Exh 75 ) These transferred employees included 26 professionals, but according to the Respondents, not a single bargaining unit employee was included Although a total of 14 secre- taries and I courier were transferred to WUC, the Respon- dents contend that all of them were "confidential"-pre- sumably even those who may have been assigned to work with the nonmanagerial professional employees (The Gen- eral Counsel and the Union contend that the new corpora- tions unilaterally changed the classifications from included bargaining unit secretaries and clerks to excluded "confi- dential" secretaries and clerks Both the 1968 and 1971 col- lective-bargaining agreements between Western Union and the Union contained an Appendix B which provided that the excluded titles-such as "confidential" employees-re- quire mutual agreement through negotiations before the "positions may be established beyond the number listed in Appendix B therefore or beyond the number presently in existence, whichever is greater " However, if the bargaining unit has remained intact, any dispute over whether a par- ticular employee is "an aide to an officer, management employee who deals in employee relations matters"-as a confidential employee was defined by Union President Dan Beckstead at the hearing-could be resolved through the grievance and arbitration procedure Meanwhile, it is noteworthy that secretaries were transferred from Western Union to the new corporations only if they were to be nonunion "confidential" employees ) When the next corporation, WURC, became "operation- al" in May 1970, the bargaining unit employees again re- mained on the Western Union payroll (In fact, all of the Western Union real estate department staff, except the general manager, remained on the Western Union payroll until January 1, 1971, when they were transferred to WURC) Between January 1, 1971, and October 1973, a total of 25 Western Union persons (including 7 confiden- tial and 1 clerical) were transferred from Western Union to WURC (Concerning the one "clerical" employee, who was transferred to the WURC payroll on January 1, 1971, and back to the Western Union payroll on April 3, 1971, the Respondents contend in their brief that her brief tenure with WURC "would seem clearly to be" a "de mmemis crossover" and "insignificant ") The next corporation, DSC, became "operational" 2 months later, in July 1970 A total of 80 Western Union personnel, primarily from the marketing and P&EO de- partments, were selected (but, as indicated previously, they apparently remained on the Western Union payroll until January 1, 1971) Thereafter, through November 1973, an additional 85 Western Union personnel were transferred (or "terminated" and "hired," as shown on Respondent- prepared G C Exh 165) Concerning the original group, the Respondents contend in their brief that "DSC began with a group of professional management people and a minimal support staff, consisting entirely of nonbargaining unit secretaries " Concerning those who followed, DSC President Zakarian testified that none of them came from 296 DECISIONS OF NATIONAL LABOR RELATIONS BOARD the Western Union bargaining unit, with only four excep- tions These few exceptions do not disprove the policy against transferring bargaining unit personnel One was a Western Union salesman on vacation from his job in Flori- da Zakarian testified that a "subsequent analysis" re- vealed that this employee had gone at his own expense to New York, where he applied and was hired as a salesman by DSC The other three, "as I [Zakarian] subsequently have gone back and analyzed," were acquaintances, re- cruited by two managers or officials, one or both of whom were themselves hired from outside Western Union (and who, therefore, may not have been aware of the nontrans- fer policy) Even when the entire P&EO department became TII on May 1, 1971, and TII took over many functions previously performed by Western Union, Respondents contend that no bargaining unit employees were transferred A total of 476 persons were transferred from Western Union to TII on that date, and an additional 44 persons were transferred between then and the end of 1973 The latter included two bargaining unit secretaries, Leslie Bilz and Sandra Vick, who were transferred to TII in February 1972 when they were reclassified as confidential secretaries (R W Exh 30) The same pattern was followed when GA, the latest new corporation before the time of the hearing, was staffed A total of 32 persons were transferred (27 from Western Union, 4 from WUC, and 1 from TII) As summarized in Respondents' brief, "Of the 32 employees with previous employment with one of the other respondents, all but two were hired into either managerial, professional, or confi- dential positions and there is no evidence that any were in the Telegraph bargaining unit prior to hire by GA" I therefore find that the evidence does establish that the Respondents did adopt a policy against transferring West- ern Union's union employees, and that their intention was to operate WUC, WURC, DSC, TII, and GA on a non- union basis On the other hand, the evidence does not establish that any of the new corporations went further and refused any Western Union employee's request to be hired To the con- trary, the one (current) Western Union salesman who did apply for DSC employment was hired I do not speculate why apparently none of the thousands of laid-off or termi- nated Western Union bargaining unit employees applied to work for the new nonunion companies (Between 1971 and 1973, as reported in the WUC 1973 annual meeting report, the number of employees in the Western Union bargaining units declined from about 20,000 to about 12,000) At the hearing, near the end of Respondents' defense and after Respondents' nontransfer policy had been established, the General Counsel attempted in his cross-examination of DSC President Zakarian to develop facts on which a find- ing of illegal discrimination against the "extremely quali- fied" laid-off Western Union plant technicians could be based-without first alleging any 8(a)(3) violations (Zaka- rian had testified that, to his knowledge, there were never any Western Union employees hired by DSC in its "field installation and maintenance capabilities ") Respondents' counsel objected to any questions about whether Zakarian "undertook to find out whether there were unemployed union people," asserting that this "could only bottom a 8(a)(3) charge " The General Counsel stated that "there may very well be [an 8(a)(3) ] violation," but "I'm not going to amend my complaint after the answer is in " In the absence of any 8(a)(3) allegations, I sustained the ob- jection Accordingly, I do not rule on whether DSC unlaw- fully discriminated against any of the laid-off Western Union technicians (I note that the number of plant techni- cians employed by Western Union in all divisions in- creased after Western Union purchased and expanded the TWX system, but that the number decreased between Sep- tember 1972 and September 1973-despite continued ex- pansion of TWX-when DSC was performing more of its own installation and maintenance work with newly hired nonunion technicians The laid-off union technicians had seniority only divisionwide ) D Replacement of Union With Nonunion Employees When the first four of the new corporations became op- erational (WUC, WURC, and DSC in January, May, and July, 1970, and TII in May 1971) and took over the above- described segments of Western Union's functions and ac- tivities-without hiring the union employees who had been performing the nonconfidential bargaining unit support work-there was no immediate interruption in the perfor- mance of the support work by the union employees Western Union's headquarters was then in New York City Both WUC and WURC occupied the same head- quarters, and Western Union's employees performed sup- port work for them In 1971 WUC moved its headquarters to Western Union's technology center in Mahwah, New Jersey, and TII began performing much of the support work To perform this work for WUC, TII contracted for the services of some of Western Union's Mahwah employ- ees, whom TII replaced with nonunion employees in 1973 when Western Union's headquarters was moved from New York to Upper Saddle River, New Jersey, and most of Western Union's Mahwah employees were offered employ- ment at the new headquarters WUC's only nonmanagerial nonprofessional employees are classified as confidential The headquarters of WURC is still in New York As dis- cussed above, it continued to operate as a department of Western Union, and the nonbargaining unit employees re- mained on Western Union's payroll until January 1, 1971 (over 7 months after WURC became "operational") I therefore find that during this period, Western Union con- tinued furnishing WURC the support work it provided other departments at its headquarters, and further find that, in the absence of any WURC nonconfidential sup- port personnel, Western Union continued to provide such support work to WURC until 1973 when Western Union's headquarters was moved to New Jersey (As an example, Western Union photographer Peter Tague-before he was laid off in September 1973-did photographic work for WURC at the New York headquarters) Since then, West- ern Union employees have continued to process employee benefit claims for WURC, as discussed later, but the evi- dence does not disclose who is performing other noncon- fidential support work for WURC WESTERN UNION CORP Much more bargaining unit work was involved when DSC and TII were formed Although there was no immedi- ate interruption in Western Union employees' performing this work, DSC and TII later began replacing many of these union employees with nonunion employees DSC became "operational" on July 1, 1970, but the ini- tially selected nonbargaining unit employees remained on Western Union's payroll until approximately January 1, 1971 Thereafter, between March 29 and September 15, 1971, Western Union signed a series of six agreements (dated back to July 1, 1970, and January 1, 1971, and de- scribed above under "Western Union's `capabilities' pro- vided"), under which Western Union provided DSC with a wide range of services by bargaining unit employees These services enabled DSC to take over part of, and expand, Western Union's business of leasing telephone-circuit com- munication terminals, and also to take over part of the business of leasing telegraph-circuit terminals These ser- vices included installation, maintenance, replacement, and shop reconditioning of terminal equipment, training of DSC customers, modifying DSC equipment to meet spe- cial requirements, providing graphic support and repro- ductions, drafting support, shop service, warehousing, and receiving and shipping, purchase of terminal equipment and office supplies and fixtures, and, under the January 1, 1971, FAS agreement, a list of 17 administrative services- parts of which beginning May 1, 1971, were furnished by TII, using contracted-for Western Union bargaining unit employees, as discussed below Meanwhile, DSC was grad- ually hiring nonunion support personnel, including office clerical, shop and field technicians, salesmen, etc These nonunion employees either replaced Western Union's union employees (some of whom were subsequently laid off for lack of work), or were placed in jobs which were comparable to those in Western Union's bargaining unit and which Western Union's employees would have filled if Western Union had continued to develop all of the termi- nal-leasing business under its own name On May 1, 1971, when TII became operational, it hired (through transfer) most of Western Union's managerial, engineering, and professional staff at the technology center in Mahwah In fact, all 476 of Western Union's P&EO nonbargaining unit staff (whether located in Mahwah or elsewhere) were transferred en masse to TII This left with- out Western Union supervision the bargaining unit person- nel who were performing not only the support work for the former P&EO staff at Mahwah and other computer cen- ters, but much of the support work for Western Union's other personnel at Mahwah and for DSC's Mahwah per- sonnel as well Having no nonconfidential support person- nel of its own, TII signed one contract (the above-men- tioned May 1, 1971, engineering and operating agreement) under which Western Union was to furnish TII a total of up to 208 bargaining unit "operation and maintenance" personnel, including 25 employees in Mahwah, 26 in Chi- cago, 21 in San Francisco, 22 in Atlanta, 29 in New York, 64 in Middletown, and 11 to work on Mailgram and 10 on IISS (plus up to 100 weekend test support personnel at Middletown) These bargaining unit employees included computer technicians, computer console controllers, inter- cept operators, a storeroom clerk, and a storekeeper (Par 297 20B of the agreement provided that TII "shall direct, man- age, and schedule such Telegraph personnel in accordance with and subject to the provisions of the applicable con- tracts between Telegraph and its collective bargaining units ") Under a separate contract (the May 1, 1971, gener- al service agreement), Western Union agreed to furnish TII with additional clerical and other personnel at Mahwah (G C Exh 21P shows that these were bargaining unit sec- retaries, shipping and supplies coordinators, telephone op- erators, couriers, office messengers, graphic reproduction clerks, and office machine operators) TII did not offer any of these (whom TII President Finney testified were 18 in number) employment either on May 1, 1971, or nearly 2 years later, when they and some of the other Western Union employees at Mahwah were moved (or offered transfers) to Western Union's new headquarters at Upper Saddle River Instead, TII began hiring nonunion replace- ments (in such classifications as switchboard operator, shipping-receiving clerk, mail clerk, reproduction operator, clerk-typist, and lower-level secretary-G C Exh 188) These nonunion replacements provided support work for TII itself, to the remaining Western Union personnel in Mahwah (including bargaining unit employees in the com- puter center there), and to employees of DSC and WUC, which had their headquarters also at Western Union's Mahwah technology center In addition, TII had been hir- ing other nonunion support personnel, including clerical and shop employees, to fill jobs comparable to Western Union's bargaining unit jobs However, as previously indi- cated, it did not replace the contracted-for bargaining unit computer operations personnel with nonunion employees Instead, after the Union sent its April 17, 1972, letter to Western Union (seeking information about the intercom- pany contracting, etc), the decision to have TII manage all of the computer facilities for Western Union was reversed A large part of TII's operations staff (including 23 manag- ers, 35 supervisors, 3 engineers, and 26 professionals) was returned to Western Union's payroll, and the bargaining unit support personnel continued to work for the same per- sons-but again under the name of Western Union When GA finally became operational in 1973, as the latest gift service utilizing Western Union's facilities, West- ern Union provided the R/T personnel at the Bridgeton CTB to receive customer orders, but GA hired a small number of nonunion personnel-instead of Western Union's union personnel-to staff the nearby GA service center and office Pursuant to the policy of keeping bar- gaining unit employees on Western Union's payroll, GA hired nonunion employees instead of hiring (or having transferred) Western Union bargaining unit computer con- sole controllers or systems operators to be GA computer operators, or bargaining unit monitors to be supervising operators, or Western Union clerks and operators to be GA's service operators, senior service operators, I/O oper- ator, accounts payable clerks, and payroll clerks (bargain- ing unit level employees) Thus, nonunion employees replaced the union employ- ees who had been performing in the past, and would be performing now, the bargaining unit support work con- nected with the functions transferred from Western Union to WUC and the four new subsidiaries 298 DECISIONS OF NATIONAL LABOR RELATIONS BOARD At the time of the May 22, 1973, bargaining request, and at the time of the hearing, the total number of Western Union bargaining unit employees replaced by nonunion employees remained relatively small-when compared to the approximately 10,000 or more employees now remain- ing in the bargaining unit In their brief, the Respondents estimate that there are "200 or 300 people" involved in this proceeding The Union estimates over 300, including the actual or so-called "confidential" employees The General Counsel has attached to his brief lists of job description comparisons, but does not give an estimate of the total number of nonunion bargaining unit level employees hired E Concealment of Nonunion Plans From Union The Respondents successfully concealed their intentions from the Union until after the 1971 negotiations (Western Union's 1968 contract with the Union expired on May 31, 1971 ) As one new corporation after another became operation- al, Western Union's bargaining unit (union) employees continued performing the bargaining unit work Before May 1, 1971, Western Union furnished this support work directly to WUC, WURC, and DSC through various ver- bal and written agreements On that date, as discussed above, the same Western Union employees were still per- forming the work, but Western Union contracted to supply these union employees to TII, which in turn began furnish- ing some of the services, even to Western Union itself Western Union was well aware of these maneuvers to provide bargaining unit work for each of the new compa- nies, while keeping the union employees on Western Union's payroll However, it did not reveal this informa- tion to the Union when the 1971 negotiations took place, nor reveal the plans for DSC and TII eventually to replace Western Union bargaining unit employees with their own nonunion employees During the 1971 negotiations, the Union proposed that the new companies be covered by the union contract, stat- ing that the Union considered them to be "nothing but a spin-off" from Western Union It is undisputed that the Western Union spokesman responded, in effect, "You are talking to the wrong man don't talk to me," and stated that the Union would have to talk with someone else As Union President Beckstead credibly testified, "they just didn't want to talk about it," and "gave us a vague outline of what was involved, but certainly nothing we could base anything on " Some questions were raised about DSC per- forming some work previously done by Western Union, but as Beckstead credibly testified, the union committee "knew very little about the subsidiary situation " There were other issues, such as the modernization program elim- inating bargaining unit work, which caused a strike (from June 1 to July 26, 1971), but the subsidiary question was not one of the strike issues (A new 2-year contract was signed, expiring on July 27, 1973 ) On April 17, 1972, as it appeared that some nonunion employees were being hired to perform previously bargain- ing unit work, the Union wrote letters to Western Union, WUC, WURC, DSC, and TII regarding the "corporate proliferation " The letters stated that to some extent, the new corporations "seem to or may be confining themselves to executive or policy functions and personnel," or not em- ploying bargaining unit employees performing work done under the union contract, "however, some or all of those corporations may very well be planning to exceed and even already be exceeding such confines," causing an impact on "the compensation, job security and other terms and con- ditions of employment" of Western Union's bargaining unit employees The Union requested certain information from Western Union, including intercompany contracting, and more detailed information from the other companies, to enable the Union "to assure the employees whom the Union should represent under the law and the Contract of all of the rights to which they are entitled " Western Union responded, supplying the Union with a considerable amount of information on July 19, 1972 (3 months later), and supplemented the information on January 4 and Feb- ruary 14, 1973 The other corporations resisted furnishing any information, and the Union filed a charge in an earlier proceeding (Western Union Corporation, Case 5-CA-5620) As that charge was being processed, Respondents WUC, WURC, DSC, and TII (represented then and-with GA-at the hearing by the same counsel) finally submitted requested information-between November 20, 1972, and January 12, 1973 Meanwhile, as the Union was attempting to obtain proof from the new corporations that they were a joint employer with Western Union, the Union began a defensive action, in response to efforts by CWA (which represents Western Union's New York Metropolitan Division) to organize em- ployees hired by the subsidiaries On July 19, 1972, the Union wrote employees of WURC, DSC, and TII that it was processing an NLRB charge, seeking information "to substantiate our claim" that the Union was their certified bargaining agent, and stating that although "we would have preferred securing recognition through due process of law, we are now confronted with intervention" by CWA, and "we now are put into the position of having to conduct a campaign asking for your support " The let- ters continued "Combine your strength with those 14,000 employees of the Telegraph Company nationwide and we can negotiate a single unit with ultimate bargaining power Moreover, since these subsidiaries were derived from [Western Union] Departments which were previously rep- resented by the [Union], we are familar with work content and the problems confronting you" (Emphasis supplied) WURC, DSC, and TII campaigned against union repre- sentation of their employees, as shown by the responding union campaign literature (introduced into evidence by the Respondents) As the campaign progressed, the Union promised employees of WURC, DSC, and TII that they could "obtain their own charter, elect their own officers, establish their own dues rate and establish their own se- mority area," as well as "negotiate their own contract which includes wages, benefits and working conditions " (In representing the nationwide Western Union bargaining unit, the Union is divided into separate locals, and has different rates and seniority areas ) On May 22, 1973, the Union wrote a joint letter to Western Union and each of the new companies (WUC, WURC, DSC, and TII), pointing out that a complaint and WESTERN UNION CORP notice of hearing, issued in the earlier case (5-CA-5620), had alleged that they were "a single integrated enterprise and/or a single employer " The letter requested recogni- tion, which was denied on June 5, 1973-by Western Union in one letter and by the other Respondents (through their counsel) in another letter-asserting that each of the new companies was "separate and distinct" from Western Union The refusal-to-bargain charge was filed herein on May 31, 1973, and amended on January 30, 1974, to in- clude GA which was added on January 23, 1974, to the Union's request for recognition Meanwhile, Western Union and the Union signed a 3-year agreement, expiring July 27, 1976 (On July 19, 1973, IBEW Local 3 filed a petition in Case 22-RC-5819, seeking to represent DSC's 35 Mahwah technicians, field technicians, shop specialists, specialists, and trainees, whom the Union claims are in- cluded in the Western Union bargaining unit That repre- sentation case is being held in abeyance, pending the dis- position of this proceeding) The Respondents contend (1) that the Union, having made and dropped its demand in the 1971 negotiations for recognition as to the subsidiaries, has " imphedly waived" the right to represent subsidiary employees through the ex- isting bargaining unit, and (2) that by engaging in the orga- nizing campaign, the Union "made apparent its under- standing" that the bargaining unit included only employees of Western Union I find it clear, however, that Western Union's concealment of the facts from the Union in 1971 precluded any such implied waiver, and that as quoted above, the Union specifically informed the subsidiaries' employees of its claim that the employees already were represented by the Union as their certified bargaining agent I note that in some of its campaign literature the Union was endeavoring to organize also the professional (nonbar- gaining unit) employees, whose numbers had increased during Western Union's modernization program while the number of bargaining unit employees was decreasing Many of the professional employees had been transferred to WUC and the new subsidiaries However, in view of their exclusion from the bargaining unit, their representa- tion is not involved in the proceeding F Future Fragmentation When the "corporate restructuring" began in 1969, Western Union issued its September 19, 1969, proxy state- ment, listing many of its non-FCC-regulated as well as its FCC-regulated services and systems It did not propose separating all the nonregulated services at once, but indi- cated that "if and when developments make it advisable, certain non-regulated services and activities" would be fur- nished by separate WUC subsidiaries One holding company and four new subsidiaries were incorporated by 1971 Since then, while this case and the earlier case (seeking information about the intercompany connections) have been in litigation, no additional subsid- iaries have been formed from the Western Union structure (However, there had been a continuing transfer of Western Union nonbargaining employees and management to the new companies, as already shown) 299 The Respondents did not reveal at the hearing which additional functions they may be planning to transfer from Western Union in the future, or whether Western Union or WUC is planning to permit DSC to take over part or all of Western Union's business of leasing TWX and Telex ter- minals G Contentions of the Parties The parties have filed extensive briefs, giving their ver- sions of the facts, and arguing the case from their views of what has happened Although citing many cases, the par- ties have not found any direct precedent for deciding this unique case The General Counsel, denying that this is an accretion or successorship situation, contends that the facts clearly indicate that the business operations of these new corpo- rate entities are nothing more than various segments of Western Union's pre-1969 business, that WUC took over Western Union's high level management operations, WURC its real estate operations, DSC its terminal installa- tion and maintenance, TII its planning and engineering operations, and GA its gift-by-wire operations, and that Western Union "either directly or through its former man- agement team as embodied in the parent corporation is involved in every conceivable manner in the operation of the new subsidiary corporations The only indepen- dence that these new corporation subsidiaries will ever en- joy is the freedom from a collective-bargaining obligation to their employees if Respondent succeeds in the instant case " The General Counsel contends that after the "cor- porate reorganization, we are left with nothing more than Western Union under a variety of corporate names," and "an integrated and interrelated enterprise" operating as a "single employer" He insists that all the elements of "common ownership, common management, actual control of the subsidiaries' operations by the parent company and centralized control over labor relations" are present here in "even greater degree" than in Royal Type- writer Company, a Division of Litton Business Systems, Inc, 209 NLRB 1006 (1974), in which the Board found a single employer in a conglomerate-type corporate arrangement The Union contends that it is of fundamental impor- tance in this case that none of the new companies came from outside the Western Union family "This is not a case of a holding company conglomerate acquiring new corpo- rations which had previously had independent existences To the contrary, from the start this was an integrated and unitary enterprise " The Union emphasizes that it "seeks no more than the restoration of what has been taken from it It seeks no accretions It is strictly on the defensive against Respondents' invasions which have resulted in the decretion of its unit " The Union contends that all the jobs employed by the new companies "reflect loss of jobs to the appropriate bargaining unit," which is virtually na- tionwide, consisting of over 560 job titles and descriptions, in a continually changing industry "All the work which is now being performed" by WUC and the four new subsid- iaries "was formerly performed" by Western Union The Respondents, on the other hand, contend that 300 DECISIONS OF NATIONAL LABOR RELATIONS BOARD "While it is true that each of these new enterprises has had some kind of nexus" with Western Union, the traditional bargaining unit has remained intact, "and no bargaining- unit employees has been deprived of Telegraph work or representation" by the Union "by virtue of corporate re- structuring Except in isolated instances, the production, maintenance, and clerical employees of the new companies have been `off the street' hues " Thus, the Respondents contend, the Union "is not in fact there seeking continuing representation rights respecting employees it has historical- ly represented, rather, it seeks by these proceedings to ex- pand its existing bargaining unit by adding 200 or 300 peo- ple whom it has never before represented-without affording them the opportunity for self-determination " The Respondents concede that this case "is factually dis- tinguishable from the typical case giving rise to an accre- tion," and states that the doctrine of successorship "would require radical transformation" to be applicable They con- tend that of the four key elements ("interrelation of opera- tions, centralized control of labor relations, common man- agement, and common ownership or financial control") for finding a "single integrated enterprise," only the element of common ownership is present in this case However they also argue that even if Western Union, WUC, and the four new subsidiaries do operate as a single integrated enter- prise, the newly hired outside employees should not be in- cluded in the Western Union bargaining unit, citing Frank N Smith Associates and Keuba Construction Corporation, 194 NLRB 212 (1971), Gerace Construction, Inc and Helger Construction Company, Inc, 193 NLRB 645 (1971), and Peter Kiewit Sons' Co and South Prairie Construction Co, 206 NLRB 562 (1973) The facts in those three cases (in each of which the Board found that separate union and nonunion companies in the construction industry were not a single employer) are clearly inapplicable The Respon- dents further contend that there would be difficulties in fitting the new companies' "specialized employee groups" into the overall Western Union collective-bargaining agreement (despite the fact that the same or similar jobs have long been included in the bargaining unit), and that the FCC requires separate operating personnel for an affili- ated data-processing entity (although none of the four new subsidiaries involved in this proceeding is such a separate data-processing entity) They contend that "The new sub- sidiary corporations are not merely devices for the doing of the same or similar activities under new names, rather, they are the only means by which new and different activi- ties can be undertaken " H Single Integrated Enterprise 1 In general The record, including the thousands of pages of exhibits, is replete with evidence that although Western Union de- cided in 1969 to transfer some of its nonregulated func- tions, from time to time, to newly incorporated nonunion companies, there was no intention to relinquish the central control over the entire business The long-term goal was to create a single integrated electronic data communications system, and to have "one nationwide system capable of accepting, handling, transmitting, processing and dissemi- nating messages and data," as already mentioned A part of the plan, as revealed by Western Union and WUC Board Chairman and President McFall in the WUC 1970 annual meeting report, was "to put terminals in place to serve the communications needs of our customers and then offer data processing or retrieval services as a valuable add-on " In 1970, three newly formed companies with "Western Union" in their titles, became operational The first was WUC (Western Union Corporation) which, as a holding company, became Western Union's alter ego for various corporate management and executive functions The em- ployees of the other two, WURC (Western Union Realty Corporation) and DSC (Western Union Data Services Company, Inc), remained on Western Union's own pay- roll for several months after they became operational WURC took over Western Union's realty department, and DSC took over part of Western Union's function of putting "terminals in place " As discussed below, their operations were under the tight control of Western Union and/or WUC, as were the operations of TII (which was first incor- porated under the name, Western Union Teleprocessing Company, Inc), to whom Western Union transferred a large portion of its engineering and professional staff the following year The remaining new subsidiary, GA, was formed to provide the latest of Western Union's instant- gift services (Outside firms, not involved in this proceed- ing, were acquired to provide data processing to the pub- lic-supplementing the data processing offered by Western Union in its hybrid-services Sicom and Info-Com ) 2 Common ownership and financial control WUC, found above to be Western Union's alter ego for certain corporate management and executive functions, was formed as a holding company with 100 percent of Western Union's common stock as its sole assets Western Union became its first subsidiary on January 30, 1970 WURC, DSC, TII, and GA were incorporated by WUC in 1970 and 1971, and are admittedly wholly owned subsid- iaries Thus technically, Western Union-the large communi- cations company with assets of over a billion dollars and annual revenues approaching a half billion dollars-is a subsidiary of the WUC holding company which, with its small corporate management and executive staff, owns all the stock of the four new companies (as well as interests in acquired firms which are not involved in this proceeding) As a matter of perspective, by the end of 1972 (about 6 months before the original charge was filed herein), the "subsidiary" Western Union still accounted for practically all (about 97 percent) of the consolidated revenues of the entire operation The WUC 1972 annual report mentioned "the formation of subsidiaries from [Western Union's] in- ternal resources" (referring to DSC's "data-terminal leas- ing," TII's "information system design and engineering," and WURC's "real estate") and "the acquisition of promis- ing companies " The report then stated that these nonregu- lated activities represented about 3 percent of "consolidat- ed revenues for 1972 " WESTERN UNION CORP In addition to this common ownership of Western Union, WUC, and the four new subsidiaries, the evidence shows a great degree of central control over finances As reported in the above-mentioned 1972 annual report, WUC has been able to complement Western Union's "ef- forts in attracting new flows of outside capital" which, over "the past several years has meant an average of $100 million a year " Through the sale of debentures and com- mon stock, WUC raised substantial amounts to assist Western Union in purchasing TWX, paying for the Westar domestic communications satellite system, and prepaying Western Union's bank loans By September 30, 1973, WUC had made capital contributions to Western Union in the total amount of $197,990,000, and had lent Western Union the outstanding amount of $46,490,000 on a short- term note (G C Exh 226 ) The control over the financing of the four new wholly owned subsidiaries was substantially as complete as it would have been if they were technically operating as de- partments or segments of Western Union Concerning WURC, the evidence shows that Western Union and WUC arranged, for example, that Western Union's undeveloped property for a headquarters at Upper Saddle River to be sold to WUC, which conveyed it to WURC Thereupon, WUC President McFall (who was also board chairman of both Western Union and WUC) negotiated in WUC's name, and delivered to WURC, con- struction agreements for "a building and improvements satisfactory" to WUC and Western Union Then, WURC obtained a construction loan and a 25-year $14 million mortgage loan, based on a long-term lease to WUC and a sublease to Western Union (G C Exh 36, 119-121) The financing of WURC's many other real estate transactions is arranged, guaranteed, or under the tight control of WUC and/or Western Union WUC provided for all the initial financing of the next three wholly owned subsidiaries, DSC, TII, and GA, through purchase of stock, direct or guaranteed loans, guaranty of obligations, or capital contributions At the time of the hearing, WUC was guaranteeing about 90 per- cent of all the obligations of the two larger subsidiaries, DSC and TII, and over 71 percent of the less successful GA 3 Common management Two top officials of WUC (Western Union's alter ego for certain corporate and executive functions) are the chief executive officers of the four new subsidiaries, WURC, DSC, TII, and GA They are Russell McFall (board chair- man and president of WUC, as well as board chairman of Western Union) and Charles Johnston (executive vice pres- ident of WUC and former vice president and comptroller of Western Union) McFall himself (who, as indicated in the Union's brief, "is plainly the dominant personality in the centralized con- trol" exercised over the entire operation) is board chairman of the two larger of the new subsidiaries, DSC and TII, and also a director of WURC and GA Johnston is board chair- man of WURC and GA 301 Inasmuch as the four new subsidiaries are wholly owned by WUC, their respective boards of directors are elected by the WUC directors-6 (out of 10) of whom (including Mc- Fall), along with Johnston, WUC Vice President/Secre- tary-General Counsel John Evans, and Western Union President Earl Hilburn, constitute Western Union's entire board of directors Thus, officers and directors of Western Union and WUC elected the WURC, DSC, TII, and GA directors, virtually all of whom have been officers and/or directors of Western Union and/or WUC These directors of the subsidiaries have in turn appointed the new subsid- iaries' officers, most of whom are former Western Union and/or WUC personnel The tight control which Western Union and/or WUC exercises over these subsidiaries is shown by a WUC docu- ment (G C Exh 189), issued over the signature of WUC Executive Vice President Gerald Hoyt on May 1, 1971 (the day TII became operational, and when 476 persons were transferred en masse to TII from Western Union) The document states that the TII president (Robert Finney) "is the principal representative of the shareowner," WUC, "in the management of the business," but lists "reservations and directions " These include (a) that TII has a "previous- ly approved business plan, and previously approved annual capital, expense and income budgets", (b) that the ap- pointment and compensation of TII officers "must have prior approval of the Executive Vice President of WUC", (c) that the "Hiring and compensation of all other employees [emphasis supplied] is to be in accordance with a plan which is one part of the previously approved business plan", (d) that "All financing, borrowing or investments" and the "purchase or sale of real property or equipment not specifically approved in the annual budget" shall re- quire the "prior approval of the Executive Vice President of WUC and the Vice President of Finance of WUC [then Charles Johnston]", and that the TII president "will in- form the appropriate officers" of WUC "on all matters in addition to the above which in his opinion are of sufficient importance to warrant their attention " A similarly tight control over the operations of DSC was documented in a somewhat different form about 6 months earlier On November 11, 1970 (about 5 months after DSC became "operational"), at a DSC board of directors meet- ing-which was chaired by DSC Board Chairman McFall (also board chairman of Western Union and WUC)-DSC President Zakarian reviewed the plans for the "transfer" of the DSC employees "from the payroll" of Western Union to DSC on January 1, 1971, and then proposed a similar version of the WUC "restrictions" in the form of a resolu- tion The restrictions required the DSC president to have the approval of an operating budget by the DSC board (composed entirely of Western Union and WUC officers and directors), and prior board approval of a list of items These included the "appointment and compensation of all corporate officers," and the "Compensation of all other employees" substantially (as budgeted) The listed items also required "Prior review and approval by WUC Finance Department and WUC General Counsel" of financing plans involving the issuance of corporate securities, "Prior concurrence of WUC Finance Department and WUC General Counsel" for the lease of real property with annual 302 DECISIONS OF NATIONAL LABOR RELATIONS BOARD rental exceeding $25,000, and "Concurrence of WUC Treasurer" for certain investment of funds WUC's direct control over the budgets of the subsid- iaries is shown by the document entitled "Policy," issued by Western Union and WUC Board Chairman McFall on April 27, 1972 (G C Exh 21A) The document refers to the required approval of the WURC budget "by the Board of Directors of WUC at their annual budget review meeting" (Emphasis supplied) The document sets forth real estate policy for WUC and its subsidiaries, lists various WURC services which are "to be used by each subsidiary" in all real estate matters, and then demonstrates WUC's control over the subsidiaries' budgets by providing "WUC will provide these services for all of its subsidiaries and no charge will be made to the subsidiaries' operating budgets for this service " (Emphasis supplied) Other documents in evidence also show the central con- trol exercised by Western Union and/or WUC over the four new subsidiaries' operations-in addition to the cen- tralized control over labor relations, discussed later The minutes of WUC's August 25, 1970, board meeting report that WUC President McFall had a general discussion of WUC's "business plan for the rearrangement of its opera- tions among existing subsidiaries and those under consid- eration and study" Later, as previously indicated, DSC President Zakarian repeatedly complained that DSC's ter- minal-leasing business was adversely affected by competi- tion from Western Union However, the decision was made (apparently by Western Union and/or WUC) that Western Union itself would continue leasing the "alternate DAA/TWX terminals " In 1972, shortly after the Union questioned the relationship and intercompany contracting among the various WUC corporations, the boards of both Western Union and WUC decided to transfer TII Opera- tions Division General Manager Charles Scott back to Western Union (making him a Western Union vice presi- dent), and, as previously indicated, Scott was thereafter followed by his entire 93-person former TII staff, who were likewise transferred to Western Union-apparently upon the decision of Western Union and/or WUC Similar con- trol over the activities of the subsidiaries is shown by WUC President McFall's statement, in the January 8, 1974, WUC board minutes, "that from time to time employees of the Corporation [WUC] have been and will be transferred to various subsidiaries of the Corporation in order to satis- fy special requirements of other subsidiaries and utilize to the maximum the talents and abilities of the Corporation's employees " (Extensive transfers among the companies are discussed later ) At one point in his testimony, TII President Finney con- ceded that WUC has "management control" over TII and the other wholly owned subsidiaries He testified that this was the same control which TII in turn exercised over two of WUC's acquired companies The way this control is exercised, in each case I am chairman of the board of the acquired companies And members of my staff are board members of the acquired companies And we have planning, integra- tion and technical review type functions within the TII as part of exercising this management control All the financial reporting of [the acquired company] to its owner, Western Union Corporation, is done through my controller [If it] desires to develop a new system or put in a new site, this requires a techni- cal approval within TII The board of directors of these corporations are elected of course by the stockholders, the sole stockholder being the Western Union Corporation The board of directors elect- ed the chairman and the officers and establish the delegation of authority involved to the officers It was "in that sense" that he conceded that WUC exer- cised management control over TII and the other subsid- iaries However, as shown, the control of Western Union and/or WUC over the four new subsidiaries is more perva- sive 4 Central control of labor relations policies The evidence shows that directors and officials of West- ern Union and WUC do not simply have potential control over the labor relations and personnel policies of WURC, DSC, TII, and GA-through the selection of the directors and officers of each of those new subsidiaries The evi- dence shows that they take an active part in the formula- tion of those policies, through active participation in board meetings and otherwise One of the mechanics for the exercise of this common control over labor relations policies is the above-mentioned control by WUC over the budgets of the four subsidiaries As specifically stated in the May 1, 1971, document issued by WUC when TII became operational, the hiring and compensation of all employees, other than officers, must be in accordance with a previously approved business plan, which is required along with previously approved annual capital, expense, and income budgets Western Union and WUC Board Chairman McFall's own April 27, 1972, "Pol- icy" statement refers to WUC's "annual budget review meeting " Western Union and WUC made the common decision that when each of the new subsidiaries was formed-by transferring Western Union personnel and functions to it-only nonbargaimng unit personnel (managers, profes- sionals, and "confidential" employees) would be offered transfers Western Union's bargaining unit employees (rep- resented by the Union) would-at least initially-perform the accompanying support work, but only through contrac- tual arrangements The new subsidiaries were not permitted to decide upon such matters as fringe benefits for the transferred employ- ees, or to administer the plans themselves The transferred employees were included in the benefit plans of Western Union which, in January 1971, caused WUC to be substi- tuted for Western Union as the named insurer by the insur- ance companies WUC adopted a separate pension plan for itself and the new subsidiaries, providing similar bene- fits and giving credit for Western Union service In the absence of collective bargaining, WUC sought outside ad- vice on future fringe benefits for itself and the new subsid- iaries, and decided upon coverage quite similar to Western WESTERN UNION CORP 303 Union's, and which included the pooling of experience with Western Union The subsidiaries adopted the recom- mended plans, with certain changes However, as disclosed by the minutes of the March 2, 1972, DSC directors' meet- ing, the plan adopted by DSC "had been reviewed with the Employees Benefits Committee of Western Union Corpo- ration and while not exactly the same as the plan of the parent, it is substantially similar thereto and the vari- ations had been approved by the [WUC] Benefits Plan Com- mittee " (Emphasis supplied) Not only does WUC "recommend" fringe benefit plans for the four new subsidiaries and approve variations, but Western Union plays a significant part in controlling this part of the labor relations policies Western Union pro- vides a centralized claims administration for "WUC and subsidiary companies" for life, hospital-medical-surgical benefits, major medical expenses, long-term disability, travel accident, insured and self-insured workmen's com- pensation, and statutory nonoccupational disability bene- fits It processes all the claims, for which it charges the respective companies (G C Exh 24 ) Under this close control by Western Union and/or WUC over the labor relations and personnel policies, WURC, DSC, TII, and GA-in the absence of collective bargaining with the Union-have established some new job titles for the bargaining unit level jobs Pointing out that TII's job classifications (in G C Exh 11) bear the date of September 1972 (a date after the charge was filed in the earlier case but before WUC and the new subsidiaries sub- mitted requested information), the Union states in its brief that the job classifications "were apparently created for the purpose of providing information in the previous Board case " I need not decide whether the different titles were deliberately adopted to give the impression that the jobs are different from Western Union bargaining unit jobs, be- cause I find that the bargaining unit level work being per- formed by employees of the new companies is virtually the same as Western Union's bargaining unit work 5 Interrelation of operations The operations of Western Union and the five other Re- spondents are interrelated to a marked degree They have interchanged goods and services in amounts totaling many millions of dollars, they have interchanged personnel by the hundreds, they have shared headquarters and used common facilities, they have performed related work and have dealt with the public as segments of a unified busi- ness, and, apart from the mass of intercompany contract- ing, they have operated much like separate departments rather than independent businesses As previously discussed, there were large scale transfers of functions and non bargaining unit personnel from West- ern Union to the new companies, which had neither the facilities and "capabilities," nor (because of the nonunion transfer policy) the union support personnel, to perform the functions Through a variety of oral and written ar- rangements, Western Union provided the facilities, serv- ices, and support personnel In payment therefore, Western Union charged the other Respondents the following amounts between 1970 and 1973 (G C Exh 203) $6,959,709 to WUC, $1,096,730 to WURC, $8,239,533 to DSC, $9,886,728 to TII, and $1,126, 542 to GA Thus, Western Union's total charges to the new companies dur- ing that period were $27,309,242 These charges continue to be extensive, totaling $3,069,119 to the five companies in 1973 (Cf G C Exh 24) Meanwhile, WUC was making charges to Western Union and the other subsidiaries in amounts totaling also in the millions of dollars, there have been large intercompany charges among the new subsid- iaries themselves, and TII's charges to Western Union for the transferred P&EO work (particularly the TII work on the Middletown and Bridgeton computer centers) have amounted to even larger sums-including an estimated $22 million in 1974 There has been much interchange of personnel among the six Respondents Between 1971 and 1973, there were 44 transfers of Western Union personnel to TII (in addition to the 476 transferred to TII on May 1, 1971, when TII be- came operational), 53 from TII to Western Union (in addi- tion to the 93 transferred to Western Union following the transfer back of the TII official, Charles Scott), 3 from TII to DSC, and 5 from TII to WUC (G C Exhs 186-187) Other intercompany transfers have been 83 from Western Union to DSC, 2 from Western Union to TII to DSC, 21 from DSC to Western Union, and 3 from DSC to TII (G C Exh 165), 27 transfers from Western Union to GA, 4 from WUC to GA, I from Til to GA, 5 from GA to Western Union, I from GA to WUC, and 1 from GA to TII (G C Exhs 197-199), and 24 transfers from Western Union to WURC, and 2 transfers back (G C Exh 152) With few exceptions, these transfers involved managers, professionals, and actual or so-called "confidential" em- ployees Because of the nonunion transfer policy, the inter- change of bargaining unit level employees was primarily limited to special contractual arrangements, as when West- ern Union contracted to provide TII with the services of hundreds of union employees (As previously mentioned, TII agreed under one intercompany contract with Western Union to direct and manage the union employees under the union agreement, and, under another arrangement, agreed to process first-step grievances of Western Union employees at Mahwah) WURC shared Western Union's headquarters in New York until Western Union moved its headquarters to Up- per Saddle River in 1973 WUC (after it moved its head- quarters from New York) has had its headquarters at the Western Union technology center in Mahwah, where DSC and TII have their headquarters GA's headquarters has been moved from Mahwah to Western Union's headquar- ters in Upper Saddle River At Mahwah, where employees of Western Union, WUC, DSC, and TII eat in the same cafeteria, there has been common use of some supplies and facilities An example is the computer center in building I Western Union has two computer rooms there, on either side of a communication room Western Union operates its Sicom and IISS systems from one of the rooms (the communication room providing the connections with the outside) TII manages the other computer room as a developing laboratory, under contract with Western Union, and TII has a keypunch and library facilities which, in turn, Western Union also uses under 304 DECISIONS OF NATIONAL LABOR RELATIONS BOARD contract with TII As credibly testified by Charles Magee, a Western Union (bargaining unit) chief computer techni- cian, Western Union personnel usually work on the "West- ern Union side" and TII personnel on the "TII side," but they interchange from time to time, and the person called in on Saturday may work on both sides (However, when the Western Union personnel do maintenance work on the "TII side," the development lab, they are technically main- taining Western Union equipment, as testified by TII Pres- ident Finney) I note that Magee was one of those who was on Western Union's payroll and doing Western Union computer operations work, but supervised by TII, during the period of over a year when the management of the computer operations work was performed by TII The interrelations of operations at Mahwah in 1971 and 1972 is illustrated by the testimony of Jacqueline Aurian- sen, who began working there in late 1971 for DSC as an employment agency temporary employee At that time, there was a larger staff of Western Union employees at Mahwah, but the supervisors had been transferred to TII In early 1972, TII Supervisor John Knight offered Aunan- sen a Western Union bargaining unit job, and gave her an application After she was hired by Western Union, she was supervised by TII Supervisor Knight and assigned at different times to work in each of the four buildings at the Mahwah center performing mail services for Western Union, WUC, DSC, TII, and GA Meanwhile, the five new companies have been perform- ing integral parts of Western Union's business WUC is performing much of Western Union's corporate manage- ment and executive functions It prepares the elaborate consolidated annual reports (containing consolidated fi- nancial reports, eliminating the intercompany trans- actions), which are furnished to stockholders to supple- ment Western Union's remaining skeletal reports of its separate activities It plays a significant role in raising funds for Western Union WURC, also operating with "Western Union" in its title, likewise constitutes an integral part of Western Union It handles the real estate transactions necessary for Western Union and the new companies fragmented from it, to have offices, operating centers, warehouse, etc in which to do business DSC-which prominently displays Western Union's well-known "WU" logo with the "Western Union" part of its name (Western Union Data Services Company, Inc) in its advertisements (R W Exh 39)-is providing an essen- tial part of Western Union's plan of putting terminals in place and then offering data processing It not only is ex- panding Western Union's telephone-circuit terminal-leas- ing business, but it has taken over parts of Western Union's telegraph-circuit business As demonstrated in the April 10, 1972, issue of the Western Union Telegraph Com- pany News (G C 26-A), DSC and Western Union empha- sized their unified operation in selling the new Datacom telegraph-circuit network to Crown Zellerbach Where Western Union provided the transmission service and DSC (instead of Western Union) provided the 120 terminals (to be maintained by Western Union under contract with DSC), this was reported as "a testimonial to the Single Vendor concept of sales and services " TII, from whose name the words "Western Union" were removed before it was activated, advertises as a subsidiary of "Western Union Corp," or as "Western Union's Tele- processing Industries, Inc," a "Western Union subsid- iary " (R W 36) Since it became operational on May 1, 1971, most of its activities have been continuing the former role of Western Union's P&EO department, designing and engineering Western Union's modernization program But even its long-term goal of providing such services to the public is an integral part of Western Union's plans for creating a single integrated EDC system Finally GA, whether or not it proves viable, is the latest of many instant-gift services, using Western Union facili- ties (the central telephone bureau in Bridgeton), and utiliz- ing the services of Western Union R/T personnel, who are instructed to explain, if asked, that GA "is a subsidiary of Western Union which has been in the gift business for many years " Yet, despite the foregoing evidence of interrelation of operations, and additional evidence detailed in the prior discussion of the fragmentation of Western Union, the Re- spondents contend in their brief that "Respondent Compa- nies' Operations Are Not Interrelated", that "While mutu- ally convenient and beneficial relationships do exist among the companies, the performance of services is always compensated in accordance with the formaihty of written agreements", that there has been shown no substantial or significant interchangeability among the employees, just temporary service by employees remaining on Telegraph's payroll, that the "various occurrences which might superficially resemble inter-corporation transfers are fully explained", and that there is "no basis whatsoever for holding that all or any number" of the "other Western Union companies" constitute "with Telegraph a single em- ployer " To the contrary, I find that the record is replete with evidence of such interrelation of operations Having found that the General Counsel has fully estab- lished an interrelation of operations, centralized control of labor relations, common management, and common own- ership and financial control, I find that Western Union, WUC, WURC, DSC, TII, and GA are a single integrated enterprise, and that despite the fragmentation of Western Union, it and the five new companies constitute a single employer for purposes of collective bargaining Concluding Findings As Western Union's modernization and computerization program progressed, resulting in a decline in the number of employees in the virtually nationwide certified bargaining unit, Western Union began in 1970 transferring some of its non-FCC-regulated functions to newly incorporated non- union companies, while continuing to operate the business as a single integrated enterprise It not only failed to give prior notice to the Union, but it concealed from the Union the plans to operate the new companies on a nonunion basis until after the 1971 collective-bargaining negotia- tions WESTERN UNION CORP The fragmentation of Western Union, called "corporate restructuring," began with the incorporation of four new Delaware corporations, each including "Western Union" in its name They were the holding company, WUC (West- ern Union Corporation), WURC (Western Union Realty Corporation), DSC (Western Union Data Services Compa- ny, Inc), and a fourth company, first named Western Union Teleprocessing Company, Inc On January 30, 1970, Western Union itself became a subsidiary of the holding Company, WUC, which had the same 13 directors as West- ern Union, dual officers, and assets consisting solely of Western Union's stock Thereafter, the three other Dela- ware corporations were incorporated by WUC, and be- came its wholly owned subsidiaries WURC and DSC be- came operational in May and July 1970, before efforts were made to give an appearance of separation However in 1971, before the mass transfer of Western Union's P&EO (planning and engineering operation) functions and personnel to the fourth new corporation, and before the union contract negotiations began, some steps were taken "to separate the operations " Some dual offices were elimi- nated in February 1971 (when several WUC and DSC offi- cials resigned their Western Union positions, and the West- ern Union president resigned his WUC position), and the words "Western Union" were thereafter dropped from the name of the fourth new corporation before it was activated on May I (It was renamed Teleprocessing Industries, Inc, or TII) Nevertheless, as previously found, Western Union, WUC, the first three new subsidiaries, and another wholly owned subsidiary, GA (GiftAmerica, Inc, which WUC in- corporated in 1971 and which became operational on Sep- tember 1, 1973) continued to be operated as a single inte- grated enterprise The method used to enable the first four new corpora- tions to operate on a nonunion basis, without alerting the Union before the 1971 negotiations, was for the Western Union nonbargaining unit personnel to be transferred to each of the new corporations as "a technical resource," while Western Union provided the necessary facilities, services, and bargaining unit (union) support personnel to carry on the operations Many of the intercompany con- tractual arrangements were on a verbal basis Western Union did not sign any of the written arrangements until after the February 1971 "separation" of the operations Several of the intercompany agreements were dated back from about 9 months to over a year, and one (the Western Union-DSC January 1971 FAS agreement) provided that most of its provisions would terminate nearly 3 months before it was signed Task orders for Western Union to provide various services were sometime submitted months after the work was begun The informality of the intercom- pany arrangements is also shown by the fact that "transfer- red" nonbargaining unit personnel remained on Western Union's payroll for months after WURC and DSC became operational (At the time of the 1973 collective-bargaining negotiations, after the Union became aware of some of these intercompany arrangements and as its members were being replaced by nonunion bargaining unit level employ- ees working for the new companies, the Union sought to bargain for the certified, overall unit Western Union and 305 the new companies refused, asserting that they were "sepa- rate and distinct" companies ) Western Union gave various reasons for the "corporate restructuring " These stated reasons included the limited scope of Western Union's New York corporate charter, FCC regulations and restrictions, competitive advantage, and financing flexibility And at the hearing, a further rea- son was given by the TII president, who revealed the desire for TII-by taking over the Western Union P&EO department's work of completing Western Union's huge computer centers at Middletown and Bridgeton-to earn sufficient profits on the fees it charged Western Union to give TII the "financial base" for seeking new outside busi- ness Apart from the last reason, as previously discussed, the evidence suggests considerable doubt about whether there was any necessity for the first four subsidiaries (WURC, DSC, TII, and GA) being established as separate corporate entities (WURC still acts primarily as Western Union's real estate department DSC, with its 14,000 leased terminals, is partly in competition with Western Union, which is leasing about 115,000 terminals TII is performing activities which Western Union otherwise would be pursu- ing And GA has been offering the latest of Western Union's instant-gift services) However, the issue is not whether the fragmentation of Western Union was neces- sary, or a good business practice The issue is whether the overall certified bargaining unit has remained intact Having found from all the evidence that Western Union and the five new companies are a single integrated enter- prise despite the fragmentation of Western Union, and that they constitute a single employer for purposes of collective bargaining, I find that the certified bargaining unit remains intact, including employees on the payrolls of Western Union, WUC, WURC, DSC, TII, and GA In making this finding, I have duly considered the Re- spondents' contention that if the "single integrated enter- prise" doctrine is applied herein, "the 200 or 300 employ- ees," who are "off the street" new hires of their respective employers, "will never be able to make their own choice of bargaining representative " Of course, the free choice of employees for or against union representation is of impor- tance However, in this unique case-not involving either an accretion or a successorship situation, but instead in- volving a fragmentation of a certified bargaining unit-I find that the preservation of the bargaining unit, and the rights of the bargaining unit employees whose employment rights are placed in jeopardy by the unit fragmentation are, in balance, of greater importance Accordingly I find that Western Union, WUC, WURC, DSC, and TII since June 5, 1973, and also GA since Janu- ary 30, 1974, unlawfully refused to acknowledge and recog- nize the Union as the collective-bargaining representative of their employees in the certified bargaining unit, in viola- tion of Section 8(a)(5) and (1) of the Act CONCLUSIONS OF LAW 1 By refusing on and after June 5, 1973, to recognize and bargain with the Union as the exclusive collective-bar- gaining representative of the employees in the certified bar- 306 DECISIONS OF NATIONAL LABOR RELATIONS BOARD gaining unit, Western Union, WUC, WURC, DSC, TII, and GA engaged in unfair labor practices affecting com- merce within the meaning of Section 8(a)(5) and (1) and Section 2(6) and (7) of the Act 2 The certified bargaining unit consists of all produc- tion, operations, maintenance, technical, and clerical em- ployees of The Western Union Telegraph Company in the continental United States, but excluding all employees in the New York Metropolitan Division, guards, and profes- sional, managerial, and confidential employees within the meaning of the Act 3 Western Union, WUC, WURC, DSC, TII, and GA constitute a single employer for purposes of collective bar- gaining, and their employees are included in the certified bargaining unit REMEDY Having found that the Respondents have engaged in cer- tain unfair labor practices, I find it necessary to order the Respondents to cease and desist therefrom and to take cer- tain affirmative action designed to effectuate the policies of the Act The Union contends that the bargaining order should cover not only the new subsidiaries, WURC, DSC, TII and GA, but any such other subsidiary corporations which Western Union and WUC may create in the future from a department or segment of Western Union However, I find it unnecessary at this time to anticipate a further unlawful refusal to bargain [Recommended Order onutted from publication