D.M.S Electrical Control

372 314 NLRB No. 64 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD 1 This Respondent has requested oral argument. The request is de- nied as the record, exceptions, and briefs adequately present the issues and the positions of the parties. D.M.S. Electrical Control, Inc. and its alter ego and/or successor Century Electric Contractors, Inc. and International Brotherhood of Elec- trical Workers, Local Union No. 26, AFL–CIO. Case 5–CA–21280 July 14, 1994 DECISION AND ORDER BY CHAIRMAN GOULD AND MEMBERS STEPHENS AND BROWNING On March 4, 1994, Administrative Law Judge Har- old Bernard Jr. issued the attached decision. Respond- ent Century Electric Contractors, Inc. filed exceptions and a supporting brief,1 and the General Counsel filed an answering brief. The National Labor Relations Board has delegated its authority in this proceeding to a three-member panel. The Board has considered the decision and the record in light of the exceptions and briefs and has de- cided to affirm the judge’s rulings, findings, and con- clusions and to adopt the recommended Order. ORDER The National Labor Relations Board adopts the rec- ommended Order of the administrative law judge and orders that the Respondents, D.M.S. Electrical Control, Inc. and its alter ego and/or successor Century Electric Contractors, Inc., West River, Maryland, their officers, agents, successors, and assigns, shall take the action set forth in the Order. James P. Lewis, Esq., for the General Counsel. Randall E. Goff, Esq., of Arnold, Maryland, for the Respond- ent. Charles Graham, of Washington, D.C., for the Charging Party. SUPPLEMENTAL DECISION HAROLD BERNARD JR., Administrative Law Judge. I heard this backpay case in Baltimore, Maryland, on May 4 and 5, 1993, pursuant to compliance specification (specification) issued December 31, 1992. The proceeding before me arose from a decision by Administrative Law Judge David S. Da- vidson on May 17, 1991, finding that the then solely charged Respondent, D.M.S. Electrical Control, Inc., violated Section 8(a)(5) and (1) of the Act by failing and refusing to abide by the terms and conditions of collective-bargaining agree- ments and ordering Respondent to remedy the violations by making employees whole for loss of wages and benefits caused by its unlawful conduct, including unpaid required contributions to benefits funds. Following Respondent’s fail- ure to file an answer, Judge Davidson had granted General Counsel’s Motion for Summary Judgment and the Board, by unpublished Order, adopted his findings, conclusions, and proposed Order on June 25, 1991. The United States Court of Appeals for the Fourth Circuit mandated enforcement of the Board’s Order on June 2, 1992. (G.C. Exh. 1a,b,c.) Following the above developments, a controversy arose between the parties over whether Respondent D.M.S. Elec- trical Control, Inc. (DMS) is solely responsible to comply with the Board’s Order or whether Century Electric Contrac- tors, Inc. (Century) is jointly liable for compliance with the Order’s remedial terms as either an alter ego or successor to DMS with prior notice of its potential liability for such com- pliance, and over the amounts of backpay and benefit con- tributions owing. During the hearing before me pursuant to the specification and notice of hearing naming both DMS and Century as Respondent, the parties stipulated the correct- ness of backpay and unpaid other benefits calculated in the specification as amended but left as a central issue the ques- tion whether Century and DMS are jointly liable to make such payments. A. Background DMS engages in an electrical contracting business under articles of incorporation filed in 1986, and at all relevant pe- riods of time since February 3, 1986, the Union has been the designated exclusive bargaining representative of its employ- ees, DMS having signed a letter of assent agreeing to be bound by terms and conditions of collective-bargaining agreements negotiated by the Union and the National Elec- trical Contractors Association on that date. (G.C. Exh. 7.) One of the three incorporators and corporation’s directors designated by the articles of incorporation is Michael T. Fones (Fones). (G.C. Exh. 5.) Fones testified he served as the sole director for DMS and the parties stipulate that by July 18, 1988, Fones became its sole stockholder and re- mained its president. Witness Leonard Lehner, an electrician employee for DMS in 1989 or 1990, testified that his super- visor was Gary Snodgrass, that Fones was above Snodgrass, and that there was no other supervision or management per- son other than Fones. Lehner also named Virginia Conti as a secretary at DMS and the parties agreed further that DMS also employed Joseph Penley as an electrician. Lehner’s ac- count is uncontradicted. Showing further Fones’ command status in DMS, he wrote the Union on December 15, 1989, discontinuing DMS as a member in the Union for the alleged reason his company could no longer afford monthly contributions to union trust funds, effective January 1, 1990. (G.C. Exh. 8.) DMS there- after failed and refused to abide by the terms and conditions of the agreement with the Union. (G.C. Exh. 1–A, ALJD p. 2.) The principal office for DMS designated in its articles of incorporation appears to be the same address as the residence of Fones, who also acted as the corporation’s resident agent under Maryland law. (G.C. Exh. 5 pp. 1, 4.) DMS assets in- cluded several vehicles, vans, and trucks and assorted elec- tricians’ tools. Employees kept the company vehicles at home after work; tools were stored in self-storage rental company premises; there was no company shop. During the last quarter in 1991, Fones testified DMS did business out of his home, then in West River, Maryland, where only one 373 D.M.S. ELECTRICAL CONTROL company van was parked, while a Karen Randall did most of the office operations out of her home. The number and identity of DMS employees during its op- erations changed with the ebb and flow in operations from as few as 8 to as many as 18, Fones testifying he employed about 10 employees in the last part of DMS operations, but Respondent admitting in its answer only that some 20 named individuals may have been employed during some portion of the backpay period. (G.C. Exh. 1-I.) Clearly, the size and composition in the DMS work force was a relatively fluid amorphous operational characteristic by its very nature rather than stable or unchanging. DMS had about 25 to 30 cus- tomers and did business in the Washington, D.C. and subur- ban Maryland area. B. Century The very day Fones made effective for jettisoning his firm’s contract with the Union, January 30, 1990, is the date articles of incorporation were filed creating Century and naming as its resident agent Fones’ attorney in the earlier DMS litigation described above. (G.C. Exh. 6.) Century is described therein as being designed to operate an electrical contracting business for commercial and residential cus- tomers, the same business purpose as DMS, and the record shows it has done so with about the same number of cus- tomers in about the same geographical area since inception. Century is at first described by Fones’ testimony as having as its president and only director Carol Kearney, and Vir- ginia Conti the DMS secretary noted above as a nominated officer for Century. Responding to my question seeking to learn Carol Kearney’s identity, Fones then identified Kearney as his sister. He then admitted that Kearney and he discussed how a corporation could be formed so as to enable Fones to continue to earn an income in the electrical contracting busi- ness and that he would attend to Century getting contracts and do whatever was necessary to keep her going. Fones was the principal advisor to Kearney during this planning and afterward because Kearney had no electrical business experi- ence whatsoever. Fones had told Kearney that DMS could not afford to go on further. Fones nonetheless testified that he did not know when Kearney had formed Century during his further examination, which struck me as an effort to dis- tance himself from the process in which he obviously had played a central role. He also offered the implausible asser- tion that Kearney, out of sisterly concern, created Century only to afford Fones an adequate income. Fones testified that DMS had ‘‘folded’’ at some point in his testimony con- cerning how it had fallen on hard times, yet in the very next breathe admitted he had continued operations by paying cash for supplies. By contrast with Fones’ inherent contradictions, and unforthcoming manner on the stand, employee Leonard Lehner credibly testified that he recalled that there was no break between the last time he got paid by DMS and then got paid by Century, that Virginia Conti brought the checks to employees in the field. He testified that it was Fones who came to him and told him that there was another company starting up, Century Electric, and if he wanted a job, he was more than welcome to have one, advising Lehner to see Kearney and that she would employ him. Lehner further tes- tified that Virginia Conti told him he was hired and asked him how much he was making so she would know how much to pay him. As corporate secretary for Century, Conti wrote a letter to the Montgomery County code enforcement office, electrical division on April 10, 1992, stating as fol- lows: I am writing this letter to inform you that DMS Elec- trical Control, Inc. is no longer in business. DMS has changed its name to Century Electrical Contractors, Inc. The new address is as follows: Century Electric Contractors, Inc. 5149 Cedarlea Drive West River, MD 20778 Also enclosed please find a certificate of insurance, a copy of our statewide license, and a copy of DMS Electrical Control’s Electrical Contractor’s business li- cense, and the Master Electrician’s (Bruce Pickett) li- cense number. [G.C. Exh. 11.] The address given for Century is Fones’ home address. The master electrician for Century, Bruce Pickett, also served in such position for DMS. I admitted the letter over Respondent counsel’s hearsay and lack of foundation objections after first inquiring in open court with all parties present into its ori- gins and being fully satisfied that it bears the earmarks of reliability. Though accorded the opportunity to do so, Re- spondent did not call Conti to the stand to inquire into the letter’s genuineness nor explain its failure to do so, nor did Respondent’s counsel contest its authenticity with any degree of specificity whatsoever. Fones, when examined on the point merely testified he had not authorized it and unpersuasively denied knowledge. Significantly, Fones did not disaffirm the letter’s contents or deny its validity even then. The reliable exhibit stands as an uncontested and ad- mitted representation binding on Respondent through cor- porate officer Conti that DMS merely changed its name to Century. I do not credit Fones’ testimony that he took no part in operations or management at Century until June 1992 be- cause he testified earlier to committing himself to getting Century contracts, the Company’s life blood, and to doing anything to keep Century going from its inception in January 1990. He was empowered by his special status as Kearney’s brother and advisor to help conduct operations and he helped secure contracts. He was privy to information from corporate secretary Conti regarding available electrical contracts and assigned himself work as he saw fit on a salary basis far above other employees pay. He, in yet another effort to dis- tance himself from Century’s inner managerial sanctum unforthcomingly describe how ‘‘they,’’ meaning Century management, had a place of business in West River at 5149 Cedarlea—which turns out to be his home where Century records are also kept. Moreover, Fones hired employee David Belcher as an electrician for Century in March 1992 telling Belcher ‘‘Yes I can hire you’’ and ‘‘I will start you out at $16.00 an hour and if you work out, I will give you raises as you work out.’’ Fones does not deny Belcher’s credible testimony. While allegedly not an officer de jure or officially titled a manager in Century, I find Fones to have been its driving force and de facto head of operations at all relevant times since its creation in January 1990 and its start in actual oper- ations under the parties’ stipulation in the third quarter of 374 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD 1991. In addition, it is clear that Fones becomes legal half- owner of Century in June 1992 with his sister and an Edward Shultz as the other shareholders, and Fones serving as presi- dent and treasurer. Fones and Shultz later acquire full owner- ship from Kearney for $50 cash and by assuming tax liabil- ity; while Fones later buys out Shultz’ 50 shares for $20,000, becoming full owner by April 1, 1993. The Kearney-Fones- Shultz transactions manifest a lack of arm’s-length dealing between brother and sister consistent with a disguised con- tinuance scenario. Fugazy Continental Corp., 265 NLRB 1301 (1983). When Century began so-called active operations—under the parties’ stipulation in the third quarter of operations in 1991, a period when DMS was in a low profile or inactive status—Century employed six electricians, including Fones in his special salaried status: Bruce Pickett, Leonard Lehner, Gary Snodgrass, Joseph Penley, and Steve Elliott—the latter a casual hire appearing only quite briefly on Century’s pay- roll. All but Elliott worked for DMS just prior to the start in Century’s operations, as did Virginia Conti. The employ- ees Fones kept on the DMS payroll before deactivating or mothballing DMS just when Century was activated con- stituted a virtual majority of Century’s work force then, while Fones, in his position of de facto manager and adviser to Kearney, and Conti, continued the same operational lead- ership. The business remained electrical contracting, the number and geographical location of customers about the same, with business quarters mainly remaining in the same Fones’ family ownership—mainly Fones after a brief loca- tion at his sister’s house. The DMS assets, the vehicles noted above, did not transfer to Century, Fones having sold them to pay bills beforehand. The DMS equipment, tools, and records were not available for transfer to Century because Fones reportedly failed to pay a self-storage fee and these contents were levied upon. Fones was the sole owner of DMS, in de facto control over the operations of Century early on in its formative and operational stages with his sister who depended on him to run Century, then next legal owner with Edward Shultz, who is not shown in the record to be more than a silent-partner- like co-owner, and then, in short order Fones once again re- sumes sole ownership of the same enterprise, with substan- tially the same employees, location, and number of cus- tomers and places of business, without any hiatus in oper- ations between DMS and Century, the motive for the super- ficial changes in name and duplicate corporation articles found hereinafter to be motivated by the desire to avoid the terms in the union contract. Counsel for Respondents moved for dismissal at the hear- ing, contending that there was a hiatus in operations between DMS operations being closed and the startup of Century in- asmuch as Fones didn’t take part in management at Century until becoming a stockholder, because the chain of ownership between DMS and Century was broken, and because there was no evidence Fones closed DMS to avoid labor union ob- ligations. For the reasons noted, namely, Fones behind the scenes—and open—exercise of authority and control as advi- sor to and proven special benefactor of his sister as owner and founder of Century I find no merit to either the hiatus or broken chain of ownership argument. The record is replete with efforts by Fones to construct scenarios as to the roles he did or did not play regarding very relevant issues in the case, especially efforts by him to distance himself from im- portant events when he had just testified to the contrary, and to be far less than forthcoming. Thus, he testified at one point he did not know Century was being formed and had no knowledge whatsoever about the Company. The rendering of small partial truths piecemeal when larger issues are at stake is as discrediting to a witness as an untruth—it was only upon examination by the court that reluctantly offered admissions of plain truth were rendered. This attempted mis- construction of events coupled with evasiveness, inherent in- consistencies, and answers to pressingly delivered leading questions amounted to very unpersuasive reasons for the de- activation of DMS and startup of Century being presented. Combined with the fact that Fones had the admitted motive to get out from under the terms of the collective-bargaining agreement with the Union as he stated in his letter to the Union, this provides a strongly reasonable basis to infer that DMS deactivated and Century, which admittedly did not honor Respondent’s contract, was formed to enable Fones through Century to avoid the Union’s contract obligations imposed on his enterprise and so achieve greater profitability for himself. Nor did Respondent call Virginia Conti, Carol Kearney, or Edward Shultz to testify in contradiction to the employee accounts or exhibits received into evidence without accounting for its failure to do so where their indicated pos- session of direct knowledge concerning relevant events is clearly reasonable to assume, thereby warranting the infer- ence such testimony would be adverse to Respondent’s inter- ests in the litigation of the issues before me. Auto Workers v. NLRB, 459 F.2d 1329, 1336 (D.C. Cir. 1972). Based on the foregoing, I conclude that the factors re- quired to find an alter ego or disguised continuance, includ- ing the formation of Century to avoid DMS labor relations obligations, are present and conclude that both DMS and Century as alter egos are jointly liable for the specification— denoted backpay and unpaid benefits. Marbro Co., 310 NLRB 1145, 1148 (1993). Based on the record evidence out- lined above demonstrating clearly that there was a substantial continuity of the employing enterprise, and that Fones re- mained at the helm in operations of both DMS and Century at all relevant times and therefore had actual knowledge and notice of the DMS prior unlawful conduct when purchasing Century—as well as when he earlier assumed control at its inception—I conclude Century is a successor to DMS and thus liable additionally to remedy the unfair labor practices previously committed by DMS. Marbro Co., supra at 1150; and Golden State Bottling Co. v. NLRB, 414 U.S. 168 (1973). The parties agree that the formulas used to calculate back- pay and unpaid benefits contained in the compliance speci- fication as amended and resulting figures are true and cor- rect. At the hearing Respondent counsel further stipulated to the correctness of employee Dennis Phillips’ medical ex- pense of $2566 in an amendment 13(b) to the specification, and made no objection to a further amendment numbered 13(c) setting forth employee Thomas L. Spruill dependent’s medical expenses of $420 made by motion during an interim period before the hearing closed. The motion, supporting at- tachments, Respondents’ reply making no objection, and a copy of my order receiving same into the record are marked as Administrative Law Judge’s Exhibit 5. Respondent coun- sel specifically stated it had no objection to the Spruill 375 D.M.S. ELECTRICAL CONTROL 1 If no exceptions are filed as provided by Sec. 102.46 of the Board’s Rules and Regulations, the findings, conclusions, and rec- ommended Order shall, as provided in Sec. 102.48 of the Rules, be adopted by the Board and all objections to them shall be deemed waived for all purposes. amendment motion, did not file a brief arguing otherwise as to its foregoing described stipulations, and filed no answer to the Spruill amended specification, the contents of which are therefore deemed to be admitted and true. A review of the stipulated figures reveals that as of the hearing date Respondent DMS and its alter ego and suc- cessor Century owed a combined total amount of backpay and unpaid contributions to employee benefit funds of $119,171.90 plus employees Phillips’ and Spruill’s medical expenses or a total of $122,157.90. All the above plus inter- est accrued to the date of payment with the backpay and un- paid benefits period to continue, and correspondingly further amounts due employees, until such time as Respondent DMS and/or Respondent Century reinstate the terms and conditions of the collective-bargaining agreements and bargain with the Union as provided in the Board’s Order, as enforced by the circuit court. CONCLUSIONS OF LAW 1. Century Electric Contractors, Inc. is the alter ego of, and successor to, D.M.S. Electrical Control, Inc. 2. Century Electric Contractors, Inc. and D.M.S. Electrical Control, Inc., their officers, agents, successors, and assigns, are jointly and severally liable to remedy the unfair labor practices found in the underlying proceedings. On these findings of fact and conclusions of law and on the entire record, I issue the following recommended1 ORDER The Respondents, D.M.S. Electrical Control, Inc. and its alter ego and/or successor Century Electric Contractors, Inc., West River, Maryland, their officers, agents, successors, and assigns shall jointly and severally, pay to the employees and to the appropriate union benefit funds the sums set forth in the compliance specification as amended and prescribed hereinabove, plus interest, the amounts to continue until such time as Respondent DMS and/or Respondent Century rein- states the terms of and conditions of the collective-bargaining agreements identified herein and bargain with the Union as provided in the Board’s Order as enforced by the circuit court.