Best Mechanical Contractors, Inc.

BEST MECHANICAL CONTRACTORS 83 Best Mechanical Contractors, Inc. and G & R Con- tractors, Inc. and United Association of Jour- neymen and Apprentices of the Plumbing and Pipefitting Industry, Local No. 119. Case 15- CA-8824 30 November 1984 ' DECISION AND ORDER BY CHAIRMAN DOTSON AND MEMBERS ZIMMERMAN AND DENNIS On 5 June 1984 Administrative Law Judge Irwin H. Socoloff issued the attached decision. The Gen- eral Counsel and the Charging Party filed excep- tions and supporting briefs, Respondent G & R Contractors, Inc. filed cross-exceptions and a sup- porting brief, and Respondent Best Mechanical Contractors, Inc.. filed a brief in opposition to the exceptions of the General Counsel and the Charg- ing Party. The National Labor Relations Board has delegat- ed 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 decided to affirm the judge's rulings, findings, and conclusions and to adopt the recommended Order. ORDER The recommended Order of the administrative law judge is adopted and the complaint is dis- missed. DECISION STATEMENT OF THE CASE Iawnsf H SOCOLOFF, Administrative Law Judge On a charge filed on December 14, 1982, by United Associa- tion of Journeymen and Apprentices of the Plumbing and Ptpefitting Industry, Local No. 119, against Best-Me- chanical Contractors, Inc and G & R Contractors, Inc. (Respondents), the General Counsel of the National Labor Relations Board, by the Regional Director for Region 15, issued a complaint dated January 31, 1983, al- leging violations by Respondents of Section 8(a)(5), (3), and (1) and Section 2(6) and (7) of the National Labor Relations Act (the Act). Respondents, by their .answers, denied the commission of any unfair labor practices. Pursuant to notice, a trial was held before me in Mobile, Alabama, on March 21 and 22, 1983, at which all parties were represented by counsel and were afford- ed full opportunity to be heard, to examine and cross-ex- amine witnesses, and to introduce evidence. Thereafter, the parties filed briefs which have been duly considered. On the entire record in this case, and from my obser- vations of the witnesses, I make the following FINDINGS OF FACT I. JURISDICTION Respondent Best is an Alabama corporation, engaged at its Mobile, Alabama locale in the business of mechani- cal contracting Annually, in the course and conduct of its business operations, it purchases and receives goods and materials valued in excess of $50,000 directly from points located outside the State of Alabama. I find that Respondent Best is an employer engaged in commerce within the meaning of Section 2(2), (6), and (7) of the Act. Respondent G & R, alleged in the complaint as the alter ego of Respondent Best, is an Alabama corporation, engaged, at its Mobile, Alabama locale, in the business of mechanical contracting. II. LABOR ORGANIZATION United Association of Journeymen and Aiiprentices of the Plumbing and Pipefitting Industry, Local No. 119 (the Union) is a labor organization within the meaning of Section 2(5) of the Act III THE UNFAIR LABOR PRACTICES A. Background Respondent Best has, for many years, been affiliated with Mobile Mechanical Contractors Association, Inc, a multiemployer bargaining association of Mobile, Ala- bania area employers in the mechanical . contracting busi- ness. The plumber and pipefitter employees of those em- ployers are represented by the Union The Association, on behalf of its affiliates, and the Union have been parties to a series of multiemployer collective-bargaining agree- ments, the most recent of which is effective July 15, 1982, to July 14, 1984 .Respondent Best is bound to that agreement. In the fall of 1982, M. H. Best Sr, the founder, princi- pal owner, and chairman of the board of Respondent Best, decided to close down the business because of the huge losses suffered in the preceding 3 years and the lack of contracts for future work. He so advised his son-in- law, R J. Wagner, president of Respondent Best, and his son, George Best, a director and supervisor of that Com- pany, both of whom were minority shareholders. There- after, Wagner and George Best decided to form , their own contracting business, and they created Respondent G & R. That Respondent has refused to honor the Asso- ciation's contract with the Union In the instant case, the General Counsel contends, and Respondents deny, that Respondent G & R is the alter ego of Respondent Best, created in an unlawful effort to avoid the obligations imposed by the collective-bargain- ing agreement with the Union. The General Counsel urges that Respondents, by refusing to recognize the Union -as collective-bargaining representative of Re- spondent G & R's plumber and pipefitter employees, and apply the contract, violated Section 8(a)(5) of the Act. It is also alleged that Respondents violated Section 8(a)(3) of the Act when Respondent Best discharged, and Re- spondent G & R did not hire, certain unit employees. 273 NLRB No. 19 84 DECISIONS OF NATIONAL LABOR RELATIONS BOARD B. Facts' Respondent Best and predecessor companies owned and operated by M. H. Best Sr. have been engaged in the plumbing and pipefitting business in Mobile, Ala- bama, since 1946. In the fall of 1982, that Respondent had three corporate directors, including M. H. Best Sr, chairman of the board, who owned 175 shares, or 77 per- cent, of the corporation's stock The other directors were Best's son-in-law, R. J. Wagner, president, who owned 38 shares of stock, and Best's son, George Best, -who owned 10 shares. The only other shareholder was Barbara Wagner, R J. Wagner's wife, who owned five shares. While M. H Best Sr. determined company poli- cies, Wagner ran the day-to-day business of Respondent Best and George Best supervised the field employees and construction operations. • During the 3-year period ending October 31, 1982, Re- spondent Best suffered operating losses in excess of • $200,000. The total assets of the Company fell from $1,204,544 to $420,172, while shareholder equity went from $546,100 to $361,549. In light of this financial pic- ture, M. H Best Sr. became concerned that, at his ad- vanced age, his assets might be wiped out. The corpora- tion's accountant advised him to liquidate the business In September 1982, Best told Wagner that Respondent Best would go out of business. Best Sr. cited the finan- cial decline and stated that the Company was not getting new contracts and was losing money at the rate of $20,000 to $30,000 per month. At a board of directors meeting held on September 30, 1982, Best Sr. formally announced his decision to close the business due to finan- cial losses and a lack of work. Noting that he, personal- ly, owned the building leased to Respondent Best, Best Sr. stated that he would seek to lease it to another con- tractor. He ftirther stated his intention to sell Respondent Best's furniture, fixtures, and equipment Best Sr direct- ed that no new work be sought or accepted and he asked for the resignations, as officers and directors, of Wagner and George Best, stating his intention to pay them their salaries through December 31, 1982. Best Sr.' also or- dered that an independent appraisal he obtained to deter- ' mine the value of the office furniture, fixtures, and equip- ment. On October 12, 1982, at a shareholder's meeting, M. H. Best Sr. was, at his request, elected is the sole member of Respondent Best's board of directors At that meeting, Wagner inquired whether Best Sr. would lease the building to Wagner and George Best if they decided to organize their own mechanical contracting company Best Sr. stated that he would be happy to do so, at market value rental. 'Wagner also asked about purchase of Respondent Best's furniture, fixtures, and equipment at book value. Best Sr. stated that he would' not sell those items at book value, but only at appraised value. Follow- ing the stockholder's meeting, at a director's meeting, M H. Best Sr. elected himself both president and secretary of Respondent Best. • ' 1 The factfindmgs contained herein are based on a composite of docu- mentary and testimonial evidence introduced at trial The 'record is gen- erally free of significant evidentiary conflict - During October 1982, Wagner and George Best decid- ed to form their own company and, on October 25, Re- spondent G & R was incorporated. Its initial capital was $14,000 The sole shareholders were Wagner, the presi- dent, who owned 50 shares of stock, and George Best, the secretary-treasurer, who owned 40 shares. M. H. Best Sr had no interest, financial or otherwise, in Re- spondent G & R. In view of Respondent G.& R's thin capitalization, Wagner and George Best decided to seek the small jobs which had not been performed by Re- spondent Best, a large contractor that, normally, had sought major work. They also decided that Respondent G & R would commence its operations as a nonunion contractor. On or about November 15, 1982, Respondent G & R entered into a lease agreement with M. H. Best Sr. there- by renting a portion, but not all, of the building thereto- fore occupied by Respondent Best. 2 The lease was for a 6-month term, at a rental fee of $1500 per month, com- mencing on November 15. Respondent G & R has since made all rental payments, starting that November. Also on November 15, Respondent Best entered into an agree- ment to sell to Respondent G & R certain of its -furni- ture, fixtures, and equipment at appraised value as deter- mined by independent appraisers Thereafter, on Decem- ber 17, after appraisal had been obtained, the parties exe- cuted a bill of sale. At that time, Respondent G .& R signed a promissory note in the amount of $84,200, rep- resenting the full appraised value of the purchased mate- rial. The note was payable, without interest, on June 15, 1983 The parties also executed a collateral security agreement under which Respondent Best retained a secu- rity interest in the property sold to Respondent G & R. In early November 1982, George Best met with the employees of Respondent Best in twO groups, and in- formed them that Respondent Best was going out of business as M. H Best Sr. was tired of losing money year after year The employees were also told that Wagner and George Best were, thus, left without jobs and they had decided to form their own company which would do small scale work and operate as a nonunion shop or open shop. 3 During the ensuing days, Respond- ent Best laid off its field employees. Walter Wilson, the Union's business manager, wrote a letter to Wagner on November 11, 1982, stating that, in the event that Wagner and George Best "reopen under G & R or some other name, in the piping business, I insist that you recognize Local 119's contract and rehire the men , that you have laid off." On November- 15, Wagner placed a telephone call to Wilson and invited him to 'a meeting for that day with George Best, Best Sr., and Wagner. At the meeting', M H: Best Sr. -stated that Respondent Best was going out of business becaiise 2 Respondent Best continued to occupy a portion of the premises as it finished the jobs that it had under contract and performed certain repair work for former customers For those purposes, Best continued to employ one unit employee whose terms and conditions of employment remained governed by the contract with the Union - 3 The foregoing account of those meetings is based on the testimony of George Best and that of employees James Anthony, Malcolm Nicholas, and William C Dixon To the extent that Best's testimony differs from that of the three employees, it is not credited BEST MECHANICAL CONTRACTORS 85 of the extreme financial, losses it had suffered. Wilson said that Respondent G & R was one and the same as Respondent Best and, therefore, was bound by Respond- ent Best's contract with the Union. Wagner and George Best insisted that Respondent G & R was not connected to Respondent Best' and, as a new company, thinly cap- italized, it could not be competitive if it abided by Re- spondent Best's contract with the Union. Respondent G & R, George Best told Wilson, needed to obtain- small jobs, in order to start a cash flow and be able to stay in business. Therefore, Best and Wagner told Wilson, G & R would "go open shop." The meeting then turned to a discussion of those portions of the contract that Wagner and Best felt were too costly, namely, wages, fringe ben- efits, travel time, and paid holidays: On December 23, 1982, Wilson placed a telephone call to George Best and asked if Best had reconsidered his decision to operate Respondent G & R as an "open shop." George Best said, "No, I don't even want to dis- cuss it:" Thereafter, on January 26, 1983, Wilson sent a letter to George- Best; demanding recognition arid insist- ing that the Union's contract with Respondent Best was binding upon Respondent G & R. Wagner, on behalf of G & R, sent the following letter to Wilson on March 4, 1983: Enclosed herewith is a proposed collective-bargain- ing agreement between G & R Contractors, Inc., and U.A. Local 119. We would appreciate the op- portunity of discussing our proposal and any counter proposal of Local 119 with you at your ear- liest convenience By making the proposal, G & R Contractors, Inc. does not waive or modify its position that Local 119 does not now and has never represented an un- coerced majority of the employees of G & R Con- tractors, Inc. in an appropriate collective-bargaining unit. Wagner and George Best met with Wilson on March 17, 4 days before trial in the instant matter. At that time, Wilson stated his objections to certain of the terms con- tained in the contract proposal of Respondent G & R. He presented to Wagner and Best a proposed contract and asked them to review it as a basis for further negoti- ations. Including working foremen, who enjoyed supervisory status, Respondent Best laid off some 10 or 11 workers who did plumbing-pipefitting work, principally in the early November 1982 period. Only one of those individ- uals, Bruce Carter, who had worked as a plumber-pipe- fitter with Respondent Best sought employment with Re- spondent G & R. Carter was hired by that Respondent as a working foreman, a statutory supervisor, on Decem- ber 7, 1982. On that date he resigned his membership in the Union. Respondent G & R had, as of the time of trial, employed only two other individuals to do work covered by the contract at issue. On: January 18, 1983, it hired S. W. Arrighi as a pipefitter. Three weeks later, Arrighi was laid off. Previously, on December 9, 1982, it had hired W. J. Moiren as a pipefitter helper Neither Arrighi nor Moiren had been employed by Respondent Best. With respect to other personnel, Respondent G & R hired M. D. Crabtree as a laborer on December 8, 1982 Crabtree, who had not worked for Respondent Best, was laid off on December 23, 1982. On December 21, .1982, G & R hired Willie Crum as a laborer. Crum, who had previously worked for Respondent Best as a laborer, was laid off on February 3, 1983. Also in December 1982 Re- spondent hired J. Crabtree as an operator, and M. J. Jones as a truckdriver. Crabtree had previOiisly worked as an operator for Respondent Best and Jones had worked for Best as a truckdnver. The former secretary for Respondent Best, Ruth Colvin, was hired to perform the same job for Respondent G & R. 4 Respondent G & R also hired the former purchasing agent for Respondent Best, Harper Field, to • perform the same duties for Re- spondent G & R. At the time of trial, Respondent G & R had performed only five jobs, at least one of which was for a customer which, previously, had been a customer of Respondent Best. However, Respondent Best's relationship with that customer had terminated 1 year before Respondent G & R was engaged to perform an entirely different type of job. C Conclusions5 I conclude that Respondent G & R is not a disguised, continuance, or the alter ego, of Respondent 'Best, and that neither Respondent engaged in violations of Section 8(a)(5) and (3) of the Act. In my view, the record evi- dence demonstrates that Respondents are separate, unre- lated entities and that Respondent G & R was not cre- ated in an unlawful effort to circumvent the collective- bargaining agreement obligations undertaken by Re- spondent Best As shown, the corporate stock of Respondent G & R is owned entirely by R. J. Wagner and George Best mi- nority shareholders in Respondent Best. On the other hand, M. H. Best Sr., who has no interest in Respondent G & R, owned 77 percent of the stock of Respondent Best, and controlled that corporation While R J. Wagner and, to some extent, George Best ran the day-to- day affairs of Respondent Best, its company policies were set by M H Best Sr It was M. H. Best Sr alone who decided to cease the operations of Respondent Best. The corporate policies of Respondent G & R are set by Wagner and George Best, and they also run the daily af- fairs of that Respondent. There is no integration or inter- relation of the operations of the two Respondents. As of October 31, 1982, Respondent Best had between $300,000 and $400,000 in working capital. It performed large contracting jobs, utilizing more than 10 plumber and pipefitter employees. Respondent G & R com- menced operations with just $14,000 in working capital 4 Colvin still does work for Respondent Best Her time so spent is billed by Respondent G & R to Respondent Best 5 In view of my deposition of this case, Infra, I need not pass on Re- spondent G & Rs contention that the contract unit is inappropriate be- cause it includes working foreman, statutory supervisors, and, also, that the subject contract is an Illegal "members only" agreement 86 DECISIONS OF NATIONAL LABOR RELATIONS BOARD and sought the small worknot performed by Respondent Best. Respondent G & R employs only two or three indi- viduals to perform plumbing and pipefitting work. In .addition to the separate ownership and control of the two Respondents, and the very great difference in the scope Of their operations, the record is devoid of evi- dence indicating that the purpose Of the cessation of op- erations by Respondent Best, and the creatidn of Re- spondent G, 8E. R, was to avoid the oblikations of Re- spondent Best 'under its contract with the Union. The record does not contain evidence of union animus, albeit Wagner and George Best did decide that Respondent G ,& R Would commence operations as a nonunion contrac- tor. Nor has there been irregular dealings. The one trans- action between the Respondents, the sale of certain fuini- ture, fixtures, and equipment, was demonstrably at arm's length, and the purchase price was determined by inde- pendent appraisa1. 6 Likewise, it is not contended that Re- spondent' G & R's lease of the building, owned, personal- ly, by M. H Best Sr. was at other than , fair market value. Against this background, that Respondent G & R was housed in the....same building occupied by Respondent Best, employed a small number of individuals who for- merly worked for Respondent Best, and performed work for at least one former customer of Respondent Best are insufficient to show alter ego status. For those factors are outweighed by the separate ownership and control of the two Respondents, the entirely different scope of their operations, the absence of irregular business dealings be- tween them, .and the lack of evidence showing that the cessation of operations by the .one and the creation of the other were motivated by antiunion considerations. Ac- 6 Cf Fugazy Continental Corp, 265 NLRB 1301 (1982) cordingly, the allegations of 8(a)(5) -violations must be dismissed. - There is no evidence in this record to show, that the layoffs of the plumber and pipefitter employees by Re- spondent Best, in November 1982, were .other than in im- plementation of the lawful business decision reached by that Respondent to cease its operations As there is also no evidence that Respondent G & R refused to,hire ap- plicants for employment who were former employees of Respondent Best, or advised the „former Best employees that it would not hire them, the allegations in the ,:com- plaint alleging violations of Section 8(a)(3) must also be dismissed. „ CONCLUSIONS OF LAW 1. Respondent Best, Mechanical'Contractors, Inc. is an employer engaged in commerce, and in operations affect- ing commerce, within the meaning .of, Section' 2(2), (6), and (7) of the Act - 2. United Association of Journeymen and Apprentices ofrthe Plumbing and. Pipefitting Industry, Local No.. 119 is a labor organization within the meaning of ,Section 2(5) of the Act. , • 3. Respondents have not violated the Act, as alleged in the complaint On these findings of fact and conclusions of law and on the entire record, I issue the following recommend- ed 7 • . ORDER The complaint. is dismissed in its entirety. 7 If no exceptions are filed as provided by Sec 102 46 of the Board's Rules and Regulations, the findings, 'conclusions, and recommended 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 pur- poses