Gilroy Heating & Air Conditioning

GILROY SHEET METAL Gilroy Sheet Metal, Inc. and Billie Hanoum, a sole proprietorship, d/b/a Gilroy Heating & Air Conditioning and Sheet Metal Workers Local 309, Sheet Metal International Association. Case 32-CA-6832 24 June 1986 DECISION AND ORDER BY MEMBERS DENNIS, JOHANSEN, AND BABSON On 5 August 1985 Administrative Law Judge Gerald A. Wacknov issued the attached decision. The General Counsel and the Charging Party each filed exceptions and a supporting brief. 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. i The General Counsel and the Charging Party have excepted to the judge's failure to make any finding regarding the complaint allegation that Respondent Gilroy Sheet Metal, Inc (Sheet Metal) and Respondent Gilroy Heating & Air Conditioning (Heating & Air) are a single employ- er While we agree that the judge erroneously failed to address the single employer allegation , this does not affect our decision In this regard, the Board normally applies the term "single employer" to situations in which ongoing, nominally distinct businesses are alleged to be one and the same in terms of common control over labor relations, integration of oper- ations, common management , and common ownership See, e.g, Clinch Valley Clinic Hospital, 213 NLRB 515 (1974), enfd on other grounds 516 F.2d 996 (4th Cir 1975), Holiday Inn, 274 NLRB 687 (1985) Here, Sheet Metal commenced operations , allegedly as a disguised continuance of Heating & Air , only after Heating & Air ceased operations Accordingly, on the facts here, we find that Sheet Metal and Heating & Air are not a single employer In adopting the judge's finding that Sheet Metal is not an alter ego of Heating & Air, we particularly note the following As the judge found, the evidence does not establish that hostility toward the Union was a motive for terminating Heating & Air or for founding Sheet Metal Rather, the cessation of one company and formation of the other resulted from matters unrelated to the Union , including personal health , financial, and marital difficulties Compare, e g , Fugazy Continental Corp, 265 NLRB 1301 (1982), enfd 725 F 2d 1416 (D C Cir 1984) Additionally, the newly created company, Sheet Metal, was owned exclusively by Milton Hanoum His wife, Billie Hanoum, who had been an owner of Heating & Air, had no ownership interest in Sheet Metal and was sepa- rated from her husband by the time he formed the latter company These circumstances distinguish the present case from others in which the Board has predicated an alter ego finding , in part, on a shift in ownership among close family members See, e g , Advance Electric, 268 NLRB 1001 (1984). Finally, in the present case, unlike certain other cases in which the Board has found a newly created company to be the alter ego of a previously existing one, Sheet Metal did not take over any unfinished work started by Heating & Air. Compare, e g , Advance Electric, supra, Campbell-Harris Electric, 263 NLRB 1143 (1983), enfd 719 F 2d 292 (8th Cir. 1983) Contrary to the suggestion of our dissenting colleague, we are not stat- ing that a showing of unlawful motivation is essential to a finding of alter ego status Rather, the presence or absence of unlawful motivation is merely one factor that the Board considers in weighing the circumstances of any particular case. See, e g, Fugazy Continental Corp, above, NLRB v Tricor Products, 636 F 2d 266, 270 ( 10th Cir 1980) 1075 ORDER The recommended Order of the administrative law judge is adopted and the complaint is dis- missed. MEMBER DENNIS, dissenting. Contrary to my colleagues, I conclude that Gilroy Sheet Metal, Inc. (Sheet Metal) is the alter ego of Gilroy Heating & Air Conditioning (Heat- ing & Air) and bound to any bargaining obligation that Heating & Air may have had to the Union. I would remand the case to the judge to determine what, if any, bargaining obligation Heating & Air had at the time Sheet Metal began operations and refused to deal with the Union. It is undisputed that Sheet Metal performs sub- stantially the same work that Heating & Air per- formed. Eighty to ninety percent of its business is the same. It operates from the same location with the same suppliers, and uses equipment that it leases from Heating & Air at less than market rental. The majority bases its refusal to find alter ego status primarily on lack of continuity in owner- ship between Heating & Air and Sheet Metal, and lack of antiunion motivation for terminating Heat- ing & Air and organizing Sheet Metal. With respect to ownership, the original compa- ny, Heating & Air, was established by Milton and Billie Hanoum with Milton's assets and funds ob- tained from a loan for which they jointly applied. Ownership of business and assets was placed in Bil- lie's name as sole proprietor to enable Milton to maintain union benefits and to work with tools of the trade. Billie was bookkeeper for the business, and Milton bid jobs, managed the business, and performed unit work. Milton was hourly paid; Billie received a salary which the two determined each year; and the remaining earnings went into the business. The second company, Sheet Metal, is a corporation, and Milton owns all shares that have been sold. He is president of the company and con- trols all operations. While "paper" ownership of the two companies is different, the facts show that Milton Hanoum participated in ownership of Heating & Air and solely owns Sheet Metal. He controls the oper- ations of Sheet Metal as he did those of Heating & Air, and the business entity is a continuing one de- spite any change of name or form or any paper changes of ownership. With respect to motivation, the evidence may not show that Heating & Air ceased business and Sheet Metal began operations in an attempt to avoid the union contract, but a showing of antiun- ion motivation is not essential to finding alter ego status. See Goodman Piping Products v. NLRB, 741 280 NLRB No. 121 1076 DECISIONS OF NATIONAL LABOR RELATIONS BOARD F.2d 10 (2d Cir. 1984), enfg. E.G. Sprinkler Corp., 268 NLRB 1241 (1984), where the court stated: The argument that the Board must find anti- union animus or an intent to evade the union obligations before it can impose alter ego status is unpersuasive. The cases relied on by the appellant show that anti-union animus may be "germane," NLRB v. Tricor Products, Inc., 636 F.2d 266, 270 (10th Cir. 1980), or even a sufficient basis for imposing alter ego status, Southport Petroleum Co. v. NLRB, 315 U.S. at 106; they do not establish that anti-union moti- vation is necessary. As Heating & Air and Sheet Metal have the same management, business purpose, operation, equipment, supervision, and the same de facto own- ership, I find that one is the alter ego of the other. See Crawford Door Sales Co., 226 NLRB 1144 (1976). David Dominguez, Esq., for the General Counsel. Milton J. Hanoum, President, of Gilroy, California, for the Respondent. Kathryn A. Sure, Esq. (Wylie, Blunt, McBride & Jesinger), of San Jose, California, for the Charging Party. DECISION STATEMENT OF THE CASE GERALD A. WACKNOV, Administrative Law Judge. Pursuant to notice, a hearing with respect to this matter was held before me in Santa Clara, California, on 8 May 1985. The initial charge was filed on 12 October 1984 by Sheet Metal Workers Local 309, Sheet Metal Interna- tional Association (the Union). An amended charge was subsequently filed by the Union. On 18 December 1984 the Regional Director for Region 32 of the National Labor Relations Board (the Board) issued a complaint and notice of hearing alleging a violation by Gilroy Sheet Metal, Inc. and Billie Hanoum, a sole proprietorship, d/b/a Gilroy Heating & Air Conditioning (Respondent) of Section 8(a)(1), (3), and (5) of the National Labor Relations Act. The parties were afforded a full opportunity to be heard, to call, examine, and cross-examine witnesses, and to introduce relevant evidence. Since the close of the hearing, briefs have been received from the General Counsel and Respondent. On the entire record, and based on my observation of the witnesses and consideration of the briefs submitted, I make the following FINDINGS OF FACT I. JURISDICTION Respondent Gilroy Sheet Metal, Inc. is a California corporation engaged in the fabrication and sale of sheet metal and related products with its principal place of business located in Gilroy, California. The record shows that in the course and conduct of its business operations, which commenced on 9 July 1984, Respondent Gilroy Sheet Metal, Inc., within a 12-month period thereafter, purchased and received goods valued in excess of $50,000 from suppliers located within the State of Cali- fornia which suppliers have received such goods in sub- stantially the same form directly from outside the State. I find that Respondent is an employer engaged in com- merce within the meaning of Section 2(6) and (7) of the Act. II. THE LABOR ORGANIZATION INVOLVED It is admitted that the Union is, and has been at all times material herein, a labor organization within the meaning of Section 2(5) of the Act. III. THE ALLEGED UNFAIR LABOR PRACTICES A. The Issue The principal issue raised by the pleadings is whether Gilroy Sheet Metal, Inc. is an alter ego of Billie Hanoum, a sole proprietorship, d/b/a Gilroy Heating & Air Conditioning and has, therefore, violated Section 8(a)(1), (3), and (5) of the Act by failing and refusing to assume and abide by the provisions of a collective-bar- gaining agreement between the Union and that employer. B. The Facts In 1978 Milton Hanoum, a journeyman sheet metal worker, and his wife Billie Hanoum decided to establish a sheet metal business. Because becoming an owner of the business would have jeopardized Milton Hanoum's union fringe benefit package and would have restricted his right to work with the tools of the trade, a business named Gilroy Heating & Air Conditioning was estab- lished as a sole proprietorship, owned by Billie Hanoum, who had no experience in sheet metal work. All licenses, insurance policies, Federal and state tax identification numbers, and a fictitious business name were secured in Billie Hanoum's name. The funds needed to initially cap- italize the business were jointly borrowed by the Han- oums, and certain handtools and a vehicle were contrib- uted to the business by Milton Hanoum. Thereafter, Milton Hanoum essentially operated all phases of the business, including bidding on jobs and performing all the work. The bookkeeping work was performed by his wife. Gilroy Heating & Air Conditioning entered into an agreement with the Union, executed by Milton Hanoum, extending from 1 July 1978 to 30 June 1981. On 15 Sep- tember 1982 Billie Hanoum executed a memorandum agreement adopting the then-current areawide contract extending it retroactively from 1 July 1982 until 30 June 1985; and on 14 June 1983, Billie Hanoum entered into a modification of the contract, extending it until 30 June 1986. Milton Hanoum was the only employee until January 1980. Thereafter, from 1 January 1980 through late 1982 Gilroy Heating & Air Conditioning employed several employees, obtaining them through the contractual hiring hall provisions of the aforementioned contract GILROY SHEET METAL with the Union. Milton Hanoum hired the employees and supervised their work. The Company operated prof- itably during this period and at the end of each year the Hanoums determined the amount of Billie Hanoum's salary. Milton Hanoum, who worked with the tools of the trade, was hourly paid. The remainder of the earn- ings were put back in the business. All assets of the Company were solely owned by Billie Hanoum. Because of a decline in business, largely due to the fact that the contractual wage and fringe benefit package pre- cluded Gilroy Heating & Air Conditioning from being able to compete with the bids of nonunion sheet metal shops, the Company experienced a period of gradual economic decline. After December 1982 the Company had no employees designated as sheet metal employees other than Milton Hanoum. However, the Hanoums em- ployed their son-in-law, Louis Glowski, who did not per- form sheet metal work but merely assisted Milton Hanoum by delivering supplies to the jobsites and per- forming general laborer's duties. The Union did not re- quire that Glowski become a member. At the instant hearing Milton Hanoum stated that the evidence he desired to present was contained in two lengthy sworn affidavits taken by a Board agent during the investigation of this case, and in a third affidavit signed by Hanoum but submitted to the Board by an at- torney. It was agreed at the hearing that the content of the affidavits would be considered to be evidence, sub- ject to cross-examination of Hanoum. Regarding the dis- solution of Gilroy Heating & Air Conditioning, Hanoum states the following in one of the aforementioned affida- vits: Billie and I started having disagreements about whether Heating [Gilroy Heating & Air Condition- ing] should dissolve its operations starting in Janu- ary 1984. She suffers from high blood pressure and her doctor told her in March 1984 that unless she got out of the business she was headed for a nerv- ous breakdown. I told her that she was leaving me high and dry since I couldn't own a shop and work with the tools. She said that she didn't want to have her name on anything involving the operations of Heating any longer since she couldn't be around to see how things were going. Billie and I agreed to keep the operations going through June, 1984. As of March I started making preparations for opening a new operation that would remove Billie from the picture altogether. In April 1984, after 38 years of marriage, the Hanoums separated and have remained separated since that time. Milton Hanoum testified that he and his wife do not be- lieve in divorce and that, therefore, unless some time in the future they could arrive at a reconciliation, their sep- aration would remain a permanent arrangement. On 13 June 1984 Billie Hanoum wrote Milton Hanoum as follows- Due to my mental and physical health at this time I find it necessary to dissolve my company , Gilroy 1077 Heating & Air Conditioning June 27, 1984. This will be the last day of employment. Apparently about the same time she notified the Union of the discontinuation of the business. As of 27 June 1984 there were no projects in progress which Gilroy Sheet Metal, Inc., which commenced business on 9 July 1984, took over. Milton Hanoum, who is 57 years of age, testified that he established Gilroy Sheet Metal, Inc. not "to get out of the union contract, but I did it to survive." He thereupon capitalized the new Company with his own funds and entered into all business arrangements, including the lease of the same building, without any type of financial assistance from Billie Hanoum. He is currently leasing several trucks and certain other equipment from Billie Hanoum for the sum of $800 per month, and testified that this was the most expeditious way of handling the assets of Gilroy Heating & Air Conditioning as the busi- ness would not have been worth much had it been sold outright. Milton Hanoum estimated that to rent the simi- lar equipment from other sources would cost about $1200 to $1500 per month. Milton Hanoum's affidavit further states as follows: Explaining further the motivation behind dissolving Heating, Heating would not have stayed in business longer than it did even if it had been successful with its bids. Billie's doctor made it clear to her that she had to remove herself from the business or else risk grave medical problems. There is no way Billie was going to continue Heating's operations even if it had turned into a profitable venture Billie's nerv- ousness and blood pressure worsened as the business fell off so it became obvious that something had to be done to rid herself of Heating.' Had Billie's health remained good and stable, Heating would have likely continued as a one employee union shop. As it was, with Billie's health deteriorating, I had the choice of either going on disability or trying to open my own business. The reason I would have had to go on disability was because my visual impairment2 is to the point that no prospec- tive employer would run the risk of hiring me and having me hurt myself, others or the quality of the job. I did not want to go on disability because I feel I have a few good years left; so, I opened Sheet Metal. From July 1984 to February 1985 Gilroy Sheet Metal, Inc. employed five employees, mostly family members, who performed work that would have been covered by the collective-bargaining agreement. All were apparently laid off in February 1985. Hanoum has refused to recog- nize the Union and assume the collective-bargaining agreement as requested. The work of Gilroy Heating & i A postheanng exhibit consisting of a note by John F Perry, M D, states that "This is to certify that Mrs Billie Hanoum was examined June 4, 1984 and was found to have extremely elevated blood pressure " There is no evidence, however, indicating that Billie Hanoum had not previous- ly been under a doctor's care for elevated blood pressure 2 Milton Hanoum has only 10-percent vision 1078 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Air Conditioning involved, with very limited exceptions, only the installation of sheet metal and/or air condition- ing for new construction projects . However, between 10 and 20 percent of the total operation of Gilroy Sheet Metal, Inc. involves the sale of sheet metal products to contractors or homeowners who perform their own in- stallation work, and the large majority of the work is similar to that performed by Gilroy Heating & Air Con- ditioning. C. Analysis and Conclusions In Fugazy Continental Corp., 265 NLRB 1301 (1982), enfd. 725 F.2d 1416 (D.C. Cir. 1984), the Board enunci- ated the criteria required to support the alter ego status of an employer as follows: In determining whether [one employer] is the alter ego of [another employer], we must consider a number of factors, no one of which, taken alone, is the sine qua non of alter ego status. Among these factors are : common management and ownership; common business purpose , nature of operations, and supervision; common premises and equipment; common customers , i.e., whether the employers constitute "the same business in the same market," as well as the nature and extent of the negotiations and formalities surrounding the transaction. We must also consider whether the purpose behind the creation of the alleged alter ego was legitimate or whether, instead, its purpose was to evade responsi- bilities under the Act. See also O. Voorhees Painting Co., 275 NLRB 779 (1985); Aspen Leasing Systems, 271 NLRB 1536 (1984); Advance Electric, 268 NLRB 1001 (1984). Gilroy Sheet Metal, Inc. performs substantially the same work at the same location , utilizing substantially the same equipment as its predecessor . The record also shows that its various local suppliers are the same, as would be expected in a relatively small community. During a period of decline in the predecessor's busi- ness, due largely to the fact that it was unable to success- fully compete with nonunion operations , the predecessor laid off all its employees except Milton Hanoum, who was its sole employee covered by the union contract from December 1982 until its demise on 27 June 1984, a period of some 18 months. Although the assets of the predecessor were entirely owned by Billie Hanoum , the business was effectively operated by her husband, Milton. Billie Hanoum has ab- solutely no ownership interest in Gilroy Sheet Metal, Inc. and does not participate in the operation of the busi- ness in any respect. She is paid, however, a monthly amount for the rental of certain vehicles and equipment which she continues to own. Milton Hanoum impressed me as a forthright individ- ual and I conclude that the predecessor was disestab- lished by his estranged wife for health reasons , as credi- ble record evidence amply demonstrates . Indeed, had there been an unlawful motive for the disestablishment of the predecessor's operations, it is highly unlikely that the Hanoums would have procrastinated for 1 -1/2 years during which time the business was not successful. Thereupon, Milton Hanoum established Gilroy Sheet Metal, Inc. essentially to have a continued source of income, as his acute vision impairment, readily apparent at the hearing during which it was necessary that docu- ments be read to him, precluded him from obtaining em- ployment elsewhere . Apparently the new business was successful for a period of time , and although it is likely that the increase in business was due to the fact that Gilroy Sheet Metal, Inc. was operating on a nonunion basis and therefore was able to more effectively compete with similar shops, this does not alter my conclusion that the motivating reason for establishing the new entity was not union related. On the basis of the foregoing, more particularly the lack of continuity in ownership and the fact that the new entity was created for a legitimate purpose rather than to evade responsibilities under the Act, I find that Gilroy Sheet Metal, Inc. is not the alter ego of Billie Hanoum, a sole proprietorship, d/b/a Gilroy Heating & Air Condi- tioning. Fugazy Continental Corp., supra. Therefore, I find that Gilroy Sheet Metal, Inc. has not violated the Act as alleged by failing to recognize the Union and assume the contract between the Union and the prede- cessor employer. CONCLUSIONS OF LAW 1. Respondent is an employer engaged in commerce within the meaning of Section 2(2), (6), and (7) of the Act. 2. The Union is a labor organization within the mean- ing of Section 2(5) of the Act. 3. Respondent has not violated the Act as alleged. On these findings of fact and conclusions of law and on the entire record, I issue the following recommend- ed3 ORDER The complaint is dismissed in its entirety. 3 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