Marino Electric, Inc.

344 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Marino Electric, Inc. and its alter ego, Marin Elec- tric, Inc., and Marin Holding Company and International Brotherhood of Electrical Work- ers, Local Union No. 716, AFL-CIO. Case 23- CA-10000 19 August 1987 DECISION AND ORDER BY CHAIRMAN DOTSON AND MEMBERS STEPHENS AND CRACRAFT On 30 April 1986 Administrative Law Judge Richard J. Linton issued the attached decision. The General Counsel and the Charging Party filed ex- ceptions and supporting briefs, and the Respond- ents filed cross-exceptions and a supporting and an- swering brief. Amicus curiae briefs were filed by the International Brotherhood of Electrical Work- ers, AFL-CIO, and the Chamber of Commerce of the United States. The General Counsel filed a brief in response to that of the Chamber of Com- merce. 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. ' Although we agree with the judge that the General Counsel failed to establish that Marro Electric, Inc was the alter ego of Marino Electric, Inc, we find 0 Vorhees Painting Co, 275 NLRB 779 (1985), on which he relied in part, to be inapplicable There, a panel majority reversed a judge's finding of alter ego status partly because one of the employers in question had a nationwide business while its alleged alter ego operated only locally In the instant case, however, the nationwide operations of Marino Electric, Inc have never included its employment of electricians to perform work of the type performed by its bargaining unit employees The relevant comparison here, therefore, is only between the local oper- ations of the alleged alter ego companies The judge stated at one point that J C Marino was not a director of Marro Electric, Inc , and later that he was The latter is correct Robert S. Breaux, Esq., for the General Counsel. James V Carroll III, Esq. (Andrews & Kurth), of Hous- ton, Texas, for Respondent Marino Electric and Marin Holding Company. Marcia Ann Cain Graham , Esq. (Andrews & Kurth), of Houston, Texas, for Respondent Marin Electric. Patrick M. Flynn, Esq. (Watson, Flynn & Bensik), of Houston , Texas, for the Charging Party, IBEW Local 716. DECISION STATEMENT OF THE CASE RICHARD J LINTON, Administrative Law Judge. This is an alleged alter ego case. Is Marin Electric, Inc. (Marin) the alter ego of Marino Electric, Inc. (MEI)? Did J. C. Marino (Marino), the real owner of both MEI and Marin, form Marin as part of a scheme ( using a holding company) to enable MEI to escape the burdens of its contract with IBEW Local 716? Or is Marin operated separately from MEI and with a different purpose so that it is not the "disguised continu- ance" of MEI7 The issue is very close. Because I conclude that the answer to the last question is yes, I answer the first two questions no, and I dismiss the complaint.' This case was tried before me in Houston, Texas, on 4 and 6 September, 28-31 October, and 1 and 4 November 19852 pursuant to the 17 May 1985 complaint and the 16 October 1985 amended complaint issued by the General Counsel of the National Labor Relations Board through the Regional Director for Region 23.3 The amended complaint (complaint) is based on a charge filed 29 March 1985 by International Brotherhood of Electrical Workers, Local Union No. 716, AFL-CIO (Union or Local 716) against Marino Electric Inc. and its alter ego Mann Electric Inc (Respondent).4 In the complaint the General Counsel alleges that the Respondent violated Section 8(a)(1) of the Act in Octo- ber when Vice President Thomas N. Fitch told employ- ees that MEI had to go nonunion under Marin in order to get sufficient work, that Marin was MEI's open shop, and that MEI had to close and reopen as Marin in order to continue in business as an electrical contractor; Sec- tion 8(a)(3) and (5) of the Act when Marin failed to honor MEI's collective-bargaining agreement (CBA) with Local 716, by Marin's failing to pay contract rates, and by MEI's terminating 13 named employees on vari- ous dates between 16 October 1984 and 18 January 1985. ' The caption of the complaint reads, in part, MEI "and its Alter Ego" Mann I have not deleted the "and its Alter Ego" phrase from the cap- tion, although leaving the phrase in the caption seems questionable in view of my dismissal of the complaint On the other hand, presence of the phrase immediately alerts readers to the nature of the case 2 The first 2 days of the hearing, 4 and 6 September, were very short No witness testified, and the discussion was devoted mainly to resolving issues concerning inspecting and copying subpoenaed documents Pro- ceedings during these 2 days in September generated only 25 pages of the transcript and are marked as volumes I and 2 For the October resump- tion, the court reporting service inadvertently began again with volume 1, page 1 In light of the limited nature and brevity of the September pro- ceedings, I have disregarded those pages when making references to the transcript in this decision The parties did likewise in their briefs Thus, references hereafter to volume i refer to 28 October 1985 References to the transcript are by volume and page 3 At the beginning of the Monday, 28 October 1985 resumption, coun- sel for the General Counsel, Robert S Breaux, announced that Clifford W Potter, the first Regional Director for Region 23, had died the pre- ceding Friday Attorney Breaux expressed tribute to the memory of former Regional Director Potter, for whom memorial services were con- ducted that day (1 6-7) 4 All dates are for 1984 unless otherwise indicated I refer to Marino Electric, Inc as MEI and to Marin Electric, Inc as Marro Thus, "Marino" refers to J C Marino, the person who owns the controlling stock 285 NLRB No. 53 MARINO ELECTRIC 345 By its answer Respondent admits certain factual mat- ters but denies violating the Act. On the entire record, including my observation of the demeanor of the witnesses, and after due consideration of the briefs filed by the General Counsel, the Union, and the Respondent, I make the following FINDINGS OF FACT 1. JURISDICTION Both MEI and Marin are 'Texas corporations head- quartered in Houston, Texas. Each is engaged in the building and construction industry as an electrical con- tractor. During 1984 MEI purchased and received in Texas goods and materials valued in excess of $50,000 from Texas suppliers, which suppliers, in turn, had pur- chased such items from points located outside Texas. During ' the past 12 months Marin purchased and re- ceived in Texas goods and materials valued in excess of $50,000 from Texas suppliers, which suppliers, in turn, had purchased such items from points located outside Texas. I find that MEI and Marin, and therefore Re- spondent, are each employers within the meaning of Sec- tion 2(2), (6), and (7) of the Act. 11I. LABOR ORGANIZATION INVOLVED Respondent admits, and I find, that I-BEW Local 716 is a labor organization within the meaning of Section 2(5) of the Act. III. THE ALLEGED UNFAIR LABOR PRACTICES A. Facts 1. From Wohlt Electric to Marin Electric This case revolves around J. C. Marino and the four corporations that he either owns or controls. MEI, the first of Marino's companies, was chartered by the State of Texas on 27 January 1978 (G.C. Exh. 2-1). After serv-, ing nearly 18 years with WohIt Electric, Inc., Marino launched his own entrepreneurial career in the electrical contracting business with MEI. Marino and his wife Judith have been the only directors of MEI, and from MEI's inception Marino has owned the controlling shares of stock (R-O-10).5 Marino ran MEI from his home or some other tempo- rary location for the first few months. In June 1978 MEI moved to its permanent quarters at 615 Hartman and mailed copies of an announcement to that effect (6:1546). Aside from listing MEI's name, logo, address, telephone number, and officers, 6 the announcement declared MEI to be (R-O-15): 5 Exhibits of MEI are designated as R-O with trailing sequence number, and Marin's exhibits bear the prefix R-N (3 603, 613). R-0-10 is a chart showing a history of the directors, officers, and stockholders of the four corporations (6.1505). 6 The officers named were J. C. Marino, president, and Tom Fitch, vice president. Fitch also had been at Wohlt Electric with Marino and ,had joined MEI shortly after its creation. Fitch joined as part owner, purchasing 16,000 of the 82,000 shares around Easter 1978 (5:1254). A new electrical contracting firm specializing in de- signing and building quality commercial and indus- trial construction. As we shall see, the nature of MEI's work, or the market it specialized in, is a key point in the evidence be- cause that specialty is contrasted with the so-called com- petitive market in which Marin operates. Even before MEI moved to its permanent quarters at 615 Hartman, Marino, in the spring of 1978, signed the Letter of Assent-A agreeing to be bound by the CBA of the Southeast Texas Chapter, National Electrical Con- tractors Association, Inc. (NECA) (5:1440-1441). Soon thereafter MEI joined NECA, and Respondent admits to this fact in its answer to complaint paragraph 10. On signing the letter' of assent at Local 716, Marino was given the opportunity to choose his first two electricians by name, and he selected Gary Kaminsky and John LeB- lanc-foremen at Wohlt Electric (5:1322, 1441). Fitch testified that Kaminsky was the first to start, and that he began about May 1978 (5:1256). Thereafter MEI called the Union when it needed to hire electricians. Joseph D. Meyer also worked at Wohlt Electric when Marino and Fitch were there. Indeed, in early 1962 Marino hired Meyer to work as an estimator at Wohlt Electric (3:686-687). Meyer testified that he joined MEI in March 1979 (3:688; 4:971) and was promoted to vice president of engineering and sales in the summer of 1979 (3:689).' From its beginning, as previously noted, MEI special- ized in designing and building quality commercial and in- dustrial construction (1:21; 6:1590). Respondent's wit- nesses refer to this as the design/build market. Marino described the nature of the design/build concept as a team concept, pioneered by Wohlt Electric, in which an owner engages an architect to prepare preliminary plans and specifications. The selected general contractor calls in the electrical contractor. The owner would then take the final plans to his bank. All of this, Marino testified, was on a negotiated basis; that is, there was no bidding by competitors (6:1547-1548). Bernard M. Kalmans gave a similar description of the design/build concept, a format he used at his own elec- trical contracting company, Kalmans Electric Company, before selling his assets to a Dallas firm in May 1984 (3:552-554). He sold out because his business (40 to 50 percent of which was design/build) became unprofitable (3:555, 556). Beginning in 1983, Kalman testified, his customers switched from negotiated contracts (design/- build) to the competitive market in which the lowest bid gets the job (3:554, 556). Although the record contains several references to lowest price getting the job, that shorthand reference must give way to the more complete statement of other witnesses that the lowest responsible (i.e., reliable) bidder is awarded the job. These' witnesses, estimators for differ- ' Minutes of a special joint meeting of MEI's shareholders and direc- tors held 12 October 1979 at Lake Tahoe, Nevada, reflect that Meyer was elected to the vice president position "effective May 1979" (G C. Exh 2-2), and the May 1979 date is reflected in the chart summary (R- 0-10) 346 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD ent general contractors in Houston, include Curtis L. Trenkelbach (4:857, a project manager), Dan Sterling (4:885, 890, 893), Gordon Albrecht (4:908), and Mark Gartrell (4.925). Even Meyer, who initially testified that bottom dollar takes the job (3:697), subsequently modi- fied that to say customers are primarily interested in the bottom dollar, but that no one wants shoddy materials or workmanship (4:1004-1005). Before 1983 MEI was quite successful, and it awarded bonuses to employees and donated to charities. By 1983, however, two adverse developments had occurred in Houston. First, the oil-based economy had begun suffer- ing and construction soon felt the pain. Second, non- union electrical contractors multiplied (1:112; 2:326, Marino; 3.556, 565, Kalmans; 3:696, Meyer). The conse- quences of the downturn in the oil-based economy are reflected in statistics appearing in the record (R-O-12; R-O-14), and reports about the events appear in both na- tional publications, such as Newsweeks and the Wall Street Journal,9 as well as in local publications such as the Houston Chronicle. i o Nonunion contractors were paying their electricians about $10 to $12 an hour, and even when a company added medical benefits the total cost came to no more than about half the $24 hourly cost (including benefits) for union scale (1:126-127, Marino; 3:564, Kalmans; 3:724, Meyer)." The difference in labor cost put a severe squeeze on union contractors, for as Marino (1:115) and Kalmans (3:563) testified, the principal cost factor difference between union and nonunion contrac- tors is the labor cost The cost of materials is essentially the same for both groups (1:115) Because of the squeeze, Kalmans sold out in early May 1984 (3:553, 565). And Wohlt Electric, the union contractor who pioneered the design/build concept, appears to have closed its doors in 1985 (6:1549, Marino). MEI took several steps in an effort to survive. First, it reduced various items of overhead expense, including consolidating some office jobs, laying off employees, dropping bonuses and eliminating advertising in the yellow pages, cutting or freezing some salaries, and more. Second, it attempted to enter the competitive a The Great Texas Oil Bust, Newsweek, March 21, 1986 at 16 Thus, above at 17, "Industry statistics tell the story In December 1981, the number of rotary-drill rigs operating in Texas peaked at 1,448-but by the end of 1982 that number had been cut in half" And at 18 above, "Houston and its real-estate boom were heavily dependent on oil In 1982 alone, Houston lost an estimated 100,000 jobs as drilling activity dried 11 up 9 Frazier, City Under Stress Houston Falls Into a State of Mental De- pression, Wall Street J , March 25, 1986 at 1, col I 10 Drummond, Construction on Offices at Virtual Standstill, Houston Chronicle, Nov 10, 1985, sec 5 at I Drummond reports, "During the historic burst in office construction in 1982 and 1983, developers com- pleted buildings equal to half the office space in the entire city Today, office construction is at a virtual standstill " As anyone would expect, "Houstonians have embarked on a massive diversification effort to ensure that the city's economy will be as bright in the future as it has in the past " Sheridan, Houston A Plan For Diversification, SPIRIT (Southwest Airlines), April 1986 at 81, 82 11 The relevant CBA is effective 14 February 1983 to 27 August 1986 (G C Exh 7) MEI is a signatory The CBA provides for a journeyman wage rate (not including benefits) of $17 88 effective 2 March 1983 and a rate of $17 98 effective 31 August 1983, with a wage rate effective 29 August 1984 to be determined in reopener negotiations (G C Exh 7 at 30) market based on two agreements NECA negotiated with the Union. These agreements allowed contractors to pay lower rates for certain work. One of these agreements was called the Market Recovery Agreement (MRA), and it provided for a $12 hourly rate for journeymen (1:131; 2:275). The other was the Ship Channel Recovery Agreement (SCRA), which allowed an hourly rate of $14.30 (6:1576). The MRA (and presumably the SCRA) was effective from November 1983 to 1984 (1:131; 6:1533). The cost of benefits, however, was based on the higher wage scale of the CBA, and this resulted in a total cost of about $15 to $16 under the MRA (2:275, 280-281). Because everyone was unhappy with the MRA and, presumably, the SCRA, these two side agreements were not renewed. The electricians did not like the MRA for obvious rea- sons, and MEI did not like it for two reasons. First, the total rate was still too high for MEI to compete with open shop contractors and, second, the dissatisfaction of the electricians manifested itself in lower productivity, higher turnover, and increased attendance problems. Third, in its efforts to enter the competitive market MEI reduced its normal overhead factor when bidding, and on a very few jobs actually submitted a bid at less than its cost simply in an effort to get a start. MEI was unsuccessful in its efforts to penetrate the competitive market (1:112; 6:1549-1550, Marino).12 A last hope MEI had was that the Union would agree to NECA's request for a 15-percent reduction in the wage-benefit package to be effective 29 August 1984. The Union declined to agree to the reduction, and the matter was submitted to the contractual arbitrator, The Council on Industrial Relations (CIR) in Washington, D.C. On 28 August 1984 the parties learned that the CIR had upheld the Union's refusal to agree to a rollback in labor costs (R-O-18). Even so, Meyer testified that a 15- percent reduction would have been too little to help (3:707, 763), and Marino testified that for MEI to com- pete it needed a labor cost factor in the $10- to $12-an- hour range (1.131). There is no question that MEI's fortunes were declin- ing. The firm incurred a net loss of $7207 for calendar year 1983, and in 1984 the news was even worse with a net loss of $35,587 (G C. Exh. 2-10). The backlog of job awards is, of course, an indication of a firm's economic prospects for the coming months. MEI's backlog history, downright gloomy on entering 1984, reflects the follow- ing (R-N-23): As of Amount 31 December 1981 $2,466,838 31 December 1982 538,123 31 December 1983 293,040 31 August 1984 94,487 In the 8-month period ending 31 August 1984, MEI was unsuccessful on at least 32 bids totaling over $2,385,000 (R-O-16) 12 MEi did secure a few contracts, but the dollar volume and profits were far too small MARINO ELECTRIC 347 In view of all the economic problems facing MEI it is not surprising that for several months before the CIR's decision, Fitch, Meyer, and Marino had discussed the possibility of forming a separate company to operate in the competitive market. On 29 August 1984, following receipt of the CIR's decision that the contractual wage rates would remain the same for another year, Marino decided to curtail MEI's operations and to create a sepa- rate company that would operate in the competitive market (1:103, 123-125, 144; 2:277; 6:1574). Marino testis fled that he and his wife Judith selected the name of Marin for the new company (2:315). That name is simply Marino with the letter "o" dropped. On 29 August Marino went to his corporate attorney who, on that date, prepared the articles of incorporation for a holding company, Marin Holding Company (Hold- ing) and for Marin Electric, Inc. (1:143-144). Two days later, 31 August 1984, the Secretary of State for Texas issued a charter to Holding.(G.C. Exh. 4-1) and one to Marin (G.C. Exh. 3-1).13 On 10 September certain stock purchases and ex- changes occurred as a result of the organizational meet- ings that date of Holding and Marin. Marino, Fitch, and Meyer (the only stockholders of MEI) exchanged their shares of MEI stock for an equal number of shares in Holding, with Holding becoming the sole stockholder of both Marino and Marin(R-O--10). From 10 September to the present (actually, to the close of the hearing insofar as the record can show), the initial and only directors of Holding have been J. C. Marino and Judith Marino,14 and the only officer Holding has had has been Marino as president and secretary (R-O-10; complaint par. 2, ad- mitted). From its 10 September organizational meeting for- ward, Marin's officers have 'been: Phillip Steffek, presi- dent; Thomas N. Fitch, vice president and secretary; Joseph D. Meyer, vice president (R-O-10; G.C. Exh. 3- 2). And its directors have been (R-O-l0; G.C. Exh. 3-2)- J. C. Marino Judith I. Marino Phillip Steffek Joseph D. Meyer Thomas N. Fitch' Charles H. Barineau, Jr. 10 Sept. 1984 to present 10 Sept. 1984 to 1 Aug. 1985 1 Aug. 1985 to present I Aug. 1985 to present 1 Aug. 1985 to present 1 Aug. 1985 to 24 Sept. 1985 From 10 September forward the 82,000 shares of Holding have been owned as follows (G.C. Exh. 4-2; R- 0-10; 1: 119-120): J. C. Marino 59,200-72.2% Thomas N. Fitch 16,000-19.5% Joseph D. Meyer 6,000-8.3% 82,000-100.0% 13 Earlier in 1980, Marino had formed J. C. Marino Interests , Inc (In- terests) that, as the record reflects, owns and leases equipment and other property, first to MEI, and later, to Mann. From the inception of Inter- ests, Marino has been the sole stockholder, director, and officer (R-O-10; 1:175-179; 5.1415) 14 Marino and his wife have been the only directors MEI has had from its inception. Thus, although J. C. Marino has never been an officer or director of Marin, he has potential control of Marin by virtue of being the majority stockholder of Holding (he and his wife Judith constitute Holding's board of di- rectors) which in turn owns all the shares of both Marin and MEI (1:122). 2. MEI before Marin In the months before Marin was created, MEI operat- ed as follows. Marino made all major decisions, handled the public and customer relations work, set the labor re- lations policies,15 and served as the project manager on the larger jobs. Fitch testified that on the larger jobs the foremen had more contact with Marino than with him (5:1261, 1264). As Marino described his function as of 1984, "I was Mr. Everything" in running the corpora- tion, serving as project manager, and working with the employees and job foremen (1:157-158). Assisting Marino in operating MEI were Thomas N. Fitch, Joseph D. Meyer, and Phillip, Steffek. Fitch was vice president of operations and production, Meyer was vice president of engineering and sales, and Steffek was the controller. Unlike Marino, Fitch, and Meyer, Steffek held no shares of MEI's stock. In practical terms, Fitch was the shop superintendent whose primary duty was to oversee the job foremen and to keep the crews balanced on the various jobs (1:158, 160; 5:1259). Meyer was in charge of estimating and en- gineering design (1:158; 3:689, 718), and Steffek ran the office and accounting function (1:163). 16 Because Marino, was personally involved in just about everything at MEI, there' were no rigid organizational lines. Thus, Larry Anders handled estimating and some service work, and reported to both Marino and Meyer (1:159; 5:1297). Anders testified he did estimating at Marino and that it was not until the summer of 1984 that he was given charge over the service department, a task which, he tes- tified, had been handled previously by Fitch (4:1072; 5:1230).1 ° All these persons, and perhaps others at, MEI, had worked with Marino at Wohlt Electric. Indeed, some had been hired by Marino at Wohlt Electric. Other names from Marino's overhead (office) staff ap- pearing in the record include Raymond Adams, a drafts- man and estimator who assisted Meyer, and Maurice Garrett, a material expeditor (1:161). Suzan L. Steffan, the office manager, worked under the supervision of Steffek (1:34; 6:1517). 3. Events after 10 September 1984 On I1 September Meyer became Marin's first employ- ee. He soon was followed by Fitch and Steffek. The top management of Marin consists of Steffek, president; Meyer, vice president; and Fitch, vice president and sec- retary. Steffek directs the office staff and the financial and accounting aspects, Fitch is in charge of the field op- 15 Of course, many aspects of labor relations were controlled by the CBA with Local 716. is Marino, Fitch, and Meyer testified, but Steffek did not. 17 Marano testified that during the cost-reduction layoffs of early 1983 Fitch took over the additional responsibility of the service trucks (6 1518) 348 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD erations, and Meyer handles the estimating, bidding, project management, and public and customer relations. The titles of Mann's officers are rather misleading, for Meyer (3:719; 4:984) and Fitch (5:1298-1299) testified that the three work together but none reports to anyone. Marino describes Marin's top management as a "three- headed deal" (1:163). According to Meyer, Marino exer- cises no supervision over any member of Marin's trium- virate (3:719, 730). Since 1978 Marino has personally owned the facility at 615 Hartman. He leased it to MEI (G.C. Exh. 2-13). When Marino decided in late August to curtail his ef- forts to enter the competitive market with MEI, and to form a separate company for that purpose, he recognized that it meant MEI's space needs would be smaller. Ac- cordingly, about 1 October MEI moved about two to four blocks to an office located at 702 Leverkuhn.18 Marino then leased space in his 615 Hartman building to Marro effective 1 October 1984 (G.C Exh. 5-7).19 Of MEI's overhead (office) staff, only Larry Anders remained with MEI and moved with Marino to the Le- verkuhn address where he ran the service department. The others transferred to Marin and remained at 615 Hartman. The electricians, being union, remained with MEI and moved to 702 Leverkuhn. Marino also had occasion to be at 615 Hartman on oc- casion, for his leasing firm, Interests, has an office there (1:69, 132, 183). Indeed, at one point in his testimony Marino referred to that as his "corporate" office (1:183- 184). Over the years MEI has participated in or bid on joint venture projects in other cities or States, usually with an out-of-state firm. For example, MEI and Hatfield Elec- tric of Columbus, Ohio, are engaged in a joint venture on a 37-story office building in Columbus. Marino refers to these projects as MEI's national joint venture work After September MEI continued pursuing its national joint venture business and what service work it had. Fol- lowing 6 weeks or more of intensive estimating, MEI was unsuccessful on its December bid (actually a joint venture bid with Hatfield Electric) for the electrical work on the new George Brown Convention Center in Houston. Former Job Foreman Arthur Wayne Boulet testified, in his opinion, if MEI had been awarded the convention center job the Company would have re- mained open (i.e., had business for the electricians), but when it lost that bid "they" (meaning Marino and Anders, apparently) no longer seemed to care (2.436). Boulet is one of 13 employees named in complaint paragraph 17 as having been terminated unlawfully be- tween 16 October 1984 and 18 January 1985. Whether the 13 were laid off or quit and the legal effect of their departure are matters the parties dispute. Regardless of the merits of that debate, there is no dispute that the oc- 18 Marino dates the move about 1 October (1 51, 92), and Anders places it about the third or fourth week of September (5 1215) 19 Although the lease bears an execution date of 15 October 1984, Marino concedes that it was not actually signed until January or Febru- ary 1985 (1 91) Because so many events were transpiring in the fall of 1984, Marino testified, it was not until January or February 1985 that he was able to catch up on the legal paperwork involving leases and other items (2 306) casion for the 13 leaving was MEI's declining amount of work. Indeed, about mid-January 1985 Anders left MEI and went to work for Marin as manager of the service department Since the pay period ending 22 January 1985, Marino has been MEI's only employee (1.166; 2:259-260). How did Marin get started9 In two ways First, while still employed at MEI, Meyer bid on two jobs when Marino decided that MEI could not afford to do the work because of the competitive pricing of the jobs. The two projects are described as the Ferranti International Controls job and the Pasadena Interfaith Phase II job. As Marino testified, MEI declined to bid against the competitive pricing on the Pasadena job (2:295-297; 5:1433) and, in the face of economic reality about the competitive market, decided to withdraw MEI's bid on the Ferranti job (2:275-278). Second, until money started flowing in from advance billings and work on the Ferranti and Pasadena jobs, Marin needed operating cash. That initial cash was ad- vanced from Holding to Marro beginning with a $1000 payment on 21 September. By 26 October Holding had loaned Marin $33,500 (G.C. Exh. 4-8). During approxi- mately the same period (from 19 September to 26 Octo- ber), MEI transferred $34,000 to Holding (G.C. Exh. 4- 8). As Marin's operation became successful over the next few months it repaid Holding. Payments were made by offsetting journal entries. As explained by Respondent's certified public accountant (CPA), Charles H Barineau Jr., it is a common practice on intercompany dealings between wholly owned firms to handle transactions (purchases, loans, and payments) by offsetting journal entries because one item simply can- cels out the other (5:1395). Barineau testified that this procedure cannot be followed in companies with minori- ty shareholders, who should be compensated (with inter- est) for the use of their money, but that it makes no dif- ference when the firms are owned 100 percent by one entity (5:1398, 1417). Marin has been successful, and in 1985 it not only repaid MEI and Holding, but it also began advancing funds to Holding. In turn, Holding loaned the money to MEI. By 30 September 1985, as CPA Barineau testified, such funds exceeded $115,000 (5.1352, 1359). During its startup period, Marin purchased much of MEI's office furniture, tools, and equipment. The re- placement cost for the tools was ascertained, and MEI discounted that figure by 75 percent to reach the market value for used tools Marin eventually paid MEI that dis- counted sum by offsetting the journal entry (2:313-314, 380-381; 4.987; 5.1373). The furniture was also paid by offsetting journal entry (5.1366, 1394). In the weeks and months after MEI's office staff (with the exception of Marino and Anders) departed to join Marin, some of that same staff continued to provide serv- ices to MEI as needed by their former employer-for a fee paid by MEI to Mann Thus, Steffek and Steffan pro- vided accounting and bookkeeping services at the rate of $1500 per month ,20 and Meyer, Fitch, and others pro- 20 See 1 184, 2 288 , 316-317, 360, 3 730, 733, 5 1225, 5 1367, 1374 MARINO ELECTRIC vided engineering, estimating, bidding, and troubleshoot- ing services at $1500 a month , or $50 an hour, paid by offsetting journal entries compensating Marin for the time of its employees.21 MEI and Marin have separate bank accounts, books and records, tax returns, and insurance . However, Marino is covered under the medical policy protecting Mann's employees. MEI pays Marin for Marino 's cover- age on a quarterly basis (5:1376) and charges the cost to Marino's salary draw (2:357-359). Although the record does not give the reason for Marino's inclusion , I assume he is included in order that he may obtain a lower rate available under group coverage. During its first year of operation (from about Septem- ber 1984 to 30 September 1985) Marin developed a cus- tomer list of 68 firms in the Houston area, with 26 being companies who were past customers of MET (R-N-3; 3:745; 4:1056, Meyer). The total dollar volume of Marin's contracts and service work during its first year was $2,025,582, with $959,845 (47.4 percent) of that sum coming from former customers of MEI (R-N-3). Marin operates strictly in the Houston area (3:797; 4:1015, 1067). Although MEI does joint venture work, most of it outside either Houston or Texas'22 Meyer tes- tified that Mann works mostly in the competitive bid market, has. no joint ventures , and most of its jobs are small (3:797). CPA Barineau gave confirming testimony (5:1387). 4. Allegedly unlawful statements a. Introduction Complaint paragraph 16 alleges that Respondent vio- lated Section 8(a)(1) of the Act when Thomas N. Fitch allegedly: (a) About October 12, 1984, informed an employee that Respondent Marino had to go "nonunion " under the name of Respondent Marin in order to get sufficient work as an electrical subcontractor. (b) About October 20, 1984, informed an employee that Respondent Marin was the open shop of Respondent Marino and was created so that Respondent could stay in business. .(c) About October 24, 1984, told an employee that Re- spondent Marino had to close down and open up at Re- spondent Marin in order to continue doing business as an electrical contractor. The General Counsel apparently relies on the testimo- ny of Ernest Dale Worthan and Carl Smith to support the allegations. Apparently the General Counsel relies on the remarks principally in relation to the subject of MEI's alleged motive to evade the CBA with the Union. Respondent did not object to the variance in the dates of some of the evidence, and it does not specifically ad- dress the paragraph 16 allegations in its brief. 21 See 2 286-293, 369; 3 732-734, 4 997- 1003, 5 1313-1314, 5 1367, 1374-1375 22 As CPA Barineau testified, during the first 9 months of 1985, 90 percent of MEI's income derived from joint venture projects (5 1384, R- N-25). 349 b. The evidence Union member Carl Smith testified that about mid-Oc- tober Fitch hired him in a telephone conversation. When Smith reported for work the next morning, Fitch asked if he was a union member. "Yes," said Smith. Fitch said he was too. Fitch added that "they" previously had been Marino Electric and had decided to open Marin Electric to cut "their" costs (3:645-647).23 Fitch was not asked about this conversation during his testimony. Ernest Dale Wortham , a member of Local 716, visited Marin's office in early November and left his name and telephone number as an electrician seeking work (3:576- 578). About 19 November Fitch telephoned Wortham and inquired whether he was still looking for work. "Yes," Wortham said. Fitch spoke of a certain job and said he was looking for someone to run it for $13 an hour.24 According to Wortham, Fitch added that Marin was a branch of Marino which "they" ("we?") had formed to stay in business, that Fitch held a union card and there was no reason for Wortham to drop his union membership. Wortham said he would call him back (3:579). On cross-examination Wortham admitted that in his 12 April 1985 pretrial affidavit he reported Fitch as saying "Marin is the open shop of Marino Electric," that Fitch said they had "formed the nonunion side in order to stay in business," and that Wortham said he would get back with him the next day (3:603-604). The following day, 20 November , Wortham and Fitch held a telephone conversation that Wortham tape record- ed. The transcript of the conversation is in evidence as Charging Party Exh. 3. In the tape recorded conversa- tion of 20 November Fitch states, "See we're just kinda starting out and uh-I mean we ain't new to the business, but Marin Electric is new." (C.P. Exh. 3 at 3.) A couple of exchanges later finds Wortham asking whether Marin foresees much work, and Fitch replies af- firmatively, adding (C.P. Exh. 3 at 3): FITCH: We, well I may have told you yesterday, but we used to be Marin Electric. WORTHAM: Yeah. FITCH : And see, Marino's union. WORTHAM: Yeah. FITCH: Well it's doing business , but uh-we formed an open shop to try and stay in business. Fitch testified that when he referred to "we" in the 20 November telephone conversation, he meant that Meyer and the others who had come over to Mann from MEI were not a bunch of upstarts, but were people who had previously worked at MEI (5:1288). The thrust of Fitch's testimony seems to be that he attempted to convey the message that the people staffing Mann were the experi- enced former staff of MEI. 2 3 No doubt Fitch actually would have used the pronouns "we" and "our " Indeed, as we shall see, Fitch testified that he used "we" in a dif- ferent conversation with employee Wortham. 24 As Marino testified (1.163; 6 1568), the record reflects that the par- ties use the term "job runner" interchangeably with "foreman " 350 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD c. Conclusions I credit the testimony of employees Smith and Wortham. I do not credit Fitch's testimony regarding the intention of his remarks to the extent no such intention is conveyed in his tape recorded words. Nevertheless, I find no violation in Fitch's remarks, and I shall dismiss complaint paragraphs 16(a), (b), and (c). 5. August 1984 remarks of J. C. Marino The record contains evidence of a conversation in August 1984 between Local 716 member Arthur Wayne Boulet and J. C. Marino concerning an open shop and Marino's plans regarding MEI.25 There is no allegation or contention that Marino's remarks were independently unlawful, but the General Counsel and the Union rely on them, in part, to show that Respondent was unlawfully motivated in establishing Marin. There is no dispute that on an unspecified date in August 1984 Boulet and Marino had a conversation at MEI's 615 Hartman location. What differs is the testimo- ny regarding the contents of the conversation. Because he had heard rumors about an open shop,26 Boulet asked Marino how the work picture looked. "Not good," replied Marino. Boulet then asked Marino about the open shop matter. According to Boulet, Marino said he was going to establish an open shop in order to sur- vive because he could not get jobs by bidding on union rates. Marino, Boulet continued, said he would keep MEI in business until the end of 1986, and that if MEI could not survive after that then he would close MEI and join the open shop that, as Boulet understood, would already be in existence.27 Marino offered Boulet $20 an hour to work at the open shop to be established, saying that he could pay his top people that much and still achieve a lower average by paying the other electricians a reduced figure. Boulet replied that he would remain union because he had been a union man all his working life. Marino said he too was union and that it hurt him to do it (2:396-397, 430-433, 437-442). Boulet concedes that in his pretrial affidavit he placed the conversation in October.28 He testified that after in- specting his checkstubs he now places the conversation in August, although he remains uncertain about the date. He also concedes that in his pretrial affidavit he states that Marino said, "I will keep my open shop and the closed shop. If work is good and I can get jobs I will stay union." (2:443-444) According to Marino, he and Boulet did discuss MEI's work prospects. Marino remarked to Boulet that open 25 Boulet was one of the first electricians hired by MEI in 1978 (2.392). Marino testified that he met Boulet at Wohit Electric (6.1525). Boulet sometimes worked as a foreman at MEI, but it appears that the last few months he worked on a service truck as a skilled, but nonsuper- visory, journeyman or leadman assisted by an apprentice 26 In June Fitch had remarked to Boulet that if MEI were an open shop it could hire cheaper labor to perform the less skilled work (2:399- 400, Boulet). 29 Boulet was uncertain whether Marino referred to the end of 1986 or until the CBA expired He testified that he did not know when the CBA expired (2.441) The scheduled expiration date is 27 August 1986 (G.C. Exh. 7) 2 s Boulet's pretrial affidavit is dated 2 May 1985 (2 411). shop companies were underbidding MEI even though they paid their leadmen $20 an hour. They could do this, Marino explained, and still reach a low average pay be- cause the lesser skilled electricians were paid reduced rates. Marino denies offering Boulet a job at Marin. He also denies saying he was going to establish an open shop or that he would try to keep MEI going until the end of 1986 (5:1432). Bearing on the timing of the Boulet-Marino conversa- tion is a conversation Boulet had with Fitch about going to work at the new company. Boulet places the Fitch conversation at the 615 Hartman location about 2 weeks after the Marino conversation (2:398). Boulet testified that he asked Fitch about the open shop. Fitch replied that if he could have Boulet, Gary Kaminsky, and Rich- ard Spade he could pay them $16 an hour and the lesser skilled employees a lower scale (2:398-399). According to Fitch, the conversation occurred in Oc- tober after he already was employed by Marin, and that on this occasion he offered to hire Boulet at $16 an hour. Boulet either declined outright or said he would think about it - (5:1290). Fitch did not explain, at the hearing, what Boulet, as an employee of MEI (whose office by then was at 702 Leverkuhn), was doing at the 615 Hart- man location. I credit Boulet regarding these conversations with Marino and Fitch. In so doing, I consider only one aspect of Marino's remarks as tending to support the General Counsel 's case regarding a motive by MEI to evade its CBA with the Union. That aspect is the fact that Marino made a job offer-indicating that Marino viewed the yet-to-be created company as an entity he would control. As for Marino's comments about operating an open shop and a unionized firm at the same time, and giving MEI until the end of 1986 "to sink or swim, those re- marks support Respondent's defense that Marino merely established a lawful, double-breasted operation when he formed Marin, and that Marino's intent from the begin- ning was that MEI survive if it could. B. Analysis and Conclusions 1. Applicable legal principles The General Counsel alleged and litigated this case on the alter ego doctrine. Thus, complaint paragraph 14 spe- cifically alleges that Marin, "as alter ego of Respondent Marino," is bound by the CBA, which binds MEI. As for intent or purpose, the General Counsel alleges, in paragraph 4: (a) At all times material herein, Respondent Marino and Respondent Marin, under the aegis of Marin Holding Company, have been under common management and ownership; shared a common busi- ness purpose by virtue of their nature of operations and supervision; shared and intermingled properties, business accounts, credits and purchases; had common customers; and are in the same business in the same market. (b) Respondent Marin and Marin Holding Com- pany were created and came into existence in an un- MARINO ELECTRIC 351 lawful effort to circumvent the collective bargain- ing agreement obligations of Respondent Marino, which obligations are referred to below in para- graphs 11 through 14. An employer cannot evade its obligations under the Act-including its commitments under a binding CBA- by forming what appears to be a new company but what in fact is a "disguised continuance," or alter ego, of the primal firm. Howard Johnson Co. v. Hotel Employees, 417 U.S. 249, 259 In. 5 (1974); Southport Petroleum Co. v. NLRB, 315 U.S. 100 (1942); Mar-Kay Cartage, 277 NLRB 1335 (1985). In determining whether one employer is the alter ego of another the Board considers several factors, no one of which is controlling. Fugmy Continental Corp., 265 NLRB 1301 (1982), enfd. 725 F.2d 1416 (D.C. Cir. 1984). The Board generally finds alter ego status when two fa- cially independent employers have substantially identical ownership, management, supervision, business purpose, operation, equipment, custortlers, and business in the same market.29 Watt Electric Co., 273 NLRB 655 (1984); Advance Electric, 268 NLRB 1001, 1002 (1984). Addition- ally, the Board considers whether the purpose behind the creation of the new firm was legitimate or whether it was an intent to evade responsibilities under the Act. Mar-Kay Cartage, Watt Electric; and Advance Electric. Regarding the last factor, the second circuit recently stated that although antiunion animus or an intent to evade may be germane, "or, even a sufficient basis for im- posing alter ego status," it is not a necessary finding. Goodman Piping Products v. NLRB, 741 F.2d 10 (2d Cir. 1984). In a careful analysis of the cases, the Sixth Circuit made a similar conclusion. NLRB v. Allcoast Transfer, 780 F.2d 576 (6th Cir. 1986), enfg. 271 NLRB 1374 (1984). See also Apex Decorating Co., 275 NLRB 459 fn. 3(198 5). Antiunion animus, of course, does not necessarily ' ac- company an intent to evade. In Watt Electric, 273 NLRB 655 (1984), the owner, John 0. Watt,, held no personal animus toward the union. He simply wanted to escape the economic burden of the union contract. A similar motivation existed in Advance Electric, 268 NLRB 1001, 1004 (1984). A majority of the court in Denzil S. Alkire v. NLRB, 716 F.2d 1014 (4th Cir. 1983), phrased the test as fol- lows: When business operations are transferred, the initial question is whether substantially the same entity controls both the old and new employer. If this control exists, then the inquiry must turn to wheth- 29 Several factors are common to an analysis of allegations of alter ego, single employer, or joint employer status However, the three doc- trines, although related and similar in some respects , are conceptually dis- tinct one from the other. Thus, alter ego is different from single employ- er. Iowa Express Distribution v. NLRB, 739 F 2d 1305 (8th Cir. 1984); Air- port Bus Service, 273 NLRB 561 (1984). And single employer is different from joint employer. NLRB v Browning-Ferris Industries, 691 F 2d 1117, 1121-1124 (3d Cir. 1982), Aspen Leasing Systems, 271 NLRB 1536 fn. 1 (1984). Because a joint 'employer is, in fact, two separate firms jointly controlling labor relations, the joint employer concept is significantly dif- ferent from that of alter ego er the transfer resulted in an expected or reasonably foreseeable benefit to the old employer related to the elimination of its labor obligations. The court in Alkire went on to state that linking em- ployer motivation for the transfer of its business to ob- taining a future benefit represents a broader standard than that of requiring antiunion animus or intent to evade labor organizations, even though in many cases the em- ployer's intended benefit may be, in fact, evasion of a labor obligation. "In other cases, however, the employer may intend no evasiveness or subterfuge, but merely seeks what it believes is a legitimate benefit offered by a strategic business reorganization." Alkire, above. In our case Respondent's position is that there was no transfer of business or assets (except for arm's-length sales of tools and equipment) from MEI to Marin. As the Board observed in Mine Workers District 23 (Kentucky Lake), 271 NLRB 461 fn. 1 (1984), in some in- stances the factors considered have been equated with the four basic indicia for finding a single employer: (1) interrelation of operations, (2) centralized control of labor relations, (3) common management, and (4) common ownership or financial control. However, the Board observed that more must be shown to establish that one is the alter ego of the other.30 The reason more must be shown is that a single employer finding does not automatically bind both firms to the existing CBA, whereas an alter ego finding does bind the new company to the CBA of the old enterprise. Watt Electric Co., 273 NLRB 655, 658 fn. 15'(1984); Victor Valley, supra. Aside from the additional factors considered in the alter ego situation, the analytical focus is different from that in single employer cases. In the latter the focus is "the interrelatedness of the employers," whereas for alter ego analysis the focus "is on the existence of a disguised continuance or an attempt to avoid the obligations of a collective bargaining agreement through a sham transac- tion or technical change in operations." Carpenters Local 1846 v. Pratt-Farnsworth, 690 F.2d 489 (5th Cir. 1982). Typically an alter ego is established for the purpose of evading the original employer's responsibilities under its CBA. Watt Electric Co., 273 NLRB 655 (1984). Conse- quently, substantial identity of ownership can be an im- portant factor for the obvious reason that the very con- cept of intent usually requires a continuation of owner- ship, or financial control, to implement that intent. Watt Electric is an example (the Watt family), as is Advance Electric, 268 NLRB 1001 (1984) (the Shoots family), and Crawford Door Sales Co., 226 NLRB 1144 (1976) (the Cordes family). But a substantial identity of ownership does not always mean that the new employer is an alter ego. This is so because the new employer may be a significantly differ- ent business and, therefore, not a "disguised continu- ance" of the original employer. Thus, the facts must reveal a common business purpose before an alter ego finding can be made. O. Voorhees Painting Co., 275 30 Citations by the Board include Victor Valley Heating, 267 NLRB - 1292, 1296-1297 ( 1983). 352 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD NLRB 779 (1985); Fred E. Fugazzi Jr., Trustee, 273 NLRB 501 (1984). 2. Discussion a. Ownership The holding company arrangement here is perhaps unique. Nevertheless, as J. C. Marino owned the con- trolling interest in MEI, so also he does with Holding, and Holding, in turn, owns all of Marin's stock (1:122). Marino testified that Holding is just a paper corpora- tion with no employees (1:148; 2:317)._ It exists, CPA Barineau testified, to assist MEI and Marin in financial operations (5:1354). That, typically, involves moving funds between the subsidiaries, MEI and Marin, a prac- tice Barineau described as typical of affiliated companies, particularly in startup situations (5:1357-1358, 1414, 1421). When subsidiaries are wholly owned, Barineau tes- tified, the parent firm takes the view that it owns all the cash. (5:1414).31 As Marino is the president and secretary of Holding, and he and his wife the only directors of Holding, it is clear that for the purposes of alter ego analysis, J. C. Marino is the majority owner of Marin and potentially can exercise financial control and any other kind of con- trol over Marin. Respondent cites several cases for the proposition that the control, to be meaningful, must be actual, not merely potential, and that this factor is considered less important than the criteria indicating operational integration, Many of these cases involve an analysis of single employer situ- ations such as in Milo Express, 212 NLRB 313 (1974), and Gerace Construction, 193 NLRB 645 (1971). As previously discussed, the focus here is somewhat different from that of the single employer analysis, and I have discussed the reason why substantially identical ownership can be important. However, common sense 'attaches more significance to this factor when the major- ity owner exercises the control that attends his owner- ship. The question, then, is the extent to which Marino exercised his right' of control. That question leads to an inquiry of how involved Marino was in the affairs of Marin. We need to couple this inquiry with consideration of the management factor. 31 For background reading on the purposes, advantages, and disadvan- tages of holding companies see, for example, Bonbnght and Means, The Holding Company.- It's Public Significance and Its Regulation (1932, 1960; reprinted 1969, Augustus M Kelley, New York), and Wert and Hender- son, Financing Business Firms, 473, 495-514 (6th ed 1979) Bonbright and Means at 12, explain that in America the holding company is used pri- marily for one or more of four purposes. (1) to combine independent companies under a centralized management or control; (2) to achieve a unified financial structure, (3) to recapitalize the financial structure of one or more enterprises through a substitution of the securities of the holding company for the securities of the subsidiary companies, and (4) to pyra- mid the voting control so as to give to the organizers of the holding company control over the subsidiaries with a minimum amount of invest- ment. b. Management (1), Discussion At MEI Marino was closely involved with all aspects of the operation, and he made all important decisions. Even so,- Marino could not do everything, and he relied for assistance on his department managers: Steffek, Fitch; and Meyer. Marino has never been an officer or employee of Marin (1:83),32 and Steffek, Fitch, and Meyer constitute Marin's ostensible management. However, Marino has been a director of Marin ever since its organizational meeting of 10 September 1984 (1:82, 128; R-0-10; G.C. Exh. 3-2a). Respondent describes Marino's role as that of a "passive investor." (Br. at 33.) As we have seen, al- though Marin's management uses the traditional titles of president (Steffek), vice president and secretary (Fitch), and vice president (Meyer), Respondent's witnesses dis- claim the normal chain of command and contend that none of the three has a boss or reports to either of the other two. The Union calls this ridiculous (Br. at 4) ar- guing, in essence, that no one is a boss at Marin any more than he was at MEI because Marino remains the boss. 33 In support of its argument the Union points to the ad- mission of Fitch that salary increases at Marin in 1985 were decided at a meeting of the shareholders (5:1311). Holding owns all Marin's shares, and we know that Marino is the majority owner of Holding. Thus, J. C. Marino determined the early 1985 salary increases of Marin's officers.34 The General Counsel argues that Marino "has considerably more actual influence over the day-to-day operations of Marin than Respondent cares to admit." (Br. at 5.) Nevertheless, Marino has never been to a Marin job- site (1:127; 6:1582, Marino), and he is not a signatory to Mann's bank account (3:722, Meyer). Steffek hires and directs the office personnel, and Fitch hires and directs the electricians. Marino testified that he assumes Fitch sets the wages of the electricians (6:1583). According to Marino (1:127) and Meyer (3:718), Marino simply is not involved in the daily affairs of Marin. Marino testified 32 In Samuel Kosoff & Sons, 269 NLRB 424 (1984), Allen Kosoff (simi- lar to J. C. Marino here) held an office in both the old and new corpora- tions That is only a surface distinction from our case, however. 33 The Union's argument of "ridiculousness" also refers to the peculiar fact that Steffek, although president, is paid less than either of Marin's vice presidents. Thus, during late 1984 Mann's officers were paid hourly rates equating to annual salaries of (2:261-263): Steffek $36,244 Fitch 62,296 Meyer 77,740 34 Notwithstanding MEI's financial plight in 1985, Marino's own salary at MEI was increased on 22 January 1985 from a yearly figure of $174,200 to $204,152 (2:259-260). As earlier noted, in 1985 Mann began to transfer funds to MEI through Holding so that, as CPA Barmeau testi- fied, by 30 September 1985 MEI owed Holding (i.e., Marin) $115,000 (5.1352-1353, 1359, R-N-20 and R-N-22) To CPA Barineau these cash advances are a normal fact of life with a parent and wholly owned sub- sidiaries (5.1357;1395, 1414-1415), one purpose being to save the interest which otherwise would be payable on a bank loan (5.1415). To the Gen- eral Counsel and the Union the "machinations" represent the self-dealing of an alter ego MARINO ELECTRIC that he does not seek to obtain new business for Marin (6:1583). The General Counsel contends that Marino is able to remain out of Marin's daily affairs only because he "dep- utized" well trained "surrogates" to act in his stead by simply transferring the top three executives (after Marino) from MEI to Marin (Br. at 19). Even though Marino does not appear to involve him- self in the daily routine of managing Marin, he admitted- ly, as a director, keeps abreast of the financial affairs of Marin by receiving and reviewing monthly accounts re- ceivable, quarterly financial statements, reports from Steffek on new contracts, and by conferring from time to time with Fitch and Meyer (1:127, 164; 6:1620). On one occasion in December 1984 Marino had lunch with Paul Bryant, a representative of IBS, the contractor on the Ferranti project. Bryant apparently informed Marino about some changes on the project, and Marino charged the lunch to his MEI American Express card. On other occasions when he would run into IBS Presi- dent Metzger, Marino would ask him how the Ferranti project was going and whether it was on schedule (2:283-286, 379). At $611,405 (G.C. Exh. 8), the Ferranti project is, by far, Marin's biggest job.35 Moreover, IBS has proved to be Marin's biggest job source.36 In late December 1983, IBS notified its subcontractors, includ- ing MEI, that henceforth all jobs would have to be com- petitively bid, and that there would be no more negotiat- ed (design/build) work (6:1555-1556). Marino testified that the Ferranti job is the only Marin job he has dis- cussed at a meeting with a customer/contractor (2:380). (2) Conclusions regarding ownership and management J. C. Marino is clearly more than a "passive investor" in Marin. Marino testified that he looked on the Ferranti job as an opportunity for "my new company" (Marin) to enter the competitive market (2:277). Counsel for the Union is doubtlessly correct when he writes (Br. at 5), "It would be naive to think that J. C. Marino would take a back seat to anyone in controlling the thrust and direction of Marin Electric." Indeed, I find that Marino in fact does set and control the thrust and direction of Marin. However, most of the corporate formalities are ob- served, and the record reflects that Marino infrequently injects himself in the daily affairs of managing Marin. As a director of Mann he normally would be entitled to ex- ercise some interest in Mann's affairs. His position as a director begs the question, however, and I do not over- look that he controls Marin through Holding. In light of the foregoing, l find the ownership and overall management factors to be indicative here of an alter ego status. The daily management and routine su- pervision (discussed next) are indicative of independent companies. 35 The next largest is the Pasadena Interfaith Phase II job at $208,900 (R-N-2). As previously discussed, these two jobs, plus startup loans from Holding, launched Marin 36 From inception to 30 September 1985, Marco's subcontracts with LBS total $775,998 out of all contracts totaling $1,840,940 (R-N-2). 353 c. Supervision and workforce The employee complement and terms and conditions of employment differ dramatically between MEI and Marin.37 Of the approximately 50 electricians who have been hired at Marin, only Richard Spade, a foreman, ever worked for MEI (1:162; 3:724; 5:1285). As of the date of his appearance as a witness, Fitch testified that Marin employed about 18 electricians (5:1285). Except for Richard Spade, none of Mann's foremen ever worked for MEI. Fitch manages Marin's field oper- ations. At MEI Fitch was in charge of the field oper- ations, but Marino also was closely involved. Although Marino admittedly has an occasional conversation with Fitch concerning Marin's field operations,,it is only (so far as the record shows) the general interest of a director and, through Holding, owner. By contrast, when Fitch was at MEI he and Marino frequently made joint deci- sions on such matters as which foreman to assign to which job. When Fitch was at MEI, Marino was the project manager on the larger jobs and was personally involved with the work and the workers on those jobs. Marino does none of that at Marin. With a qualification, there' has been no interchange of electricians, supervisors, or others (3:729, 735). The qualification is that MEI pays a fair market fee to Marin for accounting/clerical serv- ices ($1500 a month), and for occasional engineering and troubleshooting services ($1500 a month). Such fee-paid services have not converted the companies as alter egos in other cases. Aspen Leasing Systems, 271 NLRB 1536, 1538, 1542 (1984). There has been no subcontracting of jobs between MEI and Marin (5:1286, Fitch). d. Equipment and customers Marin obtained its initial supply of tools, equipment, and furniture,by purchasing the items from MEI. Al- though the purchase of the tools at 25 percent of the es- timated replacement cost may sound generous toward Marin, there is no evidence controverting the testimony of Respondent's witnesses that such formula is the cus- tomary method in the industry for establishing fair market value. Marin leases certain items, such as a computer, from Interests. Although some payments have been late, they have been made. The evidence reflects that the leasing fees are at fair market value. MEI moved to a different facility shortly after Marin was organized. Because of difficulties of moving the tele- phone equipment and its telephone number to its new office at 702 Leverkuhn, MEI left such items at the 615 Hartman office, and Marin succeeded to. them. There is no evidence that Respondent had much control over the telephone situation.38 Marin supposedly referred MEI's calls to MEI. 37 Because MET operated under the CBA with the Union, and Marin operated as an open shop utilizing very few employment formalities, the terms and conditions of employment between the two firms are vastly different. 38 It was too late in the year to cancel MEI's listing of the old tele- phone number in the new telephone directory. 354 ,DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Marin's customer base and dollar value of contracts with former customers of MEI, as a percentage of Marin's business,39 are within tolerances approved by the Board in other cases. See, for example, T. E. Eleva- tor Corp., 268 NLRB 1461 (1984) (15-of 28 customers, or 53.6 percent), and Pinter Bros., 263 NLRB 723, 738 (1982) (312 of 842, or 37 percent, were customers of the old firm). And they are significantly short of the high numbers indicating an alter ego as found in Advance Elec- tric, 268 NLRB 1001, 1002-1003 (1984).40 To the extent there have been deviations from a strict- ly arm's-length handling of sales and leases of tools, equipment, and furniture, I find them to be of only, mar- ginal significance. Regarding the matter of customers, the numbers are within permissible limits. Although it is clear that Marin's first two jobs, Ferranti and Pasadena, allowed Marin to get a running start in the electrical contracting business, it also is true that Marino decided that it would not be economically feasible for MEI to do these jobs .41 e. Business purpose MEI and Marin are electrical contractors. Marin was created to operate in the competitive market where price is the primary consideration . MEI was formed to enter the design/build, negotiated bid, high quality, new con- struction market where price is a secondary consider- ation. When MEI entered this market in 1978 business was booming, particularly in Houston. Even so, MEI ex- panded its operations to other cities and States in joint ventures. The boom started to fade in 1982. For 1983 MEI's Houston operations suffered a net loss of $237,622 while its national joint venture operations realized a net income of $224,377 (5:1379-1381; R-N-24).42 This trend increased in 1984 with MEI's Houston op- erations showing a net loss of $368,530 and its joint ven- tures having a net gain of $248,802 (R-N-24). Overall for 1984 MEI suffered a net loss of $34,587 (G.C. Exh. 2-10). ^ MEI's backlog, as already noted, dropped from $2,466,838 at the end of 1981 to $293,040 _by the close of 1983. As of 31 August 1984 MEI's backlog stood at $94,487 (R-N-23). The deteriorating backlog is a reflec- tion of the fact that by 1983 MEI's traditional market 39 Of Marin's 68 customers, 26 (38 2 percent) are former customers of MEI, and 47 4 percent of the dollar value of Mann's work is attributable to former customers of MEI (R-N-3) 4° In Advance Electric about 75 percent of the new employer's custom- ers previously were customers of the original firm,-and over 93 percent of the dollar volume of the new firm's business was attributable to the former customers of the old firm. 41 MEI never bid the Pasadena job, and it withdrew its bid on the Fer- ranti job. 42 Gross revenues are shown (on documents and in the testimony of CPA Barineau) to be reduced by expenses . However, the only expense subtracted from the point venture income was $23,541, representing the dollar amount of time (a ratio of salary and benefits) J C. Marino spent on the one project in Ohio. All other overhead was assigned to the Hous- ton operation There was no testimony on the subject of whether any other Houston overhead (such as a percentage of Marino's office rent) should have been charged to the joint venture income . Whatever the- proper allocation, MEI's overall operations resulted in a net loss of $7207 for 1983 (G.C Exh 2-10). was just about gone. By 1984 MEI's Houston operations consisted mostly of an unsuccessful effort to enter the competitive bid market. MEI was unsuccessful because its bids were too high to be awarded any jobs. Its bids were too high because its labor costs, based on the CBA, were nearly double that of the nonunion contractors.43 Meyer testified that Marin's hourly labor burden (wages and benefits) has varied from $12 to $14 (3:724, 773, 780). As early as 1983 Marino considered forming a compa- ny to enter the competitive bid market. Finally respond- ing to the urging of Meyer and Fitch, and to the finan- cial facts facing MEI, in August 1984 Marino decided to cease MEI's efforts at penetrating the competitive, bid market and to restrict MEI to its fairly successful joint ventures plus what service work it could hold or obtain. Contrasted with MEI, Marin has always confined its efforts to the Houston area where it operates in the com- petitive bid market in which price is the primary consid- eration and the lowest qualified bidder gets the job. Marin has been successful in that market because its labor costs are that of a nonunion contractor. MEI 'and Marin are not competitors. The General Counsel (Br. at 14-15, 23-24, 30) and the Union (Br. at 7) argue, in effect, that Respondent's differ- ent markets contention is so much flimflam. As the Gen- eral Counsel sees it, as of 1984 MEI was a competitive bid contractor which also provided some engineering and consulting services on a national basis. Agreeing with that assessment, the Union adds that Marin is just as much a national joint venture contractor as is MEI be- cause of MEI's use of Meyer and Fitch. The latter point overlooks that MEI compensated Marin at fair market value for the services of Meyer and Fitch, and the first point disregards the fact that MEI's traditional work evaporated, that MEI never successfully entered the competitive market, and that MEI was re- duced to a national joint venture by economic forces beyond its control. The Union would distinguish O. Voorhees Painting Co., 275 NLRB 779 (1985), on the basis that one company there was a remodeling contractor operating nationwide, whereas the other firm was a local painting contractor. Even if there is no distinction here in the work of MEI and Marin (although I would find a distinction), the panel majority in Voorhees PaintingTound it inappropriate to conclude that the two companies there should be treated as one entity "particularly where one company operates nationally and one company operates locally." Voorhees Painting, above. In our case MEI remains a viable corporation . Should its traditional market, that of design/build, reappear (an improbable event in the foreseeable future), there is every indication that MEI would apply the CBA to its 43 The market recovery agreement (MRA) provided for lower rates but still left the hourly cost of wages and benefits several dollars higher than that of the nonunion contractor . The MRA had many restrictions, and no one liked it. In July Marino, through his position as president of NECA's Southwestern Chapter, learned that the MRA would not be re- newed after its scheduled expiration in November Thus, Marino had to plan for the future on the basis that not even the MRA would be avail- able. MARINO ELECTRIC 355 resumed operations. In the meantime -MEP, vastly scaled back in size, survives on its national joint venture work. Based on the different business purpose of the firms (MEI as a design/build contractor, and Marin as a com- petitive bid contractor) and the different geographical areas currently served by the firms (MEI on a national basis with Marin restricted to the Houston area), I find that this critical factor indicates a finding of separate companies. f. Purpose or motive When MEI's traditional market dried up in Houston, and after it failed to penetrate the local competitive bid market, MEI was left with its joint ventures, some serv- ice work, and with providing some engineering services. The service work ended in January 1985, and the last en- gineering services were in May 1985 (R-N-25). MEI did not become dormant as did the original firm in Watt Electric, 273 NLRB 655 (1984). It remained active in 1985 and was so as of the hearing. Because of the re- stricted areas of its operation, MEI seldom, if ever, hires electricians. In its joint ventures MEI's partner supplies the electricians. The record is a bit unclear whether elec- tricians would be hired for the payroll of MEI or its joint venture partner, Hatfield Electric, in the event the bid had been successful on the Brown Convention Center in Houston. Richard Spade briefly participated in the bid estimating, and it was planned that he would be the general foreman (5:1315; 6:1632). Presumably, there- fore, the electricians would have been hired and super- vised by MEI. That is in keeping with the statements Marino made to Wayne Boulet in August 1984. A significant aspect of Marino's remarks on that occasion is that Marino wanted to see MEI survive even though he planned to create, in the meantime, an open shop to enter the competitive market. That is, Marino intended to go double-breast- ed.44 Concerning this factor it is difficult to discern a bright- line distinction among the cases. In some cases the exist- ence of a desire to form a second firm to operate as an open shop contractor was found to be an intent by the original firm to evade its CBA with a union notwith- standing the absence of any union animus. Compare, for example, Mar-Kay Cartage, 277 NLRB 1335 (1985); Watt Electric Co., 273 ' NLRB 655 (1984); Samuel Kosoff & Sons, 269 NLRB 424 (1984); and Advance Electric, 268 NLRB 1001 (1984), in which an intent to evade was found, with Best Mechanical Contractors, 273 NLRB 83 (1984); Commercial Decorating, 272 NLRB 1366 (1984); Victor Valley pleating, 267 NLRB 1292 (1983); and United Constructors, 233 NLRB 904 (1977), when there was no finding of an intent to evade even though the new com- pany typically was established so that a family member could start his own business on an open shop basis. There is no question that in our case Marin was estab- lished to operate in the competitive bid market because MEI could not compete by bidding under the labor costs imposed by its CBA with the Union. Marino, in effect, concedes that fact (1:103, 113, 125, 130; 2:322-323). Al- though the competitive bid market does not exclude unionized firms, as a practical matter an open shop market generally means that the competing firms are op- erating nonunion. Do these facts of themselves consti- tute, as a matter of law, an intent by MEI to evade its CBA with the Union? If so, how could an owner lawful- ly form a second company to operate in the open shop market when his unionized firm is fading because of eco- nomic forces beyond his control? Based on the objective facts, I And that Marino cre- ated Marin in order to 'have a double-breasted operation (i.e., MEI union and Marin open shop). I further find that the, withering away of MEI's use of (union) electri- cians was an incidental effect of economic forces beyond MEI's control rather than the result of MEI's achieving the illegal object of diverting business, through a sham transaction, from its unionized self to its nonunion self. Accordingly, I find that the intent or motivation factor, although a very close issue,45 does not indicate alter ego status. 3. Conclusions , As the Board observed in 0. Voorhees Painting Co., 275 NLRB 779 (1985), certain factors here would sup- port a finding of alter ego status. Mann's biggest custom- er,,IBS Contractors, Inc., had been an important custom- er of MEI, and the ownership and overall management factors are indicative of alter ego status. Some of the minor indicia are consistent with an alter ego finding. For example, Marin's startup funding came from MEI through Holding. Yet assistance in the forma- tive stage is not determinative. L & J Equipment Co., 274 NLRB 20 (1985). The sales of tools, equipment, and fur- niture were made without the benefit of appraisal by an independent firm. Favors and courtesies have been ex- changed, but they are consistent with industry practice and such are not strong factors in any event. L & J Equipment, id. Some of the paperwork evidencing vari- ous transactions or events was not prepared for weeks or even months. For example, leases were not prepared until January or February 1985 for October 1984 events, and the September 1984 resignations of Meyer and Fitch from MEI were not memorialized by written statements until the summer of 1985. On the other hand, lag time between events and cor- porate paperwork was not unprecedented. Thus, al- though Meyer became a vice president of MEI in May 1979, MEI's shareholders and directors, as previously noted, did not make it official until their joint meeting 5 months later at Lake Tahoe, Nevada. Finally, on a very few occasions Marino has become directly involved in the affairs of Marin. He had lunch with a customer (IBS) and discussed the Ferranti job. He offered Boulet a posi- tion at the yet-to-be formed Marin, and he later offered Larry Anders a position at Mann. Anders subsequently left MEI and became the service manager at Marin. He 44 "Double breasted" describes a contractor who operates two compa- nies, one unionized and the other open shop . Watt Electric, 273 NLRB 655 fn. 11 (1984) 45 To borrow a line from the Persian, Omar the tentmaker, "A hair, they say, divides the false and true " (Quatrain 50, 2d ed ) 356 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD also discusses matters from time to time with Meyer and Fitch. However, he has never visited a Marin jobsite, and'there is no evidence that he has been active in assist, ing Fitch in selecting or assigning job foremen, assisting Meyer in obtaining new work, entertaining and customer relations, in directing Marin's office staff, in discussing wages, grievances, labor relations, or any other routine business Marin personnel must perform on a daily basis. Because I find that the business purpose and motiva- tion factors are indicative of independent companies, I conclude that the evidence falls short of showing the "disguised continuance" test sanctioned by the Supreme Court in Southport Petroleum Co. v. NLRB, 315 U.S. 100; 106 (1942), and reiterated in Howard Johnson Co. v. Hotel Employees, 417 U.S. 249, 259 fn. 5 (1974). Accordingly, I shall dismiss the refusal-to-bargain allegations of the complaint. The General Counsel's theory regarding the 8(a)(3) al- legations is that MEI curtailed its work in order to divert its business to Marin as part of a calculated scheme whereby MEI could escape the burdens of the CBA yet, through Marin, continue to enjoy the fruits of that business (Br. at 25, 36).46 The theory is sound, and the issue is close. But the evidence falls short chiefly be- cause it appears that J. C. Marino simply established a new company to operate in the competitive bid market- a market MEI could not compete in successfully.47 I 4s As phrased by the Union (Br at 15), it was "sham transaction whereby Marino Electric's owners created a 'paper' holding company de- signed for the sole purpose of giving birth to Mann Electric, and laun- dering Marino's money, to yield a company free of the union contract." 41 MEI still functions in the joint venture market, but it no longer at- tempts to enter the competitive market and therefore employs no electri- therefore find the 8(a)(3) allegations to be without merit, and I shall dismiss the complaint. CONCLUSIONS OF LAW 1. Marino Electric, Inc. and Marin Electric, Inc. is each an employer within the meaning of Section 2(2), (6), and (7) of the Act. 2. International Brotherhood of Electrical Workers, Local Union No. 716, AFL-CIO is a labor organization within the meaning of Section 2(5) of the Act. On these findings of fact and conclusions of law and on the entire record, I issue the following recommend- ed48 ORDER The complaint is dismissed. clans. If the traditional market were to revive (an improbable prospect), MEI could resume operations in that design/build market, hire electri- cians through the Union's hiring hall, and otherwise comply with the terms of the CBA. "Simply established" is perhaps the wrong phrase in view of the holding company. CPA Banneau attempted to explain that the advantage of the holding company was to aid in the overall financing of the enterprises (5:1421) Although Barineau's explanation does not answer every question, the fact remains that Respondent saw a business purpose in forming a holding company See the discussion earlier in this decision concerning holding companies. Although the holding company procedure incidentally lends itself to the "machinations" argument of the General Counsel (Br. at 16) and the Union (Br at 2), that criticism would be just as vigorous if funds flowed' direct between MEI and Marin 48 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.