Capitol Steel And Iron Co.

484 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Capitol Steel and Iron Company and Shopmen's Local Union No. 546, affiliated with Interna- tional Association of Bridge, Structural and Or- namental Iron Workers. Case 16-CA-13380-1 August 17, 1990 DECISION AND ORDER BY CHAIRMAN STEPHENS AND MEMBERS CRACRAFT AND DEVANEY On August 24, 1988, Administrative Law Judge William N Cates issued the attached decision The General Counsel 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 brief and has decided to affirm the judge's rulings, findings, and conclusions only to the extent consistent with this Decision and Order The complaint alleges that the Respondent, Cap- itol Steel and Iron Company (CSIC or the Re- spondent), is a successor corporation to Capitol Steel Corporation (Capitol Steel) and has violated Section 8(a)(5) and (1) of the Act by refusing to recognize and bargain with Shopmen's Local Union No 546, affiliated with International Asso- •ciation of Bndge, Structural and Ornamental Iron Workers (the Union), which had represented Cap- itol Steel's shop employees in the Oklahoma City facility 1 The judge concluded that the Respondent is a substantially and fundamentally different busi- ness from Capitol Steel, is thus not a successor to Capitol Steel, and therefore has not violated Sec- tion 8(a)(5) and (1) The General Counsel has ex- cepted to these conclusions, and we find merit in the exceptions A Evidence Concerning Successors/up The facts, as set forth in the judge's decision and supplemented by other facts established by uncon- troverted record evidence that was not discredited, may be summarized as follows The Union represented Capitol Steel's produc- tion and maintenance employees, and its most recent contract expired in May 1986 Capitol Steel fabricated structural steel for use in powerplants, commercial buildings, and highway bridges From the mid-1960s until about 1982, Capitol Steel spe- cialized in building powerplants According to 'Capitol Steel operated a second facility in Houston, Texas, which is not involved in this case John Nesom,2 powerplant construction totally ceased about 1982 Capitol Steel's largest bridge contract, totaling $5 million, was for the Boh Brothers project Capitol Steel obtained this con- tract in 1983 and was working on it at the time it ceased operation in 1985 In October 1985, Capitol Steel reduced its shop work force from about 163 to 127 In November 1985, Capitol Steel further re- duced its work force, closed down all work bays, except bays 1 and 2, and operated with 20 shop employees until ceasing operations on December 12, 1985 Capitol Steel filed for bankruptcy in the latter part of 1985 From the time Capitol Steel ceased operations until the last week of January 1986, Nesom was in- volved in the "winding down" of Capitol Steel Also, during early 1986 Nesom, as an individual, investigated several possibilities that he hoped would result in another steel business locating at the Capitol Steel facility Further, throughout 1986 there were frequent meetings involving Nesom and union officials These meetings included discussions on a variety of issues including the possibility of re- opening the facility, and the need for documenta- tion so that Capitol Steel's former employees could receive unemployment compensation According to Nesom's testimony, m January - 1986 an individual named Don Chevas was trying to arrange a takeover of the bankrupt Capitol Steel In the course of that effort, Nesom, who at that tune was still working for Capitol Steel, Jack Wellborn, Capitol Steel's controller (who was working with Chevas), and Bill Sorensen, a repre- sentative for the owner of the plant's facility, met with union officials This meeting was held to de- termine if Nesom could work things out with the landlord, the bankruptcy court, Boh Brothers, the employees, and the Union so that the Boh Brothers project could be completed 3 This plan apparently did not succeed Respondent CSIC was incorporated in February 1986 Barbara Nesom, John Nesom's wife, is the major shareholder, chairperson, and chief executive officer of the Respondent The Respondent is certi- fied as a "Disadvantaged Business Enterprise- Women's Business Enterprise" According to Nesom's testimony, he initiated the next meeting between him and the union officials This meeting was prompted by an investor, Solo- mon Kadmany, who had expressed an interest in buying Capitol Steel's facilities in both Oklahoma 2 John Nesom is the Respondent's president and the former vice presi- dent and sales manager of Capitol Steel 3 Nesom testified that he was asked to join Chevas' effort but did not do so and that this meeting did not have anything to do with the creation of CSIC 299 NLRB No 61 CAPITOL STEEL & IRON CO 485 City and Houston, "reactivating the entire oper- ation using [the Respondent] to operate the facility with [Kadmany] bemg an investor" Kadmany also asked about the Union at the plant Nesom and Kadmany met with the union officials At this meeting Nesom stated to the union officials that if the "situation could be pulled together and res- tructed" they would need manpower However, Kadmany did not become an investor in the Okla- homa City facility Although Nesom did not have control of the plantsite during April and May 1986, he was in the facility, under the direction of Boh Brothers and the authorization of the bankruptcy court and Cap- itol Steel, in order to "load out" the uncompleted Boh Brothers project, i e, remove project materials and equipment Some of the former employees of Capitol Steel were called to help with the removal According to the uncontradicted testimony of one of these employees, who at the time of the hearing was the Union's president, the employees were paid with checks drawn on the Respondent On June 14, 1986, Capitol Steel's assets were sold at public auction Total revenue from the sale was approximately $665,000 Nesom made the fol- lowing purchases on behalf of the Respondent (1) 36 or 37 pieces of equipment (out of 500 offered for sale) for $25,000, (2) plate steel for $11,000, and (3) office furniture for $11,000 Included in the $25,000 for equipment was $7800 paid for a Grover crane which CSIC thereafter leased out and has not used CSIC has purchased equipment from other sources at a cost of $160,000 The Respondent leased from Capitol Building Corporation4 14 of approximately 24 acres, mclud- mg 8 of 17 facilities, formerly leased by Capitol Steel in Oklahoma City Included in the lease was equipment which Capitol Building Corporation purchased at the auction of Capitol Steel's assets The Respondent officially took over the premises on August 1, 1986 Nesom further testified as follows Between the time of the auction and the time the Respondent officially took over the premises, CSIC was al- lowed to stay on the premises to protect its proper- ty During some of this time former Capitol Steel employees were voluntarily working to clean the premises so that the Respondent's operations could begin Also, during the period July through Sep- tember, the union representatives indicated to Nesom that they were having a problem in obtain- ing documentation to substantiate their attempt to get unemployment compensation for the former 4 Capitol Building Corporation had no relationship to Capitol Steel other than as lessor/lessee employees of Capitol Steel Nesom assisted the Union as much as possible in that endeavor For a time during 1986, the union officials came by the plant every Friday morning to ask Nesom what jobs had been bid on, and when operations would start Nesom responded by indicating a will- ingness to talk to the union officials and asking them how they could help so that "we can put the men back to work" The union officials' response was that they could provide "good men" Nesom even asked the union representatives if they could help him obtain working capital or cash flow The union representatives gave Nesom a copy of the union contract and told him to put in whatever changes were necessary for him to be able to live with the contract Nesom testified that he felt it was up to the union representatives to make offers to him and that he was not in a position to make offers to them He agreed, however, to look at the contract and get back with them after the first of the year (i e, 1987) Nesom admitted that he did not get back in contact with the Union as he had agreed By August 26, 1986, the Respondent employed 11 unit employees, 7 of whom had previously worked for Capitol Steel On October 5, 1987, the Respondent employed approximately 16 shop em- ployees, about 12 of whom had been employed at Capitol Steel in 1985 According to Nesom's testimony, bay 1 is the Respondent's main production bay Bay 1 was one of two bays that was used by Capitol Steel during its last month of operation The Respondent's major business is the fabrication of steel for high- way bridges On October 5, 1987, the Union, by letter, re- quested a meeting with Nesom or a representative regarding the Respondent's alleged successorship to Capitol Steel The Union expressed its "contin- ued interest as the bargaining representative for your employees" On November 11, 1987, the union district representative telephoned Nesom re- garding the October 5, 1987 letter Nesom replied that he was willing to meet with the Union only if the Union did not take the position that the Re- spondent was a successor to Capitol Steel The Union filed the charge in this case on November 16, 1987 B The Judge's Decision The judge found that there was no substantial continuity of business operations between Capitol Steel and the Respondent Thus, he concluded that the Respondent was not a successor to Capitol Steel, that it accordingly had no obligation to rec- 486 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD ogmze the Union, and has therefore not engaged in the alleged unfair labor practices The judge acknowledged that former Capitol Steel employees constituted a majority of the Re- spondent's shop employees on the date of the Union's demand, but concluded that they worked under materially different conditions The judge noted that the Respondent is certified as a disad- vantaged enterprise and concluded that, as a conse- quence, its organizational structure and marketing methods were significantly different from Capitol Steel's In concluding that the Respondent was not a successor to Capitol Steel, the judge also empha- sized the reduction in the work area used for steel fabrication, the change in the type of steel fabrica- tion, the reduction in the work force, the elimina- tion of job classifications, a less formal management atmosphere, the use of only a small percentage of Capitol Steel equipment, and the acquisition of a new group of customers The judge also found that there was an 8-month hiatus between the closing of Capitol Steel and the opening of the Respondent and that this weighed against a finding of succes- sorship C The General Counsel's Exceptions In excepting to the decision, the General Coun- sel contends that the judge made several errors in his findings and conclusions of law, leading to an erroneous conclusion that the Respondent is not a successor to Capitol Steel The General Counsel points to uncontroverted evidence that, he argues, was either not mentioned by or was given insuffi- cient weight by the judge The General Counsel takes issue with the judge's refusal, in comparing Capitol Steel with the Respondent, to use the char- acter of Capitol Steel's business immediately pre- ceding its shutdown as a basis for comparison The General Counsel contends that the judge accorded excessive weight to financial and marketmg changes, changes in the customer base, and to the Respondent's engaging in various busmess enter- prises with which the unit employees have little in- volvement The General Counsel contends that in finding that the Respondent is not using the same plant facilities in the same manner as Capitol Steel the judge failed to consider that the Respondent's lease encompasses the production area used by the predecessor and certain equipment used by the predecessor The General Counsel also argues that (1) the decrease in the employee complement does not relieve the successor of the duty to bargain, (2) despite a reduction in the number of job classifica- tions the same functions are performed, and (3) the weight given by the judge to the difference in man- agement style between the two companies is exces- sive because that difference is merely the result of differences between the sizes of the companies Fi- nally, the General Counsel contends that the hiatus of 7 or 8 months was insufficient to destroy succes- sorship status D Analysts It has long been settled that an employer suc- ceeds to the collective-bargaining obligation of an- other employer if (1) a majority of its employees in an appropriate unit at, or after, the time at which union makes its bargaining demand are workers who had been employed by the predecessor, and if (2) similannes between the two operations manifest a "substantial continuity' between the enterprises" Fall River Dyeing,Corp v NLRB, 482 U S 27, 41, 43 (1987), citing, inter aim, NLRB v Burns Security Services, 406 U S 272, 280 fn 4 (1972) Here the Union made a bargaining demand on October 5, 1987, at a time when the Respondent had a shop work force of 16 employees, a majority of whom (12) had worked for Capitol Steel 5 The closer question is whether there is a sufficient continuity between the enterprises For the reasons set forth below, we find, contrary to the judge, that there is The factors for making the enterprise continuity determination were summarized by the Supreme Court in Fall River, supra at 43, as follows [W]hether the business of both employers is es- sentially the same, whether the employees of the new company are doing the same jobs in the same working conditions under the same supervisors, and whether the new entity has the same production process, produces the same products, and has basically the same body of customers The Court made it clear, however, that those factors are to be assessed primarily from the per- spective of the employees Thus the question is "whether 'those employees who have been retained will view their job situations as essentially un- altered " Id, quoting Golden State Bottling Co v NLRB, 414 U S 168, 184 (1973) Accordingly, changes in such matters as marketing, sales or cus- tomers' modes of payment have little weight in comparison with factors directly affecting the em- 5 When the successor business, as here, is starting up operations after a hiatus, the determination of work force majonty must also be made at a time when the job classifications for the contemplated operation are sub- stantially filled, so that the employees can be said to constitute a "sub- stantial and representative complement" Fall River, supra at 47 Because he found no continuity of operations, the judge did not reach the work force majority question Although 10 or 12 more shop employees were hired in February 1988, It does not appear they were lured Into new unit classifications Accordingly, we find that, at the relevant time, the Re- spondent had hired a substantial and representative complement of which a majority had been employed by the predecessor CAPITOL STEEL & IRON CO 487 ployees' daily performance of their jobs Fall River, supra at 46 and fn 11 6 There is little question that the Respondent oper- ates on a much smaller scale than did Capitol Steel at the peak of its business, and, indeed, some of the changes in operations on which the judge relied to find an absence of continuity are logical conse- quences of the reduction in scale—e g, a consider- able decline in the number of job classifications, a smaller management hierarchy with, accordingly, a less rigid chain of command, and a smaller space used for production As the judge acknowledged, however, mere diminution in size does not defeat a successorship finding if the putative successor can be said essentially to be operating the predecessor's business in miniature Lloyd Flanders, 280 NLRB 1216, 1219 (1986), citing Zim's IGA Foodhner v NLRB, 495 F 2d 1131, 1141 (7th Cir 1974), cert denied 419 U S 816 Accord Fall River, supra at 46 fn 11 We do not find that size-related changes are sufficient to affect the employees' perceptions of their jobs here, particularly in light of the fact that the predecessor's busmess had been rapidly de- clining in size prior to its shutdown Thus, for example, although Capitol Steel had had as many as 46 job classifications at one time, in the month before its cessation of operations, em- ployees performed a variety of tasks, just as those who work for the Respondent as general shop em- ployees do Furthermore, although, with the con- solidation of functions, each employee may be per- forming some additional tasks, each one also con- tinues to perform work he had performed for Cap- itol Steel 7 As we found concerning similar circum- stances in Stewart Granite Enterprises, 255 NLRB 569, 571 (1981), the addition of such tasks does not mandate a finding that the business is substantially different from the employees' perspective 8 Similarly, although a reduction in the size of management accompanied the reduction in work force, six out of nine of the office and managerial staff had worked for Capitol Steel (albeit one had returned after 5 years away from Capitol Steel) 6 Thus the Respondent's change in marketing methods and Its different cash-flow basis, as compared with Capitol Steel (receiving payment from customers as work is performed rather than payment on completion), weighs no more heavily against a continuity finding than did the contrast in Fall River between the predecessor's involvement in "converting dyeing" (purchasing unfinished goods for Its own account, dyeing them, and then selling them to apparel manufacturers) and the successor's In- volvement in "commission dyeing" (dyeing finished fabrics owned by customers to their specifications) Id at 30, 44, 46 fn 11 7 Some of the additional tasks performed by employees were occa- sioned by a change in the way in which materials and equipment were brought into the facility Before the hiatus they were brought on by rail, afterwards they were transported in wagons assembled by the employees at the Respondent's facility See also Louis Pappas' Restaurant, 275 NLRB 1519 (1985), Lloyd Flanders, supra The two most prominent managerial figures, Presi- dent Nesom and Plant Manager Cagle had both worked for Capitol Steel Although this reduction would plainly bring the employees into more fre- quent contact with upper management and mini- mize strict adherence to chain of command in su- pervision, such a change no more precludes a find- ing of substantial continuity than did the converse in NLRB v Jeffries Lithograph Go, 752 F 2d 459, 465 (9th Cir 1985), where the court, affirming the Board, found sufficient managerial continuity in the carryover of one supervisor, despite the evidence that the successor had created many new supervi- sory positions With respect to the space used for production, the evidence shows9 that only one of Capitol Steel's work bays was not being leased by the Re- spondent, and that a substantial portion of the leased premises is being used by the Respondent for the fabrication of steel 10 What is most impor- tant is that all of the Respondent's facility was for- merly a part of Capitol Steel's premises and bay 1, the Respondent's main production bay, was one of only two bays used by Capitol Steel during its last month of operation Much of the equipment used by the Respond- ent's employees in these facilities would also have been familiar because the Respondent bought 36 or 37 pieces of the 500 offered for sale at the auction of Capitol Steel's assets In addition, the Respond- ent leased other equipment formerly owned by the predecessor, notably at least a dozen cranes, which were an important part of the production process The judge made much of the alleged change in the types of steel fabricated by the two enterprises, with the Respondent engaged mamly m the fabri- cation of highway bridge steel," a product that had formed only a small proportion of Capitol Steel's output He thereby overlooked precedents mdicatmg that changes in the product mix do not preclude a contmuity finding if the basic job skills 9 We are relying here on the testimony of Nesom, the Respondent's president, and on a diagram of the facility '° The Respondent is not leasing Capitol Steel's former office building or the area known as bay 5 Further, some of the property being leased by CSIC is being used for business operations in which Capitol Steel did not engage, and a couple of the buildings are being leased by CSIC to other businesses Nesom, the Respondent's president, testified that by the time of the heanng, the Respondent had obtained contracts for products other than highway bridge steel fabrication—a contract to manufacture jet engine baffle systems and a project to fabncate steel to support rolling doors for a building In addition, the Respondent is Involved in certain business op- erations in which Capitol Steel was not involved, but these represent a minimal percentage of the Respondent's revenues, and the shop employ- ees have no involvement in those operations, except for a limited amount of time spent on some painting and cleaning projects 488 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD remain the same 12 The evidence suggests suffi- cient similarities in the job skills required by the two companies As the judge found, all "steel fabri- cation work pnmanly involves lifting, cutting, welding, and fitting steel " 13 Although there is evi- dence suggesting that the acceptance cntena for highway bridge steel are somewhat more stringent than those for the steelwork used in highnse build- ings which was a substantial portion of the work performed by Capitol Steel, the record also indi- cates that these employees would not need to be retrained to perform the work Capitol Steel had performed some work of this kind," and Gary Hyde, the Respondent's manager of quality con- trol, who had also worked for Capitol Steel, testi- fied that the employees had been expected by Cap- itol Steel to meet the more stringent standard for that work Finally, we give little weight to the fact, empha- sized by the Respondent in the proceedings below, that m order to gain a certification as a "Disadvan- taged Business Enterprise/Women's Business En- terpnse," the Respondent had to demonstrate that there was a "complete break" between it and Cap- itol Steel The purposes served by the law govern- ing such certifications are not identical to the ob- , jectives of the National Labor Relations Act, so what may constitute a "complete break" for the purposes of one does not necessanly do so for the other Cf Golden State Bottling Go, supra at 182 fn 5 ("The perimeters of the labor-law doctrine of successorship have not been so narrowly confined" as those defining "the general rule of corporate li- ability") With respect to the approximately 8-month hiatus between the shutdown of Capitol Steel and the Respondent's commencement of operations, we find it especially significant that, as was the case 12 Fall River, supra, 482 U S at 44 (change from converting dyeing to commission dyeing), Great Lakes Chemical Corp, 280 NLRB 1131, 1132 (1986), enfd 862 F 2d 100 (6th Or 1988) (successor added new chemical product lines to the swimming pool chemicals manufactured by predeces- sor), Premium Foods v NLRB, 709 F 2d 623, 627 (9th Cif 1983) (60 per- cent of predecessor's sales were to food service customers, compared with 98 percent for successor, and successor added new product line), Saks Fifth Avenue v NLRB, 634 F 2d 681, 686 (2d Or 1980) (unit work changed from altenng women's clothes exclusively to altenng clothing of men, women, and children), Good N' Fresh Foods, 287 NLRB 1231 (1988) (shift from "predominant (but not exclusive) production of fresh [baked] products to predominant (but not exclusive) production of frozen [baked] products") An observation in Good N' Fresh Foods seems especially rele- vant here "This is not a case where a steel mill was converted into a bakery" Id at 1235 13 Cf Saks Fifth Avenue, supra at 686 (despite differences in types of clothing worked on, skills remained the same cutting, sewing, and work- ing the fabric) Furthermore, in their minimal performance of painting and cleaning work (see fn 11, above), the employees' were not necessan- ly using new skills, because one of the Respondent's witnesses testified that Capitol Steel had, on occasion, performed painting and cleaning jobs for other companies 14 Some of this type of work was apparently performed on the begin- nings of the Boh Brothers project before Capitol Steel shut down with the 7-month hiatus in Fall River, supra at 45, this period was charactenzed by continuing activi- ties looking toward the reopening of the enterprise, and the Union and a number of the employees re- mained in contact with the prime movers Here, the evidence indicates that Nesom was left in charge of the process of closing Capitol Steel, and he worked for Capitol Steel until the last week of January 1986 In late December 1985, Nesom decided to investigate the possibility of starting his own company In February 1986 the Respondent was formed In the spring of 1986, former Capitol Steel employees removed an uncompleted project (the Boh Brothers project) from the former Capitol Steel's premises, and were paid with checks drawn on the Respondent Further, between the time of the auction of Capitol Steel's assets on June 24, 1986, and the time the Respondent officially took over the premises, Capitol Building Corporation al- lowed the Respondent to remain on the premises to protect its property During at least part of this penod, former Capitol Steel employees were vol- untanly workmg so that the Respondent could start operation Also, throughout 1986, representa- tives of the Union, who were also former Capitol Steel employees, discussed the Respondent's future with Nesom and indicated interest in representing the shop employees Hence, from the employees' perspective, their role during the hiatus changed from being laid-off employees of Capitol Steel to employees called to "load out" Capitol Steel's last uncompleted project while being paid by the Respondent, to volunteers helping the Respondent get 'ready to start oper- ations, to, finally, being paid employees of the Re- spondent They performed the winding down ac- tivities for Capitol Steel and the startup activities for the Respondent under the direction of Nesom Thus, the hiatus in this case did not represent a sharp break between a defunct business with no hope of revival and a completely new and unrelat- ed operation, rather it was characterized by activi- ties that linked the old with the new See Fall River, supra at 45 (noting maintenance of skeleton crew to maintain the plant and continuing efforts of predecessor's president to resurrect the busi- ness), Stewart Granite Enterprises, supra, 255 NLRB at 573 (finding activities of core group of employ- ees in phaseout of old business and startup of new indicative of continuity rather than discontinuity) We conclude that the Respondent is a successor employer to Capitol Steel Although each factor of the successorship test must be analyzed separately, the factors cannot be viewed in isolation, ultimate- ly, the totality of the circumstances is determina- tive Fall River Dyeing, supra CAPITOL STEEL & IRON CO 489 The totality of the circumstances persuades us that the core of the Respondent was derived from the remains of Capitol Steel In particular, a major- ity of the Respondent's employees had been em- ployees of Capitol Steel, a majority of the Re- spondent's managers and supervisors had worked for Capitol Steel, the Respondent's total premises had been part of Capitol Steel's facility, the Re- spondent's major business is the fabrication of steel as had been Capitol Steel's, the unit employees' job functions are basically the same as they had been at Capitol Steel, and substantial equipment used by the Respondent had been used by Capitol Steel Further, during the hiatus period, former Capitol Steel employees aided in the "winding down" and "geanng up" activities at the facility, and Nesom, CSIC's president, remained in contact with the Union From the employees' perspective, these facts would indicate a substantial continuity be- tween Capitol Steel and the Respondent Accord- ingly, we find that the Respondent is the successor to Capitol Steel and that it violated Section 8(a)(5) and (1) of the Act by refusing to recognize and bargain with the Union as the representative of its unit employees CONCLUSIONS OF LAW 1 Capitol Steel and Iron Company is the succes- sor to Capitol Steel Corporation 2 Shopmen's Local Union No 546, affiliated with International Association of Bridge, Structural and Ornamental Iron Workers, has been and is the exclusive representative of all employees in the ap- propriate unit for purposes of collective bargaining within the meaning of Section 9(a) of the Act 3 The following employees constitute a umt that is appropriate for collective bargaining within the meanmg of Section 9(b) of the Act All production and maintenance employees en- gaged in the fabrication of iron, steel, metal and other products or in maintenance in or about the Oklahoma City, Oklahoma facility, excluding all office, clerical, drafting, engi- neering employees, inspectors, watchmen, jani- tors, guards, supervisors and nonproduction yardmen 4 By failing and refusing to recognize and bar- gain collectively with the Union as the exclusive representative of the Respondent's employees in the appropriate unit since October 5, 1987, Re- spondent has engaged in and is engaging in unfair labor practices within the meaning of Section 8(a)(5) and (1) of the Act 5 The Respondent's unfair labor practices affect commerce within the meaning of Section 2(6) and (7) of the Act REMEDY Having found that the Respondent has violated Section 8(a)(5) and (1) of the Act by failing and re- fusing to bargain with the Union, we shall order it to cease and desist, to bargain on request with the Union, and, if an understanding is reached, to embody the understanding in a signed agreement ORDER The National Labor Relations Board orders that the Respondent, Capitol Steel and Iron Company, Oklahoma City, Oklahoma, its officers, agents, suc- cessors, and assigns, shall 1 Cease and desist from (a) Refusing to recognize and bargain with Shop- men's Local Union No 546, affiliated with Interna- tional Association of Bridge, Structural and Orna- mental Iron Workers, as the exclusive bargaining representative of the employees in the bargaining unit described below (b) In any like or related manner interfering with, restraining, or coercmg employees in the ex- ercise of the rights guaranteed them by Section 7 of the Act 2 Take the following affirmative action neces- sary to effectuate the policies of the Act (a) Recognize and, on request, bargain with the Union as the exclusive representative of the em- ployees in the following appropriate unit concern- ing terms and conditions of employment and, if an understandmg is reached, embody the understand- ing in a signed agreement All production and maintenance employees en- gaged in the fabrication of iron, steel, metal and other products or in maintenance in or about the Oklahoma City, Oklahoma facility, excluding all office, clerical, drafting, engi- neering employees, inspectors, watchmen, jani- tors, guards, supervisors and nonproduction yardmen (b) Post at its facility in Oklahoma City, Oklaho- ma, copies of the attached notice marked "Appen- dix " 15 Copies of the notice, on forms provided by the Regional Director for Region 16 after being signed by the Respondent's authorized representa- tive, shall be posted by the Respondent immediate- ly upon receipt and maintained for 60 consecutive days in conspicuous places including all places where notices to employees are customarily posted Reasonable steps shall be taken by the Respondent 15 If this Order is enforced by a judgment of a United States court of appeals, the words in the notice reading "Posted by Order of the Nation- al Labor Relations Board" shall read "Posted Pursuant to a Judgment of the United States Court of Appeals Enforcing an Order of the National Labor Relations Board" 490 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD to ensure that the notices are not altered, defaced, or covered by any other material (c) Notify the Regional Director in writing within 20 days from the date of this Order what steps the Respondent has taken to comply APPENDIX NOTICE To EMPLOYEES POSTED BY ORDER OF THE NATIONAL LABOR RELATIONS BOARD An Agency of the United States Government The National Labor Relations Board has found that we violated the National Labor Relations Act and has ordered us to post and abide by this notice WE WILL NOT refuse to bargain with Shopmen's Local Union No 546, affiliated with International Association of Bridge, Structural and Ornamental Iron Workers, as the exclusive representative of the employees in the bargaining unit WE WILL NOT in any like or related manner interfere with, restrain, or coerce you in the exer- cise of the rights guaranteed you by Section 7 of the Act WE WILL, on request, bargain with the Union and put in writing and sign any agreement reached on terms and conditions of employment for our employees in the bargaining unit All production and maintenance employees en- gaged in the fabncation of iron, steel, metal and other products or in maintenance in or about the Oklahoma City, Oklahoma facility, excluding all office, clerical, drafting, engi- neenng employees, inspectors, watchmen, jani- tors, guards, supervisors and nonproduction yardmen CAPITOL STEEL AND IRON COMPANY Ronald K Hooks, Esq , for the General Counsel Greg James, Esq , of Oklahoma City, Oklahoma, for the Respondent Alfred Huff Business Representative, of Oklahoma City, Oklahoma, for the Charging Party DECISION STATEMENT OF THE CASE WILLIAM N CATES, Administrative Law Judge This case was tried before me in Oklahoma City, Oklahoma, on 12 and 13 April 1988 pursuant to a complaint and notice of hearing (complaint) issued by the Regional Di- rector for Region 16 of the National Labor Relations Board (Board) on 22 December 1987 The complaint was thereafter amended on 12 February 1988 The complaint is based upon a charge filed on 16 November 1987 by Shopmen's Local Union No 546, affiliated with Interna- tional Association of Bridge, Structural and Ornamental Iron Workers (Union) The complaint alleges Capitol Steel and Iron Company (CSIC) has engaged in certain violations of Section 8(a)(5) and (1) of the National Labor Relations Act (the Act) The sole issue is whether CSIC is a successor under the Act to Capitol Steel Corporation (Capitol Steel) thereby having an obligation under the Act to recognize and bargain with the Union which had been the collec- tive-bargaining representative of the employees of Cap- itol Steel All parties were afforded full opportunity to examine and cross-examine, to argue orally, and to submit briefs Briefs which have been carefully considered were sub- mitted by counsel for the General Counsel and CSIC Based upon the entire record, including my observa- tion of the demeanor of the witnesses, I conclude below, after examining the relevant evidence and applicable legal principles, that CSIC is not the successor of Capitol Steel and as such I have dismissed the complaint in its entirety FINDINGS OF FACT I JURISDICTION CSIC is an Oklahoma corporation with an office and place of business located at Oklahoma City, Oklahoma, where it is engaged in, among other things, the fabrica- tion of steel During the 12-month period preceding issu- ance of the complaint herein, a representative period, CSIC sold and shipped from its Oklahoma City, Oklaho- ma facility products, goods, and materials valued in excess of $50,000 directly to other enterprises located within the State of Oklahoma each of which other enter- prises sold and shipped goods and materials or performed services valued in excess of $50,000 directly to enter- prises located outside the State of Oklahoma Also during that same representative period, CSIC purchased and received at its Oklahoma City, Oklahoma facility products, goods, and materials valued in excess of $50,000 from other enterprises located within the State of Oklahoma, each of which other enterprises had re- ceived the products, goods, and materials directly from points outside the State of Oklahoma The complaint al- leges, the parties admit, and I find, CSIC is, and at all times material herein has been, an employer engaged in a business affecting commerce within the meaning of Sec- tion 2(2), (6), and (7) of the Act II LABOR ORGANIZATION The complaint alleges, the parties admit, and I find, the Umon is, and at all times material herein has been, a labor organization within the meaning of Section 2(5) of the Act III THE ALLEGED UNFAIR LABOR PRACTICES A The Facts Generally speaking, there does not appear to be any major disputes about the history and background of the two companies involved herein I have set forth the fol- CAPITOL STEEL & IRON CO 491 lowing undisputed or credited facts in for the most part chronological order commencing with the background and history of Capitol Steel and then proceeding to do the same for CSIC Although the facts set forth are not all inclusive, all evidence, and arguments of counsels about the evidence, has been weighed and considered To the extent that any testimony or other evidence not mentioned in this decision may appear to contradict my findings of fact I have not disregarded that evidence but have rejected it as not relevant, surplusage, lacking in probative weight, or incredible 1 Background and history of Capitol Steel Capitol Steel was founded in 1910 and during its 75 years of existence operated a facility in Oklahoma City, Oklahoma Commencing in 1953 it also operated a second facility located in Houston, Texas 1 Until 1977, when it filed for a name change, Capitol Steel operated as the Capitol Steel and Iron Company From 1930 until it entered bankruptcy in 1985, Capitol Steel housed its Oklahoma City operations on leased property located at 1726 South Agnew Street, Oklahoma City, Oklahoma Capitol Steel leased approximately 24 plus acres and 17 different facilities containing approximately 600,000 square feet of usable space from Capitol Building Corpo- ration 2 Capitol Steel engaged in the fabrication of struc- tural steel for use in power plants, commercial buildmgs, and highway bndges From approximately 1963 until Capitol Steel ceased doing business in 1985, it had sales in excess of $600 million 3 Only approximately $6 million (or 1 percent) of that sales total was for highway bridge work 4 Capitol Steel's best year for total sales was 1978 when it had sales totaling $92 million, none of which was for highway bridge work In 1985, Capitol Steel's last year in business, it had sales totaling $40 million of which a little under $200,000 was for highway bridge work Of the $6 million, $5 million in total sales for high- way bridge work involved one contract obtained by Capitol Steel from the Boh Brothers Company in 1983 That project called for Capitol Steel to perform the fab- rication work in 1984 The project involved a highway bridge Boh Brothers Company was constructing in the State of Louisiana Capitol Steel never performed the fabrication work on the Boh Brothers project and in 1985 the basic steel was removed from Capitol Steel's lo- cation and taken to a competitor which performed the steel fabrication work for Boh Brothers Company 5 Cap- The Houston, Texas facility, also no longer in business, is not in- volved in the case sub judice 2 Capitol Building Corporation had no relationship to Capitol Steel other than as lessor/lessee 3 CSIC President John Nesom, who worked for Capitol Steel from 1963 until 1985 as a salesman, vice president of sales, and senior vice president of marketing and sales, credibly testified without contradiction as to the total sales volume for Capitol Steel during the above-referenced period CSIC President Nesom could only recall approximately five highway bridge jobs being performed by Capitol Steel from 1963 until 1985 Nesom's recollections were corroborated in essential parts by CSIC Qual- ity Control Manager Gary Lee Hyde and CSIC employee Elbert Wil- liams 5 Thus, Capitol Steel only performed approximately Si million in high- way bndge work out of $600 million in total sales over approximately 23 years' time itol Steel performed no fabrication work directly or indi- rectly for the State of Oklahoma Department of Trans- portation from 1963 until it went into bankruptcy in 1985 From approximately 1963 forward, Lawrence V Van Horn was the chairman of the board and chief executive officer of Capitol Steel 6 Other Capitol Steel officials and managers were President Henry A Hewitt Jr, Secretary- Treasurer M 0 Abshere, Executive Vice President and Chief Operating Officer Gerald B Emerson, Assistant Secretary-Treasurer (Oklahoma) W J Muse, Assistant Secretary-Treasurer (Houston) W T Tyler Jr, Vice President of Purchasing and Procurement E H Allen, Vice President and Sales Manager John Nesom, Vice President and Sales Manager (Houston) D P Barnhart, Vice President and General Manager J S Fowler Jr, and Vice President of Production (Oklahoma) E H Wimsett 7 Capitol Steel filed for bankruptcy in the latter part of 1985 Prior to October of that year, it employed approxi- mately 163 shop (unit) employees That number was re- duced to approximately 127 in October and at the time it ceased operating on or about 12 December 1985 it em- ployed approximately 20 unit employees The Union had, for an extended time prior to Decem- ber 1985, represented the shop employees of Capitol Steel Capitol Steel and the Union had been parties to collective-bargaining agreements, the most recent of which expired in May 1986 The most recent collective- bargaining agreement called for 47 different unit job clas- sifications After Capitol Steel went into bankruptcy and ceased operating as a business entity in 1985, there were at least two attempts to revive the Company One such attempt resulted in a January 1986 meeting at an Oklahoma City, Oklahoma restaurant between Capitol Steel Controller Jack Wellborn, investor Don Chevas, Capitol Steel Vice President and Sales Manager Nesom, Capitol Building Corporation Owner John Sorenson, Union Business Rep- resentative Albert L Huff, Union President Virgil Smith, and George King Wellborn attempted to explore with those present the possibility of investor Chevas taking over Capitol Steel's entire operation including its equip- ment, facilities, and utilizing some of its employees Nothing materialized from that meeting The second attempt to save Capitol Steel took place in February 1986 when all of those present at the January meeting (except investor Chevas) again met to discuss Capitol Steel's future This time the group met with a foreign investor, Solomon Kadmany, of Israel Kadmany wanted to purchase Capitol Steel's entire operation, however, his attempted purchase never materialized 6 Records from the Secretary of State's office for Oklahoma reflects Capitol Steel was ongmally incorporated in June 1921 with Van Horn as the incorporator Those records also reflect that Capitol Steel had a stated capitol of $500,000 and 4 million shares of common ordinary voting stock 7 It appears four of the principal stockholders of Capitol Steel agreed to a leveraged buyout of Capitol Steel in 1982 The record is silent on whether all the above officials remained in their same positions after the 1982 buyout 492 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Commencing in approximately January 1986, Nesom commenced to tell "anybody" that would listen that he hoped to start a new steel fabricating company in Okla- homa City, Oklahoma, if he could acquire space, equip- ment, and the necessary funding to do so 8 In the spring of 1986, Boh Brothers Company° 'ob- tained bankruptcy court approval to remove steel it owned from Capitol Steel's premises and transport it to another company for fabrication work Representatives of Boh Brothers Company, again with bankruptcy court approval, obtained Nesom's assistance in loading out its steel at Capitol Steel's facility Nesom contracted with Boh Brothers Company to load the steel for a labor-only cost of $76,000 Nesom utilized former Capitol Steel em- ployees to load Boh Brothers' steel 10 The loadout took approximately 5 weeks to complete Two of those hired to help in the loadout were Union Business Representa- tive Huff and Union President Smith Nesom told these two union officials, as well as the other former Capitol Steel employees assistmg in the loadout, that he hoped to open his own steel fabricating company in Oklahoma City, Oklahoma, if he could find property and equipment and arrange financing The bankruptcy court ordered the assets of Capitol Steel sold at public auction on 24 June 1986 The auction was carried out by Industrial Plants Corporation 11 Ap- proximately 1427 items were offered (approximately 500 of which were equipment) at the sale which produced approximately $665,000 in revenues 12 CSIC President Nesom attended the auction and made purchases totaling $47,000 He purchased the following (1) 36 or 37 pieces of equipment for which he paid $25,000, (2) plate steel for which he paid $11,000, and (3) office furniture and fixtures for which he paid $11,000 Included in the $25,000 expended for equipment was $7800 paid for a "Grove crane" which CSIC thereafter leased out and has not utilized Since the Capitol Steel auction, CSIC has purchased additional equipment from other sources at a cost of $160,000 2 CSIC's incorporation and operations CSIC, with its initial Oklahoma City, Oklahoma loca- tion at Blue Sage Street was incorporated on 25 Febru- ary 1986 Barbara Nesom (B Nesom), the major stock- holder (owning 500 of 502 shares of common stock issued), is the chairman and chief executive officer of the Company CSIC President Nesom, who owns the two remaining shares of common stock, is the only officer of 6 Nesom testified he kept an open mind at that time about a union rep- resenting employees at any enterpnse he might be Involved with 9 Bob Brothers Company is not otherwise Involved in this proceeding " The record does not reflect exactly how many employees Nesom utilized However, they were paid a flat rate of $10 per hour on checks drawn on CSIC "Industrial Plants Corporation is a Skokie, Illinois corporation that specializes in providing assistance in liquidating businesses by offering ap- praisals and auctioneenng services 12 An Independent appraisal had been made of Capitol Steel's assets in November 1984 That appraisal reflected assets of $1,747,916 of which $994,516 was located in Oklahoma City, Oklahoma The appraisal was made by M B Valuation Services, Inc of Dallas, Texas CSIC that had been an official of Capitol Steel 13 CSIC was founded with the intent of becoming and subse- quently became (22 December 1986) certified as a Disad- vantaged Business Enterprise/Women's Business Enter- prise by the Oklahoma Department of Transportation pursuant to the Small Business Act, 15 U S C 637 et seq 14 Being certified as a Disadvantaged Business Enterprise/Women's Business Enterprise affords the cer- tified company certain marketing and contract bidding advantages One among the eligibility standards for qualifying as a Disadvantaged Business Enterprise/Women's Business Enterprise is, "the owner- ship and control by [the disadvantaged] individuals shall be real, substantial, and continuing and shall go beyond the pro forma ownership of the firm as reflected in its ownership documents" (Co Exh 21, "Eligibility Stand- ards," p 3, par 2) CSIC commenced operating as a steel fabricator in August 1986 CSIC leased from Capitol Building Corpo- ration 14 of the 24 acres at South Agnew Street, Oklaho- ma City, Oklahoma, that had previously been leased by Capitol Steel CSIC leases at a cost of approximately $146,000 per year approximately 8 of the 17 facilities pre- viously utilized by Capitol Steel and has an option to purchase all the property at that address from Capitol Building Corporation 15 The lease arrangement allows CSIC the use of certain overhead and walking cranes that Capitol Buildmg Corporation purchased at the bank- ruptcy sale of Capitol Steel By 26 August 1986, CSIC employed 11 shop employ- ees, 7 of which had previously worked for Capitol Steel 18 Throughout the year 1986 and on a frequent basis after August, certain officials of the Union, usually Business Representative Huff and President Smith, ques- tioned CSIC President Nesom about the future of CSIC and told him the Union was interested in representing the shop employees at CSIC They even gave Nesom a copy of the collective-bargaining agreement the Union had with Capitol Steel and told him they were willing to make modifications on that agreement in order to make it acceptable to CSIC 17 is Other officials and management personnel of CSIC are C Whitman, chief estimator, G Hyde, quality control manager, J Golden, administra- tive assistant, D Nesom, controller, R Ball, chief draftsman, J Cagle, plant manager, J Calhoun, production manager, and P Murcko, detaller '4 A "Women's Business Enterprise" is "a small business concern" (as defined in Sec 3 of the Small Business Act) that is at least 51-percent owned and controlled by one or more women A "Disadvantaged Busi- ness Enterpnse" is defined as an enterpnse that is at least 51-percent owned by one or more "socially and economically disadvantaged individ- uals" 15 Capitol Steel did not have an option to purchase the property Cap- itol Steel's most recent annual lease fee for all 24 acres and 17 facilities was $65,000 per year 16 The seven were Tommy Bellah, David Hawkins, Charles D John- son, Frank R Landers, Jimmy Payton, Cecil H Prock, and Alfred L Young Additionally, Marion E Drake and Elbert Williams had worked for Capitol Steel, however, both had been terminated on 13 November and 13 December 1985, respectively 17 Although I found CSIC President Nesom's overall testimony to be reliable, I find it unnecessary, in deciding the Issues herein, to make a spe- cific finding as to whether he was given a copy of the Union's collective- bargaining agreement with Capitol Steel early in 1986 as claimed by the representatives of the Union or on or about July or August as claimed by Nesom CAPITOL STEEL & IRON CO 493 The Union's contact with CSIC was minimal, if at all, between December 1986 and October 1987 18 Business Representative Huff testified he learned in October from a CSIC employee that CSIC had granted its unit em- ployees a wage increase Huff said he felt if the Compa- ny "had got things going well enough to grant a wage increase" then it could bargain with the Union Accord- ingly, on 5 October 1987, Huff wrote CSIC President Nesom the following letter This letter is to serve as official notification of the desire of representatives of Shopmen's Local Union No 546 of the International Association of Bridge, Structural and Ornamental Iron Workers (AFL-CIO) to once again meet with you or a des- ignated representative of the Company to discuss matters contained in the existing collective bargain- ing agreement, specifically, your successorship of the Capitol Steel Corporation This Local Umon wants to reassert its position and to assure you of its sincere and continued inter- est as the bargaining agent for your employees, and presuming such, respectfully requests that a meeting be scheduled within the month of October, at a place mutually agreeable, to discuss such matters that will, we believe, be of mutual benefit to both parties Please notify the undersigned as timely as possi- ble, the date m October, tune and your location preference in which we can meet Union District Representative David Turnbull tele- phoned CSIC President Nesom on 11 November 1987 to find out what CSIC's response would be to the Union's letter CSIC President Nesom told Turnbull he was will- ing to meet with the Union anytime and place to find out what it could do to assist CSIC but as long as the Union took the position CSIC was the successor of Capitol Steel, he did not want to talk with them Turnbull said he did not contact CSIC thereafter On the date of the Union's wntten bargaining demand (5 October 1987), CSIC employed approximately 16 shop employees Approximately 12 of the 16 had been em- ployed at Capitol Steel in 1985 When employees were hired at CSIC, they were told they would be general shop workers that would have to perform (and have in fact performed) whatever tasks CSIC needed done As of the trial herein, CSIC employed approximately 26 to 28 shop employees The number of shop employees had remained relatively stable from October 1987 until February 1988 At that time CSIC added approximately 10 to 12 shop employees which brought its total unit 18 Union Busuiess Representative Huff testified there was no contact dunng the above-referenced time because CSIC President Nesom was to contact the Union Instead of the union officials contacting him complement to the above-referenced 26 to 28 employees Approximately 14 of the 26 to 28 employees had previ- ously worked for Capitol Steel, however, only two of them perform generally the same work in essentially the same locations with the same supervision that they had at Capitol Steel James Cagle, Charles Whitman, and Gary Lee Hyde currently hold positions at CSIC to the positions they held at Capitol Steel, namely, plant manager, chief estimator, and quality control manager, respectively Although CSIC is involved in many operations, it is primarily a steel fabricator CSIC has attempted to con- centrate its steel work in the area of highway bridge fab- rication because it is paid for such work as progress is made on the work CSIC President Nesom testified [W]e can only solicit business from people who are willing to pay us as we perform, and not wait until we get through with the project and then pay us net 30 days from finish, because we do not have the working capital that the old company had to buy the materials, pay the labor, and run six to eight months before cash flow would start So, virtually, every contract that we perform on highway work, we know the procedures to get our cash flow and funding as we perform, and the clientele we have on labor contracts only for bridge work, we make the agreement with the client going m, you pay us on a timely basis, either bi-monthly no longer than every two weeks, and we'll perform the con- tract for you accordingly And that's what we have done in every contract that we've had CSIC does not do business with any customers previous- ly served by Capitol Steel The other business operations that CSIC is involved in include (1) painting and clean- ing projects for other steel fabricators, (2) operating war- ehousing and storage facilities, (3) brokenng steel and re- lated items, and (4) renting equipment and office space More specifically, CSIC provides storage space for other companies for, among other items, antique carriages, camper vehicles, food processing items, used tires, and railroad cars CSIC also leases office space to a tire re- processing company and to a publishing company A portion of one of the facilities leased by CSIC has been converted into an apartment for its watchman CSIC concentrates its production work essentially into one work bay area Since it commenced operations, CSIC has performed the following work or has engaged in the following en- terprises that generated the revenues set forth 494 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Aprox Revenues Received Cumulative Totals Approx % Thereof Type of Work 1986 1987 1988 Bridge Work Labor Only (on other contractors materials) $76,000 $319,000 $172,000 $567,000 32 6 Bridge work labor and materials -0- 295,000 -0- 295,000 169 Labor only (loading or unloading trucks etc no materials in- volved) 11,000 800 -0- 11,800 06 Labor for painting and blasting steel -0- 90,000 -0- 90,000 51 Materials brokered (buying and selling without handling the materials 700 65,000 -0- 65,000 37 Selling plain (unfabricated) steel 28,000 1,500 766 30,266 17 Materials fabricate -0- 139,102 -0- 139,000 79 Materials fabricated and erected 525,000 -0- -0- 525,000 31 Renting equipment 6,000 -0- -0- 6,000 03 Storage contracts 213 8,700 -0- 8,943 05 Totals $646,913 $919,132 $172,766 $1,738,811 994 CSIC did not purchase any patented processes or trademarks from Capitol Steel nor does it do business with any customers of the type that Capitol Steel did business with B Legal Principles In NLRB v Burns Security Services, 406 U S 272 (1972), the Supreme Court first dealt the issue of a suc- cessor employer's obligation to bargain with the Union that had represented the employees of its predecessor In Burns, the Supreme Court approved the Board's and Court's approach with respect to determining whether a new company is indeed the successor of its predecessor The approved approach is primarily factual in nature and is based upon a consideration of the totality of the cir- cumstances in a given situation As the Supreme Court noted in Fall River Dyeing Corp v NLRB, 482 U S 27 (1987), this approach Requires that the Board focus on whether the new company has "acquired substantial assets of its pred- ecessor and continued, without interruption or sub- stantial change, the predecessor's business oper- ations" Golden State Bottling Co v NLRB, 414 U S at 184 Hence, the focus is on whether there is "substantial continuity" between the enterprises In determining whether an employer is a successor, the Board's approach has been to consider the following fac- tors (1) whether there has been a substantial continuity of the same business operations, (2) whether the new em- ployer utilizes the same plant as the previous employer, (3) whether the new employer has the same or substan- tially same work force, (4) whether the same jobs exist under the same working conditions, (5) whether the new employer employs the same supervisors, (6) whether the new employer uses the same machinery, equipment, and methods of production, (7) whether the new employer manufactures the same product, offers the same services, and/or has the same customers, and (8) whether there has been a hiatus between the previous and new employ- er's operations None of the above factors is dispositive NLRB v Band-Age, Inc , 534 F 2d 1 (1st Cir 1976), cert demed 429 US 921 (1976) The above factors are to be examined from the em- ployees' perspective As the court noted in NLRB v Se- curity-Columbian Banknote Co, 541 F 2d 135 (3d Cir 1976), "this 'employee viewpoint' derives from the con- cept that the only reason to limit a successor employer's ability to reorganize his labor relations is to offer the em- ployees some protection from sudden change in the em- ployment relationship" The court went on to note that the factors must be carefully examined to see "whether the changes in the nature of the employment relation- ships are sufficiently substantial to vitiate the employee's original choice of bargaining representative" The underlying policy of the successor employer doc- trine seeks to facilitate transfers of capital to enable reor- ganization and vitalization of business enterprises but at the same time protect employee rights and assure the ac- complishment of the transition in an environment of in- dustrial peace See NLRB v Security-Columbian Bank- note Co, supra The Supreme Court m Fall River Dyeing, supra, noted it had observed in Burns, supra, that al- though a successor employer had an obligation to bar- gain with a union representing the employees of its pred- ecessor, the new or successor employer (1) was free to set initial terms on which it would hire employees of a predecessor, (2) was not bound by the predecessor's col- lective-bargaining agreement, and (3) was under no obli- gation to hire the employees of its predecessor—subject to the restriction that it not discriminate against union employees in its hiring Thus, the Supreme Court rea- soned that the applicability of the Burns, supra, successor employer doctrine rested for the most part in the hands of the successor In so concluding, the Supreme Court stated CAPITOL STEEL & IRON CO 495 If the new employer makes a conscious decision to maintain generally the smae business and to hire a majority of its employees from the predecessor, then the bargaining obligation of Section 8(a)(5) is activated The Supreme Court also observed This makes sense When one considers that the em- ployer intends to take advantage of the trained work force of its predecessor A mere change in ownership of an employing business enterprise does not itself absolve the new owner from the obligation to recognize and bargain with the labor organization that represented the former owner's em- ployees In considering the successor issue, I am not unmindful that some of the various factors overlap I have, where appropriate for discussion and analysis purposes, consoli- dated some of the factors C Positions of the Parties Counsel for the General Counsel asserts many factors show CSIC to be substantially similar to Capitol Steel and as such warrants a finding that it is the successor of Capitol Steel and hence obligated to bargain with the Union He asserts CSIC operates out of portions of the same facility that Capitol Steel did and that a majonty of its work force came from Capitol Steel He further as- serts CSIC produces essentially the same products on some of the same machinery and with some of the same supervision that had been utilized at Capitol Steel Ac- cordingly, he argues CSIC must be found to be the suc- cessor of Capitol Steel To further enhance his position, counsel for the General Counsel asserts domg highway bridge fabrication work, which CSIC does, is not signifi- cantly different from performing fabrication work for highnse buildings and power plants which Capitol Steel did In that regard, counsel for the General Counsel con- tends Capitol Steel also performed some highway bridge fabrication work Counsel for the General Counsel argues it is insignifi- cant to the issues herein that CSIC is a Disadvantaged Business Enterprise/Women's Business Enterprise He as- serts such organizational structuring and marketing strat- egies do not affect the basic character of the work per- formed by the shop employees of CSIC Further, counsel for the General Counsel argues the fact CSIC is engaged in other business enterprises in addition to steel fabrica- tion does not alter the outcome herein because CSIC's warehousing, brokering of steel, and selling various products has little, if any, effect on unit employees at CSIC Finally, Counsel for the General Counsel con- tends the 8-month hiatus between the demise of Capitol Steel and the commencement of CSIC is not of sufficient duration to destroy the continuity of the business enter- prise In summary, counsel for the General Counsel urges that CSIC has substantially continued the same business enterprise that Capitol Steel operated and is thus re- quired to bargain with the Union as the representative of its shop employees Counsel for CSIC contends an examination of the to- tality of the circumstances involving the two companies herein dictates a finding that CSIC is not the successor to Capitol Steel Counsel asserts CSIC made a "con- scious decision" not to maintain the same type business that its predecessor operated In this regard, he notes CSIC has been certified as a Disadvantaged Business Enterprise/Women's Business Enterprise and he asserts for it to have obtained that governmental certification, it had to and has demonstrated there was a complete break between it and Capitol Steel Counsel also notes CSIC does not do business with any of the customers Capitol Steel serviced He asserts the steel fabrication portion of CSIC's business is primarily concentrated in the pay-as- the-work-is-performed highway bridge fabrication work whereas Capitol Steel's bridge fabrication work only amounted to approximately 1 percent of its overall busi- ness Counsel also argues against a successorship finding by contending CSIC engages in a wide variety of enter- prises that Capitol Steel did not engage in In this regard, counsel points to the fact CSIC is in the warehousing, storage, and material brokering business in addition to its bridge fabrication work Counsel asserts other factors in its favor are that CSIC only utilizes a portion of the property previously utilized by Capitol Steel and that it leases the property from an independent company unrelated to Capitol Steel Counsel further asserts that because CSIC only purchased ap- proximately 6 percent of Capitol Steel's assets at the bankruptcy sale and thereafter made substantial asset purchases elsewhere, it cannot be found to be utilizing the same equipment that Capitol Steel utilized CSIC does not dispute it hired some former Capitol Steel employees, but it asserts only two of them are cur- rently being supervised by the same supervision they had at Capitol Steel CSIC also contends its work force is more highly skilled and diversified than Capitol Steel's was and as such the former employees of Capitol Steel are not performing the same functions at CSIC that they performed at Capitol Steel Additionally, counsel asserts the former employees readily perceive and acknowledge there is a different management atmosphere at CSIC and as such understand there is no continuity between CSIC and their old employer, Capitol Steel Finally, counsel argues one additional factor demon- strates the "discontinuity" of the employing enterprises and that is there was a hiatus of several months between the time Capitol Steel went out of business and CSIC came into existence as a steel fabricator He asserts CSIC had no relationship with Capitol Steel during the hiatus Simply stated, CSIC contends it is not the successor to Capitol Steel and hence has no bargaining obligation with the Union on that basis D Analysis, Discussion, and Conclusions I am persuaded CSIC has demonstrated it elected to, and m fact does, conduct a business that is substantially and fundamentally different from that of Capitol Steel It is a Disadvantaged Business Enterprise/Women's Busi- ness Enterprise Consequently, unlike Capitol Steel, it is 496 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD owned and managed as a disadvantaged enterprise Being a disadvantaged enterprise has resulted in its organiza- tional structure and marketing methods being significant- ly different from Capitol Steel By being a Disadvan- taged Business Enterprise/Women's Business Enterprise, it is placed on various lists provided to contractors bid- ding on federally funded highway projects This greatly assists CSIC because, unlike Capitol Steel, it is in the highway bridge fabrication business as its mainstay The highway bridge fabrication business is on a pay-as-the- work-is-performed basis Thus, CSIC operates on a sig- nificantly different cash flow basis than did its predeces- sor, Capitol Steel Capitol Steel received payment for the work it performed upon the completion of its various fabrication projects whereas CSIC receives revenues as work is performed Other factors reflecting the overall change in the business character of CSIC as opposed to Capitol Steel is found in the fact it has entered into van- ous other enterprises such as warehousing and stonng items, pamtnig and cleaning steel for other contractors, and brokering unfabncated steel As is elsewhere noted, CSIC began its steel fabrication operations in August 1986 at the same street address Capitol Steel had utilized However, it only leased from Capitol Building Corporation (an unrelated company) ap- proximately 14 of the 24 acres and 8 of the 17 facilities that Capitol Steel had utilized CSIC concentrates its steel fabrication business essentially into one work bay area whereas Capitol Steel utilized all the work bay areas at that location Thus, it is clear that not only does CSIC utilize a much smaller area, both in acres and number of facilities, it concentrates its steel fabrication work into one single streamlined work bay area In light of the above and viewed from the employee's perspec- tive, I am persuaded CSIC does not utilize the same plant facilities in the same manner that its predecessor, Capitol Steel, did I am persuaded this element of the successorship test favors a finding that CSIC is not the successor of Capitol Steel 19 Prior to October 1985, Capitol Steel employed ap- proximately 163 (shop) unit employees It reduced that number to approximately 127 in October with a further '2 I reject counsel for the General Counsel's contention that the facts herein on this element of the successorslup test are indistinguishable from those in Lloyd Flanders, 280 NLRB 1216 (1986), in which the new com- pany therein was found to be the successor of its bankrupt predecessor In Lloyd Flanders, supra, the company had attempted to dramatically downsize and consolidate its operations before It ceased doing business The predecessor kept its work force fully Informed of its intentions and moved certain of its operating machinery prior to ceasing to do business It is clear that in reality as well as from the employee's perspective, the new company in Llyod Flanders, supra, was simply a continuation of the old bankrupt company That substantial continuity is demonstrated by the fact the new company in Lloyd Flanders, supra, purchased its predeces- sor's Menominee, Michigan "real property with improvements, all the equipment, machinery, furniture, furnishings, and fixtures all Inven- tory of raw matenals, work in progress, and finished goods except [one] inventory" 280 NLRB at 1217 Whereas, in the case at bar, CSIC, as will hereinafter be shown, purchased only a very small percentage of Capitol Steel's equipment, machinery, and raw materials and did not pur- chase any work in progress, finshied goods, trademarks, or real property from Capitol Steel I find the totality of the circumstances in Lloyd Flan- ders, supra, to be quite different from those in the case at bar and do not find Lloyd Flanders, supra, to be controlling herein on this or any of the other elements of the successors/up test reduction in November until it only employed 20 unit employees at the time it ceased doing business on or about 12 December 1985 CSIC became operational on or about 1 August 1986 and by August 26 had a shop employee complement of 11, 7 of which had previously been employed by Capitol Steel As of 5 October 1987, the date of the Union's demand to bargain, CSIC em- ployed approximately 16 unit employees, 12 of which had previously worked for Capitol Steel CSIC's work complement remained relatively stable until February 1988 when it added approximately 10 to 12 unit employ- ees bringing its complement to 26 to 28, 14 of which had worked for Capitol Steel Thus, CSIC employs (at least until very recently if not presently) as a majority of its unit employees those who had previously worked for Capitol Steel The fact CSIC employs as a majority of its unit employees those who had been employed at its predecessor cannot, on the facts herein, be controlling on whether, with respect to this element of successorship test, it should be viewed as a successor employer The unit employees at CSIC cannot reasonably view their jobs as being unaltered in light of the fact there has been such a reduction in the number of unit employees from approximately 163 at Capitol Steel to approximately 16 at CSIC 20 I am not unmindful that mere dimumtion in the employee complement of the bargaining unit does not relieve a successor of its duty to bargain However, that factor may not be viewed in isolation Other factors that need to be considered are, for example, that the em- ployees herein were told when they were hired they would be and they do perform as general shop employ- ees whereas at Capitol Steel they worked in some 46 dif- ferent unit classifications Although steel fabrication work primarily involves lifting, cuttmg, welding, and fit- ting steel, the skill levels required to perform specific types of fabrication work vanes greatly according to the undisputed testimony of CSIC Quality Control Manager Hyde Hyde stated the acceptance cntena for highway bridge steel work, which CSIC performs, is "a lot more stringent" than the steel work utilized in highnse buildings which type work Capitol Steel performed Thus, not only are CSIC's employees in a smaller unit performing general shop work rather than specifically as- signed jobs, they are also working under different ac- ceptance criteria than they did at Capitol Steel In light of the above, I am persuaded Counsel for the General counsel has failed to demonstrate that the same jobs exist at CSIC under the same working conditions that existed at Capitol Steel Along this same line, it is important to note the man- agement atmosphere at CSIC is completely different from what it had been at Capitol Steel As employees 20 I reject counsel for the General Counsel's contention that I consider as a point of comparison between CSIC and Capitol Steel, the number of employees Capitol Steel employed during its last month (December 1985) in business when it only employed 20 unit employees rather than when it employed 163 unit employees prior to October 1985 To consider Capitol Steel's work force as being that of its last month in operation would not, in my opinion, be viewing the situation through the eyes of the employ- ees involved herein It would be unreasonable to assume the employees viewed Capitol Steel's work force as being the small number of employ- ees It employed right before It went out of business CAPITOL STEEL & IRON CO 497 Williams and Whitmire testified, employees at Capitol Steel had to follow a somewhat rigid chain of command with respect to any problems, actual or perceived, whereas at CSIC they are free to discuss their problems not only with their immediate supervisors but with anyone in management up to and including the chairman of the board/chief executive officer Therefore, the unit employees at CSIC cannot help but perceive they are working for a new and substantially different employer With respect to any common officials and supervisiors at the two companies, only CSIC President Nesom had been an official of Capitol Steel His primary functions at Capitol Steel were in the areas of marketing and sales whereas at CSIC he serves as the hands-on overall daily manager of the enterprise As of 5 October 1987, the date of the Union's bargaining demand, six (including CSIC President Nesom) of the nine supervisory and office employees at CSIC had been employed at Capitol Steel However, of that six, only two held the same posi- tions at Capitol Steel that they now hold at CSIC, namely, Plant Supervisor (Manager) Cagle, and Chief Estimator Whitman Of the remammg four, at least one had not been employed by Capitol Steel during the 5 years preceding his employment at CSIC Two of the six mentioned above are the chief draftsman and administra- tive assistant and the record does not reflect that they have any direct contact with the unit employees As of the trial herein, only two CSIC employees that had pre- viously worked for Capitol Steel are performing the same work in the same location under the same supervi- sion that they had at Capitol Steel Thus, although there is substantial supervisory carryover from Capitol Steel to CSIC, I am persuaded the employees would nonetheless view CSIC as a new and substantially different employ- er I so conclude first because CSIC President Nesom's duties have changed from marketmg and sales to overall daily management As one witness put it, he is on the shop floor far too much Secondly, only two employees currently are supervised by the same supervision in the same area doing the same work they had performed at Capitol Steel Additionally, one of the officer/manage- ment/supervisory personnel at CSIC had not worked at Capitol Steel at any time during the 5 years preceding his employment at CSIC Clearly, the unit employees could not reasonably view that individual as a carryover from their old employer Additionally, the evidence tends to indicate that Plant Manager Cagle functions at CSIC more or less as a first level supervisor whereas at Capitol Steel he was removed from immediate supervi- sion of unit employees Stated differently, there were a number of lower level supervisors that reported to and functioned between Cagle and the unit employees at Capitol Steel whereas that does not appear to be the case at CSIC In light of all the above, I am persuaded the unit employees could not at any time have reasonably viewed CSIC as a continuation of Capitol Steel based on the makeup of its management and supervision CSIC only purchased approximately 36 or 37 of the 500-plus items of Capitol Steel equipment that was sold at public auction in June 1986 Of the $47,000 total that CSIC spent at the Capitol Steel auction, only $25,000 was for equipment Included in that $25,000 for equip- ment was $7800 for a "Grove crane" that was leased out and not utilized by CSIC Therefore, CSIC only utilizes $17,200 worth of equipment in its operations that is pur- chased from Capitol Steel CSIC's purchases must be compared to the $665,000 in revenues that were derived from the sale of all of Capitol Steel's assets at the public auction Since the Capitol Steel auction, CSIC has ob- tained other equipment from other sources at a cost of $160,000 21 CSIC utilizes its equipment from Capitol Steel and elsewhere essentially in a centralized one work bay area whereas Capitol Steel utilized numerous work bay areas Thus, I conclude that CSIC, under the cir- cumstances herein, does not use the same machinery and equipment in the same manner of location that Capitol Steel did CSIC does not serve any of the customers previously served by Capitol Steel The mainstay of CSIC's steel fabrication business is highway bridge work whereas Capitol Steel only sold $6 million of type work out of sales totaling $600 million Furthermore, Capitol Steel never performed $5 million of the $6 million in highway bridge work that it sold Specifically, it did not perform work on a $5 million highway bridge contract that it had with Boh Brothers and that work was shipped out in an unfabncated status from Capitol Steel to a competitor that actually performed the work Thus, it is clear CSIC is in a different type steel fabrication business and does not service any customers previously serviced by Capitol Steel Accordingly, I find such to strongly militate against a finding of continuity between Capitol Steel and CSIC As a result of the above changes, and in light of all the factors outlined in this decision, I am persuaded produc- tion steps and job assignments have been and/or are per- ceived to have been substantially modified such as to compel a finding that CSIC is not the successor to Cap- itol Steel When the hiatus of approximately 8 months between the demise of Capitol Steel and the commencement of operations by CSIC is viewed in light of all these cir- cumstances, it is clear that factor also favors a findmg that CSIC is not the successor to Capitol Steel From the employees' perspective, the fact Capitol Steel was dor- mant for approximately 8 months would be Just one more indication to them that CSIC was something other than a continuation of their old employer's enterprise In summary, I conclude, after applying the principles outlined earlier to the facts herein, that the record com- pels a finding that CSIC's operations do not involve a "substantial continuity of the business enterprise" of Cap- itol Steel such that would support the 8(a)(5) allegations herein Accordingly, I recommend the 8(a)(5) complaint alle- gations be dismissed 21 I find of no great moment the fact that Capitol Building Corpora- tion, the lessor herein, purchased certain cranes at the auction of Capitol Steel's assets in order to make its (Capitol Building Corporation s) prop- erty more marketable to lessees like CSIC 498 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD CONCLUSIONS OF LAW I Capitol Steel and Iron Company (CSIC) is an em- ployer engaged in commerce within the meaning of Sec- tion 2(2), (6), and (7) of the Act 2 Shopmen's Local Union No 546, affiliated with International Association of Bndge, Structural and Orna- mental Iron Workers is a labor organization within the meaning of Section 2(5) of the Act 3 Capitol Steel and Iron Company (CSIC) is not the successor of Capitol Steel Corporation (Capitol Steel) 4 Capitol Steel and Iron Company has not engaged in the unfair labor practices alleged in the complaint [Recommended Order for dismissal omitted from pub- lication]