filed: June 28, 1991; As Corrected July 11, 1991.
On Petition For Review From The National Labor Relations Board; Nos. 22-CA-14369, 22-CA-14673.
Becker, Hutchinson, Circuit Judges and Smith, District Judge.*fn*
This case is before us on the application of the National Labor Relations Board for enforcement of its order issued against Omnitest Inspection Services, Inc. ("OTIS") and Amspec Technical Services, Inc. ("Amspec"). 29 U.S.C. § 160(e). The Board's order depends on its conclusion that Amspec is the "alter ego" of OTIS. Amspec takes issue with that conclusion. In addition, Amspec disputes the Board's decision that by reason of its alter ego status it violated the National Labor Relations Act ("Act"), 29 U.S.C. §§ 158(a)(1), (2), (3), and (5), in the following respects: (1) by discharging OTIS employee Patrick Barrett for joining Local 2B of the International Union of Operating Engineers, AFL-CIO ("Local 2B"); (2) by pretending to go out of business and withdrawing recognition of Local 2B; (3) by failing to pay contributions to Local 2B's health, welfare, and pension funds and thus repudiating its collective bargaining agreement with the union; and (4) by recognizing the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada, AFL-CIO ("UA") as the representative of its employees.
When an employer attempts to avoid its labor obligations by pretending to cease operations and then resuming the same operations through another employer, the other employer is held to be the "alter ego" of the old employer, and is "subject to all the legal and contractual obligations of the predecessor." Howard Johnson Co. v. Detroit Local Joint Exec. Board, 417 U.S. 249, 259 n.5, 41 L. Ed. 2d 46, 94 S. Ct. 2236 (1974). Our alter ego jurisprudence provides that a number of factors should be considered in determining alter ego status, and that no one factor is dispositive. NLRB v. Al Bryant, Inc., 711 F.2d 543, 553 (3d Cir. 1983), cert. denied, 464 U.S. 1039, 79 L. Ed. 2d 165, 104 S. Ct. 699 (1984); Fugazy Continental Corp., 265 N.L.R.B. 1301, 1301-02 (1982), enforced, 233 U.S. App. D.C. 310, 725 F.2d 1416 (D.C. Cir. 1984); Woodline Motor Freight, Inc., 278 N.L.R.B. 1141, 1231 (1986), enforced in relevant part, 843 F.2d 285, 288-89 (8th Cir. 1988). This application for enforcement presents, inter alia, the interesting question whether the absence of substantial similarity in ownership between two employers precludes the imposition of alter ego status, even though the employers have substantially the same management, business purpose, operations, equipment, and customers. We conclude that it does not, and for the reasons that follow, we will enforce the Board's order.
The principal figure in this case is Dan McCool, the president of Amspec and former president of OTIS. McCool has worked in the non-destructive testing industry for more than eleven years, primarily in Canada and Alaska. Non-destructive testing consists of using x-ray cameras, ultrasonic equipment, and dye penetrants, among other means, to determine the structural soundness of oil storage tanks, pipelines, steel bridge supports, etc., without damaging the structures. During 1984 and 1985, McCool approached Local 2B, a major factor in the pipeline testing industry, to ascertain the types of labor contracts available and to explore the outlook for non-destructive testing work in the New Jersey area. McCool also began negotiating with Jurgen Dreher, a German national, to establish a United States non-destructive testing company specializing in pipeline testing. The negotiations resulted in the creation of OTIS on April 3, 1985. The minutes of OTIS's first shareholders' meeting reflect that B.I.X. Holdings, Ltd. ("B.I.X.") and Edward T. Robertson, Inc., two groups affiliated with Dreher, owned 60% of OTIS's shares,*fn1 that McCool owned 20%, and that two other individuals owned 10% each.*fn2
McCool owned, and leased to OTIS, the trucks, darkrooms, cameras, and safety equipment that OTIS needed to perform non-destructive testing. McCool also negotiated and executed a collective-bargaining agreement for OTIS with Local 2B. This agreement guaranteed a 40-hour week for all of OTIS's employees engaged in both pipeline and non-pipeline testing. The agreement further obligated OTIS to withhold specific sums from its employees' paychecks for union dues and for the union's health, welfare, and pension funds. The agreement also contained a union security clause, requiring every OTIS technician to either be or become a Local 2B member, and a union referral clause, requiring OTIS to hire its technicians and assistant technicians from a union referral hall list.
B. OTIS's Operations and Management
Because McCool lived in the Chicago area, OTIS hired Paul Owen as its day-to-day manager. Owen trained, tested, and certified the employees as non-destructive testing technicians. McCool, who maintained daily contact with Owen, reported OTIS's cash flow position to B.I.X. every two weeks. In time, B.I.X. set up a $100,000 line of credit for OTIS at the Standard Charter Bank in Chicago. McCool and Dreher were the signatories on this account. McCool withdrew funds from this account, which were used for OTIS's payroll, and deposited them into another account at the Bank of Berwyn, on which McCool was the sole signatory.
McCool testified that he needed B.I.X.'s approval for any equipment purchase over $5,000 and to make bids on major projects. Because most of OTIS's jobs involved non-pipeline testing which did not come from bids, McCool infrequently required B.I.X.'s approval. Instead, he obtained jobs for OTIS by spending one week out of every month at OTIS contacting potential clients and informing them of OTIS's prices. Owen would then make follow-up visits.
C. The Discharge of Patrick Barrett
Owen initially was given the authority to hire and fire employees, but McCool recaptured this authority when he initiated a hiring freeze in January of 1986. McCool thereafter told Owen to fire all employees who would not take work on a job-to-job basis, even though the collective bargaining agreement with Local 2B guaranteed a 40-hour work week. Patrick Barrett was then discharged.
Owen had contacted Barrett in January of 1986 and had hired him as a permanent employee. Barrett worked for two to three weeks, during which time he was paid as a Level I technician. Barrett's pay stubs, however, failed to reflect that any taxes were being withheld. When Barrett inquired about the blank pay stubs, Owen responded that Barrett had been retained as a subcontractor and not as an employee of OTIS. Barrett then reminded Owen that he had been hired as a permanent employee. Barrett also informed Owen that, thinking himself to be an employee of OTIS, he had joined Local 2B and paid the initiation fee. Owen became visibly upset, and told Barrett that he should not have joined the union because he was a subcontractor. When Barrett next arrived for work, Owen, believing that he had discharged Barrett, angrily asked him why he was there. Barrett disputed that Owen had discharged him, but Owen reiterated that he was fired. Although OTIS hired several people after discharging Barrett, and OTIS advertised for a Level I technician, OTIS never rehired Barrett.
OTIS began experiencing financial problems in February of 1986. Soon thereafter, Dreher and the financial manager of B.I.X. visited OTIS and reviewed the financial situation. As a result of these visits, B.I.X. decided to discontinue its United States operations through OTIS and offered to pay $50,000 of the taxes that OTIS owed the Internal Revenue Service ("IRS") if McCool would liquidate OTIS immediately. On April 29, 1986, B.I.X. cut off all funds to OTIS and sent McCool a telex directing him to cease OTIS's operations at once.
McCool chose not to liquidate OTIS, and instead operated OTIS on the strength of its accounts receivable. OTIS was able to meet its payroll and to make payments on the equipment that it had leased from McCool. However, when Owen quit at the end of May, McCool, who could not run the company from Chicago, decided to liquidate OTIS. He nonetheless continued to operate OTIS through June, in order "to make a good portion on the ...