Custom Leather Designers

National Labor Relations Board - Board Decisions

Jul 19, 1994

314 N.L.R.B. 413 (N.L.R.B. 1994)

413
314 NLRB No. 62
CUSTOM LEATHER DESIGNERS
Custom Leather Designers, Inc. and United Food
and Commercial Workers International Union,
Local 100A, AFL–CIO. Case 13–CA–31451
July 19, 1994
DECISION AND ORDER
BY CHAIRMAN GOULD AND MEMBERS BROWNING
AND COHEN
On February 25, 1994, Administrative Law Judge
Walter H. Maloney issued the attached decision. The
General Counsel filed an exception and a supporting
brief.
The National Labor Relations Board has delegated
its authority in this proceeding to a three-member
panel.
The Board has considered the decision and the
record in light of the exception and brief and has de-
cided to affirm the judge’s rulings, findings, and con-
clusions and to adopt the recommended Order, as
modified.
The General Counsel’s sole exception is to the
judge’s failure to include a make-whole remedy for the
employees affected by the Respondent’s unlawful uni-
lateral changes in the initial terms and conditions of
employment. We find merit in this exception, and shall
modify the remedy and recommended Order accord-
ingly.
AMENDED REMEDY
Having found that the Respondent engaged in cer-
tain unfair labor practices, we shall order that it cease
and desist and take certain affirmative action designed
to effectuate the policies of the Act. In addition to the
actions set forth in the judge’s decision, we shall order
the Respondent, on the Union’s request, to retro-
actively restore preexisting terms and conditions of
employment, including wage rates and benefit plans,
and make employees whole for any and all losses they
incurred by remitting all wages and benefits that would
have been paid absent such unilateral changes, from
the initial hire until it negotiates in good faith with the
Union to agreement or impasse. The lost wages shall
be computed as in Ogle Protection Service, 183 NLRB
682 (1970), plus interest as prescribed in New Hori-
zons for the Retarded, 283 NLRB 1173 (1987). The
Respondent shall remit all payments owed to employee
benefit funds and reimburse its employees in the man-
ner set forth in Kraft Plumbing & Heating, 252 NLRB
891 fn. 2 (1980), enfd. mem. 661 F.2d 940 (9th Cir.
1981), for any expenses resulting from the Respond-
ent’s failure to make these payments. Any additional
amounts that the Respondent must pay into the benefit
funds shall be determined in the manner set forth in
Merryweather Optical Co., 240 NLRB 1213, 1216 fn.
7 (1979).
ORDER
The National Labor Relations Board adopts the rec-
ommended Order of the administrative law judge, as
modified below, and orders that the Respondent, Cus-
tom Leather Designers, Inc., Chicago, Illinois, its offi-
cers, agents, successors, and assigns, shall take the ac-
tion set forth in the Order as modified.
1. Substitute the following for paragraph 2(a).
‘‘(a) On request, rescind the wages, hours, and terms
and conditions of employment unilaterally imposed on
applicants for hire or any changes thereto, retroactively
restore preexisting terms and conditions of employ-
ment, including wage rates and benefit plans, make
employees whole for any and all losses they incurred
by remitting all wages and benefits that would have
been paid absent such unilateral changes, from the ini-
tial hire until it negotiates in good faith with the Union
to agreement or impasse, as set forth in the remedy
and amended remedy sections of the decision, and, on
request, bargain with the Union as the exclusive bar-
gaining representative of the production and mainte-
nance employees.’’
2. Substitute the attached notice for that of the ad-
ministrative law judge.
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 or-
dered us to post and abide by this notice.
WE WILL NOT refuse to bargain in good faith with
United Food and Commercial Workers International
Union, Local 100A, AFL–CIO–CLC as the exclusive
collective-bargaining representative of the production
and maintenance employees at our Chicago, Illinois
plant, excluding foremen, salesmen, chauffeurs, watch-
men, office clerical employees and supervisors as de-
fined in the Act.
WE WILL NOT unilaterally adopt initial terms and
conditions of employment of bargaining unit employ-
ees or any changes in terms and conditions of employ-
ment.
WE WILL NOT discourage membership in or activi-
ties on behalf of United Food and Commercial Work-
ers International Union, Local 100A, AFL–CIO–CLC
or any other labor organization by refusing to hire
members or otherwise discriminate against them in
their hire or tenure.
WE WILL NOT in any other manner interfere with,
restrain, or coerce you in the exercise of the rights
guaranteed you by Section 7 of the Act.
414 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
1 Respondent admits, and I find, that it is an Illinois corporation
which maintained a place of business in Chicago, Illinois, where it
manufactured leather goods. In the course and conduct of this busi-
ness, the Respondent annually manufactured and shipped directly to
points and places outside the State of Illinois goods and merchandise
valued in excess of $50,000. Accordingly, the Respondent is an em-
ployer engaged in commerce within the meaning of Sec. 2(6) and
(7) of the Act. United Food and Commercial Workers International,
Local 100A, AFL–CIO–CLC is a labor organization within the
meaning of Sec. 2(5) of the Act.
2 The charge was filed here by United Food and Commercial
Workers International Union, Local 100A, AFL–CIO–CLC (the
Union) against the Respondent on January 15, 1993; the complaint
was issued against the Respondent by the Regional Director for Re-
gion 13 on February 26, 1993; Respondent’s answer was filed on
March 8, 1993; the hearing was held in Chicago, Illinois, on Novem-
ber 1 through 3, 1993; and General Counsel’s brief was filed on or
before December 13, 1993. Following the hearing, the Respondent’s
counsel filed two motions, neither of which are permitted by the
Board’s Rules and Regulations, in which he moved to dismiss the
complaint and in which he made certain arguments relating to the
merits of the case. I will treat the substance of those motions as a
posttrial memorandum while denying the relief sought there. Fol-
lowing the filing of the General Counsel’s brief, the Respondent
filed with me a reply brief and the General Counsel filed a motion
to strike that brief. The Board’s Rules and Regulations permit only
simultaneous briefs to an administrative law judge and make no pro-
vision for reply briefs at this stage of litigation. Accordingly, the Re-
spondent’s reply brief is stricken.
3 The transcript is noted and corrected.
4 On more than one occasion Mitchell wrote letters terminating
Accurate’s sales representatives in which he signed his name as vice
president. This public representation of authority was never dis-
avowed. On several occasions Jack took Mitchell to New York,
where Accurate maintained a sales office, and introduced him to a
number of Accurate’s clients.
WE WILL, on request, rescind the wages, hours, and
terms and conditions of employment unilaterally im-
posed on applicants for hire or any changes thereto,
retroactively restore the preexisting terms and condi-
tions of employment, including wage rates and benefit
plans, make employees whole for any and all losses
they incurred by remitting all wages and benefits that
would have been paid absent our unilateral changes,
from the initial hire until we negotiate in good faith
with the Union to agreement or impasse, and WE WILL,
on request, bargain with the Union as the exclusive
collective-bargaining representative of our production
and maintenance employees.
WE WILL, in the event that we resume production,
offer employment to bargaining unit positions to all
former bargaining unit employees of Accurate Leather
and Novelty Company, Inc.
WE WILL make whole all former bargaining unit em-
ployees of Accurate Leather and Novelty Company,
Inc. for any loss of pay or benefits which they may
have suffered by reason of the discrimination in hiring
found in this case, with interest.
CUSTOM LEATHER DESIGNERS, INC.
Paul H. Hitterman, Esq., for the General Counsel.
Kenneth Ditkowsky, Esq., of Chicago, Illinois, for the Re-
spondent.
Salley A. Stix, Esq., of Madison, Wisconsin, for the Charging
Party.
DECISION
FINDINGS OF FACT
A. Statement of the Case
WALTER H. MALONEY, Administrative Law Judge. This
case came on for hearing before me on an unfair labor prac-
tice complaint,1 issued by the Regional Director for Region
13 of the National Labor Relations Board, which alleges that
Respondent Custom Leather Designers, Inc. (Respondent or
Custom)2 is either an alter ego or a successor to Accurate
Leather and Novelty Company, Inc. (Accurate) and, as such,
violated Section 8(a)(1), (3), and (5) of the Act. One theory
propounded by the General Counsel is that Accurate dis-
charged the members of its unionized bargaining unit for dis-
criminatory reasons, refused to hire them to work for the
alter ego business, and refused either to apply Accurate’s ex-
isting contract to Custom’s employees or to recognize and
bargain collectively with the Union as the representative of
Custom’s employees. The General Counsel alleges in the al-
ternative that Custom is the successor to Accurate, that it
discriminatorily refused to hire Accurate’s former employees
to prevent the Union from becoming the majority representa-
tive of Custom’s employees, and that it made unilateral
changes in terms and conditions of employment without bar-
gaining with the Union. The Respondent denies that the
Board has jurisdiction to determine this case because Accu-
rate is in bankruptcy and the trustee appointed by the U.S.
Bankruptcy Court has not been joined as a party. It also as-
serts that Custom is neither the alter ego nor the successor
to Accurate but an independent business, that it had no duty
to hire former Accurate employees, and that the Union was
never the majority representative of its employees so it had
no duty to bargain with it before adopting or changing terms
and conditions of employment of bargaining unit employees.
On these contentions the issues here were joined.3
B. The Unfair Labor Practices Alleged
For many years Accurate operated a factory at 1731 West
Belmont in Chicago where it manufactured various lines of
leather wearing apparel and accessories. Like Custom, it was
a closely held business owned and operated by the Mallon
family. The elder Mallon, Jack, founded the firm with his fa-
ther in the 1940s and owned most of Accurate’s stock. He
was president of the corporation and active in the day-to-day
operation of the firm although he took a diminishing role as
he got older. His son, Mark, was Accurate’s secretary and
a small shareholder. He handled much of the sales, finance,
and internal administration of the Company. Jack’s other son,
Mitchell, was not a shareholder but worked for the Company
for 22 years. He was in charge of all production, made sev-
eral business trips to South America to find suppliers and
possible subcontractors, helped to develop lines of product
which would be salable in a rapidly changing market, and
handled employee disciplinary matters, including the adjust-
ment of grievances with union representatives.4
415CUSTOM LEATHER DESIGNERS
5 The General Counsel adduced uncontradicted evidence that, on
November 1, 1992, Local 415A merged with Local 100A, following
which the Respondent conceded that Local 100A is the successor to
the union with which the Leather Goods Association had bargained
for many years.
6 The record is silent as to whether there is now in existence a
subsequent collective-bargaining agreement involving Local 100A
and the Association but that fact would have little bearing on the
outcome in this case. Custom was never a member of the Associa-
tion.
7 In August, Custom submitted a detailed written proposal to Har-
ley-Davidson to operate as the leather goods division of the latter
firm. In that proposal Mitchell, representing himself as president of
Custom, and Jack, representing himself as chairman of the board,
made a detailed disclosure to Harley-Davidson of its operation, its
capital, and its need for personnel and machinery as well as what
it could produce. The offer was never accepted. I credit testimony
in the record that, after Harley-Davidson officials agreed to do busi-
ness with Custom, a representative of Cole Taylor Bank approached
them and asked them to switch their business from Custom to an-
Continued
Accurate operated out of a four-story building which was
owned by Jack and his wife, Pearl Mallon. The business was
somewhat seasonal, experiencing an increase in orders in the
late summer and fall of each year in anticipation of Christ-
mas sales, and a decline thereafter. For many years, Accurate
was a member of the Chicago Luggage and Leather Goods
Manufacturers Association (the Association) and, through the
Association, bargained with the Union’s predecessor, Local
415A,5 as the representative of its production and mainte-
nance employees. The Association concluded a series of con-
tracts with the Union, one of which expired on September
30, 1993.6 When it was in operation, Accurate had at various
times as many as 150 production and maintenance employ-
ees. When it closed its doors on May 29, 1992, it employed
about 50 bargaining unit employees.
In June 1990, Accurate arranged for a loan and line of
credit from Cole Taylor Bank of nearly $3 million. Accurate
gave Cole Taylor a security interest, evidenced by a financ-
ing statement, in all of Accurate’s inventory, accounts, and
fixtures and also gave Cole Taylor a mortgage on its Bel-
mont Street building. Accurate was required to do all of its
banking through Cole Taylor and maintained both a payroll
account and a general account at that bank. A restructuring
of the loan was negotiated in January 1992 by Mark, who
handled most of Accurate’s financial affairs.
In August 1991, the premises adjacent to Accurate’s build-
ing caught fire. To suppress the fire, the Chicago Fire De-
partment used the fourth floor of Accurate’s building and, in
the process of doing so, flooded most of Accurate’s building,
and did substantial and irremediable harm to a large amount
of leather goods which Accurate was holding in inventory or
as work in process. Accurate was never paid by its insurance
carrier for a business interruption claim and began to experi-
ence cash flow problems. As a result of its loss of inventory
and its already financially strapped position, it fell behind in
meeting various obligations, including health and welfare
payments to various union trust funds. When Accurate
ceased doing business in May 1992, it was 9 months in ar-
rears in making these payments. On April 1, 1992, Cole Tay-
lor called its note and Accurate and its guarantors, namely,
Jack, Mark, and Pearl, were unable to meet the obligation,
which, at that time, exceeded $2.4 million. Efforts were
made to obtain alternative financing from the La Salle Bank,
but those efforts proved unsuccessful.
Cole Taylor allowed the business to continue for another
8 weeks but stationed a representative on the premises to
oversee the operations. On May 29, 1992, Cole Taylor noti-
fied the Mallons that it had seized the bank accounts which
Accurate had maintained in its establishment and was dis-
honoring employee paychecks that had been issued the pre-
vious week by applying the credit in the Accurate payroll ac-
count to the unpaid principal of the outstanding note. About
3 p.m. on May 29, Jack called a meeting of all employees
on the third floor of the factory. He told them what Cole
Taylor had done and that the Company could not pay them,
because the bank had taken control of the Company’s assets.
He said that they would try to open another factory so that
they could pay employees little by little but there would be
no further production at Accurate. The bank seized all the in-
ventory and work in progress and all the fixtures. It asked
the Mallons to deed the building to the bank in order to
avoid a foreclosure, but they refused. Through its attorney,
Accurate informed Cole Taylor that the Company had about
$100,000 worth of work in progress to fill existing orders
and asked permission to complete this work and apply the
proceeds of the sales to the unpaid wages which had resulted
from the seizure of the payroll account. Cole Taylor refused.
The Mallons vacated the building the same afternoon. The
only items removed from the building thereafter by anyone
other than the bank were machines owned by various leasing
companies which were not subject to the provisions of the
Accurate-Cole Taylor financing agreement.
On the same day that the Accurate business was seized by
the bank, Jack, Mitchell, and Mark executed articles of incor-
poration of Respondent Custom. These articles were filed
with the Illinois Secretary of State and approved about 3
weeks later. Eugene Stemwedel, business manager of the
Union, contacted Mitchell on May 29 after receiving word
from the shop steward at Accurate that the factory was clos-
ing. He asked Mitchell about unpaid wages and vacation
money due to the laid-off employees. Mitchell’s only reply
was that the Company was in negotiation with the bank
about allowing the Company to complete goods in process
and apply the proceeds to these wage claims, but nothing had
been resolved. When the Union received no further word
from any of the Mallons about payment, it filed a petition
in mid-June to place Accurate in bankruptcy. A trustee was
appointed to take control of Accurate’s assets and the bank-
ruptcy case is still pending.
While Accurate was still operating, Mitchell began to de-
velop a business relationship with the Harley-Davidson Com-
pany, headquartered in Milwaukee, for the production of a
line of leather wearing apparel which Harley-Davidson could
sell to purchasers of motorcycles. Ten days before the clos-
ing of Accurate, Mitchell signed and sent to Harley-Davidson
a sales order for $102,000 worth of purses and belt pouches.
The order had a July 15 delivery date. During the interim pe-
riod between the closing of Accurate and the onset of pro-
duction by Respondent Custom, Mitchell was in negotiation
with Harley-Davidson officials to obtain Harley-Davidson
business for Custom and was successful in doing so. Mitchell
testified that, without Harley-Davidson’s orders, Custom
would not have been able to function.7
416 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
other leather goods company with which the bank was doing busi-
ness. Harley-Davidson refused.
8 There is a conflict in testimony concerning Mark’s compensation
as an employee of Custom. Mark testified that he received no wages
nor salary and was reimbursed only for expenses. Mitchell testified
that his brother received $1000 a month plus expenses. Mitchell’s
testimony on this point is more probable and I credit it.
9 There is testimony in the record from a Custom employee that
the machines rented by Custom were in fact the identical machines
which had been used at Accurate and which presumably had been
repossessed on the closing of the Accurate factory. I am reluctant
to find on the basis of this testimony that the machines used in both
factories were identical simply because the witness did not explain
how he could pinpoint their identities exactly. However, it does not
really matter because it is clear that the production machinery used
in both shops was the same kind, from the same source, even if they
were not the identical equipment.
10 Mitchell testified that he could not say definitely that the skins
which Custom received from Neuberger were the identical skins
which Accurate had ordered from Neuberger, but it is certain that
they were the same commodity. He admitted that the 3600 skins he
received were not an item which Neuberger would typically have in
stock.
11 One such creditor, Neuberger, advanced Custom a substantial
amount of credit and is now suing Custom for nonpayment. The
amount in question appears in the record at various figures between
$10,000 and $30,000.
12 Almost all the Accurate bargaining unit was composed of His-
panic employees and several of its supervisors were Hispanic.
During the month of June, Custom, operating under Mitch-
ell’s leadership, began looking for capital and a place to op-
erate. Jack borrowed $315,000 from friends and, together
with his wife, invested the sum in the Custom operation. He
became chairman of the board. Mitchell, whose capital con-
tribution to Custom amounted to about $1000, became presi-
dent and was Custom’s full-time operating chief. Mark testi-
fied that he did not want to have anything more to do with
the leather goods business after his experience at Accurate
but did agree to help his brother and his father. He was em-
ployed by Custom as salesman for several months.8 Moises
Jedwabnik, familiarly known as ‘‘Bernardo,’’ a long-time su-
pervisor for Accurate, was employed in the same position by
Custom and was also elected a member of its board of direc-
tors. This was an empty honor, since the board met only
twice in a 13-month period and these meetings were perfunc-
tory in character.
On June 18, Harley-Davidson canceled the order that it
had placed with Accurate and placed a similar order 7 days
later with Custom. This cancellation and reordering was done
at Mitchell’s request. During this period of time, Harley-Da-
vidson dealt with Mitchell at his home address in Desplaines,
Illinois. Custom obtained a factory site late in June at 4330
West Belmont in Chicago, about 3 or 4 miles from the Accu-
rate factory. At first, it occupied part of a factory site owned
and operated by Wheeler Protective Clothing. Later, it took
over the entire Wheeler plant when Wheeler went out of
business and, in fact, purchased some of Wheeler’s machin-
ery.
Custom obtained its lease from Wheeler on June 29 and
began production almost immediately thereafter. By October
1, Wheeler had gone out of business so Custom arranged to
utilize the entire building. As noted, it began to lease ma-
chinery from the same suppliers that had been furnishing ma-
chines to Accurate.9 Before Accurate closed, Mitchell placed
with Neuberger Brothers, Inc., a leather supplier, an order for
South American water buffalo skins to fill the Harley-
Davidson’s order. These skins are an unusual commodity in
the leather goods industry. When Accurate closed, the order
was in transit to Neuberger so Mitchell canceled the order
and, after Custom began production, again placed with
Neuberger the same or similar order. Custom then received
the water buffalo skins from Neuberger and began to use
them in filling the Harley-Davidson’s order.10 Mitchell testi-
fied that suppliers who had done business with Accurate ex-
tended credit to Custom even though Custom had no collat-
eral to secure payment for goods which were ordered.11 Har-
ley-Davidson also gave Custom cash advances which accom-
panied the orders which it placed.
When Custom opened in late June or early July, it began
production with two or three employees, a number which
was soon increased to six or eight. By the end of July, it had
17. Mitchell testified that at no time did Custom have more
than 27 employees. Custom employed four supervisors who
had worked for Accurate and also employed two office cler-
ical employees who had also worked for Accurate. However,
it hired only five bargaining unit employees, preferring to
obtain its new hires from the Illinois Job Service and Asian
Human Services.12 When Mitchell was asked why he pre-
ferred to hire individuals who, in some instances, were tran-
sients rather than call laid-off Accurate employees back to
work, he replied that he ‘‘felt [it] would be bringing on a
lot of aggravation on myself. People had not been paid for
two weeks which I tried to see that they get paid and I
couldn’t. They were upset, understandably upset. And I felt
I’d be bringing a lot of headache into my company by bring-
ing them in.’’
Sometime in August 1992, Stemwedel called Mitchell on
behalf of the Union and asked Mitchell why Custom was not
Union and asked him if he was in business. He also asked
Mitchell why Custom was not employing any of Accurate’s
former employees inasmuch as they were in the same line of
work. Mitchell denied that Custom was in the same business
as Accurate and told Stemwedel that he would not hire any
of Accurate’s former employees. Stemwedel argued that the
Union had a contract which covered Custom’s employees if
Custom was in the same business that Accurate had been,
i.e., producing the same items for the same customers.
Mitchell made no reply other than to say that Custom was
not producing exactly the same product. Shortly thereafter,
Stemwedel sent Mitchell a formal written demand for rec-
ognition and bargaining.
Sometime in November 1992, Charles Barton, the Union’s
vice president, phoned Mitchell and told him he would like
to meet with Mitchell and discuss the differences that had
arisen between Custom and the Union. Mitchell said that he
was busy at the time but would meet with the Union after
the Christmas holidays. In January 1993, Barton called again
and repeated his request for a meeting. Mitchell said that he
would ‘‘get back’’ to Barton, but he never did and the Union
made no further effort to contact Custom. On January 15,
1993, it filed the charge in this case.
Mitchell admitted that Custom never recognized the Union
(or its predecessor), never bargained with it, and never
agreed to pay any of the bills which Accurate had left out-
standing, including unpaid wages which accrued in late May
417CUSTOM LEATHER DESIGNERS
when Cole Taylor seized Accurate’s payroll account and ap-
plied it to the outstanding loan. Both initial terms of employ-
ment of Custom’s employees and any changes made there-
after were unilaterally established by Mitchell. Sometime in
1993, Custom closed its doors, laid off its employees, and
ceased doing business. It was out of business at the time of
the hearing in this case.
C. Analysis and Conclusions
1. Asserted preemption of the Board case by the
Bankruptcy Court
Since June 1992, Accurate has been in bankruptcy as a re-
sult of a petition filed by the Union to collect back wages
for employees, as well as health and welfare contributions
which were due and owing by Accurate. Respondent Custom
argues that the jurisdicdtion of the Board to proceed against
it in this case has been preempted by the pending bankruptcy
proceeding involving Accurate and that, at the very least, the
trustee in bankruptcy of the Accurate estate should have been
joined in this case as a necessary party. The contentions are
without merit.
Respondent Custom’s argument was laid to rest by the Su-
preme Court in Nathanson, Trustee in Bankruptcy for Mac-
Kenzie Coach Lines v. NLRB, 344 U.S. 25 at 30 (1952), as
follows:
The bankruptcy court normally supervises the liq-
uidation of claims. [Citations omitted.] But the rule is
not inexorable. A sound discretion may indicate that a
particular controversy be remitted to another tribunal
for litigation. [Citation omitted.] And where the matter
in controversy has been entrusted by Congress to an ad-
ministrative agency, the bankruptcy court normally
should stay its hand pending an administrative decision.
That was our ruling in Smith v. Hoboken R. Co., 328
U.S. 123, and Thompson v. Texas M. R. Co., 328 U.S.
134, where we directed the reorganization court to
await administrative rulings by the Interstate Commerce
Commission before adjudicating controversies before it.
Like considerations are relevant here. It is the Board,
not the refereee in bankruptcy nor the court, that has
been entrusted by Congress with authority to determine
what measures will remedy the unfair labor practices.
We think wise administration therefore demands that
the bankruptcy court accommodate itself to the admin-
istrative process and refer to the Board the liquidation
of the claim, giving the Board a reasonable time for its
administrative determination.
A legislative recognition of the Board’s role in liquidating
claims of employees of a bankrupt is found in 11 U.S.C.A.
§ 362 (1979), which states:
(b) The filing of a petition under Section 301, 302, or
303 of this title does not operate as a stay—
. . . .
(4) under subsection (a)(1) of this section, of the
commencement or continuation of an action or pro-
ceeding by a governmental unit to enforce such govern-
mental unit’s policy or regulatory power;
(5) under subsection (a)(2) of this section, of the en-
forcement of a judgment, other than a money judgment,
obtained in such an action or proceeding by a govern-
mental unit to enforce such governmental unit’s police
or regulatory power.
An enforcement proceeding undertaken by the Board in a
United States court of appeals has been held to be a pro-
ceeding by a governmental unit to enforce that governmental
unit’s regulatory power, within the meaning of the above-
cited provisions of the Bankruptcy Code, and hence not sub-
ject to the automatic-stay provisions of that Act. NLRB v.
Evans Plumbing Co., 639 F.2d 291 (5th Cir. 1981). These
legal authorities have even more cogency in this case since
the General Counsel is not seeking any remedy against Accu-
rate or its bankruptcy trustee but against another legal entity,
namely, Custom, which is not a party to that bankruptcy pro-
ceeding. Accordingly, the Respondent’s arguments in this re-
gard must be rejected. See Airport Bus Service, 273 NLRB
561 (1984).
2. Deferral to arbitration
With an elaborate citation of judicial authority to the effect
that the policy of the law is to favor arbitration, Respondent
argues that the Board should defer to the grievance-and-arbi-
tration machinery found in a contract, now expired, between
Accurate and the Union. This argument ignores the fact that
Custom was not a party to that contract and that Mitchell
flatly stated that he did recognize the Union and had not fol-
lowed the Accurate contract in establishing wages and other
terms and conditions of employment in operating Custom.
The Board has its own policy pronouncement concerning
when it will and will not defer to arbitration. United Tech-
nologies Corp., 268 NLRB 558 (1985). However, the Board
has never deferred to arbitration where, as here, all of those
involved in the alleged unfair labor practice are not parties
to the agreement giving rise to a duty to arbitrate. Masters,
Mates, & Pilots (Seatrain Lines), 220 NLRB 164 (1975).
The policy of nondeferral includes situations in which one of
the parties to an unfair labor practice proceeding is the suc-
cessor to an employer who is bound by a collective-bar-
gaining agreement but is not itself bound by any agreement
to arbitrate. Retail Employees District 1199E (Greater Penn-
sylvania Avenue Nursing Center), 238 NLRB 9 (1978). Ac-
cordingly, there is no reason for the Board to defer to the
arbitration provision in a contract to which the Respondent
insists it is not a party.
3. The successorship issue
The General Counsel alleges, in the alternative, that Cus-
tom is either the alter ego or the successor in interest to Ac-
curate and, as such, had a duty to apply the Union’s contract
to its employees or to bargain with the Union over either ini-
tial terms and conditions of employment of Custom employ-
ees or any changes there. The General Counsel also alleges
that Custom discriminated against laid-off Accurate employ-
ees in assembling its work force and did so in order to avoid
a bargaining obligation with the Union. In my opinion, the
418 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
13 See NLRB v. Pratt-Farnsworth, Inc., 690 F.2d 489 (5th Cir.
1982), for an exhaustive analysis of the distinction between alter
egos and successors.
facts of this case illustrate a successor situation rather than
an alter ego.13
The elements of both relationships are similar and the
Board has had many occasions to articulate these elements.
To find an alter ego, the two entities should have substan-
tially identical ownership, management, business purpose,
operation, equipment, and customers. Goldman-Feldman,
Inc., 295 NLRB 351 (1989); Yerger Trucking, 307 NLRB
567 (1992), and cases cited there at 575. Not all of these fac-
tors must exist in every case. Normally, in an alter ego situa-
tion, an element of fraud or deceit aimed at avoiding the im-
pact of labor laws exists, although this is not an essential
factor. Usually, in alter ego situations, both companies con-
tinue to exist and function simultaneously, such as a double-
breasted operation in the building and construction industry.
See, for example, Samuel Kosoff & Sons, 269 NLRB 424
(1984). However, this, too, is not an essential factor.
Since, however, the principal focus of the alter ego doc-
trine is normally on an attempt to avoid collective-bargaining
obligations through sham transactions or technical changes of
operation, the relationship of Accurate to Custom more read-
ily lends itself to a finding of a successorship. The demise
of Accurate and the decision to establish Custom were not
the result of a devious plot on the part of the Mallons to
evade the labor laws. They were part of a plan to avoid un-
employment. In what appears to be a heavyhanded and op-
pressive effort to collect a promissory note, Cole Taylor
seized the assets of Accurate, terminating the business, and
leaving its employees not only without jobs but without pay-
checks for the final 2 weeks of their employment. The
Mallons had nothing to do with this chain of events and were
perhaps its principal victims. Custom was originally estab-
lished not to thwart the Union or the Act but to salvage
something from a lifetime of activity in the leather goods in-
dustry.
Having said this, it is clear that Custom was at least a suc-
cessor of Accurate. It had the same owners, the Mallons; it
operated in the same employing industry, with the same type
of machinery making the same type of product. Custom had
the same or similar upper management, namely, Mitchell and
Jack Mallon; it also had many of the same customers. While
Harley-Davidson, who provided Custom with the bulk of its
business, constituted only a fragment of the Accurate clien-
tele, it was an Accurate customer whom the Mallons were
cultivating when the axe fell and Accurate went out of busi-
ness. A part of Custom’s sales effort, particularly that of
Mark, was to broaden the customer base of Custom and to
do so by approaching the same major department stores and
other retail outlets whom Accurate had been serving for
years. The New York salesroom which Accurate maintained
for many years was used by Custom for this purpose after
Accurate ceased to exist. The supervisory force used by Cus-
tom was similar, though smaller, than the supervisory force
employed by Accurate.
Normally a successor is entitled to set the initial terms and
conditions of employment of its newly hired employees and
is under no duty to bargain with a union representing its
predecessor’s employees until it employs a substantial and
representative complement of those employees in the new
business. Fall River Dyeing Co. v. NLRB, 482 U.S. 27
(1987). In this regard, a normal successorship differs from an
alter ego, which is obligated to adhere to the old contract and
recognize the bargaining agent of the employees of its twin.
O’Neill, Ltd., 288 NLRB 1354 (1988). Where the Mallons
fell short of their legal obligation was not in setting up a new
corporation but in assembling its work force thereafter.
The record contains several references of the affection of
the Mallons for their longtime employees, whom they re-
garded as ‘‘family’’ and for whose reliability and expertise
they had high regard. It was to former Accurate employees
that Custom looked when it sought both supervisory and of-
fice employees. However, when it came to hiring new bar-
gaining unit employees, it preferred to hire strangers who
had no background in the leather goods industry and ended
up hiring only about 5 family members out of a total com-
plement of 20 or more. When Mitchell was asked why he
went to employment agencies for help rather than to laid-off
Accurate employees, his reply was that he did not want the
‘‘headache’’ of having on his payroll people who felt they
were entitled to money as a result of their dishonored pay-
checks from Accurate. Their presence would mean ‘‘aggrava-
tion’’ which Mitchell did not want in opening a new busi-
ness.
No other explanation for Custom’s hiring policy exists in
the record or in the written arguments filed with me. The
failure of Custom to hire experienced, unionized employees,
whose work had proved satisfactory in the past, indicates at
the very least that its selection process was deliberate and
was aimed specifically at them because of their status as
former Accurate employees. The effect of not hiring
Accurate’s former employees was to deny the Union any
possible majority status in a substantial and representative
complement of Custom’s employees. There can be little
doubt that this is what Mitchell had in mind in July 1992
when Custom began operations, although I do not think this
is what the Mallons had in mind late in May when disaster
fell on them and before the Union took the step it did in
mid-June to place Accurate in bankruptcy. Accordingly, I
find that, by refusing to hire Accurate’s bargaining unit em-
ployees (except in a few instances), Respondent Custom vio-
lated Section 8(a)(1) and (3) of the Act.
Because Custom established its work force on a discrimi-
natory basis, it was not entitled to enjoy the normal freedom
of a successor employer, which is to establish initial working
conditions and to operate on a nonunion basis until the
Union establishes its majority status. See Howard Johnson
Co. v. Detroit Joint Board, 417 U.S. 249 (1974). The latter
situation normally arises by the hiring of unionized employ-
ees of a predecessor to a majority of the positions which
open up in the new bargaining unit. Since the discriminatory
hiring policy of the Respondent prevented this event from
occurring, it is obligated to bargain with the incumbent union
of its predecessor concerning initial terms and conditions of
employment and with regard to any changes which it wishes
to make thereafter, notwithstanding the fact that the Union
may not at first have been able to establish its majority status
in the new unit through normal hiring processes. Respondent
Custom may not avoid dealing with the Union at the outset
of operation because of its failure to hire new employees on
a nondiscriminatory basis, and when it refused to do so, it
419CUSTOM LEATHER DESIGNERS
14 F. W. Woolworth Co., 90 NLRB 289 (1950).
15 If no exceptions are filed as provided by Sec. 102.46 of the
Board’s Rules and Regulations, the findings, conclusions, and rec-
ommended 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 purposes.
violated Section 8(a)(1) and (5) of the Act. I so find and
conclude. Harvard Industries, 294 NLRB 1102 (1989); Weco
Cleaning Specialists, 308 NLRB 310 (1992). By refusing to
recognize and bargain with the Union later on after the
Union made a formal demand for recognition and bargaining
on or about September 29, 1992, the Respondent again vio-
lated Section 8(a)(1) and (5) of the Act.
CONCLUSIONS OF LAW
1. Respondent Custom Leather Designers, Inc. is now and
at all times material has been an employer engaged in com-
merce within the meaning of Section 2(2), (6), and (7) of the
Act.
2. United Food and Commercial Workers International
Union, Local 100A, AFL–CIO is a labor organization within
the meaning of Section 2(5) of the Act, and is the successor
of United Food and Commercial Workers International
Union, Local 415-A, AFL–CIO, CLC.
3. All production and maintenance employees employed
by Respondent Custom at its Chicago, Illinois place of busi-
ness, excluding foremen, salesmen, chauffeurs, watchmen,
office clerical employees, and supervisors as defined in the
Act constitute a unit appropriate for collective bargaining
within the meaning of Section 9(b) of the Act.
4. At all times material, the Union, or its predecessor, has
been the exclusive collective-bargaining representative of all
employees employed in the unit found appropriate in Conclu-
sion of Law 3 for the purpose of collective bargaining within
the meaning of Section 9(a) of the Act.
5. By failing to bargain with the Union or its predecessors
concerning the initial terms and conditions of employment of
the employees employed in the bargaining unit found appro-
priate in Conclusion of Law 3 and by failing and refusing
to bargain with the Union concerning changes made in those
terms and conditions of employment, and by failing to recog-
nize and bargain with the Union at all in response to a for-
mal demand as the exclusive collective-bargaining represent-
ative of the employees employed in the bargaining unit found
appropriate in Conclusion of Law 3, the Respondent here
violated Section 8(a)(5) of the Act.
6. By discriminatorily refusing to hire employees of Accu-
rate Leather and Novelty Company, Inc. because of their
membership in and activities on behalf of the Union or its
predecessor, the Respondent here violated Section 8(a)(3) of
the Act.
7. The aforesaid unfair labor practices constitute violations
of Section 8(a)(1) of the Act and have a close, intimate, and
adverse effect on the free flow of commerce within the
meaning of Section 2(6) and (7) of the Act.
REMEDY
Having found that the Respondent here has engaged in
certain unfair labor practices, I will recommend that it be re-
quired to cease and desist therefrom and to take other affirm-
ative actions designed to effectuate the purposes and policies
of the Act. Because the violations of the Act by this Em-
ployer are pervasive and evidence an attitude of disregard for
its statutory obligations and rights of its employees, I will
recommend to the Board a so-called broad 8(a)(1) remedy
designed to suppress all violations of that section of the Act.
Hickmott Foods, 242 NLRB 1357 (1979). I will recommend
that Respondent Custom be required, in the event that it re-
opens, to offer employment to laid-off Accurate employees
to all of its bargaining unit positions and that it be required
to make whole Accurate employees for any loss of earnings
they may have suffered by reason of the discrimination in
hiring which it practiced, in accordance with the Woolworth
formula,14 with interest thereon at the rate prescribed by the
Tax Reform Act of 1986 for the overpayment and under-
payment of income taxes. New Horizons for the Retarded,
283 NLRB 1173 (1987). The recommended Order will also
require the Respondent to recognize and bargain with the
Union as the exclusive collective-bargaining representative of
its unit employees with regard to initial terms and conditions
of employment of any employees and any terms and condi-
tions of employment of unit employees which are instituted
thereafter. I will also require the Respondent to post the
usual notice, advising their employees of their rights and of
the results in the case. Because Respondent Custom is out
of business, I will require it to mail a signed copy of the no-
tice to all of its laid-off employees and to all of the laid-off
employees of Accurate. All notices shall be printed in both
English and Spanish.
On these findings of fact and conclusions of law and on
the entire record, I issue the following recommended15
ORDER
The Respondent, Custom Leather Designers, Inc., Chicago,
Illinois, its officers, agents, successors, and assigns, shall
1. Cease and desist from
(a) Refusing to recognize and to bargain collectively in
good faith with United Food and Commercial Workers Inter-
national Union, Local 100A, AFL–CIO–CLC as the exclu-
sive collective-bargaining representative of the production
and maintenance employees employed at its Chicago, Illinois
plant, excluding foremen, salesmen, chauffeurs, watchmen,
office clerical employees, and supervisors as defined in the
Act.
(b) Unilaterally adopting initial terms and conditions of
employment of bargaining unit employees or any changes in
initial terms and conditions of employment.
(c) Discouraging membership in or activities on behalf of
United Food and Commercial Workers International Union,
Local 100A, AFL–CIO–CLC or any other labor organization
by refusing to hire members or otherwise discriminating
against them in their hire or tenure.
(d) By any other means or in any other manner interfering
with, restraining, or coercing employees in the exercise of
the rights guaranteed them by Section 7 of the Act.
2. Take the following affirmative action necessary to ef-
fectuate the polices of the Act.
(a) Rescind the wages, hours, and terms and conditions of
employment unilaterally imposed on applicants for hire or
any changes thereto and, upon request, bargain collectively
with the Union as the exclusive collective-bargaining rep-
420 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
16 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
National 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.’’
resentative of the Respondent’s production and maintenance
employees.
(b) In the event that it resumes production, offer employ-
ment in bargaining unit positions to all former bargaining
unit employees of Accurate Leather and Novelty Company,
Inc.
(c) Make whole all former bargaining unit employees of
Accurate Leather and Novelty Co., Inc. for any loss of pay
or benefits which they have suffered by reason of the dis-
crimination in hiring found here, in the manner described
above in the remedy section.
(d) Preserve and, on request, make available to the Board
or its agents for examination and copying, all payroll records,
social security payment records, timecards, personnel records
and reports, and all other records necessary to analyze the
amount of backpay due under the terms of this Order.
(e) Post at the Respondent’s Chicago, Illinois place of
business copies of the attached notice, in English and Span-
ish, marked ‘‘Appendix.’’16 Copies of the notice, on forms
provided by the Regional Director for Region 13, after being
signed by the Respondent’s authorized representative, shall
be posted by the Respondent immediately upon receipt and
maintained for 60 consecutive days in conspicuous places in-
cluding all places where notices to employees are custom-
arily posted. Reasonable steps shall be taken by the Respond-
ent to ensure that the notices are not altered, defaced, or cov-
ered by any other material. Copies of said notices, in English
and Spanish, shall also be mailed by the Respondent to all
of its laid-off bargaining unit employees and to all of the
laid-off bargaining unit employees of Accurate Leather and
Novelty Co., Inc. at their last known addresses.
(f) Notify the Regional Director in writing within 20 days
from the date of this Order what steps the Respondent has
taken to comply.