D.M.S Electrical Control

National Labor Relations Board - Board Decisions

Jul 14, 1994

314 N.L.R.B. 372 (N.L.R.B. 1994)

372
314 NLRB No. 64
DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
1 This Respondent has requested oral argument. The request is de-
nied as the record, exceptions, and briefs adequately present the
issues and the positions of the parties.
D.M.S. Electrical Control, Inc. and its alter ego
and/or successor Century Electric Contractors,
Inc. and International Brotherhood of Elec-
trical Workers, Local Union No. 26, AFL–CIO.
Case 5–CA–21280
July 14, 1994
DECISION AND ORDER
BY CHAIRMAN GOULD AND MEMBERS STEPHENS
AND BROWNING
On March 4, 1994, Administrative Law Judge Har-
old Bernard Jr. issued the attached decision. Respond-
ent Century Electric Contractors, Inc. filed exceptions
and a supporting brief,1 and the General Counsel filed
an answering 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 exceptions and briefs and has de-
cided to affirm the judge’s rulings, findings, and con-
clusions and to adopt the recommended Order.
ORDER
The National Labor Relations Board adopts the rec-
ommended Order of the administrative law judge and
orders that the Respondents, D.M.S. Electrical Control,
Inc. and its alter ego and/or successor Century Electric
Contractors, Inc., West River, Maryland, their officers,
agents, successors, and assigns, shall take the action
set forth in the Order.
James P. Lewis, Esq., for the General Counsel.
Randall E. Goff, Esq., of Arnold, Maryland, for the Respond-
ent.
Charles Graham, of Washington, D.C., for the Charging
Party.
SUPPLEMENTAL DECISION
HAROLD BERNARD JR., Administrative Law Judge. I heard
this backpay case in Baltimore, Maryland, on May 4 and 5,
1993, pursuant to compliance specification (specification)
issued December 31, 1992. The proceeding before me arose
from a decision by Administrative Law Judge David S. Da-
vidson on May 17, 1991, finding that the then solely charged
Respondent, D.M.S. Electrical Control, Inc., violated Section
8(a)(5) and (1) of the Act by failing and refusing to abide
by the terms and conditions of collective-bargaining agree-
ments and ordering Respondent to remedy the violations by
making employees whole for loss of wages and benefits
caused by its unlawful conduct, including unpaid required
contributions to benefits funds. Following Respondent’s fail-
ure to file an answer, Judge Davidson had granted General
Counsel’s Motion for Summary Judgment and the Board, by
unpublished Order, adopted his findings, conclusions, and
proposed Order on June 25, 1991. The United States Court
of Appeals for the Fourth Circuit mandated enforcement of
the Board’s Order on June 2, 1992. (G.C. Exh. 1a,b,c.)
Following the above developments, a controversy arose
between the parties over whether Respondent D.M.S. Elec-
trical Control, Inc. (DMS) is solely responsible to comply
with the Board’s Order or whether Century Electric Contrac-
tors, Inc. (Century) is jointly liable for compliance with the
Order’s remedial terms as either an alter ego or successor to
DMS with prior notice of its potential liability for such com-
pliance, and over the amounts of backpay and benefit con-
tributions owing. During the hearing before me pursuant to
the specification and notice of hearing naming both DMS
and Century as Respondent, the parties stipulated the correct-
ness of backpay and unpaid other benefits calculated in the
specification as amended but left as a central issue the ques-
tion whether Century and DMS are jointly liable to make
such payments.
A. Background
DMS engages in an electrical contracting business under
articles of incorporation filed in 1986, and at all relevant pe-
riods of time since February 3, 1986, the Union has been the
designated exclusive bargaining representative of its employ-
ees, DMS having signed a letter of assent agreeing to be
bound by terms and conditions of collective-bargaining
agreements negotiated by the Union and the National Elec-
trical Contractors Association on that date. (G.C. Exh. 7.)
One of the three incorporators and corporation’s directors
designated by the articles of incorporation is Michael T.
Fones (Fones). (G.C. Exh. 5.) Fones testified he served as
the sole director for DMS and the parties stipulate that by
July 18, 1988, Fones became its sole stockholder and re-
mained its president. Witness Leonard Lehner, an electrician
employee for DMS in 1989 or 1990, testified that his super-
visor was Gary Snodgrass, that Fones was above Snodgrass,
and that there was no other supervision or management per-
son other than Fones. Lehner also named Virginia Conti as
a secretary at DMS and the parties agreed further that DMS
also employed Joseph Penley as an electrician. Lehner’s ac-
count is uncontradicted.
Showing further Fones’ command status in DMS, he wrote
the Union on December 15, 1989, discontinuing DMS as a
member in the Union for the alleged reason his company
could no longer afford monthly contributions to union trust
funds, effective January 1, 1990. (G.C. Exh. 8.) DMS there-
after failed and refused to abide by the terms and conditions
of the agreement with the Union. (G.C. Exh. 1–A, ALJD p.
2.)
The principal office for DMS designated in its articles of
incorporation appears to be the same address as the residence
of Fones, who also acted as the corporation’s resident agent
under Maryland law. (G.C. Exh. 5 pp. 1, 4.) DMS assets in-
cluded several vehicles, vans, and trucks and assorted elec-
tricians’ tools. Employees kept the company vehicles at
home after work; tools were stored in self-storage rental
company premises; there was no company shop. During the
last quarter in 1991, Fones testified DMS did business out
of his home, then in West River, Maryland, where only one
373D.M.S. ELECTRICAL CONTROL
company van was parked, while a Karen Randall did most
of the office operations out of her home.
The number and identity of DMS employees during its op-
erations changed with the ebb and flow in operations from
as few as 8 to as many as 18, Fones testifying he employed
about 10 employees in the last part of DMS operations, but
Respondent admitting in its answer only that some 20 named
individuals may have been employed during some portion of
the backpay period. (G.C. Exh. 1-I.) Clearly, the size and
composition in the DMS work force was a relatively fluid
amorphous operational characteristic by its very nature rather
than stable or unchanging. DMS had about 25 to 30 cus-
tomers and did business in the Washington, D.C. and subur-
ban Maryland area.
B. Century
The very day Fones made effective for jettisoning his
firm’s contract with the Union, January 30, 1990, is the date
articles of incorporation were filed creating Century and
naming as its resident agent Fones’ attorney in the earlier
DMS litigation described above. (G.C. Exh. 6.) Century is
described therein as being designed to operate an electrical
contracting business for commercial and residential cus-
tomers, the same business purpose as DMS, and the record
shows it has done so with about the same number of cus-
tomers in about the same geographical area since inception.
Century is at first described by Fones’ testimony as having
as its president and only director Carol Kearney, and Vir-
ginia Conti the DMS secretary noted above as a nominated
officer for Century. Responding to my question seeking to
learn Carol Kearney’s identity, Fones then identified Kearney
as his sister. He then admitted that Kearney and he discussed
how a corporation could be formed so as to enable Fones to
continue to earn an income in the electrical contracting busi-
ness and that he would attend to Century getting contracts
and do whatever was necessary to keep her going. Fones was
the principal advisor to Kearney during this planning and
afterward because Kearney had no electrical business experi-
ence whatsoever. Fones had told Kearney that DMS could
not afford to go on further. Fones nonetheless testified that
he did not know when Kearney had formed Century during
his further examination, which struck me as an effort to dis-
tance himself from the process in which he obviously had
played a central role. He also offered the implausible asser-
tion that Kearney, out of sisterly concern, created Century
only to afford Fones an adequate income. Fones testified that
DMS had ‘‘folded’’ at some point in his testimony con-
cerning how it had fallen on hard times, yet in the very next
breathe admitted he had continued operations by paying cash
for supplies.
By contrast with Fones’ inherent contradictions, and
unforthcoming manner on the stand, employee Leonard
Lehner credibly testified that he recalled that there was no
break between the last time he got paid by DMS and then
got paid by Century, that Virginia Conti brought the checks
to employees in the field. He testified that it was Fones who
came to him and told him that there was another company
starting up, Century Electric, and if he wanted a job, he was
more than welcome to have one, advising Lehner to see
Kearney and that she would employ him. Lehner further tes-
tified that Virginia Conti told him he was hired and asked
him how much he was making so she would know how
much to pay him. As corporate secretary for Century, Conti
wrote a letter to the Montgomery County code enforcement
office, electrical division on April 10, 1992, stating as fol-
lows:
I am writing this letter to inform you that DMS Elec-
trical Control, Inc. is no longer in business. DMS has
changed its name to Century Electrical Contractors, Inc.
The new address is as follows:
Century Electric Contractors, Inc.
5149 Cedarlea Drive
West River, MD 20778
Also enclosed please find a certificate of insurance,
a copy of our statewide license, and a copy of DMS
Electrical Control’s Electrical Contractor’s business li-
cense, and the Master Electrician’s (Bruce Pickett) li-
cense number. [G.C. Exh. 11.]
The address given for Century is Fones’ home address. The
master electrician for Century, Bruce Pickett, also served in
such position for DMS. I admitted the letter over Respondent
counsel’s hearsay and lack of foundation objections after first
inquiring in open court with all parties present into its ori-
gins and being fully satisfied that it bears the earmarks of
reliability. Though accorded the opportunity to do so, Re-
spondent did not call Conti to the stand to inquire into the
letter’s genuineness nor explain its failure to do so, nor did
Respondent’s counsel contest its authenticity with any degree
of specificity whatsoever. Fones, when examined on the
point merely testified he had not authorized it and
unpersuasively denied knowledge. Significantly, Fones did
not disaffirm the letter’s contents or deny its validity even
then. The reliable exhibit stands as an uncontested and ad-
mitted representation binding on Respondent through cor-
porate officer Conti that DMS merely changed its name to
Century.
I do not credit Fones’ testimony that he took no part in
operations or management at Century until June 1992 be-
cause he testified earlier to committing himself to getting
Century contracts, the Company’s life blood, and to doing
anything to keep Century going from its inception in January
1990. He was empowered by his special status as Kearney’s
brother and advisor to help conduct operations and he helped
secure contracts. He was privy to information from corporate
secretary Conti regarding available electrical contracts and
assigned himself work as he saw fit on a salary basis far
above other employees pay. He, in yet another effort to dis-
tance himself from Century’s inner managerial sanctum
unforthcomingly describe how ‘‘they,’’ meaning Century
management, had a place of business in West River at 5149
Cedarlea—which turns out to be his home where Century
records are also kept.
Moreover, Fones hired employee David Belcher as an
electrician for Century in March 1992 telling Belcher ‘‘Yes
I can hire you’’ and ‘‘I will start you out at $16.00 an hour
and if you work out, I will give you raises as you work
out.’’ Fones does not deny Belcher’s credible testimony.
While allegedly not an officer de jure or officially titled
a manager in Century, I find Fones to have been its driving
force and de facto head of operations at all relevant times
since its creation in January 1990 and its start in actual oper-
ations under the parties’ stipulation in the third quarter of
374 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
1991. In addition, it is clear that Fones becomes legal half-
owner of Century in June 1992 with his sister and an Edward
Shultz as the other shareholders, and Fones serving as presi-
dent and treasurer. Fones and Shultz later acquire full owner-
ship from Kearney for $50 cash and by assuming tax liabil-
ity; while Fones later buys out Shultz’ 50 shares for $20,000,
becoming full owner by April 1, 1993. The Kearney-Fones-
Shultz transactions manifest a lack of arm’s-length dealing
between brother and sister consistent with a disguised con-
tinuance scenario. Fugazy Continental Corp., 265 NLRB
1301 (1983).
When Century began so-called active operations—under
the parties’ stipulation in the third quarter of operations in
1991, a period when DMS was in a low profile or inactive
status—Century employed six electricians, including Fones in
his special salaried status: Bruce Pickett, Leonard Lehner,
Gary Snodgrass, Joseph Penley, and Steve Elliott—the latter
a casual hire appearing only quite briefly on Century’s pay-
roll. All but Elliott worked for DMS just prior to the start
in Century’s operations, as did Virginia Conti. The employ-
ees Fones kept on the DMS payroll before deactivating or
mothballing DMS just when Century was activated con-
stituted a virtual majority of Century’s work force then,
while Fones, in his position of de facto manager and adviser
to Kearney, and Conti, continued the same operational lead-
ership. The business remained electrical contracting, the
number and geographical location of customers about the
same, with business quarters mainly remaining in the same
Fones’ family ownership—mainly Fones after a brief loca-
tion at his sister’s house. The DMS assets, the vehicles noted
above, did not transfer to Century, Fones having sold them
to pay bills beforehand. The DMS equipment, tools, and
records were not available for transfer to Century because
Fones reportedly failed to pay a self-storage fee and these
contents were levied upon.
Fones was the sole owner of DMS, in de facto control
over the operations of Century early on in its formative and
operational stages with his sister who depended on him to
run Century, then next legal owner with Edward Shultz, who
is not shown in the record to be more than a silent-partner-
like co-owner, and then, in short order Fones once again re-
sumes sole ownership of the same enterprise, with substan-
tially the same employees, location, and number of cus-
tomers and places of business, without any hiatus in oper-
ations between DMS and Century, the motive for the super-
ficial changes in name and duplicate corporation articles
found hereinafter to be motivated by the desire to avoid the
terms in the union contract.
Counsel for Respondents moved for dismissal at the hear-
ing, contending that there was a hiatus in operations between
DMS operations being closed and the startup of Century in-
asmuch as Fones didn’t take part in management at Century
until becoming a stockholder, because the chain of ownership
between DMS and Century was broken, and because there
was no evidence Fones closed DMS to avoid labor union ob-
ligations. For the reasons noted, namely, Fones behind the
scenes—and open—exercise of authority and control as advi-
sor to and proven special benefactor of his sister as owner
and founder of Century I find no merit to either the hiatus
or broken chain of ownership argument. The record is replete
with efforts by Fones to construct scenarios as to the roles
he did or did not play regarding very relevant issues in the
case, especially efforts by him to distance himself from im-
portant events when he had just testified to the contrary, and
to be far less than forthcoming. Thus, he testified at one
point he did not know Century was being formed and had
no knowledge whatsoever about the Company. The rendering
of small partial truths piecemeal when larger issues are at
stake is as discrediting to a witness as an untruth—it was
only upon examination by the court that reluctantly offered
admissions of plain truth were rendered. This attempted mis-
construction of events coupled with evasiveness, inherent in-
consistencies, and answers to pressingly delivered leading
questions amounted to very unpersuasive reasons for the de-
activation of DMS and startup of Century being presented.
Combined with the fact that Fones had the admitted motive
to get out from under the terms of the collective-bargaining
agreement with the Union as he stated in his letter to the
Union, this provides a strongly reasonable basis to infer that
DMS deactivated and Century, which admittedly did not
honor Respondent’s contract, was formed to enable Fones
through Century to avoid the Union’s contract obligations
imposed on his enterprise and so achieve greater profitability
for himself. Nor did Respondent call Virginia Conti, Carol
Kearney, or Edward Shultz to testify in contradiction to the
employee accounts or exhibits received into evidence without
accounting for its failure to do so where their indicated pos-
session of direct knowledge concerning relevant events is
clearly reasonable to assume, thereby warranting the infer-
ence such testimony would be adverse to Respondent’s inter-
ests in the litigation of the issues before me. Auto Workers
v. NLRB, 459 F.2d 1329, 1336 (D.C. Cir. 1972).
Based on the foregoing, I conclude that the factors re-
quired to find an alter ego or disguised continuance, includ-
ing the formation of Century to avoid DMS labor relations
obligations, are present and conclude that both DMS and
Century as alter egos are jointly liable for the specification—
denoted backpay and unpaid benefits. Marbro Co., 310
NLRB 1145, 1148 (1993). Based on the record evidence out-
lined above demonstrating clearly that there was a substantial
continuity of the employing enterprise, and that Fones re-
mained at the helm in operations of both DMS and Century
at all relevant times and therefore had actual knowledge and
notice of the DMS prior unlawful conduct when purchasing
Century—as well as when he earlier assumed control at its
inception—I conclude Century is a successor to DMS and
thus liable additionally to remedy the unfair labor practices
previously committed by DMS. Marbro Co., supra at 1150;
and Golden State Bottling Co. v. NLRB, 414 U.S. 168
(1973).
The parties agree that the formulas used to calculate back-
pay and unpaid benefits contained in the compliance speci-
fication as amended and resulting figures are true and cor-
rect. At the hearing Respondent counsel further stipulated to
the correctness of employee Dennis Phillips’ medical ex-
pense of $2566 in an amendment 13(b) to the specification,
and made no objection to a further amendment numbered
13(c) setting forth employee Thomas L. Spruill dependent’s
medical expenses of $420 made by motion during an interim
period before the hearing closed. The motion, supporting at-
tachments, Respondents’ reply making no objection, and a
copy of my order receiving same into the record are marked
as Administrative Law Judge’s Exhibit 5. Respondent coun-
sel specifically stated it had no objection to the Spruill
375D.M.S. ELECTRICAL CONTROL
1 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.
amendment motion, did not file a brief arguing otherwise as
to its foregoing described stipulations, and filed no answer
to the Spruill amended specification, the contents of which
are therefore deemed to be admitted and true.
A review of the stipulated figures reveals that as of the
hearing date Respondent DMS and its alter ego and suc-
cessor Century owed a combined total amount of backpay
and unpaid contributions to employee benefit funds of
$119,171.90 plus employees Phillips’ and Spruill’s medical
expenses or a total of $122,157.90. All the above plus inter-
est accrued to the date of payment with the backpay and un-
paid benefits period to continue, and correspondingly further
amounts due employees, until such time as Respondent DMS
and/or Respondent Century reinstate the terms and conditions
of the collective-bargaining agreements and bargain with the
Union as provided in the Board’s Order, as enforced by the
circuit court.
CONCLUSIONS OF LAW
1. Century Electric Contractors, Inc. is the alter ego of,
and successor to, D.M.S. Electrical Control, Inc.
2. Century Electric Contractors, Inc. and D.M.S. Electrical
Control, Inc., their officers, agents, successors, and assigns,
are jointly and severally liable to remedy the unfair labor
practices found in the underlying proceedings.
On these findings of fact and conclusions of law and on
the entire record, I issue the following recommended1
ORDER
The Respondents, D.M.S. Electrical Control, Inc. and its
alter ego and/or successor Century Electric Contractors, Inc.,
West River, Maryland, their officers, agents, successors, and
assigns shall jointly and severally, pay to the employees and
to the appropriate union benefit funds the sums set forth in
the compliance specification as amended and prescribed
hereinabove, plus interest, the amounts to continue until such
time as Respondent DMS and/or Respondent Century rein-
states the terms of and conditions of the collective-bargaining
agreements identified herein and bargain with the Union as
provided in the Board’s Order as enforced by the circuit
court.