RCR Sportswear

National Labor Relations Board - Board Decisions

Sep 30, 1993

312 N.L.R.B. 513 (N.L.R.B. 1993)

513
312 NLRB No. 82
RCR SPORTSWEAR
1 The Respondents have requested oral argument. The request is
denied as the record, exceptions, and briefs adequately present the
issues and the positions of the parties.
2 We find it unnecessary to rely on the judge’s statement in sec.
III, par. 16 indicating that holding corporate meetings to make cor-
porate decisions was a formality inappropriate for such a small
closed corporation. We also do not rely on the judge’s statement in
sec. III, par. 19 implying that holding Respondents Anthony and
Daniel Ribaudo individually liable for the violations committed by
the Respondent Companies would not add anything to the standard
remedy appropriate for alter ego cases.
3 Chairman Stephens agrees that under current Board law the judge
was correct in not imposing individual liability on the Ribaudos.
4 We have amended the judge’s recommended Order, inter alia, to
conform to the Amended Conclusions of Law and the Amended
Remedy, to provide for reinstatement and a make-whole remedy for
employees who were constructively discharged, and to direct the
Company to remit to the Union the dues which are being held in
escrow.
5 All dates are in 1992 unless otherwise noted. 6 See also White-Evans Service Co., 285 NLRB 81, 82 (1987).
RCR Sportswear, Inc., and its alter egos, In Stitch-
es, Inc., and Anthony Ribaudo and Daniel
Ribaudo and Local 158, International Ladies
Garment Workers Union, AFL–CIO. Case 22–
CA–18731
September 30, 1993
DECISION AND ORDER
BY CHAIRMAN STEPHENS AND MEMBERS
DEVANEY AND RAUDABAUGH
On March 5, 1993, Administrative Law Judge Ray-
mond P. Green issued the attached decision. The Gen-
eral Counsel filed exceptions and a supporting brief.
The Respondents filed exceptions, a supporting brief,
and a reply to the General Counsel’s exceptions. The
Charging Party filed a letter stating that it joined in the
General Counsel’s exceptions.
The National Labor Relations Board has considered
the decision and the record in light of the exceptions
and briefs1 and has decided to affirm the judge’s rul-
ings, findings,2 and conclusions3 as modified and to
adopt the recommended Order as modified, and set
forth in full below.4
1. The General Counsel has excepted, inter alia, to
the judge’s failure to find, as alleged in the complaint,
that on or about September 14, 1992,5 Respondent
RCR Sportswear, Inc. and its alter ego Respondent In
Stitches, Inc. (the Respondent), violated Section 8(a)(3)
and (1) by conditioning employees’ employment on
their working in a nonunion setting, i.e., without the
union contract that, as the judge properly found, the
Respondent was obligated to keep in effect subject
only to the minor modifications made in the chapter 11
proceeding. The judge did not address this complaint
allegation. For the reasons set forth below, we agree
with the General Counsel that the Respondent con-
structively discharged employees in violation of Sec-
tion 8(a)(3) and (1) of the Act. In so finding, we rely
primarily on the admissions of the Respondent’s two
owners, Daniel and Anthony Ribaudo.
Daniel Ribaudo testified that on Friday, September
11, after he found that the chapter 7 bankruptcy filing
had been approved, he had a meeting with the employ-
ees at which he told them that RCR would be closing
down at the end of the day. Daniel Ribaudo further
testified that he told the employees they had the option
of signing up for unemployment or working for the
new company, and that if they came to work for the
new company, they would receive the same wages but
there would be no benefits. In reply to a question by
the judge as to how employees knew that the union
contract would not be applied, Daniel Ribaudo re-
sponded that ‘‘this is the obvious answer. No benefits
means no contract.’’ When questioned further, Daniel
Ribaudo agreed with the judge ‘‘that that would be a
reasonable conclusion [the employees] might come to
from the context of the conversation.’’ According to
Daniel Ribaudo, about three or four employees did not
appear for work on Monday, September 14.
Anthony Ribaudo in his affidavit, which was admit-
ted as substantive evidence, stated that when the em-
ployees came to work on Monday, he gave them appli-
cations, and ‘‘I explained to the employees that they
would be paid the same wage and it would be a non-
union factory. I did not tell them that they could not
be represented by the ILGWU or any other union.’’
The supplemental affidavit of Anthony Ribaudo, which
was also admitted as substantive evidence, attests that
employee Catherine Onerato told Daniel Ribaudo on
Tuesday, September 15, ‘‘that she had to leave; that
she couldn’t stay; that the Union called a meeting fol-
lowing work the previous day, and the spokesperson
told the employees that their benefits would be cut off
if they stayed with In Stitches. She quit, along with
five others.’’
In Control Services, 303 NLRB 481, 485 (1991),
enfd. 975 F.2d 1551 (3d Cir. 1992), the Board, with
court approval, found that employees who quit rather
than work under conditions established in derogation
of the statutory right to bargain were constructively
discharged in violation of Section 8(a)(3) and (1) of
the Act. The Board relied on the theory of constructive
discharge applicable to employees who quit after being
confronted with a choice between resignation or con-
tinued employment conditioned on relinquishment of
statutory rights.6
We find this line of constructive discharge cases to
be applicable to the instant case. Here, employees were
confronted with the choice of resigning or working
under conditions that were established in derogation of
their statutory rights. As the alter ego of RCR Sports-
wear, In Stitches was obligated under the Act to ad-
here to the collective-bargaining agreement with the
514 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
7 We are not suggesting that employees are privileged to quit their
employment whenever there is alleged a mere breach of a collective-
bargaining agreement.
8 Contrary to the Respondent’s contention, we find that this state-
ment was not ‘‘clarified’’ by the subsequent remark in the affidavit
that ‘‘I did not tell them that they could not be represented by the
ILGWU or any other union,’’ because the latter is simply too ambig-
uous to serve as a clarification.
9 The identity of these employees can be determined at the compli-
ance stage of this proceeding.
10 The General Counsel cites, inter alia, NLRB v. Great Dane
Trailers, 388 U.S. 26 (1967).
11 The notice to employees was not alleged to be an independent
violation of Sec. 8(a)(1) of the Act.
Union, subject only to the modifications made in the
chapter 11 proceeding. Notwithstanding this statutory
obligation, Daniel Ribaudo told employees that if they
worked for In Stitches they would receive ‘‘no bene-
fits,’’ and he admitted that employees would reason-
ably have understood that comment to mean that the
entire collective-bargaining agreement would not be
applied.7 Any doubt on that score was eliminated on
the first day of operations when Anthony Ribaudo in-
formed employees that In Stitches ‘‘would be a non-
union factory.’’8 Under these circumstances, we find
that employees, such as Catherine Onerato, who quit
rather than work under the conditions the Respondent
unlawfully imposed, were constructively discharged in
violation of Section 8(a)(3) and (1) of the Act.9
2. The judge found, and we agree, that the Respond-
ent violated Section 8(a)(5) and (1) by failing to remit
union dues to the Union, because the dues constituted
an appropriate and obligatory payroll deduction under
the terms of the collective-bargaining agreement to
which In Stitches was bound. The General Counsel has
excepted to the judge’s failure to find additionally that
the Respondent violated Section 8(a)(3), (4), and (1) of
the Act by deducting union dues from its employees
and placing the dues in escrow. The judge did not ad-
dress these additional allegations.
In December, In Stitches, pursuant to its attorney’s
advice, withheld union dues from employees for the
months of October and November in the amount of
$70 per employee and placed them in an escrow ac-
count pending the outcome of this case. A notice dis-
tributed to employees in their paychecks read as fol-
lows:
Due to a complaint filed by the ILGWU with the
National Labor Relations Board a dispute con-
cerning unfair labor practice has resulted. This
may [sic] some time to resolve, however it re-
quires that we with hold union dues that would
have been paid under the contract. The funds will
be held in a bank account [sic] til the dispute is
resolved. We will investigate as to whether this
entitles former members to any benefits. Sorry for
the inconvenience, and thank you for your pa-
tience.
The General Counsel argues that the Respondent’s
action in denying to employees their benefits under the
collective-bargaining agreement, while simultaneously
deducting a substantial amount of money from their
paychecks for dues and blaming it on the Union’s fil-
ing a charge with the Board, was inherently destructive
of employee rights and undermined employee support
for the Union.10 We disagree.
Contrary to the General Counsel, we do not believe
that the Respondent’s conduct was so inherently de-
structive of employee rights that under Great Dane an
unlawful motive can be presumed in the absence of
any supporting evidence. The employees did owe dues
to the Union, and it was proper for the Respondent to
deduct the sums from their paychecks. Accordingly,
we turn to the question of whether the record as a
whole will support a finding that the Respondent’s
placing the dues in an escrow account was unlawfully
motivated.
Although the notice quoted above is somewhat
inartfully worded, we find that the Respondent’s intent
was not to retaliate against the employees because of
the Union’s filing of the charge, but was simply to
safeguard disputed dues on the advice of its attorney.
The Respondent was not attempting to penalize em-
ployees who supported the Union, but was endeavoring
to protect itself from additional liability should the
Board determine, as the Board has in fact here deter-
mined, that In Stitches was the alter ego of RCR
Sportswear and therefore bound by the collective-bar-
gaining agreement. Although we agree with the judge
that the failure to remit the dues to the Union violated
Section 8(a)(5), we find no additional violation of Sec-
tion 8(a)(3) or (4) in the Respondent’s placing the dis-
puted union dues in escrow pending the outcome of
this case.11
AMENDED CONCLUSIONS OF LAW
Insert the following as Conclusion of Law 5 and re-
number the following paragraph.
‘‘5. By constructively discharging employees be-
cause of their membership in or activities on behalf of
the Union, the Respondent has violated Section 8(a)(3)
and (1) of the Act.’’
AMENDED REMEDY
Having found that the Respondent has engaged in
certain unfair labor practices, we shall order it to cease
and desist and to take certain affirmative action de-
signed to effectuate the policies of the Act.
We shall order the Respondent to offer employees
Catherine Onerato, and all other employees who are
determined at the compliance stage of this proceeding
to have been constructively discharged, immediate and
515RCR SPORTSWEAR
12 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.’’
full reinstatement to their former jobs, or if those jobs
no longer exist, to substantially equivalent positions,
without prejudice to their seniority or any other rights
or privileges previously enjoyed, and to make them
whole for any loss of earnings or other benefits they
may have suffered as a result of the Respondent’s un-
lawful conduct. Backpay shall be computed in accord-
ance with F. W. Woolworth Co., 90 NLRB 289
(1950), with interest thereon computed in the manner
prescribed in New Horizons for the Retarded, 283
NLRB 1173 (1987).
We shall order the Respondent to make unit em-
ployees whole for any loss of earnings and other bene-
fits resulting from its repudiation of the collective-bar-
gaining agreement. Backpay shall be computed in the
manner prescribed in Ogle Protection Service, 183
NLRB 682 (1970), with interest as prescribed in New
Horizons for the Retarded, supra. Further, the Re-
spondent shall remit to the Union the dues which it is
holding in escrow, with interest as prescribed in New
Horizons for the Retarded, supra, and make the pay-
ments as required by its collective-bargaining agree-
ment to the various benefit funds retroactive to Sep-
tember 14, 1992, to the extent that such payments have
not been made. Any additional amounts due the em-
ployee benefit funds shall be paid as prescribed in
Merryweather Optical Co., 240 NLRB 1213, 1216 fn.
7 (1979). The Respondent shall also reimburse the unit
employees for any expenses ensuing from the Re-
spondent’s unlawful failure to make the required bene-
fit payments as set forth in Kraft Plumbing & Heating,
252 NLRB 891 fn. 2 (1980), enfd. mem. 661 F.2d 940
(9th Cir. 1981), with interest as prescribed in New Ho-
rizons for the Retarded, supra.
We shall also order the Respondent to grant access
to union representatives as required by its collective-
bargaining agreement.
ORDER
The National Labor Relations Board orders that the
Respondent, RCR Sportswear, Inc., and its alter ego In
Stitches, Inc., Passaic, New Jersey, its officers, agents,
successors, and assigns, shall
1. Cease and desist from
(a) Refusing to honor the terms and conditions of
the collective-bargaining agreement that is in effect
until May 31, 1994, between RCR Sportswear, Inc., In
Stitches, Inc., and Local 158, International Ladies Gar-
ment Workers Union, AFL–CIO.
(b) Denying access to union representatives as re-
quired by the collective-bargaining agreement.
(c) Failing to remit union dues to the Union as re-
quired by the collective-bargaining agreement.
(d) Constructively discharging employees because of
their membership in or activities on behalf of the
Union.
(e) In any like or related manner interfering with, re-
straining, 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
effectuate the policies of the Act.
(a) Give full force and effect to the terms and condi-
tions of employment provided in the collective-bar-
gaining agreement with the Union and make whole
unit employees for any loss of earnings and other ben-
efits resulting from the Respondent’s repudiation of
that agreement and its unlawful unilateral changes, in
the manner set forth in the remedy section of this deci-
sion.
(b) Grant access to union representatives as required
by the collective-bargaining agreement.
(c) Remit to the Union the union dues which are
held in escrow with interest in the manner set forth in
the remedy section of this decision.
(d) Remit the benefit fund payments which have be-
come due and reimburse unit employees for any ex-
penses ensuing from the Respondent’s unlawful failure
to make the required payments, in the manner set forth
in the remedy section of this decision.
(e) Offer immediate and full reinstatement to Cath-
erine Onerato and all other employees who, at the
compliance stage of this proceeding, are found to have
been constructively discharged, to their former posi-
tions or, if those positions no longer exist, to substan-
tially equivalent positions, without prejudice to their
seniority and other rights and privileges previously en-
joyed and make them whole for any loss of pay and
other benefits suffered as a result of the discrimination
against them in the manner set forth in the remedy sec-
tion of this decision.
(f) Remove from its files any reference to the un-
lawful constructive discharges and notify the employ-
ees in writing that this has been done and that the con-
structive discharges will not be used against them in
any way.
(g) Preserve and, on request, make available to the
Board or its agents for examination and copying, all
payroll records, social security payment records, time-
cards, personnel records and reports, and all other
records necessary to analyze the amounts due under
the terms of this Order.
(h) Post at its facility in Passaic, New Jersey, copies
of the attached notice marked ‘‘Appendix.’’12 Copies
of the notice, on forms provided by the Regional Di-
rector for Region 22, after being signed by the Re-
spondent’s authorized representative, shall be posted
by the Respondent immediately upon receipt and main-
516 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
tained 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 to ensure that the notices are not al-
tered, defaced, or covered by any other material.
(i) Notify the Regional Director in writing within 20
days from the date of this Order what steps the Re-
spondent 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 or-
dered us to post and abide by this notice.
Section 7 of the Act gives employees these rights.
To organize
To form, join, or assist any union
To bargain collectively through representatives
of their own choice
To act together for other mutual aid or protec-
tion
To choose not to engage in any of these pro-
tected concerted activities.
WE WILL NOT refuse to honor the terms and condi-
tions of the collective-bargaining agreement that is in
effect between RCR Sportswear, Inc., In Stitches, Inc.,
and Local 158, International Ladies Garment Workers
Union, AFL–CIO. The term of that agreement runs
until May 31, 1994.
WE WILL NOT deny access to union representatives
pursuant to our collective-bargaining agreement.
WE WILL NOT fail and refuse to remit union dues to
the Union as required by our collective-bargaining
agreement.
WE WILL NOT constructively discharge employees
because of their membership in or activities on behalf
of the Union.
WE WILL NOT in any like or related manner interfere
with, restrain, or coerce you in the exercise of the
rights guaranteed you by Section 7 of the Act.
WE WILL continue in full force and effect the terms
and conditions of employment contained in the collec-
tive-bargaining agreement that is currently in effect be-
tween RCR Sportswear, Inc., In Stitches, Inc., and
Local 158, International Ladies Garment Workers
Union, AFL–CIO and make whole unit employees for
any loss of earnings and other benefits resulting from
our repudiation of the agreement.
WE WILL grant access to union representatives as re-
quired by our collective-bargaining agreement.
WE WILL remit to the Union with interest the union
dues which have been held in escrow.
WE WILL remit the benefit fund payments which
have become due and reimburse unit employees for
any expenses ensuing from our unlawful failure to
make the required payments.
WE WILL offer immediate and full reinstatement to
Catherine Onerato and all other employees who were
constructively discharged to their former positions or,
if those postions no longer exist, to substantially equiv-
alent positions, without prejudice to their seniority or
any other rights or privileges previously enjoyed and
WE WILL make them whole for any loss of earnings
and other benefits resulting from their discharge, less
any net interim earnings, plus interest.
WE WILL remove from our files any reference to the
unlawful constructive discharges and notify the em-
ployees in writing that this has been done and that the
constructive discharges will not be used against them
in any way.
RCR SPORTSWEAR, INC., AND IN
STITCHES, INC.
William E. Milks, Esq., for the General Counsel.
Theodore M. Simon, Esq., for the Respondents.
Joseph S. Fine, Esq. (Reitman, Parsonnet & Duggan), for the
Union.
DECISION
STATEMENT OF THE CASE
RAYMOND P. GREEN, Administrative Law Judge. This case
was tried in Newark, New Jersey, on January 12, 1993. The
charge was filed on October 15, 1992, and the complaint
issued on November 27, 1992. The complaint as amended at
the hearing alleged in substance:
1. That RCR Sportswear, In Stitches, Inc., and their share-
holders, Anthony Ribaudo and Daniel Ribaudo, are alter
egos.
2. That In Stitches, Inc., which began operations on Sep-
tember 14, 1992, is bound to the same collective-bargaining
agreement that had been binding upon RCR Sportswear be-
fore that company purportedly went out of business on Sep-
tember 11, 1992.
3. That In Stitches has failed and refused to abide by the
terms and conditions of the collective-bargaining agreement.
Also that the Respondent has deducted union dues but in-
stead of forwarding them to the Union, has put them in es-
crow.
Although conceding that In Stitches is a successor to RCR,
the Respondent, contends that it is not an alter ego. There-
fore, although arguing that In Stitches has an obligation to
bargain with the Union (which it has offered to do), it denies
that it is obligated to adopt and abide by the contract that
was in existence between RCR and the Union.
On the entire record, including my observation of the de-
meanor of the witnesses, and after considering the briefs
filed, I make the following
517RCR SPORTSWEAR
FINDINGS OF FACT
I. JURISDICTION
The Respondent admits and I find that it is an employer
engaged in commerce within the meaning of Section 2(2),
(6), and (7) of the Act and that the Union is a labor organi-
zation within the meaning of Section 2(5) of the Act.
II. ALLEGED UNFAIR LABOR PRACTICES
Anthony Ribaudo and Daniel Ribaudo, and their father be-
fore them, have been involved in the garment industry for
many years. (The father retired from the business in 1977.)
They also have had a longstanding collective-bargaining rela-
tionship with the Union covering the workers who worked at
RCR, a company which acted as a contractor in that industry.
RCR was located at 183 Monroe Street, Passaic, New Jer-
sey. Its two shareholders and officers were Anthony and
Daniel Ribaudo. The building at Monroe Street and the
equipment used by RCR (sewing machines, etc.), is owned
by a corporation named Perfay, Inc. The latter corporation
was established by the father in the 1960s to hold title to real
estate. Since about 1975 when RCR transferred title of 183
Monroe Street to Perfay, RCR has paid rent to it at the rate
of about $3000 per month. (A mortgage on this property is
secured in part, by liens on the residences of Anthony and
Daniel Ribaudo.) Perfay was formed long before the instant
dispute arose and never had any employees. There was no
suggestion or evidence to show that Perfay was established
as a device to defraud or evade any of the obligations that
RCR had either to the Union, to its employees, or to any
other creditors. In fact, as business turned bad, the Ribaudos,
in an effort to keep RCR operational, had Perfay waive the
collection of rent from RCR from about February or March
1992. Also, in July 1992, the Ribaudos issued a check from
Perfay in the amount of $1200 to cover RCR’s payroll taxes.
The Ribaudos also owned another company called End
Run Inc., which acted as a garment industry manufacturer
and was also located at 183 Monroe Street. In this capacity,
the Ribaudos solicited work from retail customers and pursu-
ant to garment industry tradition, End Run did not actually
do any manufacturing. Instead, when sales were made, End
Run subcontracted out the making of the garments to con-
tractors. No doubt because of the relationship of the two
companies, RCR did much of the contracting work for End
Run.
Apart from a commissioned salesman, End Run did not
employ any other workers. In the period relevant to this pro-
ceeding, End Run did not have a contract with the Union.
As in the case of Perfay, the evidence shows that End Run
was established long before the present dispute arose. There
was no evidence or suggestion that End Run was established
or operated in a manner to evade any of the obligations that
RCR had to the Union, to employees, or to other creditors.
RCR was a member of an employer association which ne-
gotiated a collective-bargaining agreement on behalf of its
member/employers with the Union. The most recent contract
binding upon RCR, ran from June 1, 1991, through May 31,
1994. This agreement, among other things, provided for
wage rates and required the Employer to make contributions
on behalf of employees, to various benefit funds such as pen-
sion, welfare, and vacation funds. The agreement also re-
quired the Employer to deduct union dues from those em-
ployees who so authorized, and remit them to the Union. Fi-
nally, the agreement permitted union representatives to visit
the factory and talk to employees about union related mat-
ters.
There does not appear to be any disagreement that times
have not been good in the garment industry. This is partly
because of the recession, partly because of imported goods,
and partly because of competition from nonunion firms. The
evidence establishes that both Anthony and Daniel Ribaudo,
during 1991 and 1992, lent RCR approximately $103,000
from their personnel assets so that the Company could con-
tinue to operate and pay its work force. There is no evidence
that they were ever repaid or have any hope of being repaid.
As a consequence of its financial condition, RCR during
1991 and 1992, defaulted on payments to the contractually
required benefit funds. The Union, as the representative of
the employee beneficiaries of these funds properly and suc-
cessfully instituted arbitration proceedings to collect these
moneys.
On February 2, 1992, the Union secured a judgement
against RCR for the amount of $57,277. On April 29, 1992,
the Company advised the Union that because of its financial
condition it wanted to meet with the Union and negotiate re-
lief from the terms of the collective-bargaining agreement.
The Union responded on May 8, 1992:
It is the position of the Union that a meeting with
RCR would not be productive. There have been several
meetings in the past, all of which led to compromises
in favor of the company. In each instance, the principal
of RCR failed to comply with his commitments.
I have been instructed to make whatever efforts are
possible to collect the outstanding obligations.
On July 7, 1992, RCR filed a petition in bankruptcy seek-
ing to reorganize its business pursuant to the provisions of
Chapter 11. At that point, RCR listed debts of $87,000 of
which at least $60,000 was owed to the Union’s benefit
funds on behalf of employees. RCR listed its assets as being
worth about $6000.
On July 17, 1992, RCR filed with the bankruptcy court a
petition for interim relief pursuant to Section 1113(e) of the
Bankruptcy Code. In essence, it requested that the court set
aside the collective-bargaining agreement. The Union op-
posed this petition because in its view, the relief would not
save the Company and would undermine the existing collec-
tive-bargaining agreements it had with other employers in the
garment industry.
On August 19, 1992, the court granted RCR partial relief.
RCR was allowed to pay overtime rates after 40 hours of
work and it was allowed to defer putting into effect a 4-per-
cent wage increase that was supposed to occur in June 1992.
(The Ribaudos also took a cut in pay.)
On September 4, 1992, the Ribaudos filed to convert the
Chapter 11 petition into a Chapter 7 petition. That is, they
decided to liquidate RCR and asked the bankruptcy court for
permission to do so. In the application, Anthony Ribaudo
stated:
Relief is insufficient to allow the debtor to continue
in business and, in fact debtor is unable to pay the con-
tinuing costs of labor or, on the other hand, to procure
518 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
business at sufficient price to allow debtor to pay the
costs of labor required by the collective-bargaining
agreement.
. . . .
Thus, it is clear that as a result of debtor’s inability
to decrease its labor costs, liquidation and termination
of the business is the sole alternative that makes any
economic sense. It is also clear to me that the chief
creditor, the I.L.G.W.U., and its benefit funds, would
be unwilling to compromise their claims against the
debtor, even if at some point down the road, the court
were to allow a rejection of the agreement pursuant to
Sec. 1113(a) and (b). Under such circumstances, a reor-
ganization plan would not be approved and the debtor
would still have to go down the Chapter 7 road. It
might as well be now.
The application to convert to Chapter 7 was granted on
September 10, 1992.
During the week ending September 11, 1992, the employ-
ees were told that the Company was going to be closed but
that a new company, In Stitches, would be opened on Mon-
day, September 14, 1992. The employees were told by An-
thony Ribaudo that they could go to work for the new com-
pany but that although their wage rates would remain the
same, they would not get the other union benefits.
On September 11, 1992, RCR was officially closed and on
September 14, In Stitches was officially opened. In Stitches,
whose two shareholders and officers are Anthony and Daniel
Ribaudo, is located at 183 Monroe Street, and is engaged in
exactly the same business as RCR. It uses the same machin-
ery and has the same customers. When it commenced oper-
ations, the In Stitches’ work force consisted of about 85 per-
cent to 90 percent of the employees who worked for RCR.
Anthony Ribaudo stated in his pretrial affidavit that In
Stitches was formed
because it was the only business myself and my brother
knew. RCR could not survive with its current union ob-
ligations, and we could not get relief from the union or
the Bankruptcy Court. I knew we could only be com-
petitive by not having to pay union contract obligations.
Hearing from employees, Union Representative Vincenza
Ramirez called Daniel Ribaudo on September 11, 1992, and
asked what was happening. She was told that the employees
would be offered jobs at In Stitches on Monday which was
going to operate as a nonunion company. On Monday, Sep-
tember 14, when she sought to speak to the employees at the
factory, Daniel Ribaudo refused her access, asserting that as
In Stitches was a nonunion firm, she had no visitation rights.
On October 19, 1992, In Stitches offered to recognize and
bargain with the Union for a new contract. The Union re-
sponded that it was their position that In Stitches was bound
to the existing contract between it and RCR.
In December 1992, Ramirez again attempted to visit the
employees at the factory premises but was denied access.
Also in December 1992, In Stitches, pursuant to its attor-
ney’s advice, withheld union dues from employees for the
months of October and November 1992 in the amount of $70
per employee. Instead of remitting this money to the Union,
it placed them in an escrow account pending the outcome of
this case.
III. ANALYSIS
What is perhaps unusual about this case, is the candor and
lack of subterfuge which the Ribaudos engaged in when they
closed RCR and opened In Stitches. They did not attempt to
hide their actions either from the employees, the Union, or
the Government when this charge was filed. In fact, they
have been open and aboveboard in stating their reasons for
doing what they did. While this may be admirable from a
moral point of view, I don’t think that it affects the outcome
of this case which, in my opinion, clearly establishes that In
Stitches is an alter ego of RCR.
In Advance Electric 268 NLRB 1001, 1002 (1984), the
Board stated that the test for determining alter ego status
was:
The legal principles to be applied in determining
whether two factually separate employers are in fact
alter egos are well settled. Although each case must
turn on its own facts, we generally have found alter ego
status where the two enterprises have ‘‘substantially
identical’’ management, business purpose, operation,
equipment, customers, and supervision as well as own-
ership. Denzil S. Alkire, 259 NLRB 1323, 1324 (1982).
Accord: NLRB v. Campbell-Harris Electric, 719 F.2d
292 (8th Cir. 1983). Other factors which must be con-
sidered in determining whether an alter ego status is
present in a given case include ‘‘whether the purpose
behind the creation of the alleged alter ego was legiti-
mate or whether, instead its purpose was to evade re-
sponsibilities under the Act.’’ Fugazy Continental
Corp., 265 NLRB 1301 (1982).
In MIS, Inc., 289 NLRB 491 (1988), the Board, citing Ad-
vance Electric stated that; ‘‘No one factor is determinative
of alter ego status, and not all of these indicia need be
present to find that an alter ego relationship exists.’’
The Respondent, I think, makes too much of the fact that
in some cases, the Board or the courts have indicated that
‘‘subterfuge’’ was engaged in or that the new corporation
was a ‘‘disguised continuance’’ of the old. See for example
NLRB v. O’Neill, 140 LRRM 2557, 2562 (9th Cir. 1992).
See also Perma Coatings, 293 NLRB 803 (1989). (No alter
ego found where there was no substantial commonalty of
ownership and no evidence of antiunion animus.)
It may be important in some cases to look at intent or mo-
tive in order to evaluate a set of facts that may, on the sur-
face, be ambiguous. In many alter ego cases, the companies
often make a greater effort to conceal their relatedness, for
example, by transferring assets to a new company with rel-
atives taking the place of the original owners. See Kenmore
Contracting Co., 289 NLRB 336 (1988), and cases cited
therein. In such cases where there has been at least an at-
tempt to disguise common ownership and control, an inquiry
into motivation may illuminate the true purpose of the trans-
action and show that it was not intended to be at arms
length.
In the present case, the facts are not ambiguous. The
shareholders, management, and business purpose of In Stitch-
es is exactly the same as RCR. In Stitches continued operat-
ing, without hiatus, at the same location, using the same em-
ployees, the same equipment, and having the same customer
base. Moreover, if one wishes to inquire into motivation, that
519RCR SPORTSWEAR
1 Having terminated the Chapter 11 proceeding and converting it
into a Chapter 7 proceeding, it is questionable as to whether the in-
terim relief granted by the court on July 21, 1992, would still be
applicable.
too is crystal clear; the owners of both companies desired to
get out of the contractual obligations owed by RCR to the
Union and to the various benefit funds established by its col-
lective-bargaining agreement.
I also cannot accept the Respondent’s argument that In
Stitches is not an alter ego of RCR because of the interven-
ing bankruptcy proceeding during which RCR was the debtor
in possession. In William B. Allen, 267 NLRB 700, 706–707
(1983), enfd. 758 F.2d 1145 (6th Cir. 1985), cert. denied 474
U.S. 1101 (1986), the debtor in possession was held to be
the alter ego of the respondent when the business was oper-
ated in the same manner and with the same employees as be-
fore the filing of a Chapter 11 petition. In Cagle’s Inc., 218
NLRB 603 (1975), the Board held that a trustee in bank-
ruptcy was deemed to be the alter ego of a debtor company.
In Century Printing Co., 242 NLRB 659, 666 (1979), enfd.
661 F.2d 914 (3d Cir., 1981), a new company was held to
be the alter ego of a bankrupt company which was sold by
the receiver-trustee to the family of the original owners and
where those original owners, during and after the bankruptcy
proceedings, continued to control the operations of the busi-
ness.
Given the continuity of ownership and control, both before
and after the bankruptcy proceedings, I do not see how those
intervening events would affect the conclusion that In Stitch-
es is the alter ego of RCR. I therefore conclude that In
Stitches is bound to all of the terms and conditions of the
collective-bargaining agreement binding on RCR, except to
the extent that the banruptcy court may modify or alter its
terms pursuant to the provisions of the bankruptcy law.1 To
the extent that the Respondent’s defense is based on its fi-
nancial condition, that claim is not one which is properly be-
fore the Board. In this regard, the appropriate procedure falls
within the Bankruptcy Code and the Respondent may not es-
cape its valid contractual obligations through the exercise of
self-help.
The General Counsel asserts that the Ribaudos should be
held individually liable for the debts of RCR which is a
closely held corporation.
There are cases holding that the shareholders of a corpora-
tion are individually liable for the obligations of the corpora-
tion. Such cases may hold that the corporate veil will be
pierced whenever it is employed to perpetrate fraud, evade
existing obligations, or circumvent a statute. Southport Petro-
leum Co. v. NLRB, 315 U.S. 100, 106 (1942). Allen Hat Co.,
26 NLRB 937, 964 (1940), enfd. 116 F.2d 281 (8th Cir.
1940). Shareholder liability has been found where the indi-
vidual shareholder participated in a scheme or plan of eva-
sion, NLRB v. Hopwood Retinning Co., 104 F.2d 302, 304
(2d Cir. 1939), or siphoned off assets for the purpose of ren-
dering insolvent and frustrating a monetary obligation such
as backpay. NLRB v. Deena Artware, 361 U.S. 398, 402–403
(1960). Additionally, the Board has found a stockholder to
be individually liable where he has so integrated or inter-
mingled his assets and affairs that ‘‘no distinct corporate
lines are maintained.’’ Campo Slacks, 266 NLRB 492 fn. 1
and 500 at fn. 18 (1980).
In Workroom For Designers, 274 NLRB 840 (1985), the
company’s single shareholder was held to be individually lia-
ble where he had committed most of the ‘‘numerous and
egregious’’ unfair labor practices. While noting that the com-
pany’s owner had commingled personal and corporate assets
and had disregarded corporate form, the Board stated; ‘‘The
most important factor in our resolution on this issue, how-
ever, is Sissleman’s admission at the hearing that he planned
to avoid any liability for backpay.’’ Similarly, in Air Vac In-
dustries, 282 NLRB 703 (1987), the evidence showed a pro-
pensity of the corporate owners not only to commingle assets
but that they did so with the fraudulent intention of enriching
themselves while depleting corporate assets to the detriment
of their creditors.
It must be kept in mind, however, that these are the excep-
tions and not the rule. NLRB v. Deena Artware, supra. At
18A Am.Jur. 2d, § 850, at 721–730, the authors point out:
Although corporate shareholders were not immune
from liability for corporate debts or obligations at com-
mon law, shareholder insulation from such liability has
been the cornerstone of corporate law in the United
States since the 19th century, and virtually every state
now has a statute limiting a shareholder’s liability to
the cost of the shares held.
The public policy rationale for this rule is to encourage
men and women to establish business enterprises (and there-
by give employment to their neighbors), by not requiring
them to risk all of their own, and their families’ personnel
assets. It was recognized that the benefits to the public at
large of such a rule would, on balance, outweigh the costs
to those creditors who, on occasion, might be unable to col-
lect debts that otherwise were due to them.
The general rule limiting liability applies to both large and
small corporations; to public as well as closed corporations.
The rule is as applicable to a candy store owner as it is to
IBM. The exceptions to the rule are not meant to negate it
insofar as small closed corporations are concerned. From my
reading of the cases and treatises, the single most important
factor in finding individual liability, in the absence of a spe-
cific statutory exception, is a determination that there has
been some type of improper conduct by the shareholder
which was designed to perpetrate a fraud on innocent parties
so that the corporation’s debts to them might be unjustly
evaded. NLRB v. O’Neill, supra; Stafford’s Restaurant, 271
NLRB 734 fn. 1 (1984); 18A Am.Jur. 2d, § 855, pp. 724
to 730.
The facts in the present case are not, in my opinion, suffi-
cient to establish that Anthony and Daniel Ribaudo should be
held personally liable for the potential liability of RCR and
In Stitches.
Anthony and Daniel Ribaudo are the sole stockholders of
RCR, its alter ego In Stitches, Perfay, and End Run. They
did not hold corporate meetings on the occasions that they
made corporate decisions, such formality being inappropriate
for a small closed corporation owned by two brothers who
meet each other every working day of their lives.
It was established that for a time there were three cars reg-
istered as being owned by RCR that were used as the per-
sonal cars of the brothers and their father. These were a 1981
Cadillac, a 1984 Cadillac, and a Chevrolet Blazer. This was
520 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
the only evidence of any corporate assets being used by the
Ribaudos for nonbusiness use. In my opinion, this is not sig-
nificant.
The General Counsel contends that there has been comin-
gling of personal and corporate assets and therefore the
Ribaudos should be individually liable. In this case, the evi-
dence, apart from the three cars, shows that in 1990 and
1991, the Ribaudos lent about $103,000 to RCR and also
caused, in 1992, moneys to be transferred from Perfay to
RCR. (In the latter case largely by waiving rent payments.)
This money was lent or transferred into RCR in an effort to
have that company survive and pay its employees and its
creditors. Unlike the cases cited above, the transactions here
were not designed to transfer money out of RCR in order to
enrich the Ribaudos and to avoid payment to RCR’s credi-
tors. Indeed the purpose behind the money transfers here was
exactly the opposite of the types of transactions that typically
occur when the stockholders of a failing corporation are in-
tent on saving their own skins by defrauding the
corporations’s creditors.
The General Counsel argues that unless I hold the
Ribaudos personally liable, the remedy to the violations will
not be effective. In this regard, I shall order that In Stitches
be obligated to honor the applicable collective-bargaining
agreement and that the order be binding on any successor,
assign, or alter ego of the Respondent. If the Ribaudos are
able to stay in business at all, any company they own and
operate in similar fashion will be bound to this Order and
I don’t think that an order holding them individually liable
will add anything to the standard remedy appropriate for alter
ego cases.
CONCLUSIONS OF LAW
1. In Stitches, Inc., is the alter ego of RCR Sportswear,
Inc. and is bound to honor the collective-bargaining agree-
ment between RCR Sportswear, Inc., and Local 158, Inter-
national Ladies Garment Workers Union, AFL–CIO.
2. By failing and refusing to honor the collective-bargain-
ing agreement described above, the Company has engaged in
unfair labor practices affecting commerce within the meaning
of Section 8(a)(1) and (5) of the Act.
3. By denying access to union representatives in accord-
ance with the terms of the aforesaid contract, the Company
violated Section 8(a)(1) and (5) of the Act.
4. By failing to remit union dues to the Union, the Com-
pany violated Section 8(a)(1) and (5) of the Act.
5. The aforesaid unfair labor practices affect commerce
within the meaning of Section 2(6) and (7) of the Act.
REMEDY
Having found that the Respondent has engaged in certain
unfair labor practices, I find that it must be ordered to cease
and desist and to take certain affirmative action designed to
effectuate the policies of the Act.
It is recommended that Respondent be ordered to make the
required payments to the various benefit funds since Septem-
ber 14, 1992, to the extent such payments have not been
made. Moreover, it is recommended that such payments to
these funds be made with interest to be computed according
to the practice set forth in Merryweather Optical Co., 240
NLRB 12l3, 12l6 fn. 7 (l979).
[Recommended Order omitted from publication.]