“It is well settled that a sole proprietorship has no legal identity separate from that of the individual who owns it.”
How later courts described this case
- “It is well settled that a sole proprietorship has no legal identity separate from that of the individual who owns it.”
Written by the judges who cited it.
The opinion
NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with
Fed. R. App. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Argued December 8, 2011
Decided March 15, 2012
Before
DANIEL A. MANION, Circuit Judge
ILANA DIAMOND ROVNER, Circuit Judge
JOHN DANIEL TINDER, Circuit Judge
No. 06‐4350
CENTRAL ILLINOIS CARPENTERS Appeal from the United States District
HEALTH AND WELFARE TRUST Court for the Central District of Illinois.
FUND and CARPENTERS WELFARE,
PENSION AND RETIREMENT No. 03 CV 3250
SAVINGS FUNDS OF ILLINOIS,
Plaintiffs‐Appellees, Jeanne E. Scott, Judge.
v.
JAY J. OLSEN d/b/a J&L BUILDERS and
J&L CONSTRUCTION,
Defendant‐Appellant.
O R D E R
Central Illinois Carpenters Health and Welfare Trust Fund (“Central Illinois Fund”)
is a fringe benefit collection agent for funds administered by the Mid‐Central Council of
Carpenters. Carpenters Welfare Fund of Illinois, Carpenters Pension Fund of Illinois, and
Carpenters Retirement Savings Fund of Illinois (“Welfare, Pension, and Retirement Funds”)
are the fringe benefit collection agents for funds administered by the Heartland Council.
Central Illinois Fund and the Welfare, Pension, and Retirement Funds (jointly “the Funds”),
sued Jay Olsen under ERISA, alleging that Olsen failed to make contributions required by
No. 06‐4350 Page 2
various collective bargaining and trust agreements. The district court granted the Funds
summary judgment on liability, concluding that Olsen was obligated to make additional
payments to the Funds. However, the court held that a genuine issue of material fact
precluded summary judgment on the issue of the exact amount of money he owed. The
parties later stipulated to the amount. Olsen now appeals, claiming that the district court
erred in granting the plaintiffs summary judgment on the issue of liability and in denying
his motion for summary judgment. We affirm.
I.
Jay Olsen is in the construction business. He conducts business as a sole proprietor
doing business as (“d/b/a”) J & L Construction and J & L Builders. According to Olsen, J &
L Construction performs only residential work while J & L Builders performs only
commercial work. Olsen states that J & L Construction and J & L Builders “maintain
separate books, separate accounting practices, separate bank accounts and have separate
clients.” Olsen, though, is the sole owner of both J & L Builders and J & L Construction and,
from his home in Normal, Illinois, controls the operations, management, and labor relations
for both businesses. Olsen personally maintains the time and payroll records for both J & L
Builders and J & L Construction, and they share one crew of employees. When employees
work on residential projects they work under the name of J & L Construction, and when
they work on commercial projects it is under the name of J & L Builders. The employees
receive one W‐2 form, which includes income from both J & L Builders and J & L
Construction. And J & L Builders and J & L Construction share the same FEIN number.
On May 14, 1997, Jay Olsen, d/b/a J & L Builders (the commercial business), signed a
Memorandum of Agreement with the Carpenters Local Union 195. Among other things, in
the Memorandum of Agreement Olsen agreed to be bound by the terms of various trust
agreements of fringe benefit funds. He also agreed to be bound by the Collective
Bargaining Agreement between Heartland Regional Council of Carpenters United
Brotherhood of Carpenters & Joiners of America AFL‐CIO Local 195, Ottawa, Illinois, and
Illinois Valley Contractors Association, Inc., covering Commercial and Residential Work
Performed in the Illinois counties of Bureau, LaSalle, Marshall, Putnam and Stark
(“Heartland CBA”). The Heartland CBA was effective from June 1, 1998, to May 31, 2003.
On April 27, 1998, Jay Olsen, d/b/a J & L Builders, signed an agreement recognizing
the Mid‐Central Illinois District Council of Carpenters as the exclusive bargaining
representative and adopting all collective bargaining agreements to which that labor
organization was a party. The agreement further incorporated all collective bargaining
No. 06‐4350 Page 3
agreements between Central Illinois Builders of the A.G.C., Builders Association of
Tazewell County, McLean County Contractors Group, Greater Peoria Contractors and
Suppliers Association, Inc., and Mid‐Central Illinois District Council of Carpenters (“Mid‐
Central CBA”). The Mid‐Central CBA was effective May 1, 1998, through April 30, 2003,
and covered both commercial and residential work.
The Funds sued Jay Olsen in a three‐count complaint. In Count I, the Central Illinois
Fund alleged that Jay Olsen, d/b/a J & L Builders, failed to make fringe benefit contributions
required by the Mid‐Central CBA and trust agreements. Count II was brought by the
Welfare, Pension, and Retirement Funds, and alleged that Jay Olsen, d/b/a J & L Builders,
failed to make fringe benefit contributions required by the Heartland CBA and related trust
agreements. In Count III, the Funds alleged that Jay Olsen is personally liable for the fringe
benefits of his employees as alleged in Counts I and II “regardless of whether they were
employed by J & L Construction” or J & L Builders.
Prior to filing suit, the Central Illinois Fund hired Romolo & Associates to audit the
payroll records of J & L Builders for the period of April 1, 1998, to March 31, 2000, to
determine whether J & L Builders was in compliance with its reporting obligations.
Following the audit, M. Joseph Romolo, a Certified Public Accountant, issued a report of on
behalf of Romolo & Associates which concluded that Olsen owed the Central Illinois Fund
an additional $15,702.10 on behalf of three employees — Derek Harken, Todd Conklin, and
Jeff Dickerson. The Welfare, Pension, and Retirement Funds also engaged Romolo &
Associates to examine the payroll records of J & L Builders. This second audit was for the
period of May 1, 1998, to December 31, 1998, and concluded that additional amounts were
due the Welfare, Pension, and Retirement Funds, this time in the amount of $7,687.54 for
Harken, Dickerson, Paul Vesper, and Richard Wills. Finally, Romolo & Associates
performed a third audit of the payroll records of J & L Builders for the period from January
1, 1999, to March 31, 2000. Similar to the other two reports, this third audit (performed for
the Welfare, Pension and Retirement Funds) concluded that Olsen owed an additional
$9,517.10 to the Welfare, Pension and Retirements Funds for hours worked by Harken,
Dickerson, and Conklin.
During discovery, the Funds questioned Olsen about the conclusions of Romolo &
Associates’ payroll audit reports. During his deposition, Olsen admitted that Conklin,
Dickerson, Harken, and Vesper were residential carpenters and that the audit reports
accurately listed the number of hours they worked during the audit periods. Olsen
nonetheless maintained that no contributions were due the Funds because the employees
were performing residential carpentry work for J & L Construction and not for J & L
No. 06‐4350 Page 4
Builders, and that J & L Construction was not liable for contributions because it was not a
party to the collective bargaining agreements.
Following discovery, the parties filed cross‐motions for summary judgment. The
Funds argued that Olsen’s deposition testimony and the three Romolo payroll audits
established, as a matter of law, Olsen’s liability under ERISA. Olsen countered that the
Romolo audits were insufficient to establish either liability or damages because they were
not audits conducted pursuant to Generally Accepted Accounting Principles (“GAAP”).
The district court concluded that the Funds were entitled to summary judgment on the issue
of liability, but that a factual dispute existed on the amount of damages. The parties later
stipulated to the amount of damages. Olsen then filed this appeal.
II.
On appeal, Olsen argues that the district court erred in granting the Funds summary
judgment on the question of liability and in denying his own motion for summary
judgment. Summary judgment is appropriate when “the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a). We review grants of summary judgment de novo, viewing the
record in the light most favorable to the non‐moving party and drawing all reasonable
inferences in their favor. Moreover, “[a]lthough we have previously cautioned against
weighing evidence at summary judgment, we have also said that a factual dispute is
‘genuine’ only if a reasonable jury could find for either party.” Blood v. VH‐1 Music First,
668 F.3d 543, 546 (7th Cir. 2012) (internal citations and quotation omitted).
The district court denied Olsen summary judgment and granted the Funds summary
judgment based on the Funds’ claims under ERISA. Under ERISA,
Every employer who is obligated to make contributions to a multiemployer
plan under the terms of the plan or under the terms of a collectively
bargained agreement shall, to the extent not inconsistent with law, make such
contributions in accordance with the terms and conditions of such plan or
such agreement.
29 U.S.C. § 1145.
Olsen maintains on appeal that he is not obligated to make contributions for work
performed by employees working for J & L Construction because J & L Construction was
No. 06‐4350 Page 5
not a party to any collective bargaining agreement requiring such payments. Alternatively,
Olsen argues that even if he could be liable for contributions for employees of J & L
Construction, the Funds have failed to establish such liability because they did not obtain an
audit in conformity with GAAP. We consider each issue in turn.
First, it is well established under ERISA’s single employer doctrine “that when two
entities are sufficiently integrated, they will be treated as a single entity for certain
purposes.” Moriarty v. Svec, 164 F.3d 323, 332 (7th Cir. 1998) (citing Radio & Television Broad.
Technicians Local Union 1264 v. Broad. Serv., 380 U.S. 255, 256 (1965)). And if two entities
qualify as “single employer,” then each business is required to make health and welfare
contributions as mandated by a governing CBA, even if one entity did not sign the CBA. Id.
at 332. In determining whether two entities comprise a “single employer,” ERISA asks
whether they are “under common control.” 29 U.S.C. § 1301(b)(1). There are four factors
which inform this determination: 1) the interrelation of operations; 2) common
management; 3) centralized control of labor relations; and 4) common ownership. South
Prairie Constr. Co. v. International Union of Operating Eng’rs, 425 U.S. 800, 802 n.3 (1976).
Before considering these factors, we pause to note that it is questionable whether the
single employer doctrine and its four factors even apply in this case because J & L
Construction and J & L Builders are not two separate legal entities. They are simply
assumed names under which Olsen conducts business as a “sole proprietorship.” See
Moriarty, 164 F.3d at 336 (Manion, J., concurring); see also Vernon v. Schuster, 688 N.E.2d
1172, 1176‐77 (Ill. 1997) (“It is well settled that a sole proprietorship has no legal identity
separate from that of the individual who owns it.”). In other words, the names “J & L
Construction” and “J & L Builders” are merely other names for “Olsen’s.” And Olsen is one
man who owns a single business, and thus is a single employer, without resort to the single
employer doctrine.
But the Funds do not make this argument and instead plod through the factors, so
we will too. The district court concluded that those factors demonstrate as a matter of law
that J & L Construction and J & L Builders constitute a single employer under the common
control of Olsen. We agree. The sole proprietor status of both J & L Construction and J & L
Builders conclusively disposes of three of the four factors: Olsen, as the sole owner, has
centralized control of all labor relations and is the common management and common
owner of both businesses. That leaves only the “interrelations of operations” factor. The
undisputed facts also show that J & L Construction and J & L Builders have interrelated
operations. While Olsen maintains separate accounting systems, books and bank accounts,
the same employees work for both J & L Construction and J & L Builders and receive one
No. 06‐4350 Page 6
W‐2 form, which includes income earned by the employees while performing work for both
J & L Construction and J & L Builders. Olsen also personally maintains the time and payroll
records for both J & L Builders and J & L Construction and runs both out of his home in
Normal, Illinois. Finally, J & L Builders and J & L Construction share the same FEIN
number. The operation of J & L Builders and J & L Construction is thus highly interrelated,
even though Olsen maintains separate records and uses a different name for his business
depending on the type of customer he is serving. Such differences are irrelevant. For
instance, in Moriarty, this court concluded that a sole proprietor of a funeral home and a
livery service was liable for contributions under a single employer theory, Moriarty, 164 F.3d
at 335, even though the owner maintained separate records and bank accounts. Moriarty v.
Svec, 994 F.Supp. 963, 970 (N.D. Ill. 1998).
Olsen attempts to overcome the conclusion that J & L Builders and J & L
Construction constitute a single employer by arguing that the unions viewed them as
separate entities as shown by the existence of separate agreements with both J & L Builders
and J & L Construction. Specifically, Olsen points to a 1997 Recognition Agreement with
Mid‐Central signed by Jay Olsen, d/b/a J & L Construction. (That agreement terminated in
January of 1998 and the Funds are not seeking contributions under that agreement.) Olsen
then argues that since Mid‐Central entered into agreements with both J & L Construction
and J & L Builders, the two must be separate entities. Olsen’s argument is misplaced for
two reasons. First, J & L Construction and J & L Builders are sole proprietorships and thus
the agreements were with Olsen personally and not with separate entities. Second, even if
the unions recognized two separate entities, that is irrelevant because the “single employer”
test presumes that there are two employers and then asks if they are under common control
and thus should be treated as a single employer under ERISA. The existence of agreements
entered into by differently named sole proprietorships does not alter in any way the
balancing of the factors: there is still common management, a common owner, centralized
control over labor relations, and a close interrelation of operations. In short, as the district
court concluded, based on the facts in this case, no reasonable jury could find that J & L
Builders and J & L Construction are two separate employers. Accordingly, Olsen is
required to make contributions to the Funds for covered employees whether they worked
under the name of J & L Construction or J & L Builders. See Moriarty, 164 F.3d at 335.
Olsen argues that even if he is required to make contributions for employees of both
J & L Construction and J & L Builders, the Funds can only establish that contributions are
owed if they perform an audit in conformity with GAAP. Olsen then contends that because
no such audit was performed, the Funds cannot establish liability.
No. 06‐4350 Page 7
Olsen’s argument is misplaced for two reasons. First, neither the CBA nor the trust
agreements require an audit to establish liability. Rather, liability for contributions to the
Funds arises if covered work, as defined by the CBAs and other agreements, was
performed. Olsen concedes that the CBAs and other agreements covered residential
carpentry work and in his deposition testimony he confirmed that several employees of J &
L Construction performed residential carpentry work but that no contributions were made.
There is nothing in the CBAs or trust agreements which requires the Fund to obtain an audit
to establish that covered work was in fact performed.
In response, Olsen cites to language from one trust agreement which states: “The
Trustees may . . . have an audit made by an independent certified public accountant . . . of
the payroll of any Employer in connection with . . . contributions.” (emphasis added). And
he then quotes from other trust agreements which provide: “In the event that upon audit
made by the Trustees and/or upon other evidence it is found by the Trustees that an
Employer has failed to make required Employer Contributions,” the Trustee may seek a
variety of remedies. No part of this language, though, requires an audit to establish liability;
rather, the language only provides that a trustee may have an audit. It thus merely
recognizes that an audit may be conducted, but does not establish an audit as a condition
precedent to liability.
Second, even if the trust agreements required an “audit” to establish liability, the
Funds obtained an audit within the meaning of the trust agreements. While Olsen objects
that the audits were not audits conducted pursuant to GAAP, the above language does not
require an audit under GAAP, but rather states that the Trustees may have “an audit . . . of
the payroll” or in the case of the second set of trust agreements, an “audit . . . . or . . . other
evidence.” The audit Romolo & Associates performed was a payroll audit and “other
evidence,” thus satisfying the various provisions on which Olsen relies for his proposition
that an audit was required. While Olsen also challenges the assumptions of the audit (for
instance, the Funds’ direction to Romolo & Associates to treat any work not clearly
identified as not covered, as covered), he admitted in his deposition that the audit correctly
identified the hours worked by several residential carpenters. Accordingly, even if there
were some problems with the audits, they were nonetheless sufficient to establish liability,
i.e., that some additional contributions were required. Thus, even if the trust agreements
required an “audit,” the payroll audit performed by Romolo & Associates satisfied the trust
agreements and established Olsen’s liability to the Funds. The district court therefore
properly granted the Funds summary judgment and denied Olsen’s motion for summary
judgment.
No. 06‐4350 Page 8
III.
J & L Construction and J & L Builders are sole proprietors and a single employer for
purposes of ERISA. Accordingly, Olsen, the owner, is liable for contributions under the
CBA and other agreements he signed, whether doing business as J & L Construction or as J
& L Builders. Olsen admitted that the CBAs required contributions for residential
carpenters and that he did not make contributions for residential carpenters who worked
for J & L Construction. These admissions are sufficient, in themselves, to establish Olsen’s
liability to the Funds. Contrary to Olsen’s argument, the trust agreements do not require an
audit pursuant to GAAP to establish liability and even if an “audit” were required, the
payroll audit performed by Romolo & Associates would qualify. Accordingly, the district
court properly granted the Funds summary judgment on the issue of liability and denied
Olsen’s motion for summary judgment. For these and the foregoing reasons, we AFFIRM.