noting that deference “does not . . . extend to the Board’s legal conclusions, including its interpretation of a collective bargaining agreement, which we review de novo.”
How later courts described this case
- noting that deference “does not . . . extend to the Board’s legal conclusions, including its interpretation of a collective bargaining agreement, which we review de novo.”
- “Because the alter ego doctrine contemplates the existence of a predecessor corporation and a successor corporation, a single person need not own, manage, or supervise both corporations at the same time. The doctrine would be rendered useless if an employer could avoid liability by simply washing his hands of one company and starting a new one.”
- conducting an alter ego analysis
Written by the judges who cited it.
The opinion
United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
For the Fifth Circuit July 1, 2003
Charles R. Fulbruge III
Clerk
No. 02-60030
J. VALLERY ELECTRIC, INC.; VALLERY ELECTRIC, INC.,
Petitioners-Cross-Respondents,
VERSUS
NATIONAL LABOR RELATIONS BOARD,
Respondent-Cross-Petitioner.
Petitions for Review for Enforcement of the
Order of the National Labor Relations Board
Before WIENER, BENAVIDES, and DENNIS, Circuit Judges.
JAMES L. DENNIS, Circuit Judge.
J. Vallery Electric, Inc. and Vallery Electric, Inc. petition
for review of the decision and order of the National Labor
Relations Board (“Board”). The Board found that the companies are
alter egos and/or constitute a single employer and that they
violated section 8(a)(1), (5) of the National Labor Relations Act
(“NLRA”), 29 U.S.C. § 158(a)(1), (5), by withdrawing recognition of
their employees’ collective bargaining representative and by
failing to abide by the terms of the collective bargaining
1
agreement. The Board cross-petitions for enforcement of its order.
We DENY the employers’ petitions and GRANT enforcement of the
Board’s order.
I.
Jimmy Vallery (“Vallery”) formed Vallery Electric in 1975 as
a sole proprietorship offering residential and commercial
electrical contracting services in Monroe, Louisiana. In 1993, he
incorporated his business as Vallery Electric, Inc. (“VE”). He and
his wife, Bobbie, each owned 50 of VE’s 100 shares. Vallery served
as VE’s president; his father, A.J. Vallery, was its vice
president; and Bobbie Vallery its secretary/treasurer. Together,
the three constituted VE’s board of directors.
On September 1, 1992, VE signed a letter of assent authorizing
the Quachita Valley chapter of the National Electrical Contractors
Association (“NECA”), a trade association, to serve as VE’s
representative for current and future collective bargaining
agreements (“CBA”) with the International Brotherhood of Electrical
Workers Local 446, AFL-CIO (“IBEW”). In granting this authority to
NECA, VE “agree[d] to comply with, and be bound by, all of the
terms and conditions contained” in the CBAs negotiated with the
IBEW. VE also
agree[d] that if a majority of its employees authorize[d]
the [IBEW] to represent them in collective bargaining,
[VE would] recognize the [IBEW] as the NLRA Section 9(a)
collective bargaining agent for all employees performing
electrical construction work within the jurisdiction of
2
[the IBEW] on all present and future jobsites.1
After VE signed the letter of assent, the IBEW began referring
its members to VE for commercial jobs. VE paid these workers
according to the union scale. With the knowledge of the IBEW’s
business manger, Lonnie Shows, however, VE used nonunion labor
compensated at nonunion wages for its residential projects. Shows
later testified that the long-standing practice among local
electrical contractors was to utilize union labor only for
commercial jobs.
In July 1995, John Hopkins replaced Shows as the IBEW’s
business manager. By letter dated October 4, 1995, Hopkins
informed local contractors, including VE, that the IBEW and NECA
had negotiated a new CBA covering the period of September 1, 1995,
through August 31, 1997. Hopkins’ letter disavowed any side
agreements made by Shows:
Any verbal or written agreements made by the prior
administration with [NECA] or any individual contractors
will not be honored by this administration. Only signed
agreements by this administration will be honored.
Twice in 1996 Hopkins met with Vallery to complain about VE’s use
of nonunion labor for residential jobs. On June 18, 1996, VE
entered into a voluntary recognition agreement with the IBEW,
1
Section 9(a) of the NLRA provides that “Representatives
designated or selected for the purposes of collective bargaining by
the majority of the employees in a unit appropriate for such
purposes, shall be the exclusive representatives of all the
employees in such unit for the purposes of collective bargaining in
respect to rates of pay, wages, hours of employment or other
conditions of employment.” 29 U.S.C. § 159(a).
3
pursuant to § 9(a) of the NLRA, through which it recognized that
the IBEW represented a majority of its employees “in the bargaining
unit described in the current collective bargaining agreement” and
that the IBEW was “the exclusive collective bargaining agent for
all employees within . . . the bargaining unit.”
In January 1997, Hopkins complained to NECA that VE was
working a commercial job using nonunion employees. Hopkins’
complaint prompted a meeting between Hopkins, Vallery, and the
president of NECA, at which Vallery agreed to make appropriate
payments to the IBEW’s apprenticeship fund to resolve the matter.
Following the meeting Vallery told the NECA president that he
intended “to separate” from VE because of the high cost of union
labor. He further said that he had already discussed the matter
with a lawyer and was in the process of developing his strategy.
In February 1997, VE transferred title to a warehouse it owned
to Jimmy and Bobbie Vallery without compensation. On March 21,
1997, the Vallerys incorporated a new electrical contracting
business, J. Vallery Electric, Inc. (JVE), of which they owned all
the stock. Jimmy Vallery served as JVE’s president; Bobbie Vallery
was secretary/treasurer; and Todd Vallery, their son, its vice
president. Together, the three formed JVE’s board of directors.
On the same day that JVE was incorporated, Vallery resigned as
president of VE, and he and his wife transferred their VE stock to
A.J. Vallery without compensation.
JVE began doing business in May 1997. It operated out of the
4
same facility that VE had used since 1993. It took title to three
of VE’s five trucks, as well as other pieces of VE’s equipment,
without compensation. It employed five of VE’s seven employees.
And it took over VE’s residential work, as well as at least one of
VE’s commercial jobs. Of JVE’s first 68 jobs, 55 were residential
and 13 were commercial. JVE’s yellow-pages advertisement, which
closely resembled VE’s, announced that JVE performed both
commercial and residential work and had been in business since
1965.
VE moved to a new location, where it was run by A.J. Vallery.
It performed only commercial work. After several months, it ceased
active operations. By January 1998 VE’s two remaining employees
sought work through the union hall. At the time of the hearing, VE
had no jobs and did not employ any electricians.
By letter dated June 9, 1997, Hopkins complained to Vallery
that “[VE was] operating a . . . non-union company, known as J.
Vallery Electric.” He demanded that Vallery “supply [the IBEW]
with information concerning VE’s relationship with the nonunion
company.”
On November 18, 1997, the IBEW and NECA reached a new CBA
covering the period between September 1, 1997, and August 31, 1999.
JVE did not apply the new CBA to any of its employees.
On December 8, 1997, the IBEW charged that VE and JVE were
alter egos and/or a single employer and that the company committed
unfair labor practices, in violation of § 8(a)(1), (5) of the NLRA,
5
by failing and refusing to bargain with the exclusive collective
bargaining representative of its employees.2 By letter to the IBEW
dated April 9, 1999, Vallery denied that JVE was the alter ego of
VE or that the IBEW represented JVE’s employees. On April 21,
1999, the IBEW filed a second charge, stating that the company
committed unfair labor practices by failing to apply the terms and
conditions of the CBA to its employees and by withdrawing
recognition of the IBEW as the exclusive bargaining representative
of its employees.
The charges were consolidated and a hearing was held. An
administrative law judge (“ALJ”) issued a decision and recommended
order, finding the violations as alleged. On review, the Board
adopted the ALJ’s findings and recommended order with minor
technical modifications.
The Board’s order requires JVE/VE to cease and desist from the
unfair labor practices found. It requires JVE/VE to apply the
terms and conditions of the 1997-1999 CBA and to recognize the IBEW
2
It is an unfair labor practice under § 8(a)(1) of the NLRA
for an employer “to interfere with, restrain, or coerce employees
in the exercise of the rights guaranteed in section 157 of this
title,” namely to organize, join, and bargain through unions. 29
U.S.C. § 158(a)(1); see also id. § 157 (“Employees shall have the
right to self-organization, to form, join, or assist labor
organizations, to bargain collectively through representatives of
their own choosing, and to engage in other concerted activities for
the purpose of collective bargaining or other mutual aid or
protection . . . .”). It is an unfair labor practice under
§ 8(a)(5) for an employer “to refuse to bargain collectively with
the representatives of his employees, subject to the provisions of
section 159(a) of this title.” Id. § 158(a)(5).
6
as the exclusive collective-bargaining representative of the unit
consisting of “[a]ll employees performing electrical work.” It
further requires JVE/VE to make its employees whole for any loss of
earnings and other benefits suffered as a result of unfair labor
practices; to bargain with the IBEW, upon request, and to embody
the terms of any understanding that is reached in a written
agreement; and to post a remedial notice.
II.
We will uphold a decision of the Board “if it is reasonable
and supported by substantial evidence on the record considered as
a whole.”3 Substantial evidence is “such relevant evidence as a
reasonable mind would accept to support a conclusion.”4
“Recognizing the Board’s expertise in labor law, we will defer to
plausible inferences it draws from the evidence, even if we might
reach a contrary result were we deciding the case de novo.”5 Our
deference extends to our review of both the Board’s findings of
fact and its application of the law.6 It does not, however, extend
to the Board’s legal conclusions, including its interpretation of
3
Valmont Indus., Inc. v. NLRB, 244 F.3d 454, 463 (5th Cir.
2001).
4
Universal Camera Corp. v. NLRB, 340 U.S. 474, 477 (1951),
quoted in NLRB v. Thermon Heat Tracing Serv., Inc., 143 F.3d 181,
185 (5th Cir. 1998).
5
Thermon Heat Tracing, 143 F.3d at 185, quoted in Valmont
Indus., 244 F.3d at 463.
6
29 U.S.C. § 160(e); Southport Petroleum Co. v. NLRB, 315
U.S. 100, 106 (1942).
7
a collective bargaining agreement, which we review de novo.7
Still, we are “mindful of the Board’s considerable expertise in
interpreting collective bargaining agreements.”8
III.
The Board made three key determinations in this case. First,
it found that VE and JVE are alter egos and/or together constitute
a single employer. It then concluded that the appropriate
bargaining unit under the 1997-1999 CBA was “All employees
performing electrical work.” Based on these determinations, it
found that JVE/VE had committed unfair labor practices, in
violation of § 8(a)(1), (5) of the NLRA, by failing to apply the
terms and conditions of the CBA to its employees beginning on March
21, 1997, the day on which JVE was incorporated, and by withdrawing
recognition of the IBEW on April 9, 1999, the date of Vallery’s
letter denying that the IBEW represented JVE’s employees.
A.
An employer cannot evade its obligations to its employees
under a CBA “by setting up what appears to be a new company, but is
in reality a ‘disguised continuance’ of the old one.”9 “Although
a bona fide successor is not in general bound by a prior collective
7
See Valmont Indus., 244 F.3d at 463; Jones Dairy Farm v.
NLRB, 909 F.2d 1021, 1028 (7th Cir. 1990).
8
Jones Dairy, 909 F.2d at 1028.
9
Carpenters Local Union No. 1846, United Bhd. of Carpenters
& Joiners of Am., AFL-CIO v. Pratt-Farnsworth, Inc., 690 F.2d 489,
507 (5th Cir. 1983) (quoting Southport Petroleum, 315 U.S. at 106).
8
bargaining agreement, an alter ego will be so bound.”10 Hence, when
a successor corporation is merely the alter ego of its predecessor,
“the courts have had little difficulty holding that the successor
is in reality the same employer and is subject to all the legal and
contractual obligations of the predecessor.”11
Whether two companies are alter egos is a question of fact
answered through two inquiries.12 First, the Board must determine
“whether the two enterprises have substantially identical
management, business purpose, operation, equipment, customers,
supervision, and ownership.”13 Second, it must gauge whether there
was an unlawful motive behind the creation of the new business
entity, determining whether there was a “disguised continuance” or
“attempt to avoid the obligations of [an existing] collective
bargaining agreement through a sham transaction or technical change
in operations.”14
We find that there is substantial evidence showing that JVE
and VE are identical. First and foremost, Jimmy and Bobbie Vallery
10
Id. (citing NLRB v. Tricor Prods., Inc., 636 F.2d 266, 269-
70 (10th Cir. 1980)).
11
Howard Johnson v. Detroit Local Joint Executive Bd., 417
U.S. 249, 259 n.5 (1974) (citing Southport Petroleum, 315 U.S. at
106).
12
See Southport Petroleum, 315 U.S. at 106.
13
Carpenters Local, 690 F.2d at 507.
14
Id.
9
owned both the predecessor and successor corporations.15 Their
transfer of VE to A.J. Vallery, Jimmy’s father, without
compensation is also indicative of common ownership.16 There is
substantial proof of that JVE and VE had substantially identical
business purposes and operations. Both companies offered
residential and commercial electrical services. Although JVE
focused its business on residential projects, it advertised its
commercial services and 13 of its first 68 jobs were commercial.17
Moreover, JVE took all VE’s pending and current residential jobs,
15
Because the alter ego doctrine contemplates the existence
of a predecessor corporation and a successor corporation, a single
person need not own, manage, or supervise both corporations at the
same time. The doctrine would be rendered useless if an employer
could avoid liability by simply washing his hands of one company
and starting a new one. See Carpenters Local, 690 F.2d at 507-08;
see also NLRB v. Omnitest Inspection Servs., Inc., 937 F.2d 112,
113 (3d Cir. 1991) (“When an employer attempts to avoid its labor
obligations by pretending to cease operations and then resuming the
same operations through another employer, the other employer is
held to be the ‘alter ego’ of the old employer, and is ‘subject to
all the legal and contractual obligations of the predecessor.’”
(citations omitted)).
16
See NLRB v. Dane County Dairy, 795 F.2d 1313, 1322 (7th Cir.
1986) (“Familial control constitutes common ownership and
control.”); Goodman Piping Products, Inc. v. NLRB, 741 F.2d 10, 11-
12 (2d Cir. 1984) (finding common ownership when the predecessor
was corporation wholly owned by the husband and the successor
corporation by the wife); J.M. Tanaka Constr., Inc. v. NLRB, 675
F.2d 1029, 1035 (9th Cir. 1982) (finding that ownership of
businesses by members of the same family was one indication of
alter ego status).
17
See Advance Elec., Inc. v. IBEW Local No. 124, Int’l Bhd of
Elec. Workers, AFL-CIO, 268 NLRB 1001, 1002 (1984) (holding that an
employer that performed only residential work and an employer that
performed both residential and commercial work had “substantially
identical” business purposes and modes of operation).
10
as well as at least one commercial one. Vallery successively
managed VE and JVE and successively supervised the employees of
each. As for equipment, facilities, and employees, JVE took over
the building VE had used; took possession of three of VE’s five
trucks; and became the employer of five of VE’s seven employees.18
JVE even took over the design of VE’s advertisement in the local
telephone book. In short, there is substantial evidence that JVE
held itself out as a continuation of VE.
We also find that there is substantial evidence of an unlawful
motive in the creation of JVE. VE’s transfer of personal and real
property, as well as stock, to Vallery or JVE without any
consideration shows that there was not even a pretense of an arm’s
length relationship between JVE, VE, and the principals of each
during the formation of JVE.19 We flatly reject the argument that
JVE was innocently incorporated as a part of A.J. Vallery’s estate
planning. Because A.J. Vallery had no ownership interest in VE
prior to March 21, 1997, this argument lacks any factual support
whatsoever. On the contrary, the record clearly shows that Vallery
openly expressed his concerns about VE’s obligations to the IBEW
and admitted his intention to start a new corporation specifically
18
See Carpenters Local, 690 F.3d at 508 (“[A]n alter ego case
frequently contains specific findings on the substantial continuity
of the work force from the union to the nonunion employer.”).
19
See Central States, S.E. & S.W. Areas Pension Fund v. Sloan,
902 F.2d 593, 597 (7th Cir. 1990) (holding that the transfer of
ownership of four trucks “without a dollar changing hands” is
considered a sham transfer of assets).
11
to avoid paying union wages.20
Applying our highly deferential standard of review, we
conclude that the Board’s adoption of the ALJ’s factual finding
that JVE was the alter ego of VE is supported by substantial
evidence.21
B.
The Board adopted the ALJ’s conclusion that the appropriate
bargaining unit for the period covered by the 1997-1999 CBA was
“[a]ll employees performing electrical work.”22 JVE/VE argues that
the IBEW and the local contractors represented by NECA previously
agreed to narrow, and thus to modify, the scope of the bargaining
unit to “all . . . employees performing commercial electrical
work.”
We find no evidence of any intent to modify the bargaining
20
Contrary to VE’s and JVE’s insistence, neither Vallery’s
past support of unions nor his intent to make money in forming JVE
is relevant to the question of whether JVE was created with an
unlawful motive. See Goodman Piping, 741 F.2d at 12 (explaining
that while “anti-union animus may be ‘germane,’” it is not
necessary “for imposing alter ego status” (citing Tricor, 636 F.2d
at 270)); Tricor, 636 F.2d at 269 (holding that the establishment
of a successor company for economic gain is “irrelevant” in
determining whether the purpose of creating that company was also
to avoid labor law obligations).
21
Because we uphold the Board’s alter-ego finding, we need not
consider its alternative finding that JVE and VE are a single
employer within the meaning of the NLRA.
22
The conclusion of law reads: “The appropriate unit as
described in paragraph 8 of the collective-bargaining agreement for
the period from September 1, 1997, to August 31, 1999, as set out
in article II, section 3 is as follows: ‘All employees performing
electrical work.’”
12
unit description. Indeed, all evidence is to the contrary. The
modification JVE/VE says happened was neither memorialized during
the pendency of any CBA nor written into any new CBA. It certainly
was not expressly made part of the 1997-1999 CBA at issue. Had
there been an intent to narrow the unit description at some point,
the new description would have appeared in the first CBA after the
modification. Indeed, given the importance the IBEW and NECA
attached to written documentation (as demonstrated by the CBA
provision requiring changes be in writing), it is highly unlikely
that they intended to modify the unit description but then failed
to memorialize their agreement in subsequent CBAs.
Furthermore, even if at some earlier point the IBEW and NECA
had tacitly agreed to narrow the unit description while Shows was
the IBEW’s business manager, any such modification lasted only as
long as the CBA then in effect. In this respect the evidence is
unequivocal that, regardless of what had happened previously, there
was no agreement to alter the unit description during the pendency
of any CBA negotiated by Hopkins. When Hopkins announced the 1995-
1997 CBA, for example, he clearly announced his intention to
enforce the bargaining unit described in the CBA and expressly
disavowed contrary arrangements made by Shows. He reiterated his
position to Vallery on more than one occasion during 1996 in the
context of complaints that VE was using nonunion workers.
Indeed, VE’s own conduct reveals no intent to narrow the unit
description beyond what is included in the CBA. In June 1996, VE
13
recognized the IBEW as the representative of its employees “in the
bargaining unit described in the current collective bargaining
agreement.” It made no attempt to qualify its recognition to
account for the supposed modification. And in January 1997, VE
made a contribution to the IBEW apprenticeship fund to settle a
complaint about VE’s use of nonunion workers, effectively conceding
the scope of the unit description. In short, the evidence in no
way indicates any agreement to modify the unit description included
in the CBAs at issue or allows a reasonable inference of such an
agreement.
We also reject, for two reasons, JVE/VE’s alternative argument
that the use of nonunion workers for residential jobs became an
implied term of the 1997-1999 CBA through the course of past
practice. First, as stated above, the evidence shows that the
practice did not continue once Hopkins became the IBEW’s business
manager in July 1995. Hence, at the time the 1997-1999 CBA went
into effect in September 1997, there was no on-going past practice
of allowing contractors to use nonunion labor on residential jobs.23
Second, there is no evidence that the IBEW waived its right to
negotiate the scope of the bargaining unit. As a matter of law,
23
For this reason, JVE/VE’s reliance on Bonnell/Tredegar
Indus., Inc. v. NLRB, 46 F.3d 339, 344 (4th Cir. 1995), is
misplaced. In that case the Fourth Circuit held that the company’s
past practice of calculating an identified holiday benefit pursuant
to an unidentified but long-standing formula had become an implied
term of the CBA, such that the formula could not be unilaterally
altered during the pendency of the CBA. In the present case, there
was no on-going past practice that affected the 1997-1999 CBA.
14
the scope of a bargaining unit is a term and condition of
employment and, thus, is a mandatory subject of bargaining absent
“clear and unmistakable” waiver.24 To the extent that the IBEW,
under Shows’s leadership, tacitly agreed to divert residential work
away from union labor, such acquiescence does not constitute a
waiver of the IBEW’s right to bargain the unit description.25
Accordingly, the unit description was neither modified by agreement
nor narrowed through past practice. The unit description is
exactly as stated: “all employees performing electrical work.”
C.
The Board found that JVE/VE had committed an unfair labor
practice by failing to apply the terms and conditions of the CBA to
its employees beginning on March 21, 1997. Because the unit
description encompassed both residential and commercial work, and
because JVE/VE did not apply the CBA to any employee of JVE, we
find that this finding is supported by substantial evidence.
Likewise, the Board’s finding that JVE/VE committed an unfair
labor practice by withdrawing recognition of the IBEW necessarily
follows from Vallery’s letter of April 9, 1999. In that letter,
Vallery denied that the IBEW represented JVE’s employees. Because
24
See Road Sprinkler Fitters Local Union No. 669 v. NLRB, 676
F.2d 826, 831 (D.C. Cir. 1982) (quoting Fibreboard Paper Prods.
Corp. v. NLRB, 379 U.S. 203, 209 (1964)); see also Local 666, Int’l
Alliance of Theatrical Stage Employees & Moving Pictures Mach.
Operators of the United States & Canada v. NLRB, 904 F.2d 47, 48
(D.C. Cir. 1990) (citing 29 U.S.C. § 158(a)(5), (d)).
25
Road Sprinkler Fitters, 676 F.2d at 833.
15
JVE and VE are alter egos, Vallery’s letter constitutes substantial
evidence that JVE/VE withdrew recognition of the IBEW on April 9,
1999.
IV.
For the foregoing reasons, we DENY the petitions for review,
and GRANT enforcement of the Board’s order.
PETITIONS FOR REVIEW DENIED; ENFORCEMENT GRANTED.
16