Alkire v. N.L.R.B.

• Decision Date: 30 August 1983
• Docket Number: 82-1401,Nos. 82-1135,s. 82-1135
• Citation: 716 F.2d 1014
• Parties: 114 L.R.R.M. (BNA) 2180, 98 Lab.Cas. P 10,419 Denzil S. ALKIRE, a sole proprietorship, and Upshur Enterprises, Inc., a corporation, Petitioners, v. NATIONAL LABOR RELATIONS BOARD, Respondent. NATIONAL LABOR RELATIONS BOARD, Petitioner, v. MOUNTAINEER HAULING AND RIGGING, INC., Respondent.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1014

716 F.2d 1014

114 L.R.R.M. (BNA) 2180, 98 Lab.Cas. P 10,419

Denzil S. ALKIRE, a sole proprietorship, and Upshur

Enterprises, Inc., a corporation, Petitioners, v. NATIONAL LABOR RELATIONS BOARD, Respondent.

NATIONAL LABOR RELATIONS BOARD, Petitioner, v. MOUNTAINEER HAULING AND RIGGING, INC., Respondent.

Nos. 82-1135, 82-1401.

United States Court of Appeals Fourth Circuit.

Argued Nov. 9, 1982.

Decided Aug. 30, 1983.

Charles M. Surber, Jr., Charleston, W.V. (Forrest H. Roles, Jackson, Kelly, Holt & O'Farrell, Charleston, W.V., on brief), for petitioners.

David S. Fishback, Washington, D.C. (William S. Lubbers, Gen. Counsel, John E. Higgins, Jr., Deputy Gen. Counsel, Robert E. Allen, Associate Gen. Counsel, Elliott Moore, Deputy Associate Gen. Counsel, Carl A. De Deo, Washington, D.C., on brief), for N.L.R.B.

Before WIDENER and SPROUSE, Circuit Judges, and GORDON, ^* Senior District Judge.

GORDON, Senior District Judge.

Denzil S. Alkire (Alkire), a sole proprietorship, and Upshur Enterprises, Inc. (Upshur), a corporation wholly owned by Alkire, seek review of a finding by the National Labor Relations Board (the Board) that they are both alter egos of Mountaineer Hauling and Rigging, Inc. (Mountaineer). As a consequence of its alter ego finding, the Board ruled that all three entities had violated Sections 8(a)(1) and 8(a)(3), of the National Labor Relations Act, 29 U.S.C. Secs. 158(a)(1) and 158(a)(3), when Mountaineer conditioned reinstatement of striking union members, who had been employed by Alkire and Upshur before the strike, upon submission of a new job application. 259 NLRB No. 174 (February 1, 1982). The Board has filed a cross-appeal for enforcement of its order. Because we believe that the Board misapplied the standard for imposing alter ego status, we decline to enforce the order and remand the case to the Board with instructions to dismiss.

I.

Prior to December 15, 1977, Alkire operated a trucking business hauling coal and other materials in the Buckhannon, West Virginia, area. Approximately ninety percent of the business was hauling union coal for the Badger Coal Company; the other ten per cent consisted of non-union hauling. On December 15, during a nationwide coal strike that had virtually shut down Alkire's hauling operations, Alkire informed his employees that for economic reasons he was dissolving his business. Between that date and March 6, 1978, ¹ when Alkire entered a sale and lease agreement with Mountaineer for the assets of his trucking business, all activity relating to the hauling operations were carried out through Upshur. ² These were primarily caretaking and recordkeeping functions.

Mountaineer was formed in February 1978 by Dennett Houdyeshell, a former driver for Alkire, for the purpose of taking over Alkire's trucking business. After investigating several avenues to divest himself of his hauling operations, Alkire negotiated with Houdyeshell the sale of all its assets for $250,000.00. The purchase price was to be paid with the proceeds of a Small Business Administration loan. This loan was approved in January 1978, to be effective in July 1978 when Houdyeshell finished a period of parole.

In the interim, the parties agreed that Mountaineer would lease the vehicles and equipment, with Alkire remaining responsible for taxes, licenses, and loan payments. In return, Mountaineer would pay as rent on this equipment an amount equal to its net profit on hauling operations after deduction of all expenses, including a salary to Houdyeshell. Over the period of the lease these payments amounted to less than Alkire's obligations on the equipment loans. In addition, the parties entered a separate oral employment contract under which Alkire received four hundred dollars per week for his services as a consultant to Mountaineer. In this capacity he calculated and advised Houdyeshell about job bids and supplies purchases. He had no authority over employment decisions, nor did he supervise the daily operations of the business.

In April 1978, after the end of the national coal strike, Mountaineer began hauling union coal, principally with the same customers, including Badger, for whom Alkire had hauled prior to the strike. As its operations increased, Mountaineer hired back many of the drivers who had worked for Alkire, although it refused to hire some of his former employees who sought work. ³ These personnel decisions were made by David Straight, Vice President and General Manager of Mountaineer, who had been a dispatcher with some additional personnel-related duties for Alkire and Upshur.

In July 1978 Houdyeshell informed Alkire that the SBA had cancelled his loan because of the unfair labor practice charges filed against Mountaineer, and he indicated that he had been unable to obtain alternate financing. Thus, by its terms the sale and lease agreement terminated, and several days later Alkire sold his trucking business assets to another party.

Based upon these circumstances, the terms of the agreement between Mountaineer and Alkire, and Alkire's continued involvement in the business, the Board concluded that Mountaineer was an alter ego of Alkire and Upshur. Therefore, Mountaineer was under a duty to reinstate each of Alkire's drivers who had offered to return to work, and the Board found that its failure to do so in the case of nine former employees constituted an unfair labor practice in violation of the Act. The Board ordered back pay for those individuals, a remedy for which Alkire and Upshur, as alter egos of Mountaineer, were held jointly liable.

II.

A principal purpose of the labor laws is to "redress the perceived imbalance of economic power between labor and management" by granting employees the right to organize, bargain collectively, and strike. American Shipbuilding Co. v. NLRB, 380 U.S. 300, 316, 85 S.Ct. 955, 966, 13 L.Ed.2d 855 (1965). The Act also restricts an employer's ability to discourage or interfere in any manner with an employee's exercise of these rights. To this end the Act creates a framework of duties only within which the contending parties are free to employ economic or other persuasive efforts to determine the conditions of their working relationship. A violation of these duties improperly alters this economic balance and is considered an unfair labor practice. See, e.g., American Shipbuilding Co., supra.

While these NLRA-imposed duties limit the activity of the parties within the employer-employee relationship, each party remains free to end the relationship at any time. An employee may cease to be an employee, and the employer may cease to be an employer, for whatever reason it chooses--the employee by quitting employment, the employer by quitting business. Textile Workers Union v. Darlington Mfg. Co., 380 U.S. 263, 271-72, 85 S.Ct. 994, 1000, 13 L.Ed.2d 827 (1965). Ending the relationship in this way also ends the duties each owes to the other. Thus, although the Act forbids certain types of conduct by an employer motivated by employee union activity or membership, the employer may close his entire business, even if the liquidation is motivated by vindictiveness toward the union. Darlington Mfg. Co., supra at 273-74, 85 S.Ct. at 1001.

Frequently, when one business entity ceases operation, its niche in the economic order is occupied by another entity, often utilizing the same facilities and equipment, employing a substantially identical workforce, and serving many of the former entity's customers. When the business entities are corporations these similarities alone are insufficient to overcome the normal presumption under the Labor Act, as in other areas of the law, that the corporations are separate and distinct entities with the concomitant protection of limited liability. United Telegraph Workers v. NLRB, 571 F.2d 665, 667 (D.C.Cir.1978).

Surrounding circumstances, however, viewed in light of national labor policy, may "require that the rightful prerogative of owners independently to rearrange their businesses and even eliminate themselves as employers be balanced by some protection to the employees from a sudden change in the employment relationship." John Wiley & Sons v. Livingston, 376 U.S. 543, 549, 84 S.Ct. 909, 914, 11 L.Ed.2d 898 (1964). Otherwise an employer would be able to alter his corporate form whenever he found it inconvenient or unprofitable to recognize NLRA-created obligations, or to remedy previous unfair labor practices. Such easy evasion of the obligations imposed by the Act would frustrate its objectives and render its protections illusory indeed.

Thus, to achieve the purposes of the Act by preventing an employer from gaining an unearned advantage in his labor activities simply by altering his corporate form, the alter ego doctrine will be applied, when appropriate, to treat two nominally separate business entities as if they were a single continuous employer. Application of this doctrine requires an examination of the circumstances under which the transfer of business operations was conducted, in order to determine whether the change resulted in a "bona fide discontinuance and a true change of ownership," or merely a "disguised continuance of the old employer." Southport Petroleum Co. v. NLRB, 315 U.S. 100, 106, 62 S.Ct. 452, 455, 86 L.Ed. 718 (1942).

If alter ego status is imposed upon the two entities, the labor obligations of the original employer will be carried over to the subsequent entity, and both will be held liable for any violation of these duties by either employer. The decision whether the transfer of business is a disguised continuance, and the alter ego doctrine applied, rests upon a factual determination. Southport Petroleum, supra at 106, 62 S.Ct. at 455.

III.

Although the Court in Southport Petroleum, supra, indicated that "a disguise intended to evade" the labor laws was a sufficient condition to impose alter ego status, 315 U.S. at 106, 62 S.Ct. at 455, it did not decide whether such...