Bernal, Inc.Download PDFNational Labor Relations Board - Board DecisionsSep 19, 1973206 N.L.R.B. 72 (N.L.R.B. 1973) Copy Citation 72 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Bernal, Inc. and Bernal Rotary Systems, Inc. and Inter- national Union, United Automobile, Aerospace and Agricultural Implement Workers of America, UAW. Case 7-CA-9763 September 19, 1973 BY CHAIRMAN MILLER AND MEMBERS FANNING AND PENELLO On April 24, 1973, Administrative Law Judge Ivar H. Peterson-issued the attached Decision in this pro- ceeding. Thereafter, General Counsel filed exceptions and a supporting brief, and Respondents filed an- swering briefs. , Pursuant to the provisions of Section 3(b) of the National Labor Relations Act, as amended, the Na- tional Labor Relations Board has delegated its au- thority in this proceeding to a three-member panel. The Board has considered the record and the at- tached Decision in light of the exceptions and briefs and has decided to affirm the rulings, findings, and conclusions I of the Administrative Law Judge and to adopt his recommended Order. ORDER Pursuant to Section 10(c) of the National Labor Relations Act, as amended, the National Labor Rela- tions Board adopts as its Order the recommended Order of the Administrative Law Judge and hereby orders that the complaint be, and it hereby is, dis- missed in its entirety. i As we view the Administrative Law Judge's decision, he dismissed the complaint's allegations that (1) Bernal unlawfully refused to bargain over the sale of part of its business and the effects thereof, and (2) that subsequently Bernal and Rotary unlawfully refused to bargain as a single employer, while finding it unnecessary to reach and decide the merits of Respondents' 10(b) defense . We agree. We are satisfied that the sale of the experimental rotary operation , of which the Union had advance notice and did not protest, had at most a minimal effect on unit work and that the unit employees were not adversely affected by Bernal's termination of that operation. Accordingly, we shall dismiss the complaint on its merits and not decide the 10(b) issue, since it is uncertain whether the 10(b) period in the circumstances of this case commenced with the formation of the new company or, when the Union became aware of a possible impact on the unit work and Respondents' refusal to bargain as a single employer, or whether each of these events gave rise to a 10(b) period of its own. DECISION STATEMENT OF THE CASE IvAR H. PETERSON: Administrative Law Judge: I heard this case in Detroit, Michigan, on January 15 and 16, 1973, upon the complaint issued by the Acting Regional Director for Region 7 on October 12, 1972, based, upon charges filed on August 21 by International Union, United- Automobile, Aerospace and Agricultural Implement Workers of Ameri- ca, UAW, herein called the Union. Briefly stated, the com- plaint alleged that Bernal, Inc., and Bernal Rotary Systems, Inc., are affiliated companies and a single employer and that since on or about August 16, 1972, Respondent Rotary has refused to recognize or bargain with the Union as the exclusive representative of the unit consisting of all produc- tion and maintenance employees, including truck drivers and shipping and receiving employees employed by Bernal, Inc., and Rotary, but excluding all office clerical employees, professional employees, and guards and supervisors as de- fined in the Act. Rotary filed an answer on October 17 and Bernal filed its answer on November 3. Both Respondents deny the commission of any unfair labor practices. Upon the entire record in the case and my observation of the witnesses as they testified, and a careful consideration of the briefs filed by all parties on or about March 7, I make the following: FINDINGS OF FACT 1. JURISDICTION The Respondents, Michigan corporations, maintain their principal offices, and places of business in Detroit, Michi- gan. Bernal is engaged in the manufacture , sale, and distri- bution of die-cutting punches, and related products. Rotary is engaged in the manufacture, sale, and distribution of die-cutting cylinders, and related machinery and systems. During the year 1971 Bernal manufactured, sold, and distri- buted products valued in excess of $200,000, of which prod- ucts valued in excess of $50,000 were shipped from its place of business to points located outside the State of Michigan. I find that Respondent Bernal is an employer engaged in commerce within the meaning of Section 2(6) and (7) of the Act. No dollar volume of products is given for Rotary nor is its shipments in interstate commerce disclosed. I further find that the Union is a labor organization within the mean- ing of Section 2(5) of the Act. If. THE ALLEGED UNFAIR LABOR PRACTICES A. The "Single Employer" Issue Admittedly, the following named persons have been and now are supervisors of Bernal within the meaning of Section 2(11) of the Act: Alan Rae Pfaff, Sr., president, and chair- man of the Board; Paul Douglas Pfaff, vice president; George Miller, secretary and director; William Hamer, plant superintendent; William Jones, foreman; and Paul Madill, engineer-supervisor. In its answer, Rotary denied that George Miller and Paul Madill were supervisors within the meaning of the Act, but otherwise admitted that the following were supervisors within the meaning of the Act: Alan Rae Pfaff, Jr., presi- dent and director; George Miller, vice president, secretary, and director; and George C. Capen, treasurer-supervisor. In order properly to assess the relationship between the two Respondents, it is necessary to go into substantial de- tail, -On May 22, 1968, a majority of the employees in the appropriate unit previously set forth,, who were then em 206- NLRB No. 9S BERNAL, INC. 73 ployed by Bernal, voted in an election conducted pursuant to an agreement for consent election (Case 7-RC-8913) for the Union as their exclusive representative . Prior to Febru- ary 1, 1972, Bernal manufactured, sold, and distributed steel rule die-cutting punches and other products. In 1964 the Company had begun experimenting with a new patented product, the manufacture of a rotary die and cutting ma- chine . No bargaining unit employees were used in that ex- perimental work except that occassionally they did some general machine work. On occasion, the engineers working on the machine to be used for demonstration purposes, would go into the production end of the plant and use machinery there for perfecting the dies being made for the demonstration machine. Prior to February 1, 1972, Bernal was owned entirely by Alan Pfaff, Sr., and his two sons Alan Pfaff, Jr., and P. Douglas Pfaff. The father owned 3490 shares of stock out of a total of 5,000, and the two sons held 760 and 750 shares, respectively. These three, plus George Miller, their attorney, and one Elroy Sandberg made up the board of directors of Bernal. Pfaff, Sr., was chairman of the Board, Alan was president, Douglas was vice president, and Miller was secre- tary-treasurer. Inasmuch as Alan, Sr., was semiretired, the chief operational officers were the two sons, Alan and Douglas . The patented experimental machine was a project to which Alan was closely attached. Early in 1971 the senior Alan and Douglas began to complain that the experimental tooling for this machine was costing too much and was affecting the operation of their regular business . Subse- quently, the father and Douglas refused to accept this bur- den any longer and determined that no funds were to be allocated for sales promotion or tooling development. In view of this development, Alan was faced with two alternatives : to abandon the project in which he had invest- ed considerable time, effort, and money or, secondly, to work out some arrangement whereby he could continue work on the Rotary project. After negotiations, Bernal and Alan reached an agreement, the substance of which was as follows: 1. Alan, severing all relations with Bernal, returned his stock in that company for $20,642.09, and organized his own corporation, Rotary. 2. Bernal sold Rotary certain machinery, tools, and equipment, including the Rotary die-cutting cylinder. 3. Rotary leased the space previously used in connection with the rotary machine, subject to termination on 120 days' notice, and also agreed to reimburse Bernal for a certain leasehold program and to pay its portion of rent, utilities, and services of Bernal employees or, if he was to use the Bernal machinery if it was required , to pay therefor. 4. Bernal agreed to assign all patent and license rights to Rotary and the latter assumed all Bernal's obligations under the licensing agreement and agreed to pay Bernal a royalty. Formal documents were executed and the record shows that over a period Rotary paid Bernal substantial sums of money- Also, Rotary thereafter leased additional space some distance from the Bernal plant . Any work that Bernal did for Rotary was kept completely separate. Time records were kept on separate cards and charged to Rotary , includ- ing a charge for overhead and profit. There was no overlap- ping with respect to supervision . No person associated with Rotary, either as a stockholder , director, officer, or supervi- sor was in any way associated with Bernal , except that Miller, the attorney , continued as secretary for both corpo- rations but later resigned from Bernal. Bernal's production operations continued as before, with no changes . No employees were terminated or otherwise affected by the withdrawal of Alan or by the sale of certain machinery and equipment to Rotary . Some work by bar- gaining unit employees on Rotary machinery was, in fact, performed for Bernal and charged to it. Thus, employee Henry Nedvidek worked 98 hours in January , 32 hours in February, 15 hours in April, and nothing thereafter. Two other employees worked a total of 8 hours between January and March . Any work which was performed on what were formerly Bernal machines was performed by engineers of Rotary, who had never been in the bargaining unit and who had been permitted to do such work under the collective- bargaining agreement for experimental work. Rotary hired its first full-time employees in April or May-a couple of general machinists, a graduate mechanical engineer, a ma- chine operator specializing in electrode manufacturing, a sharpener-inspector, and a cooperative student interested in learning to become a machinist. In December 1971 an agreement was reached whereby Alan was to establish his own company , so Douglas Pfaff testified. He added that he personally advised Dean Spoon- er, president of the Union, of what Bernal proposed to do and also notified Nedvidek , the Union's shop chairman. Pfaff told Spooner that there was no intention on the part of Bernal to in any way affect the rights or the work of the Bernal employees , and that this was the reason for inform- ing Spooner of the change prior to the effective date, Janu- ary 1. Nedvidek testified that he was informed there would be a separate timecard procedure for working on the Rotary side and that employees would have to punch out on the Bernal timecard and pick up another timecard from the foreman , punch in, and go to work on the Rotary side and, when they were through , punch out, go back to Bernal, and punch in on that company's timecard . Neither Spooner nor Nedvidek raised any questions concerning the separation until Rotary hired an employee by the name of Dennis Blaga, who began working on Rotary equipment . Nedvidek testified that this occurred in April and that after Blaga had worked about a week Nedvidek "confronted Mr. Hamer, the plant superintendent , as to whether or not he had given this employee a union-security check-off card and I was informed that he did not." Nedvidek related that he told Hamer that Blaga was "performing bargaining unit wotk," and that Hamer replied that he "had nothing to do with the people on the Rotary side or their work." About a week or two later, Nedvidek talked to Douglas Pfaff about the mat- ter and a meeting was set up . Nedvidek wrote out a griev- ance relating to this problem and a meeting was held with Douglas on May 17 . Nedvidek related that when he met with Douglas he stated that he would like to talk to the latter "about Dennis performing bargaining unit work and not being in the Union," and was advised by Douglas "that I had no right to grieve because the machinery had been sold- . ... to the Rotary side by Bernal, Incorporated." Nedvi- dek testified that he told Douglas that the basis of the griev- ance was that the arrangement was "eroding the bargaining 74 DECISIONS OF NATIONAL LABOR RELATIONS BOARD unit" and that Douglas replied "You got no right to grieve because we don't own that machinery any more ." Nedvidek testified that after Blaga was hired Bernal employees "did no work on the Bernal rotary side" although "periodically the engineers on the Rotary side and Mr . Blaga would come over to the Bernal , Incorporated side and use our machinery to perform certain tasks on parts like drilling holes or boring them or tapping them..... After Nedvidek's discussion with Douglas regarding Blaga Nedvidek talked to Spooner about the first of May and Spooner suggested that the mat- ter should be discussed at the bargaining table in August. Although Nedvidek did draw up a grievance , it apparently never was filed with the Company. In June, the Union gave Bernal a 60-day notice of its intention to terminate the contract and proposing that the parties meet for the purpose of negotiating a new agree- ment. The first meeting between Douglas and the Union's negotiating committee was held on August 9 . After a griev- ance was first discussed the subject of the new company was raised . Douglas told Spooner that Rotary was a completely separate organization and that Spooner would have to deal with Alan directly with respect to that concern . The next bargaining meeting was held on August 16. The pending grievance was settled and then a discussion ensued on terms and conditions of a new agreement. Proposals and counter- proposals were made . The Union desired to know if Doug- las intended to negotiate for both Bernal and Rotary, and Douglas answered that he could not negotiate for Rotary because it was a separate company and that the Union would have to negotiate with Alan. The Union then stated it would file unfair labor practice charges with the Board, and did so. B. Discussion and Conclusions In urging that the two Respondents be found to constitute a single employer, counsel for the General Counsel relies primarily upon the decision in Royal Oak Tool & Machine Company, Inc., 132 NLRB 1361, enfd. 320 F.2d 77 (C.A. 6, 1963). In that case , the management of Royal Oak in 1959 decided to separate its grinder division from the tool and die division by transferring the former to a separate corpora- tion . In pursuit of this objective , Royal Oak obtained an advance ruling from the Internal Revenue Service concern- ing the tax consequences involved . The business reasons advanced for this proposed transaction was that it was de- sirable to separate the employees of the two divisions in separate bargaining units because the skilled workers in the tool division were represented by the Tool and Die Workers Association, and that the high wage rate applicable to these workers was inappropriate to the semiskilled and unskilled workers employed in the grinder division. A favorable rul- ing was obtained from the Internal Revenue Service and, in consequence, a new company bearing the name R 0 Man- ufacturing Company was formed . The Trial Examiner found that a majority of the capital stock in the new corpo- ration was issued to the same individuals that controlled Royal Oak as officers, directors and majority stockholders. He concluded that the new corporation was the alter ego of Royal Oak. The Board, however, disagreed with this alter ego finding and concluded that "the two companies consti- tute a single employer for purposes of bargaining with the Union under the circumstances of this case , in view of their common ownership , interlocking officers and directors, and the fact that R 0 produces the same product , with virtually the same employees, as were produced by the grinder divi- sion of Royal Oak prior to the `spin-off.' " In that case the court (at p. 82) stated: It is , of course, arguable that each company ought to have a separate unit consisting solely of its own em- ployees . Such would seem to be an orderly and logical method of determining appropriate units for collective bargaining . Respondents made such an argument which, considered abstractly, is not without its appeal. But at the time of the spin-off there was an existing bargaining agreement in effect which included tool and die workers and production workers in a single appro- priate unit recognized and agreed upon by all parties thereto . The Tool & Die Association, acting for Royal Oak, negotiated with the Union for the wages and sen- iority rights of the tool and die workers . Royal Oak negotiated with the Union for the lower wage rates applicable to production workers in the Grinder Divi- sion and for their seniority rights. The provisions for pensions , vacations and other employee benefits nego- tiated by the Association were part of the master con- tract and were applicable to both classes of employees. Thus , instead of separate units and contracts for each class of workers the parties agreed upon one contract and one appropriate bargaining unit consisted of all the affected employees in both divisions . Many of the ele- ments ordinarily found in an appropriate bargaining unit are not present here. There is no mutuality of interest between the tool and die workers and the pro- duction workers in wages, hours and working condi- tions (see: Continental Baking Co., 99 NLRB 777 (1952)), and many other factors found in various ap- propriate units are missing . But there is the significant fact of agreement between all of the parties to the con- tract as to the appropriate bargaining unit and the Board's approval of their action. This Court cannot substitute its judgment for that of the Board ... . In his brief, counsel for the Respondent distinguishes Royal Oak and two other cases cited by counsel for the General Counsel (Ozark Trailers, Inc., 161 NLRB 561, and Fiberboard Paper Products Corp., 322 F.2d 411 (C.A.D.C. 1963), affd . 379 U .S. 203 (1964)). Counsel argues that in each of the foregoing cases "there existed anti-union ani- mus" and that, therefore, they "are in no respect analogous to the situation at Bernal , Inc. where no such animus ex- isted." He further argues that Royal Oak "can be easily distinguished" from Bernal since the purpose of the separa- tion of the grinder division from its tool and die division by selling its machinery and some assets to a separate corpora- tion was to come within the "spin-off " provisions of the Internal Revenue Code and save taxes, but that the separate corporation was still controlled by the board of directors. Counsel points out that in the case of Bernal, the reasons for selling the experimental project was purely economic. The senior Pfaff and his son Douglas did not have faith in the project and felt that the Company could no longer carry on its experimentation work. They communicated this view BERNAL, INC. 75 to Alan and demoted him from the position of president of the Company. Counsel further argues that the concern organized "for the specific purpose of further exploiting the patent it pur- chased from Bernal, Inc. was in no manner tied into the operations of Bernal, Inc. The record clearly establishes a sincere and honest purpose in this transaction for economic reasons and to provide a son with an opportunity to further his `labor of love' on which he had spent 6 or 7 years of his life and work. The transaction had nothing to do with the Union or employees. There was no attempt by the Company to chill any unionism, nor was there any anti-union senti- ment for the relationship with the Union and its members was good. The Union president himself respected Alan, Jr., and felt he was a man who could be trusted." It should further be observed that no attempt was made to hide or misrepresent what was being done. As pointed out above, the union president and the plant chairman were told of the proposed change and they made no objection. More- over, no employees were discharged or laid off by reason of the sale of the rotary related machinery and equipment to Rotary. It should be further observed that the sale of Rotary could in no way benefit Bernal nor Alan, Sr., or the brother Douglas, since they had no financial interest in nor any control over Rotary. Counsel concludes that the "conclu- sion is inescapable that for economic reasons a major change in the capital-structure was made, in good faith, with the knowledge of the employees and the Union which re- sulted in a partial liquidation of an expensive and non- revenue producing phase of the company, the rotary experi- ment, as the result of which Bernal, Inc. was able to recoup substantial capital investment and assured the efficient con- tinuation of its regular line of products which for years had supported the business." On the' other hand, counsel for the General Counsel, while noting that the instant case differs somewhat from Royal Oak particularly in that supervision in Rotary is not entirely the same as in the Rotary operation formerly con- ducted by Bernal, he states that inasmuch as the overall direction of the new enterprise remains in Alan, formerly the president of Bernal, "there exists a genuine parallel with the facts in Royal Oak." He argues that "the most striking evidence of continuity and unity between the ,two corpora- tions" is the fact they share a single building and that the only visible and physical evidence of the corporate spin-off was a curtain put up in the latter part of 1971 and remaining up at all times thereafter. He also points out that manage- ment representatives told Nedvidek, when the separation was contemplated, that there would be no changes and that the bargaining unit work would be done as before. Counsel further notes that the "most conspicuous link between the two corporations in the present case is, of course, the close family relationship between the owners and administrators of the two corporations." Taking note of the two promisory notes executed by Rotary in favor of Bernal, each in the amount of $15,586 due on December 31, 1973, and Decem- ber 31, 1974, respectively, do not provide for interest, he "submits that interest-free financing is not typical of arms- length transactions, and is simply additional evidence of the continuing connection between two allegedly independent business concerns." It should be observed, however, that each of the notes provides that all amounts overdue and unpaid shall bear 7 percent interest. Although the case is by no means free from doubt, I am of the opinion that the facts here demonstrate that the Re- spondents were, in fact, two separate entities. It is difficult to conceive what more could have been done to separate the two businesses, short of selling Rotary to a complete stran- ger. Accordingly, I shall dismiss the complaint in its entire- ty. ORDER1 Upon the foregoing findings of fact and upon the entire record in the case, it is hereby ordered that the complaint herein be, and it hereby is, dismissed in its entirety. 1 In view of my conclusion, it seems unnecessary to consider the Respon- dents' contention that the complaint should not have been issued because, as counsel puts it in his brief, "its charges are actually based upon events which occurred more than six months prior to the issuance of the complaint, and is [therefore] barred by Sec. 10(b) of the Act." Copy with citationCopy as parenthetical citation