Bernal, Inc.

National Labor Relations Board - Board Decisions

Sep 19, 1973

206 N.L.R.B. 72 (N.L.R.B. 1973)

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."