Capitol Steel And Iron Co.

National Labor Relations Board - Board Decisions

Aug 17, 1990

299 N.L.R.B. 484 (N.L.R.B. 1990)

484 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
Capitol Steel and Iron Company and Shopmen's
Local Union No. 546, affiliated with Interna-
tional Association of Bridge, Structural and Or-
namental Iron Workers. Case 16-CA-13380-1
August 17, 1990
DECISION AND ORDER
BY CHAIRMAN STEPHENS AND MEMBERS
CRACRAFT AND DEVANEY
On August 24, 1988, Administrative Law Judge
William N Cates issued the attached decision The
General Counsel filed exceptions and a supporting
brief
The National Labor Relations Board has delegat-
ed its authority in this proceeding to a three-
member panel
The Board has considered the decision and the
record in light of the exceptions and brief and has
decided to affirm the judge's rulings, findings, and
conclusions only to the extent consistent with this
Decision and Order
The complaint alleges that the Respondent, Cap-
itol Steel and Iron Company (CSIC or the Re-
spondent), is a successor corporation to Capitol
Steel Corporation (Capitol Steel) and has violated
Section 8(a)(5) and (1) of the Act by refusing to
recognize and bargain with Shopmen's Local
Union No 546, affiliated with International Asso-
•ciation of Bndge, Structural and Ornamental Iron
Workers (the Union), which had represented Cap-
itol Steel's shop employees in the Oklahoma City
facility 1 The judge concluded that the Respondent
is a substantially and fundamentally different busi-
ness from Capitol Steel, is thus not a successor to
Capitol Steel, and therefore has not violated Sec-
tion 8(a)(5) and (1) The General Counsel has ex-
cepted to these conclusions, and we find merit in
the exceptions
A Evidence Concerning Successors/up
The facts, as set forth in the judge's decision and
supplemented by other facts established by uncon-
troverted record evidence that was not discredited,
may be summarized as follows
The Union represented Capitol Steel's produc-
tion and maintenance employees, and its most
recent contract expired in May 1986 Capitol Steel
fabricated structural steel for use in powerplants,
commercial buildings, and highway bridges From
the mid-1960s until about 1982, Capitol Steel spe-
cialized in building powerplants According to
'Capitol Steel operated a second facility in Houston, Texas, which is
not involved in this case
John Nesom, 2 powerplant construction totally
ceased about 1982 Capitol Steel's largest bridge
contract, totaling $5 million, was for the Boh
Brothers project Capitol Steel obtained this con-
tract in 1983 and was working on it at the time it
ceased operation in 1985 In October 1985, Capitol
Steel reduced its shop work force from about 163
to 127 In November 1985, Capitol Steel further re-
duced its work force, closed down all work bays,
except bays 1 and 2, and operated with 20 shop
employees until ceasing operations on December
12, 1985 Capitol Steel filed for bankruptcy in the
latter part of 1985
From the time Capitol Steel ceased operations
until the last week of January 1986, Nesom was in-
volved in the "winding down" of Capitol Steel
Also, during early 1986 Nesom, as an individual,
investigated several possibilities that he hoped
would result in another steel business locating at
the Capitol Steel facility Further, throughout 1986
there were frequent meetings involving Nesom and
union officials These meetings included discussions
on a variety of issues including the possibility of re-
opening the facility, and the need for documenta-
tion so that Capitol Steel's former employees could
receive unemployment compensation
According to Nesom's testimony, m January -
1986 an individual named Don Chevas was trying
to arrange a takeover of the bankrupt Capitol
Steel In the course of that effort, Nesom, who at
that tune was still working for Capitol Steel, Jack
Wellborn, Capitol Steel's controller (who was
working with Chevas), and Bill Sorensen, a repre-
sentative for the owner of the plant's facility, met
with union officials This meeting was held to de-
termine if Nesom could work things out with the
landlord, the bankruptcy court, Boh Brothers, the
employees, and the Union so that the Boh Brothers
project could be completed 3 This plan apparently
did not succeed
Respondent CSIC was incorporated in February
1986 Barbara Nesom, John Nesom's wife, is the
major shareholder, chairperson, and chief executive
officer of the Respondent The Respondent is certi-
fied as a "Disadvantaged Business Enterprise-
Women's Business Enterprise"
According to Nesom's testimony, he initiated the
next meeting between him and the union officials
This meeting was prompted by an investor, Solo-
mon Kadmany, who had expressed an interest in
buying Capitol Steel's facilities in both Oklahoma
2 John Nesom is the Respondent's president and the former vice presi-
dent and sales manager of Capitol Steel
3 Nesom testified that he was asked to join Chevas' effort but did not
do so and that this meeting did not have anything to do with the creation
of CSIC
299 NLRB No 61
CAPITOL STEEL & IRON CO

485
City and Houston, "reactivating the entire oper-
ation using [the Respondent] to operate the facility
with [Kadmany] bemg an investor" Kadmany also
asked about the Union at the plant Nesom and
Kadmany met with the union officials At this
meeting Nesom stated to the union officials that if
the "situation could be pulled together and res-
tructed" they would need manpower However,
Kadmany did not become an investor in the Okla-
homa City facility
Although Nesom did not have control of the
plantsite during April and May 1986, he was in the
facility, under the direction of Boh Brothers and
the authorization of the bankruptcy court and Cap-
itol Steel, in order to "load out" the uncompleted
Boh Brothers project, i e, remove project materials
and equipment Some of the former employees of
Capitol Steel were called to help with the removal
According to the uncontradicted testimony of one
of these employees, who at the time of the hearing
was the Union's president, the employees were
paid with checks drawn on the Respondent
On June 14, 1986, Capitol Steel's assets were
sold at public auction Total revenue from the sale
was approximately $665,000 Nesom made the fol-
lowing purchases on behalf of the Respondent (1)
36 or 37 pieces of equipment (out of 500 offered
for sale) for $25,000, (2) plate steel for $11,000, and
(3) office furniture for $11,000 Included in the
$25,000 for equipment was $7800 paid for a Grover
crane which CSIC thereafter leased out and has
not used CSIC has purchased equipment from
other sources at a cost of $160,000
The Respondent leased from Capitol Building
Corporation4 14 of approximately 24 acres, mclud-
mg 8 of 17 facilities, formerly leased by Capitol
Steel in Oklahoma City Included in the lease was
equipment which Capitol Building Corporation
purchased at the auction of Capitol Steel's assets
The Respondent officially took over the premises
on August 1, 1986
Nesom further testified as follows Between the
time of the auction and the time the Respondent
officially took over the premises, CSIC was al-
lowed to stay on the premises to protect its proper-
ty During some of this time former Capitol Steel
employees were voluntarily working to clean the
premises so that the Respondent's operations could
begin Also, during the period July through Sep-
tember, the union representatives indicated to
Nesom that they were having a problem in obtain-
ing documentation to substantiate their attempt to
get unemployment compensation for the former
4 Capitol Building Corporation had no relationship to Capitol Steel
other than as lessor/lessee
employees of Capitol Steel Nesom assisted the
Union as much as possible in that endeavor
For a time during 1986, the union officials came
by the plant every Friday morning to ask Nesom
what jobs had been bid on, and when operations
would start Nesom responded by indicating a will-
ingness to talk to the union officials and asking
them how they could help so that "we can put the
men back to work" The union officials' response
was that they could provide "good men" Nesom
even asked the union representatives if they could
help him obtain working capital or cash flow The
union representatives gave Nesom a copy of the
union contract and told him to put in whatever
changes were necessary for him to be able to live
with the contract Nesom testified that he felt it
was up to the union representatives to make offers
to him and that he was not in a position to make
offers to them He agreed, however, to look at the
contract and get back with them after the first of
the year (i e, 1987) Nesom admitted that he did
not get back in contact with the Union as he had
agreed
By August 26, 1986, the Respondent employed
11 unit employees, 7 of whom had previously
worked for Capitol Steel On October 5, 1987, the
Respondent employed approximately 16 shop em-
ployees, about 12 of whom had been employed at
Capitol Steel in 1985
According to Nesom's testimony, bay 1 is the
Respondent's main production bay Bay 1 was one
of two bays that was used by Capitol Steel during
its last month of operation The Respondent's
major business is the fabrication of steel for high-
way bridges
On October 5, 1987, the Union, by letter, re-
quested a meeting with Nesom or a representative
regarding the Respondent's alleged successorship
to Capitol Steel The Union expressed its "contin-
ued interest as the bargaining representative for
your employees" On November 11, 1987, the
union district representative telephoned Nesom re-
garding the October 5, 1987 letter Nesom replied
that he was willing to meet with the Union only if
the Union did not take the position that the Re-
spondent was a successor to Capitol Steel The
Union filed the charge in this case on November
16, 1987
B The Judge's Decision
The judge found that there was no substantial
continuity of business operations between Capitol
Steel and the Respondent Thus, he concluded that
the Respondent was not a successor to Capitol
Steel, that it accordingly had no obligation to rec-
486 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
ogmze the Union, and has therefore not engaged in
the alleged unfair labor practices
The judge acknowledged that former Capitol
Steel employees constituted a majority of the Re-
spondent's shop employees on the date of the
Union's demand, but concluded that they worked
under materially different conditions The judge
noted that the Respondent is certified as a disad-
vantaged enterprise and concluded that, as a conse-
quence, its organizational structure and marketing
methods were significantly different from Capitol
Steel's In concluding that the Respondent was not
a successor to Capitol Steel, the judge also empha-
sized the reduction in the work area used for steel
fabrication, the change in the type of steel fabrica-
tion, the reduction in the work force, the elimina-
tion of job classifications, a less formal management
atmosphere, the use of only a small percentage of
Capitol Steel equipment, and the acquisition of a
new group of customers The judge also found that
there was an 8-month hiatus between the closing of
Capitol Steel and the opening of the Respondent
and that this weighed against a finding of succes-
sorship
C The General Counsel's Exceptions
In excepting to the decision, the General Coun-
sel contends that the judge made several errors in
his findings and conclusions of law, leading to an
erroneous conclusion that the Respondent is not a
successor to Capitol Steel The General Counsel
points to uncontroverted evidence that, he argues,
was either not mentioned by or was given insuffi-
cient weight by the judge The General Counsel
takes issue with the judge's refusal, in comparing
Capitol Steel with the Respondent, to use the char-
acter of Capitol Steel's business immediately pre-
ceding its shutdown as a basis for comparison The
General Counsel contends that the judge accorded
excessive weight to financial and marketmg
changes, changes in the customer base, and to the
Respondent's engaging in various busmess enter-
prises with which the unit employees have little in-
volvement The General Counsel contends that in
finding that the Respondent is not using the same
plant facilities in the same manner as Capitol Steel
the judge failed to consider that the Respondent's
lease encompasses the production area used by the
predecessor and certain equipment used by the
predecessor The General Counsel also argues that
(1) the decrease in the employee complement does
not relieve the successor of the duty to bargain, (2)
despite a reduction in the number of job classifica-
tions the same functions are performed, and (3) the
weight given by the judge to the difference in man-
agement style between the two companies is exces-
sive because that difference is merely the result of
differences between the sizes of the companies Fi-
nally, the General Counsel contends that the hiatus
of 7 or 8 months was insufficient to destroy succes-
sorship status
D Analysts
It has long been settled that an employer suc-
ceeds to the collective-bargaining obligation of an-
other employer if (1) a majority of its employees in
an appropriate unit at, or after, the time at which
union makes its bargaining demand are workers
who had been employed by the predecessor, and if
(2) similannes between the two operations manifest
a "substantial continuity' between the enterprises"
Fall River Dyeing,Corp v NLRB, 482 U S 27, 41,
43 (1987), citing, inter aim, NLRB v Burns Security
Services, 406 U S 272, 280 fn 4 (1972) Here the
Union made a bargaining demand on October 5,
1987, at a time when the Respondent had a shop
work force of 16 employees, a majority of whom
(12) had worked for Capitol Steel 5 The closer
question is whether there is a sufficient continuity
between the enterprises For the reasons set forth
below, we find, contrary to the judge, that there is
The factors for making the enterprise continuity
determination were summarized by the Supreme
Court in Fall River, supra at 43, as follows
[W]hether the business of both employers is es-
sentially the same, whether the employees of
the new company are doing the same jobs in
the same working conditions under the same
supervisors, and whether the new entity has
the same production process, produces the
same products, and has basically the same
body of customers
The Court made it clear, however, that those
factors are to be assessed primarily from the per-
spective of the employees Thus the question is
"whether 'those employees who have been retained
will view their job situations as essentially un-
altered " Id, quoting Golden State Bottling Co v
NLRB, 414 U S 168, 184 (1973) Accordingly,
changes in such matters as marketing, sales or cus-
tomers' modes of payment have little weight in
comparison with factors directly affecting the em-
5 When the successor business, as here, is starting up operations after a
hiatus, the determination of work force majonty must also be made at a
time when the job classifications for the contemplated operation are sub-
stantially filled, so that the employees can be said to constitute a "sub-
stantial and representative complement" Fall River, supra at 47 Because
he found no continuity of operations, the judge did not reach the work
force majority question Although 10 or 12 more shop employees were
hired in February 1988, It does not appear they were lured Into new unit
classifications Accordingly, we find that, at the relevant time, the Re-
spondent had hired a substantial and representative complement of which
a majority had been employed by the predecessor
CAPITOL STEEL & IRON CO 487
ployees' daily performance of their jobs Fall River,
supra at 46 and fn 11 6
There is little question that the Respondent oper-
ates on a much smaller scale than did Capitol Steel
at the peak of its business, and, indeed, some of the
changes in operations on which the judge relied to
find an absence of continuity are logical conse-
quences of the reduction in scale—e g, a consider-
able decline in the number of job classifications, a
smaller management hierarchy with, accordingly, a
less rigid chain of command, and a smaller space
used for production As the judge acknowledged,
however, mere diminution in size does not defeat a
successorship finding if the putative successor can
be said essentially to be operating the predecessor's
business in miniature Lloyd Flanders, 280 NLRB
1216, 1219 (1986), citing Zim's IGA Foodhner v
NLRB, 495 F 2d 1131, 1141 (7th Cir 1974), cert
denied 419 U S 816 Accord Fall River, supra at
46 fn 11 We do not find that size-related changes
are sufficient to affect the employees' perceptions
of their jobs here, particularly in light of the fact
that the predecessor's busmess had been rapidly de-
clining in size prior to its shutdown
Thus, for example, although Capitol Steel had
had as many as 46 job classifications at one time, in
the month before its cessation of operations, em-
ployees performed a variety of tasks, just as those
who work for the Respondent as general shop em-
ployees do Furthermore, although, with the con-
solidation of functions, each employee may be per-
forming some additional tasks, each one also con-
tinues to perform work he had performed for Cap-
itol Steel 7 As we found concerning similar circum-
stances in Stewart Granite Enterprises, 255 NLRB
569, 571 (1981), the addition of such tasks does not
mandate a finding that the business is substantially
different from the employees' perspective 8
Similarly, although a reduction in the size of
management accompanied the reduction in work
force, six out of nine of the office and managerial
staff had worked for Capitol Steel (albeit one had
returned after 5 years away from Capitol Steel)
6 Thus the Respondent's change in marketing methods and Its different
cash-flow basis, as compared with Capitol Steel (receiving payment from
customers as work is performed rather than payment on completion),
weighs no more heavily against a continuity finding than did the contrast
in Fall River between the predecessor's involvement in "converting
dyeing" (purchasing unfinished goods for Its own account, dyeing them,
and then selling them to apparel manufacturers) and the successor's In-
volvement in "commission dyeing" (dyeing finished fabrics owned by
customers to their specifications) Id at 30, 44, 46 fn 11
7 Some of the additional tasks performed by employees were occa-
sioned by a change in the way in which materials and equipment were
brought into the facility Before the hiatus they were brought on by rail,
afterwards they were transported in wagons assembled by the employees
at the Respondent's facility
See also Louis Pappas' Restaurant, 275 NLRB 1519 (1985), Lloyd
Flanders, supra
The two most prominent managerial figures, Presi-
dent Nesom and Plant Manager Cagle had both
worked for Capitol Steel Although this reduction
would plainly bring the employees into more fre-
quent contact with upper management and mini-
mize strict adherence to chain of command in su-
pervision, such a change no more precludes a find-
ing of substantial continuity than did the converse
in NLRB v Jeffries Lithograph Go, 752 F 2d 459,
465 (9th Cir 1985), where the court, affirming the
Board, found sufficient managerial continuity in the
carryover of one supervisor, despite the evidence
that the successor had created many new supervi-
sory positions
With respect to the space used for production,
the evidence shows9 that only one of Capitol
Steel's work bays was not being leased by the Re-
spondent, and that a substantial portion of the
leased premises is being used by the Respondent
for the fabrication of steel 10 What is most impor-
tant is that all of the Respondent's facility was for-
merly a part of Capitol Steel's premises and bay 1,
the Respondent's main production bay, was one of
only two bays used by Capitol Steel during its last
month of operation
Much of the equipment used by the Respond-
ent's employees in these facilities would also have
been familiar because the Respondent bought 36 or
37 pieces of the 500 offered for sale at the auction
of Capitol Steel's assets In addition, the Respond-
ent leased other equipment formerly owned by the
predecessor, notably at least a dozen cranes, which
were an important part of the production process
The judge made much of the alleged change in
the types of steel fabricated by the two enterprises,
with the Respondent engaged mamly m the fabri-
cation of highway bridge steel," a product that
had formed only a small proportion of Capitol
Steel's output He thereby overlooked precedents
mdicatmg that changes in the product mix do not
preclude a contmuity finding if the basic job skills
9 We are relying here on the testimony of Nesom, the Respondent's
president, and on a diagram of the facility
'° The Respondent is not leasing Capitol Steel's former office building
or the area known as bay 5 Further, some of the property being leased
by CSIC is being used for business operations in which Capitol Steel did
not engage, and a couple of the buildings are being leased by CSIC to
other businesses
Nesom, the Respondent's president, testified that by the time of the
heanng, the Respondent had obtained contracts for products other than
highway bridge steel fabrication—a contract to manufacture jet engine
baffle systems and a project to fabncate steel to support rolling doors for
a building In addition, the Respondent is Involved in certain business op-
erations in which Capitol Steel was not involved, but these represent a
minimal percentage of the Respondent's revenues, and the shop employ-
ees have no involvement in those operations, except for a limited amount
of time spent on some painting and cleaning projects
488 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
remain the same 12 The evidence suggests suffi-
cient similarities in the job skills required by the
two companies As the judge found, all "steel fabri-
cation work pnmanly involves lifting, cutting,
welding, and fitting steel " 13 Although there is evi-
dence suggesting that the acceptance cntena for
highway bridge steel are somewhat more stringent
than those for the steelwork used in highnse build-
ings which was a substantial portion of the work
performed by Capitol Steel, the record also indi-
cates that these employees would not need to be
retrained to perform the work Capitol Steel had
performed some work of this kind," and Gary
Hyde, the Respondent's manager of quality con-
trol, who had also worked for Capitol Steel, testi-
fied that the employees had been expected by Cap-
itol Steel to meet the more stringent standard for
that work
Finally, we give little weight to the fact, empha-
sized by the Respondent in the proceedings below,
that m order to gain a certification as a "Disadvan-
taged Business Enterprise/Women's Business En-
terpnse," the Respondent had to demonstrate that
there was a "complete break" between it and Cap-
itol Steel The purposes served by the law govern-
ing such certifications are not identical to the ob-
, jectives of the National Labor Relations Act, so
what may constitute a "complete break" for the
purposes of one does not necessanly do so for the
other Cf Golden State Bottling Go, supra at 182 fn
5 ("The perimeters of the labor-law doctrine of
successorship have not been so narrowly confined"
as those defining "the general rule of corporate li-
ability")
With respect to the approximately 8-month
hiatus between the shutdown of Capitol Steel and
the Respondent's commencement of operations, we
find it especially significant that, as was the case
12 Fall River, supra, 482 U S at 44 (change from converting dyeing to
commission dyeing), Great Lakes Chemical Corp, 280 NLRB 1131, 1132
(1986), enfd 862 F 2d 100 (6th Or 1988) (successor added new chemical
product lines to the swimming pool chemicals manufactured by predeces-
sor), Premium Foods v NLRB, 709 F 2d 623, 627 (9th Cif 1983) (60 per-
cent of predecessor's sales were to food service customers, compared
with 98 percent for successor, and successor added new product line),
Saks Fifth Avenue v NLRB, 634 F 2d 681, 686 (2d Or 1980) (unit work
changed from altenng women's clothes exclusively to altenng clothing of
men, women, and children), Good N' Fresh Foods, 287 NLRB 1231 (1988)
(shift from "predominant (but not exclusive) production of fresh [baked]
products to predominant (but not exclusive) production of frozen [baked]
products") An observation in Good N' Fresh Foods seems especially rele-
vant here "This is not a case where a steel mill was converted into a
bakery" Id at 1235
13 Cf Saks Fifth Avenue, supra at 686 (despite differences in types of
clothing worked on, skills remained the same cutting, sewing, and work-
ing the fabric) Furthermore, in their minimal performance of painting
and cleaning work (see fn 11, above), the employees' were not necessan-
ly using new skills, because one of the Respondent's witnesses testified
that Capitol Steel had, on occasion, performed painting and cleaning jobs
for other companies
14 Some of this type of work was apparently performed on the begin-
nings of the Boh Brothers project before Capitol Steel shut down
with the 7-month hiatus in Fall River, supra at 45,
this period was charactenzed by continuing activi-
ties looking toward the reopening of the enterprise,
and the Union and a number of the employees re-
mained in contact with the prime movers
Here, the evidence indicates that Nesom was left
in charge of the process of closing Capitol Steel,
and he worked for Capitol Steel until the last week
of January 1986 In late December 1985, Nesom
decided to investigate the possibility of starting his
own company In February 1986 the Respondent
was formed In the spring of 1986, former Capitol
Steel employees removed an uncompleted project
(the Boh Brothers project) from the former Capitol
Steel's premises, and were paid with checks drawn
on the Respondent Further, between the time of
the auction of Capitol Steel's assets on June 24,
1986, and the time the Respondent officially took
over the premises, Capitol Building Corporation al-
lowed the Respondent to remain on the premises to
protect its property During at least part of this
penod, former Capitol Steel employees were vol-
untanly workmg so that the Respondent could
start operation Also, throughout 1986, representa-
tives of the Union, who were also former Capitol
Steel employees, discussed the Respondent's future
with Nesom and indicated interest in representing
the shop employees
Hence, from the employees' perspective, their
role during the hiatus changed from being laid-off
employees of Capitol Steel to employees called to
"load out" Capitol Steel's last uncompleted project
while being paid by the Respondent, to volunteers
helping the Respondent get 'ready to start oper-
ations, to, finally, being paid employees of the Re-
spondent They performed the winding down ac-
tivities for Capitol Steel and the startup activities
for the Respondent under the direction of Nesom
Thus, the hiatus in this case did not represent a
sharp break between a defunct business with no
hope of revival and a completely new and unrelat-
ed operation, rather it was characterized by activi-
ties that linked the old with the new See Fall
River, supra at 45 (noting maintenance of skeleton
crew to maintain the plant and continuing efforts
of predecessor's president to resurrect the busi-
ness), Stewart Granite Enterprises, supra, 255 NLRB
at 573 (finding activities of core group of employ-
ees in phaseout of old business and startup of new
indicative of continuity rather than discontinuity)
We conclude that the Respondent is a successor
employer to Capitol Steel Although each factor of
the successorship test must be analyzed separately,
the factors cannot be viewed in isolation, ultimate-
ly, the totality of the circumstances is determina-
tive Fall River Dyeing, supra
CAPITOL STEEL & IRON CO 489
The totality of the circumstances persuades us
that the core of the Respondent was derived from
the remains of Capitol Steel In particular, a major-
ity of the Respondent's employees had been em-
ployees of Capitol Steel, a majority of the Re-
spondent's managers and supervisors had worked
for Capitol Steel, the Respondent's total premises
had been part of Capitol Steel's facility, the Re-
spondent's major business is the fabrication of steel
as had been Capitol Steel's, the unit employees' job
functions are basically the same as they had been at
Capitol Steel, and substantial equipment used by
the Respondent had been used by Capitol Steel
Further, during the hiatus period, former Capitol
Steel employees aided in the "winding down" and
"geanng up" activities at the facility, and Nesom,
CSIC's president, remained in contact with the
Union From the employees' perspective, these
facts would indicate a substantial continuity be-
tween Capitol Steel and the Respondent Accord-
ingly, we find that the Respondent is the successor
to Capitol Steel and that it violated Section 8(a)(5)
and (1) of the Act by refusing to recognize and
bargain with the Union as the representative of its
unit employees
CONCLUSIONS OF LAW
1 Capitol Steel and Iron Company is the succes-
sor to Capitol Steel Corporation
2 Shopmen's Local Union No 546, affiliated
with International Association of Bridge, Structural
and Ornamental Iron Workers, has been and is the
exclusive representative of all employees in the ap-
propriate unit for purposes of collective bargaining
within the meaning of Section 9(a) of the Act
3 The following employees constitute a umt that
is appropriate for collective bargaining within the
meanmg of Section 9(b) of the Act
All production and maintenance employees en-
gaged in the fabrication of iron, steel, metal
and other products or in maintenance in or
about the Oklahoma City, Oklahoma facility,
excluding all office, clerical, drafting, engi-
neering employees, inspectors, watchmen, jani-
tors, guards, supervisors and nonproduction
yardmen
4 By failing and refusing to recognize and bar-
gain collectively with the Union as the exclusive
representative of the Respondent's employees in
the appropriate unit since October 5, 1987, Re-
spondent has engaged in and is engaging in unfair
labor practices within the meaning of Section
8(a)(5) and (1) of the Act
5 The Respondent's unfair labor practices affect
commerce within the meaning of Section 2(6) and
(7) of the Act
REMEDY
Having found that the Respondent has violated
Section 8(a)(5) and (1) of the Act by failing and re-
fusing to bargain with the Union, we shall order it
to cease and desist, to bargain on request with the
Union, and, if an understanding is reached, to
embody the understanding in a signed agreement
ORDER
The National Labor Relations Board orders that
the Respondent, Capitol Steel and Iron Company,
Oklahoma City, Oklahoma, its officers, agents, suc-
cessors, and assigns, shall
1 Cease and desist from
(a) Refusing to recognize and bargain with Shop-
men's Local Union No 546, affiliated with Interna-
tional Association of Bridge, Structural and Orna-
mental Iron Workers, as the exclusive bargaining
representative of the employees in the bargaining
unit described below
(b) In any like or related manner interfering
with, restraining, or coercmg employees in the ex-
ercise of the rights guaranteed them by Section 7
of the Act
2 Take the following affirmative action neces-
sary to effectuate the policies of the Act
(a) Recognize and, on request, bargain with the
Union as the exclusive representative of the em-
ployees in the following appropriate unit concern-
ing terms and conditions of employment and, if an
understandmg is reached, embody the understand-
ing in a signed agreement
All production and maintenance employees en-
gaged in the fabrication of iron, steel, metal
and other products or in maintenance in or
about the Oklahoma City, Oklahoma facility,
excluding all office, clerical, drafting, engi-
neering employees, inspectors, watchmen, jani-
tors, guards, supervisors and nonproduction
yardmen
(b) Post at its facility in Oklahoma City, Oklaho-
ma, copies of the attached notice marked "Appen-
dix " 15 Copies of the notice, on forms provided by
the Regional Director for Region 16 after being
signed by the Respondent's authorized representa-
tive, shall be posted by the Respondent immediate-
ly upon receipt and maintained for 60 consecutive
days in conspicuous places including all places
where notices to employees are customarily posted
Reasonable steps shall be taken by the Respondent
15 If this Order is enforced by a judgment of a United States court of
appeals, the words in the notice reading "Posted by Order of the Nation-
al Labor Relations Board" shall read "Posted Pursuant to a Judgment of
the United States Court of Appeals Enforcing an Order of the National
Labor Relations Board"
490 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
to ensure that the notices are not altered, defaced,
or covered by any other material
(c) Notify the Regional Director in writing
within 20 days from the date of this Order what
steps the Respondent has taken to comply
APPENDIX
NOTICE To EMPLOYEES
POSTED BY ORDER OF THE
NATIONAL LABOR RELATIONS BOARD
An Agency of the United States Government
The National Labor Relations Board has found
that we violated the National Labor Relations Act
and has ordered us to post and abide by this notice
WE WILL NOT refuse to bargain with Shopmen's
Local Union No 546, affiliated with International
Association of Bridge, Structural and Ornamental
Iron Workers, as the exclusive representative of the
employees in the bargaining unit
WE WILL NOT in any like or related manner
interfere with, restrain, or coerce you in the exer-
cise of the rights guaranteed you by Section 7 of
the Act
WE WILL, on request, bargain with the Union
and put in writing and sign any agreement reached
on terms and conditions of employment for our
employees in the bargaining unit
All production and maintenance employees en-
gaged in the fabncation of iron, steel, metal
and other products or in maintenance in or
about the Oklahoma City, Oklahoma facility,
excluding all office, clerical, drafting, engi-
neenng employees, inspectors, watchmen, jani-
tors, guards, supervisors and nonproduction
yardmen
CAPITOL STEEL AND IRON COMPANY
Ronald K Hooks, Esq , for the General Counsel
Greg James, Esq , of Oklahoma City, Oklahoma, for the
Respondent
Alfred Huff Business Representative, of Oklahoma City,
Oklahoma, for the Charging Party
DECISION
STATEMENT OF THE CASE
WILLIAM N CATES, Administrative Law Judge This
case was tried before me in Oklahoma City, Oklahoma,
on 12 and 13 April 1988 pursuant to a complaint and
notice of hearing (complaint) issued by the Regional Di-
rector for Region 16 of the National Labor Relations
Board (Board) on 22 December 1987 The complaint was
thereafter amended on 12 February 1988 The complaint
is based upon a charge filed on 16 November 1987 by
Shopmen's Local Union No 546, affiliated with Interna-
tional Association of Bridge, Structural and Ornamental
Iron Workers (Union) The complaint alleges Capitol
Steel and Iron Company (CSIC) has engaged in certain
violations of Section 8(a)(5) and (1) of the National
Labor Relations Act (the Act)
The sole issue is whether CSIC is a successor under
the Act to Capitol Steel Corporation (Capitol Steel)
thereby having an obligation under the Act to recognize
and bargain with the Union which had been the collec-
tive-bargaining representative of the employees of Cap-
itol Steel
All parties were afforded full opportunity to examine
and cross-examine, to argue orally, and to submit briefs
Briefs which have been carefully considered were sub-
mitted by counsel for the General Counsel and CSIC
Based upon the entire record, including my observa-
tion of the demeanor of the witnesses, I conclude below,
after examining the relevant evidence and applicable
legal principles, that CSIC is not the successor of Capitol
Steel and as such I have dismissed the complaint in its
entirety
FINDINGS OF FACT
I JURISDICTION
CSIC is an Oklahoma corporation with an office and
place of business located at Oklahoma City, Oklahoma,
where it is engaged in, among other things, the fabrica-
tion of steel During the 12-month period preceding issu-
ance of the complaint herein, a representative period,
CSIC sold and shipped from its Oklahoma City, Oklaho-
ma facility products, goods, and materials valued in
excess of $50,000 directly to other enterprises located
within the State of Oklahoma each of which other enter-
prises sold and shipped goods and materials or performed
services valued in excess of $50,000 directly to enter-
prises located outside the State of Oklahoma Also
during that same representative period, CSIC purchased
and received at its Oklahoma City, Oklahoma facility
products, goods, and materials valued in excess of
$50,000 from other enterprises located within the State
of Oklahoma, each of which other enterprises had re-
ceived the products, goods, and materials directly from
points outside the State of Oklahoma The complaint al-
leges, the parties admit, and I find, CSIC is, and at all
times material herein has been, an employer engaged in a
business affecting commerce within the meaning of Sec-
tion 2(2), (6), and (7) of the Act
II LABOR ORGANIZATION
The complaint alleges, the parties admit, and I find,
the Umon is, and at all times material herein has been, a
labor organization within the meaning of Section 2(5) of
the Act
III THE ALLEGED UNFAIR LABOR PRACTICES
A The Facts
Generally speaking, there does not appear to be any
major disputes about the history and background of the
two companies involved herein I have set forth the fol-
CAPITOL STEEL & IRON CO 491
lowing undisputed or credited facts in for the most part
chronological order commencing with the background
and history of Capitol Steel and then proceeding to do
the same for CSIC Although the facts set forth are not
all inclusive, all evidence, and arguments of counsels
about the evidence, has been weighed and considered
To the extent that any testimony or other evidence not
mentioned in this decision may appear to contradict my
findings of fact I have not disregarded that evidence but
have rejected it as not relevant, surplusage, lacking in
probative weight, or incredible
1 Background and history of Capitol Steel
Capitol Steel was founded in 1910 and during its 75
years of existence operated a facility in Oklahoma City,
Oklahoma Commencing in 1953 it also operated a
second facility located in Houston, Texas 1 Until 1977,
when it filed for a name change, Capitol Steel operated
as the Capitol Steel and Iron Company From 1930 until
it entered bankruptcy in 1985, Capitol Steel housed its
Oklahoma City operations on leased property located at
1726 South Agnew Street, Oklahoma City, Oklahoma
Capitol Steel leased approximately 24 plus acres and 17
different facilities containing approximately 600,000
square feet of usable space from Capitol Building Corpo-
ration 2 Capitol Steel engaged in the fabrication of struc-
tural steel for use in power plants, commercial buildmgs,
and highway bndges From approximately 1963 until
Capitol Steel ceased doing business in 1985, it had sales
in excess of $600 million 3 Only approximately $6 million
(or 1 percent) of that sales total was for highway bridge
work 4 Capitol Steel's best year for total sales was 1978
when it had sales totaling $92 million, none of which
was for highway bridge work In 1985, Capitol Steel's
last year in business, it had sales totaling $40 million of
which a little under $200,000 was for highway bridge
work Of the $6 million, $5 million in total sales for high-
way bridge work involved one contract obtained by
Capitol Steel from the Boh Brothers Company in 1983
That project called for Capitol Steel to perform the fab-
rication work in 1984 The project involved a highway
bridge Boh Brothers Company was constructing in the
State of Louisiana Capitol Steel never performed the
fabrication work on the Boh Brothers project and in
1985 the basic steel was removed from Capitol Steel's lo-
cation and taken to a competitor which performed the
steel fabrication work for Boh Brothers Company 5 Cap-
The Houston, Texas facility, also no longer in business, is not in-
volved in the case sub judice
2 Capitol Building Corporation had no relationship to Capitol Steel
other than as lessor/lessee
3 CSIC President John Nesom, who worked for Capitol Steel from
1963 until 1985 as a salesman, vice president of sales, and senior vice
president of marketing and sales, credibly testified without contradiction
as to the total sales volume for Capitol Steel during the above-referenced
period
CSIC President Nesom could only recall approximately five highway
bridge jobs being performed by Capitol Steel from 1963 until 1985
Nesom's recollections were corroborated in essential parts by CSIC Qual-
ity Control Manager Gary Lee Hyde and CSIC employee Elbert Wil-
liams
5 Thus, Capitol Steel only performed approximately Si million in high-
way bndge work out of $600 million in total sales over approximately 23
years' time
itol Steel performed no fabrication work directly or indi-
rectly for the State of Oklahoma Department of Trans-
portation from 1963 until it went into bankruptcy in
1985
From approximately 1963 forward, Lawrence V Van
Horn was the chairman of the board and chief executive
officer of Capitol Steel 6 Other Capitol Steel officials and
managers were President Henry A Hewitt Jr, Secretary-
Treasurer M 0 Abshere, Executive Vice President and
Chief Operating Officer Gerald B Emerson, Assistant
Secretary-Treasurer (Oklahoma) W J Muse, Assistant
Secretary-Treasurer (Houston) W T Tyler Jr, Vice
President of Purchasing and Procurement E H Allen,
Vice President and Sales Manager John Nesom, Vice
President and Sales Manager (Houston) D P Barnhart,
Vice President and General Manager J S Fowler Jr,
and Vice President of Production (Oklahoma) E H
Wimsett 7
Capitol Steel filed for bankruptcy in the latter part of
1985 Prior to October of that year, it employed approxi-
mately 163 shop (unit) employees That number was re-
duced to approximately 127 in October and at the time it
ceased operating on or about 12 December 1985 it em-
ployed approximately 20 unit employees
The Union had, for an extended time prior to Decem-
ber 1985, represented the shop employees of Capitol
Steel Capitol Steel and the Union had been parties to
collective-bargaining agreements, the most recent of
which expired in May 1986 The most recent collective-
bargaining agreement called for 47 different unit job clas-
sifications
After Capitol Steel went into bankruptcy and ceased
operating as a business entity in 1985, there were at least
two attempts to revive the Company One such attempt
resulted in a January 1986 meeting at an Oklahoma City,
Oklahoma restaurant between Capitol Steel Controller
Jack Wellborn, investor Don Chevas, Capitol Steel Vice
President and Sales Manager Nesom, Capitol Building
Corporation Owner John Sorenson, Union Business Rep-
resentative Albert L Huff, Union President Virgil Smith,
and George King Wellborn attempted to explore with
those present the possibility of investor Chevas taking
over Capitol Steel's entire operation including its equip-
ment, facilities, and utilizing some of its employees
Nothing materialized from that meeting
The second attempt to save Capitol Steel took place in
February 1986 when all of those present at the January
meeting (except investor Chevas) again met to discuss
Capitol Steel's future This time the group met with a
foreign investor, Solomon Kadmany, of Israel Kadmany
wanted to purchase Capitol Steel's entire operation,
however, his attempted purchase never materialized
6 Records from the Secretary of State's office for Oklahoma reflects
Capitol Steel was ongmally incorporated in June 1921 with Van Horn as
the incorporator Those records also reflect that Capitol Steel had a
stated capitol of $500,000 and 4 million shares of common ordinary
voting stock
7 It appears four of the principal stockholders of Capitol Steel agreed
to a leveraged buyout of Capitol Steel in 1982 The record is silent on
whether all the above officials remained in their same positions after the
1982 buyout
492 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
Commencing in approximately January 1986, Nesom
commenced to tell "anybody" that would listen that he
hoped to start a new steel fabricating company in Okla-
homa City, Oklahoma, if he could acquire space, equip-
ment, and the necessary funding to do so 8
In the spring of 1986, Boh Brothers Company° 'ob-
tained bankruptcy court approval to remove steel it
owned from Capitol Steel's premises and transport it to
another company for fabrication work Representatives
of Boh Brothers Company, again with bankruptcy court
approval, obtained Nesom's assistance in loading out its
steel at Capitol Steel's facility Nesom contracted with
Boh Brothers Company to load the steel for a labor-only
cost of $76,000 Nesom utilized former Capitol Steel em-
ployees to load Boh Brothers' steel 10 The loadout took
approximately 5 weeks to complete Two of those hired
to help in the loadout were Union Business Representa-
tive Huff and Union President Smith Nesom told these
two union officials, as well as the other former Capitol
Steel employees assistmg in the loadout, that he hoped to
open his own steel fabricating company in Oklahoma
City, Oklahoma, if he could find property and equipment
and arrange financing
The bankruptcy court ordered the assets of Capitol
Steel sold at public auction on 24 June 1986 The auction
was carried out by Industrial Plants Corporation 11 Ap-
proximately 1427 items were offered (approximately 500
of which were equipment) at the sale which produced
approximately $665,000 in revenues 12 CSIC President
Nesom attended the auction and made purchases totaling
$47,000 He purchased the following (1) 36 or 37 pieces
of equipment for which he paid $25,000, (2) plate steel
for which he paid $11,000, and (3) office furniture and
fixtures for which he paid $11,000 Included in the
$25,000 expended for equipment was $7800 paid for a
"Grove crane" which CSIC thereafter leased out and
has not utilized Since the Capitol Steel auction, CSIC
has purchased additional equipment from other sources
at a cost of $160,000
2 CSIC's incorporation and operations
CSIC, with its initial Oklahoma City, Oklahoma loca-
tion at Blue Sage Street was incorporated on 25 Febru-
ary 1986 Barbara Nesom (B Nesom), the major stock-
holder (owning 500 of 502 shares of common stock
issued), is the chairman and chief executive officer of the
Company CSIC President Nesom, who owns the two
remaining shares of common stock, is the only officer of
6 Nesom testified he kept an open mind at that time about a union rep-
resenting employees at any enterpnse he might be Involved with
9 Bob Brothers Company is not otherwise Involved in this proceeding
" The record does not reflect exactly how many employees Nesom
utilized However, they were paid a flat rate of $10 per hour on checks
drawn on CSIC
"Industrial Plants Corporation is a Skokie, Illinois corporation that
specializes in providing assistance in liquidating businesses by offering ap-
praisals and auctioneenng services
12 An Independent appraisal had been made of Capitol Steel's assets in
November 1984 That appraisal reflected assets of $1,747,916 of which
$994,516 was located in Oklahoma City, Oklahoma The appraisal was
made by M B Valuation Services, Inc of Dallas, Texas
CSIC that had been an official of Capitol Steel 13 CSIC
was founded with the intent of becoming and subse-
quently became (22 December 1986) certified as a Disad-
vantaged Business Enterprise/Women's Business Enter-
prise by the Oklahoma Department of Transportation
pursuant to the Small Business Act, 15 U S C 637 et
seq 14 Being certified as a Disadvantaged Business
Enterprise/Women's Business Enterprise affords the cer-
tified company certain marketing and contract bidding
advantages One among the eligibility standards for
qualifying as a Disadvantaged Business
Enterprise/Women's Business Enterprise is, "the owner-
ship and control by [the disadvantaged] individuals shall
be real, substantial, and continuing and shall go beyond
the pro forma ownership of the firm as reflected in its
ownership documents" (Co Exh 21, "Eligibility Stand-
ards," p 3, par 2)
CSIC commenced operating as a steel fabricator in
August 1986 CSIC leased from Capitol Building Corpo-
ration 14 of the 24 acres at South Agnew Street, Oklaho-
ma City, Oklahoma, that had previously been leased by
Capitol Steel CSIC leases at a cost of approximately
$146,000 per year approximately 8 of the 17 facilities pre-
viously utilized by Capitol Steel and has an option to
purchase all the property at that address from Capitol
Building Corporation 15 The lease arrangement allows
CSIC the use of certain overhead and walking cranes
that Capitol Buildmg Corporation purchased at the bank-
ruptcy sale of Capitol Steel
By 26 August 1986, CSIC employed 11 shop employ-
ees, 7 of which had previously worked for Capitol
Steel 18 Throughout the year 1986 and on a frequent
basis after August, certain officials of the Union, usually
Business Representative Huff and President Smith, ques-
tioned CSIC President Nesom about the future of CSIC
and told him the Union was interested in representing
the shop employees at CSIC They even gave Nesom a
copy of the collective-bargaining agreement the Union
had with Capitol Steel and told him they were willing to
make modifications on that agreement in order to make
it acceptable to CSIC 17
is Other officials and management personnel of CSIC are C Whitman,
chief estimator, G Hyde, quality control manager, J Golden, administra-
tive assistant, D Nesom, controller, R Ball, chief draftsman, J Cagle,
plant manager, J Calhoun, production manager, and P Murcko, detaller
' 4 A "Women's Business Enterprise" is "a small business concern" (as
defined in Sec 3 of the Small Business Act) that is at least 51-percent
owned and controlled by one or more women A "Disadvantaged Busi-
ness Enterpnse" is defined as an enterpnse that is at least 51-percent
owned by one or more "socially and economically disadvantaged individ-
uals"
15 Capitol Steel did not have an option to purchase the property Cap-
itol Steel's most recent annual lease fee for all 24 acres and 17 facilities
was $65,000 per year
16 The seven were Tommy Bellah, David Hawkins, Charles D John-
son, Frank R Landers, Jimmy Payton, Cecil H Prock, and Alfred L
Young Additionally, Marion E Drake and Elbert Williams had worked
for Capitol Steel, however, both had been terminated on 13 November
and 13 December 1985, respectively
17 Although I found CSIC President Nesom's overall testimony to be
reliable, I find it unnecessary, in deciding the Issues herein, to make a spe-
cific finding as to whether he was given a copy of the Union's collective-
bargaining agreement with Capitol Steel early in 1986 as claimed by the
representatives of the Union or on or about July or August as claimed by
Nesom
CAPITOL STEEL & IRON CO

493
The Union's contact with CSIC was minimal, if at all,
between December 1986 and October 1987 18 Business
Representative Huff testified he learned in October from
a CSIC employee that CSIC had granted its unit em-
ployees a wage increase Huff said he felt if the Compa-
ny "had got things going well enough to grant a wage
increase" then it could bargain with the Union Accord-
ingly, on 5 October 1987, Huff wrote CSIC President
Nesom the following letter
This letter is to serve as official notification of
the desire of representatives of Shopmen's Local
Union No 546 of the International Association of
Bridge, Structural and Ornamental Iron Workers
(AFL-CIO) to once again meet with you or a des-
ignated representative of the Company to discuss
matters contained in the existing collective bargain-
ing agreement, specifically, your successorship of
the Capitol Steel Corporation
This Local Umon wants to reassert its position
and to assure you of its sincere and continued inter-
est as the bargaining agent for your employees, and
presuming such, respectfully requests that a meeting
be scheduled within the month of October, at a
place mutually agreeable, to discuss such matters
that will, we believe, be of mutual benefit to both
parties
Please notify the undersigned as timely as possi-
ble, the date m October, tune and your location
preference in which we can meet
Union District Representative David Turnbull tele-
phoned CSIC President Nesom on 11 November 1987 to
find out what CSIC's response would be to the Union's
letter CSIC President Nesom told Turnbull he was will-
ing to meet with the Union anytime and place to find out
what it could do to assist CSIC but as long as the Union
took the position CSIC was the successor of Capitol
Steel, he did not want to talk with them Turnbull said
he did not contact CSIC thereafter
On the date of the Union's wntten bargaining demand
(5 October 1987), CSIC employed approximately 16 shop
employees Approximately 12 of the 16 had been em-
ployed at Capitol Steel in 1985 When employees were
hired at CSIC, they were told they would be general
shop workers that would have to perform (and have in
fact performed) whatever tasks CSIC needed done
As of the trial herein, CSIC employed approximately
26 to 28 shop employees The number of shop employees
had remained relatively stable from October 1987 until
February 1988 At that time CSIC added approximately
10 to 12 shop employees which brought its total unit
18 Union Busuiess Representative Huff testified there was no contact
dunng the above-referenced time because CSIC President Nesom was to
contact the Union Instead of the union officials contacting him
complement to the above-referenced 26 to 28 employees
Approximately 14 of the 26 to 28 employees had previ-
ously worked for Capitol Steel, however, only two of
them perform generally the same work in essentially the
same locations with the same supervision that they had
at Capitol Steel James Cagle, Charles Whitman, and
Gary Lee Hyde currently hold positions at CSIC
to the positions they held at Capitol Steel, namely, plant
manager, chief estimator, and quality control manager,
respectively
Although CSIC is involved in many operations, it is
primarily a steel fabricator CSIC has attempted to con-
centrate its steel work in the area of highway bridge fab-
rication because it is paid for such work as progress is
made on the work CSIC President Nesom testified
[W]e can only solicit business from people who are
willing to pay us as we perform, and not wait until
we get through with the project and then pay us
net 30 days from finish, because we do not have the
working capital that the old company had to buy
the materials, pay the labor, and run six to eight
months before cash flow would start So, virtually,
every contract that we perform on highway work,
we know the procedures to get our cash flow and
funding as we perform, and the clientele we have
on labor contracts only for bridge work, we make
the agreement with the client going m, you pay us
on a timely basis, either bi-monthly no longer
than every two weeks, and we'll perform the con-
tract for you accordingly And that's what we have
done in every contract that we've had
CSIC does not do business with any customers previous-
ly served by Capitol Steel The other business operations
that CSIC is involved in include (1) painting and clean-
ing projects for other steel fabricators, (2) operating war-
ehousing and storage facilities, (3) brokenng steel and re-
lated items, and (4) renting equipment and office space
More specifically, CSIC provides storage space for other
companies for, among other items, antique carriages,
camper vehicles, food processing items, used tires, and
railroad cars CSIC also leases office space to a tire re-
processing company and to a publishing company A
portion of one of the facilities leased by CSIC has been
converted into an apartment for its watchman
CSIC concentrates its production work essentially into
one work bay area
Since it commenced operations, CSIC has performed
the following work or has engaged in the following en-
terprises that generated the revenues set forth
494 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
Aprox Revenues Received
Cumulative Totals Approx %ThereofType of Work 1986 1987 1988
Bridge Work Labor Only (on
other contractors materials) $76,000 $319,000 $172,000 $567,000 32 6
Bridge work labor and materials -0- 295,000 -0- 295,000 169
Labor only (loading or unloading
trucks etc no materials in-
volved) 11,000 800 -0- 11,800 06
Labor for painting and blasting
steel -0- 90,000 -0- 90,000 51
Materials brokered (buying and
selling without handling the
materials 700 65,000 -0- 65,000 37
Selling plain (unfabricated) steel 28,000 1,500 766 30,266 17
Materials fabricate -0- 139,102 -0- 139,000 79
Materials fabricated and erected 525,000 -0- -0- 525,000 31
Renting equipment 6,000 -0- -0- 6,000 03
Storage contracts 213 8,700 -0- 8,943 05
Totals $646,913 $919,132 $172,766 $1,738,811 994
CSIC did not purchase any patented processes or
trademarks from Capitol Steel nor does it do business
with any customers of the type that Capitol Steel did
business with
B Legal Principles
In NLRB v Burns Security Services, 406 U S 272
(1972), the Supreme Court first dealt the issue of a suc-
cessor employer's obligation to bargain with the Union
that had represented the employees of its predecessor In
Burns, the Supreme Court approved the Board's and
Court's approach with respect to determining whether a
new company is indeed the successor of its predecessor
The approved approach is primarily factual in nature and
is based upon a consideration of the totality of the cir-
cumstances in a given situation As the Supreme Court
noted in Fall River Dyeing Corp v NLRB, 482 U S 27
(1987), this approach
Requires that the Board focus on whether the new
company has "acquired substantial assets of its pred-
ecessor and continued, without interruption or sub-
stantial change, the predecessor's business oper-
ations" Golden State Bottling Co v NLRB, 414
U S at 184 Hence, the focus is on whether there is
"substantial continuity" between the enterprises
In determining whether an employer is a successor, the
Board's approach has been to consider the following fac-
tors (1) whether there has been a substantial continuity
of the same business operations, (2) whether the new em-
ployer utilizes the same plant as the previous employer,
(3) whether the new employer has the same or substan-
tially same work force, (4) whether the same jobs exist
under the same working conditions, (5) whether the new
employer employs the same supervisors, (6) whether the
new employer uses the same machinery, equipment, and
methods of production, (7) whether the new employer
manufactures the same product, offers the same services,
and/or has the same customers, and (8) whether there
has been a hiatus between the previous and new employ-
er's operations
None of the above factors is dispositive NLRB v
Band-Age, Inc , 534 F 2d 1 (1st Cir 1976), cert demed
429 US 921 (1976)
The above factors are to be examined from the em-
ployees' perspective As the court noted in NLRB v Se-
curity-Columbian Banknote Co, 541 F 2d 135 (3d Cir
1976), "this 'employee viewpoint' derives from the con-
cept that the only reason to limit a successor employer's
ability to reorganize his labor relations is to offer the em-
ployees some protection from sudden change in the em-
ployment relationship" The court went on to note that
the factors must be carefully examined to see "whether
the changes in the nature of the employment relation-
ships are sufficiently substantial to vitiate the employee's
original choice of bargaining representative"
The underlying policy of the successor employer doc-
trine seeks to facilitate transfers of capital to enable reor-
ganization and vitalization of business enterprises but at
the same time protect employee rights and assure the ac-
complishment of the transition in an environment of in-
dustrial peace See NLRB v Security-Columbian Bank-
note Co, supra The Supreme Court m Fall River Dyeing,
supra, noted it had observed in Burns, supra, that al-
though a successor employer had an obligation to bar-
gain with a union representing the employees of its pred-
ecessor, the new or successor employer (1) was free to
set initial terms on which it would hire employees of a
predecessor, (2) was not bound by the predecessor's col-
lective-bargaining agreement, and (3) was under no obli-
gation to hire the employees of its predecessor—subject
to the restriction that it not discriminate against union
employees in its hiring Thus, the Supreme Court rea-
soned that the applicability of the Burns, supra, successor
employer doctrine rested for the most part in the hands
of the successor In so concluding, the Supreme Court
stated
CAPITOL STEEL & IRON CO 495
If the new employer makes a conscious decision to
maintain generally the smae business and to hire a
majority of its employees from the predecessor,
then the bargaining obligation of Section 8(a)(5) is
activated
The Supreme Court also observed
This makes sense When one considers that the em-
ployer intends to take advantage of the trained work
force of its predecessor
A mere change in ownership of an employing business
enterprise does not itself absolve the new owner from
the obligation to recognize and bargain with the labor
organization that represented the former owner's em-
ployees
In considering the successor issue, I am not unmindful
that some of the various factors overlap I have, where
appropriate for discussion and analysis purposes, consoli-
dated some of the factors
C Positions of the Parties
Counsel for the General Counsel asserts many factors
show CSIC to be substantially similar to Capitol Steel
and as such warrants a finding that it is the successor of
Capitol Steel and hence obligated to bargain with the
Union He asserts CSIC operates out of portions of the
same facility that Capitol Steel did and that a majonty of
its work force came from Capitol Steel He further as-
serts CSIC produces essentially the same products on
some of the same machinery and with some of the same
supervision that had been utilized at Capitol Steel Ac-
cordingly, he argues CSIC must be found to be the suc-
cessor of Capitol Steel To further enhance his position,
counsel for the General Counsel asserts domg highway
bridge fabrication work, which CSIC does, is not signifi-
cantly different from performing fabrication work for
highnse buildings and power plants which Capitol Steel
did In that regard, counsel for the General Counsel con-
tends Capitol Steel also performed some highway bridge
fabrication work
Counsel for the General Counsel argues it is insignifi-
cant to the issues herein that CSIC is a Disadvantaged
Business Enterprise/Women's Business Enterprise He as-
serts such organizational structuring and marketing strat-
egies do not affect the basic character of the work per-
formed by the shop employees of CSIC Further, counsel
for the General Counsel argues the fact CSIC is engaged
in other business enterprises in addition to steel fabrica-
tion does not alter the outcome herein because CSIC's
warehousing, brokering of steel, and selling various
products has little, if any, effect on unit employees at
CSIC Finally, Counsel for the General Counsel con-
tends the 8-month hiatus between the demise of Capitol
Steel and the commencement of CSIC is not of sufficient
duration to destroy the continuity of the business enter-
prise
In summary, counsel for the General Counsel urges
that CSIC has substantially continued the same business
enterprise that Capitol Steel operated and is thus re-
quired to bargain with the Union as the representative of
its shop employees
Counsel for CSIC contends an examination of the to-
tality of the circumstances involving the two companies
herein dictates a finding that CSIC is not the successor
to Capitol Steel Counsel asserts CSIC made a "con-
scious decision" not to maintain the same type business
that its predecessor operated In this regard, he notes
CSIC has been certified as a Disadvantaged Business
Enterprise/Women's Business Enterprise and he asserts
for it to have obtained that governmental certification, it
had to and has demonstrated there was a complete break
between it and Capitol Steel Counsel also notes CSIC
does not do business with any of the customers Capitol
Steel serviced He asserts the steel fabrication portion of
CSIC's business is primarily concentrated in the pay-as-
the-work-is-performed highway bridge fabrication work
whereas Capitol Steel's bridge fabrication work only
amounted to approximately 1 percent of its overall busi-
ness
Counsel also argues against a successorship finding by
contending CSIC engages in a wide variety of enter-
prises that Capitol Steel did not engage in In this regard,
counsel points to the fact CSIC is in the warehousing,
storage, and material brokering business in addition to its
bridge fabrication work
Counsel asserts other factors in its favor are that CSIC
only utilizes a portion of the property previously utilized
by Capitol Steel and that it leases the property from an
independent company unrelated to Capitol Steel Counsel
further asserts that because CSIC only purchased ap-
proximately 6 percent of Capitol Steel's assets at the
bankruptcy sale and thereafter made substantial asset
purchases elsewhere, it cannot be found to be utilizing
the same equipment that Capitol Steel utilized
CSIC does not dispute it hired some former Capitol
Steel employees, but it asserts only two of them are cur-
rently being supervised by the same supervision they had
at Capitol Steel CSIC also contends its work force is
more highly skilled and diversified than Capitol Steel's
was and as such the former employees of Capitol Steel
are not performing the same functions at CSIC that they
performed at Capitol Steel Additionally, counsel asserts
the former employees readily perceive and acknowledge
there is a different management atmosphere at CSIC and
as such understand there is no continuity between CSIC
and their old employer, Capitol Steel
Finally, counsel argues one additional factor demon-
strates the "discontinuity" of the employing enterprises
and that is there was a hiatus of several months between
the time Capitol Steel went out of business and CSIC
came into existence as a steel fabricator He asserts CSIC
had no relationship with Capitol Steel during the hiatus
Simply stated, CSIC contends it is not the successor to
Capitol Steel and hence has no bargaining obligation
with the Union on that basis
D Analysis, Discussion, and Conclusions
I am persuaded CSIC has demonstrated it elected to,
and m fact does, conduct a business that is substantially
and fundamentally different from that of Capitol Steel It
is a Disadvantaged Business Enterprise/Women's Busi-
ness Enterprise Consequently, unlike Capitol Steel, it is
496 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
owned and managed as a disadvantaged enterprise Being
a disadvantaged enterprise has resulted in its organiza-
tional structure and marketing methods being significant-
ly different from Capitol Steel By being a Disadvan-
taged Business Enterprise/Women's Business Enterprise,
it is placed on various lists provided to contractors bid-
ding on federally funded highway projects This greatly
assists CSIC because, unlike Capitol Steel, it is in the
highway bridge fabrication business as its mainstay The
highway bridge fabrication business is on a pay-as-the-
work-is-performed basis Thus, CSIC operates on a sig-
nificantly different cash flow basis than did its predeces-
sor, Capitol Steel Capitol Steel received payment for the
work it performed upon the completion of its various
fabrication projects whereas CSIC receives revenues as
work is performed Other factors reflecting the overall
change in the business character of CSIC as opposed to
Capitol Steel is found in the fact it has entered into van-
ous other enterprises such as warehousing and stonng
items, pamtnig and cleaning steel for other contractors,
and brokering unfabncated steel
As is elsewhere noted, CSIC began its steel fabrication
operations in August 1986 at the same street address
Capitol Steel had utilized However, it only leased from
Capitol Building Corporation (an unrelated company) ap-
proximately 14 of the 24 acres and 8 of the 17 facilities
that Capitol Steel had utilized CSIC concentrates its
steel fabrication business essentially into one work bay
area whereas Capitol Steel utilized all the work bay
areas at that location Thus, it is clear that not only does
CSIC utilize a much smaller area, both in acres and
number of facilities, it concentrates its steel fabrication
work into one single streamlined work bay area In light
of the above and viewed from the employee's perspec-
tive, I am persuaded CSIC does not utilize the same
plant facilities in the same manner that its predecessor,
Capitol Steel, did I am persuaded this element of the
successorship test favors a finding that CSIC is not the
successor of Capitol Steel 19
Prior to October 1985, Capitol Steel employed ap-
proximately 163 (shop) unit employees It reduced that
number to approximately 127 in October with a further
' 2 I reject counsel for the General Counsel's contention that the facts
herein on this element of the successorslup test are indistinguishable from
those in Lloyd Flanders, 280 NLRB 1216 (1986), in which the new com-
pany therein was found to be the successor of its bankrupt predecessor
In Lloyd Flanders, supra, the company had attempted to dramatically
downsize and consolidate its operations before It ceased doing business
The predecessor kept its work force fully Informed of its intentions and
moved certain of its operating machinery prior to ceasing to do business
It is clear that in reality as well as from the employee's perspective, the
new company in Llyod Flanders, supra, was simply a continuation of the
old bankrupt company That substantial continuity is demonstrated by the
fact the new company in Lloyd Flanders, supra, purchased its predeces-
sor's Menominee, Michigan "real property with improvements, all the
equipment, machinery, furniture, furnishings, and fixtures all Inven-
tory of raw matenals, work in progress, and finished goods except
[one] inventory" 280 NLRB at 1217 Whereas, in the case at bar, CSIC,
as will hereinafter be shown, purchased only a very small percentage of
Capitol Steel's equipment, machinery, and raw materials and did not pur-
chase any work in progress, finshied goods, trademarks, or real property
from Capitol Steel I find the totality of the circumstances in Lloyd Flan-
ders, supra, to be quite different from those in the case at bar and do not
find Lloyd Flanders, supra, to be controlling herein on this or any of the
other elements of the successors/up test
reduction in November until it only employed 20 unit
employees at the time it ceased doing business on or
about 12 December 1985 CSIC became operational on
or about 1 August 1986 and by August 26 had a shop
employee complement of 11, 7 of which had previously
been employed by Capitol Steel As of 5 October 1987,
the date of the Union's demand to bargain, CSIC em-
ployed approximately 16 unit employees, 12 of which
had previously worked for Capitol Steel CSIC's work
complement remained relatively stable until February
1988 when it added approximately 10 to 12 unit employ-
ees bringing its complement to 26 to 28, 14 of which had
worked for Capitol Steel Thus, CSIC employs (at least
until very recently if not presently) as a majority of its
unit employees those who had previously worked for
Capitol Steel The fact CSIC employs as a majority of its
unit employees those who had been employed at its
predecessor cannot, on the facts herein, be controlling on
whether, with respect to this element of successorship
test, it should be viewed as a successor employer The
unit employees at CSIC cannot reasonably view their
jobs as being unaltered in light of the fact there has been
such a reduction in the number of unit employees from
approximately 163 at Capitol Steel to approximately 16
at CSIC 20 I am not unmindful that mere dimumtion in
the employee complement of the bargaining unit does
not relieve a successor of its duty to bargain However,
that factor may not be viewed in isolation Other factors
that need to be considered are, for example, that the em-
ployees herein were told when they were hired they
would be and they do perform as general shop employ-
ees whereas at Capitol Steel they worked in some 46 dif-
ferent unit classifications Although steel fabrication
work primarily involves lifting, cuttmg, welding, and fit-
ting steel, the skill levels required to perform specific
types of fabrication work vanes greatly according to the
undisputed testimony of CSIC Quality Control Manager
Hyde Hyde stated the acceptance cntena for highway
bridge steel work, which CSIC performs, is "a lot more
stringent" than the steel work utilized in highnse
buildings which type work Capitol Steel performed
Thus, not only are CSIC's employees in a smaller unit
performing general shop work rather than specifically as-
signed jobs, they are also working under different ac-
ceptance criteria than they did at Capitol Steel In light
of the above, I am persuaded Counsel for the General
counsel has failed to demonstrate that the same jobs exist
at CSIC under the same working conditions that existed
at Capitol Steel
Along this same line, it is important to note the man-
agement atmosphere at CSIC is completely different
from what it had been at Capitol Steel As employees
20 I reject counsel for the General Counsel's contention that I consider
as a point of comparison between CSIC and Capitol Steel, the number of
employees Capitol Steel employed during its last month (December 1985)
in business when it only employed 20 unit employees rather than when it
employed 163 unit employees prior to October 1985 To consider Capitol
Steel's work force as being that of its last month in operation would not,
in my opinion, be viewing the situation through the eyes of the employ-
ees involved herein It would be unreasonable to assume the employees
viewed Capitol Steel's work force as being the small number of employ-
ees It employed right before It went out of business
CAPITOL STEEL & IRON CO 497
Williams and Whitmire testified, employees at Capitol
Steel had to follow a somewhat rigid chain of command
with respect to any problems, actual or perceived,
whereas at CSIC they are free to discuss their problems
not only with their immediate supervisors but with
anyone in management up to and including the chairman
of the board/chief executive officer Therefore, the unit
employees at CSIC cannot help but perceive they are
working for a new and substantially different employer
With respect to any common officials and supervisiors
at the two companies, only CSIC President Nesom had
been an official of Capitol Steel His primary functions at
Capitol Steel were in the areas of marketing and sales
whereas at CSIC he serves as the hands-on overall daily
manager of the enterprise As of 5 October 1987, the
date of the Union's bargaining demand, six (including
CSIC President Nesom) of the nine supervisory and
office employees at CSIC had been employed at Capitol
Steel However, of that six, only two held the same posi-
tions at Capitol Steel that they now hold at CSIC,
namely, Plant Supervisor (Manager) Cagle, and Chief
Estimator Whitman Of the remammg four, at least one
had not been employed by Capitol Steel during the 5
years preceding his employment at CSIC Two of the six
mentioned above are the chief draftsman and administra-
tive assistant and the record does not reflect that they
have any direct contact with the unit employees As of
the trial herein, only two CSIC employees that had pre-
viously worked for Capitol Steel are performing the
same work in the same location under the same supervi-
sion that they had at Capitol Steel Thus, although there
is substantial supervisory carryover from Capitol Steel to
CSIC, I am persuaded the employees would nonetheless
view CSIC as a new and substantially different employ-
er I so conclude first because CSIC President Nesom's
duties have changed from marketmg and sales to overall
daily management As one witness put it, he is on the
shop floor far too much Secondly, only two employees
currently are supervised by the same supervision in the
same area doing the same work they had performed at
Capitol Steel Additionally, one of the officer/manage-
ment/supervisory personnel at CSIC had not worked at
Capitol Steel at any time during the 5 years preceding
his employment at CSIC Clearly, the unit employees
could not reasonably view that individual as a carryover
from their old employer Additionally, the evidence
tends to indicate that Plant Manager Cagle functions at
CSIC more or less as a first level supervisor whereas at
Capitol Steel he was removed from immediate supervi-
sion of unit employees Stated differently, there were a
number of lower level supervisors that reported to and
functioned between Cagle and the unit employees at
Capitol Steel whereas that does not appear to be the case
at CSIC In light of all the above, I am persuaded the
unit employees could not at any time have reasonably
viewed CSIC as a continuation of Capitol Steel based on
the makeup of its management and supervision
CSIC only purchased approximately 36 or 37 of the
500-plus items of Capitol Steel equipment that was sold
at public auction in June 1986 Of the $47,000 total that
CSIC spent at the Capitol Steel auction, only $25,000
was for equipment Included in that $25,000 for equip-
ment was $7800 for a "Grove crane" that was leased out
and not utilized by CSIC Therefore, CSIC only utilizes
$17,200 worth of equipment in its operations that is pur-
chased from Capitol Steel CSIC's purchases must be
compared to the $665,000 in revenues that were derived
from the sale of all of Capitol Steel's assets at the public
auction Since the Capitol Steel auction, CSIC has ob-
tained other equipment from other sources at a cost of
$160,000 21 CSIC utilizes its equipment from Capitol
Steel and elsewhere essentially in a centralized one work
bay area whereas Capitol Steel utilized numerous work
bay areas Thus, I conclude that CSIC, under the cir-
cumstances herein, does not use the same machinery and
equipment in the same manner of location that Capitol
Steel did
CSIC does not serve any of the customers previously
served by Capitol Steel The mainstay of CSIC's steel
fabrication business is highway bridge work whereas
Capitol Steel only sold $6 million of type work out of
sales totaling $600 million Furthermore, Capitol Steel
never performed $5 million of the $6 million in highway
bridge work that it sold Specifically, it did not perform
work on a $5 million highway bridge contract that it had
with Boh Brothers and that work was shipped out in an
unfabncated status from Capitol Steel to a competitor
that actually performed the work Thus, it is clear CSIC
is in a different type steel fabrication business and does
not service any customers previously serviced by Capitol
Steel Accordingly, I find such to strongly militate
against a finding of continuity between Capitol Steel and
CSIC
As a result of the above changes, and in light of all the
factors outlined in this decision, I am persuaded produc-
tion steps and job assignments have been and/or are per-
ceived to have been substantially modified such as to
compel a finding that CSIC is not the successor to Cap-
itol Steel
When the hiatus of approximately 8 months between
the demise of Capitol Steel and the commencement of
operations by CSIC is viewed in light of all these cir-
cumstances, it is clear that factor also favors a findmg
that CSIC is not the successor to Capitol Steel From the
employees' perspective, the fact Capitol Steel was dor-
mant for approximately 8 months would be Just one
more indication to them that CSIC was something other
than a continuation of their old employer's enterprise
In summary, I conclude, after applying the principles
outlined earlier to the facts herein, that the record com-
pels a finding that CSIC's operations do not involve a
"substantial continuity of the business enterprise" of Cap-
itol Steel such that would support the 8(a)(5) allegations
herein
Accordingly, I recommend the 8(a)(5) complaint alle-
gations be dismissed
21 I find of no great moment the fact that Capitol Building Corpora-
tion, the lessor herein, purchased certain cranes at the auction of Capitol
Steel's assets in order to make its (Capitol Building Corporation s) prop-
erty more marketable to lessees like CSIC
498 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
CONCLUSIONS OF LAW
I Capitol Steel and Iron Company (CSIC) is an em-
ployer engaged in commerce within the meaning of Sec-
tion 2(2), (6), and (7) of the Act
2 Shopmen's Local Union No 546, affiliated with
International Association of Bndge, Structural and Orna-
mental Iron Workers is a labor organization within the
meaning of Section 2(5) of the Act
3 Capitol Steel and Iron Company (CSIC) is not the
successor of Capitol Steel Corporation (Capitol Steel)
4 Capitol Steel and Iron Company has not engaged in
the unfair labor practices alleged in the complaint
[Recommended Order for dismissal omitted from pub-
lication]