Lihli Fashions Corp.

National Labor Relations Board - Board Decisions

Apr 28, 1995

317 N.L.R.B. 163 (N.L.R.B. 1995)

163
317 NLRB No. 24
LIHLI FASHIONS CORP.
1 NLRB v. Hospital San Rafael, 42 F.3d 45, 50–51 (1st Cir. 1994);
E.G. Sprinkler Corp., 268 NLRB 1241, 1243–1244 (1984), enfd. sub
nom. Goodman Piping Products v. NLRB, 741 F.2d 10, 12 (2d Cir.
1984).
2 Ibid.
3 Contrary to the Respondents’ contentions, Mars’ testimony was
uncontroverted.
Lihli Fashions Corporation and King Kuo Inter-
national Enterprises, Inc., and their alter egos,
Lihli of New York, Inc. and Liyan Inter-
national Inc. and International Ladies’ Gar-
ment Workers’ Union, Local 89-22-1, AFL–
CIO. Case 29–CA–17681
April 28, 1995
DECISION AND ORDER
BY CHAIRMAN GOULD AND MEMBERS STEPHENS
AND TRUESDALE
On December 23, 1994, Administrative Law Judge
Raymond P. Green issued the attached decision. The
Respondent filed exceptions and a supporting brief and
the General Counsel filed a brief in support of the
judge’s decision.
The National Labor Relations Board has delegated
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 briefs and has de-
cided to affirm the judge’s rulings, findings, and con-
clusions and to adopt the recommended Order.
We agree with the judge that Liyan Interna-
tional/Lihli of New York is the alter ego of Lihli
Fashions/King Kuo. The record contains substantial
evidence that the companies shared substantially iden-
tical ownership, management, employee complement,
supervision, customers, and business purpose. That evi-
dence is sufficient to show the alter ego status of these
companies, even without evidence of antiunion animus,
i.e., that one entity was set up to evade the union obli-
gations of the other.1 Nonetheless, evidence of motiva-
tion to avoid such obligations is relevant to an alter
ego finding.2
Beginning in August 1992, Lihli Fashions/King Kuo
breached its collective-bargaining agreement with the
Union by failing to pay unit employees the contrac-
tually mandated pay raise, and in December 1992, it
ceased making contractually required payments to the
Union’s health and welfare fund. Union representative
Linda Mars testified3 that in late February 1993, before
Lihli Fashions/King Kuo allegedly went out of busi-
ness in late April, she was denied contractually man-
dated access to the Respondents’ facility and told,
‘‘this is not a union shop no more.’’ Subsequently,
after the establishment of Lihli of New York and
Liyan International, owner Lihli Hsu denied Mar’s
telephone request to see the unit employees, stating,
‘‘[W]hy are you still hunting around us . . . this shop
is no longer a union shop, no more.’’ Finally on Octo-
ber 26, 1993, the Respondents again denied the
Union’s written request for access to the unit employ-
ees. These attempts by the Respondents to evade their
statutory responsibilities, provide additional support for
the judge’s 8(a)(1) and (5) findings.
ORDER
The National Labor Relations Board adopts the rec-
ommended Order of the administrative law judge and
orders that the Respondent, Lihli Fashions Corporation
and King Kuo International Enterprises, Inc., and their
alter egos, Lihli of New York, Inc. and Liyan Inter-
national Inc., New York, New York, its officers,
agents, successors, and assigns, shall take the action
set forth in the Order.
Haydee Rosario, Esq. and James Kearns, Esq., for the Gen-
eral Counsel.
Robert A. Schutzman, Esq., for the Respondents.
Everett Lewis, Esq. and Lauren Esposito, Esq. (Lewis,
Greenwald, Kennedy, Clifton & Schwartz, P.C.), for the
Union.
DECISION
STATEMENT OF THE CASE
RAYMOND P. GREEN, Administrative Law Judge. This case
was tried in Brooklyn, New York, on September 20 and Oc-
tober 18, 1994. The charge was filed on September 30, 1993,
and was personally served on the Respondents on or about
October 28, 1993. The first amended charge was filed on De-
cember 21, 1993, and served by certified mail on or about
December 22, 1993. The complaint was issued on December
27, 1993, and amended on September 21, 1994. As amended,
the complaint alleged:
1. That Lihli Fashions Corporation and King Kuo Inter-
national Enterprises were New York corporations that did
business until late April 1993, out of 36–32 34th Street,
Long Island City, New York, and were engaged in the manu-
facture of silk dresses, blouses, suits, and other ladies ap-
parel. It is contended that these two corporations constituted
a single employer within the meaning of the National Labor
Relations Act.
2. That Lihli Fashions/King Kuo had recognized the Union
as the bargaining representative of its production, mainte-
nance, and packing and shipping employees and that said
corporations (as a single employer) had entered into succes-
sive collective-bargaining agreements with the Union, the last
being effective from August 1, 1991, to July 31, 1994.
3. That in late April 1993, on a date presently unknown,
Lihli of New York Inc. and Liyan International Inc. com-
menced operations at the same location described above.
4. That the two new entities, Lihli of New York and Liyan
International, are a single employer.
5. That Lihli of New York/Liyan International are the alter
egos of Lihli Fashions/King Kuo.
164 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
6. That as an alter ego, Lihli of New York/Liyan is an em-
ployer which was bound by the terms of the aforesaid collec-
tive-bargaining agreement.
7. That the Respondents have failed to provide a 35-cent-
per-hour wage increase that was due to its employees on Au-
gust 1, 1993.
8. That since late April 1993, the Respondents have failed
to make payments to the welfare fund and the pension fund
as required by the contract.
9. That since late April 1993, the Respondents have re-
fused to grant access to the Union’s representatives as re-
quired by the collective-bargaining agreement.
On the entire record, including my observation of the de-
meanor of the witnesses, and after considering the General
Counsel’s statement in support of its position and the briefs
filed by the General Counsel and the Charging Party, I make
the following
FINDINGS OF FACT
I. JURISDICTION
The Respondents, all of which are New York corporations,
are engaged in the business of designing and manufacturing
women’s garments. The Respondents admit and I find that
each of them have purchased goods and materials valued in
excess of $50,000 which were shipped to them from outside
the State of New York. I therefore conclude that the Re-
spondents are employers engaged in commerce within the
meaning of Section 2(2), (6), and (7) of the Act. I also find
that the Union is a labor organization within the meaning of
Section 2(5) of the Act.
II. ALLEGED UNFAIR LABOR PRACTICES
Lihli Fashions and King Kuo were two New York cor-
porations engaged in the manufacture of designer women’s
clothes. (They have since been dissolved.) They were located
at 36–32 34th Street, Long Island City in a building owned
by the Hsu family. It was conceded that both corporations
were operated as a single employer, albeit if any distinction
must be made, Lihli Fashions made knitted garments and
King Kuo created garments which generally were made of
silk. In both cases, these companies made garments for a de-
signer named Adolpho and they were sold through Adolpho
to the high-end departments of such stores as Saks Fifth Av-
enue and Neiman Marcus.
There is no question but that Lih Yuh Kuo who is also
known as Lihli Hsu was the president and the chief operating
officer of Lihli Fashions and King Kuo. Lihli Hsu testified
that she and her children owned the stock whereas her chil-
dren asserted that to their knowledge, they did not have any
shares. The Respondents were unable to locate the stock cer-
tificates for the two companies and therefore the ownership
of Lihli Fashions and King Kuo is in doubt.
Subject to the control of Lihli Hsu, the principle super-
visors of Lihli Fashions/King Kuo were Kim-mi, Yvonne
Wang, and Sue Fue Kuo. In addition, after their graduations
from college, Lihli Hsu’s three children, Henry, Ruth, and
Karen Hsu, were engaged to perform certain services for the
companies.
For a number of years, Lihli Fashions/King Kuo had main-
tained a collective-bargaining relationship with the Union.
The most recent contract was for the period from August 1,
1991, to July 31, 1994. (It is noted that the contract between
the Union and Lihli Fashions/King Kuo incorporated by ref-
erence the terms of a collective-bargaining agreement be-
tween the Apparel Manufacturers, Association Inc., the Af-
filiated Dress Manufacturers, Inc., and the Dressmakers’
Joint Council.) Among other things, the contract required the
company to (a) make contributions to jointly administered
pension and welfare funds, (b) grant certain wage and cost
of living increases to employees, and (c) grant access to
union representative to its premises.
Beginning in August 1992, Lihli Fashions/King Kuo start-
ed to breach certain provisions of the collective-bargaining
agreement. The company failed to grant to its employees a
35-cent-per-hour wage increase that was due on August 1,
1992, and it failed to make contractually required payments
to the pension and welfare funds after December 1, 1992. In
response, the Union commenced arbitration proceedings
against the Company and obtained awards in each instance.
Sometime in early 1993, Adolpho announced that he was
retiring and did so in May 1993. Initially, the Hsu family at-
tempted to get a license from Adolpho to produce garments
under his name, but this was refused. Accordingly, a decision
was made to directly market garments designed by Lihli Hsu
under the Lihli name.
The record indicates that in the spring of 1993, the Hsu
family approached the buyer from Saks Fifth Avenue and
convinced that company to carry the Lihli garments in its de-
signer department, albeit at prices that were somewhat lower
than when similar garments made by Lihli Fashions/King
Kuo were sold by Adolpho. At about the same time, two
new corporations were formed, Liyan International and Lihli
of New York, each of these being owned equally by Lihli
Hsu and her three children. Simultaneously, steps were taken
to dissolve the two former corporations, namely, Lihli Fash-
ions and King Kuo.
Lihli of New York and Liyan International are separate
New York corporations but with common ownership. Lihli of
New York operates out of a showroom located on 57th Street
in Manhattan, New York. Karen Hsu spends most of her
time out of this location where she is responsible for show-
ing the line to customers. Liyan International is located in
Long Island City at the same building that the two former
corporations were located. Liyan manufactures exclusively
for Lihli Inc., and all of its manufacturing operations are
conducted at this location. (Lihli only sells garments manu-
factured by Liyan.) Henry Hsu and Ruth Hsu spend most of
their time at the Long Island City location. Lihli Hsu splits
her time between both locations.
With the acquisition of the Saks Fifth Avenue account, the
Company commenced to design, sell, and manufacture knit-
ted and silk garments under its own label. After a period dur-
ing the winter of 1992–1993 when many employees were
laid off by Lihli Fashions/King Kuo, the new company re-
called many of the old employees as these were the people
who had the necessary skills to make the custom-made
clothes that were being sold. After acquiring the account of
Saks Fifth Avenue, the new companies were able to obtain
many of the former customers, such as Neiman Marcus, who
had previously purchased the garments under the Adolpho
label.
Notwithstanding the dissolution of the two old corpora-
tions and the creation of the two new corporations, the evi-
165LIHLI FASHIONS CORP.
1 See Central Management Co., 314 NLRB 763 (1994).
dence shows that there really has been little change in the
operations of the companies. Their customer base of the new
corporations is essentially the same as the old corporations,
as are the vendors with whom they do business. The super-
visors are the same and most of the employees of the two
new corporations had previously been employed in identical
jobs by the two old corporations. The manufacturing oper-
ations are the same, using the same type of equipment at the
same location. The types of garments sold are essentially the
same as when they were marketed under the Adolpho label.
The old corporations were controlled by Lihli Hsu and she
still has the last word in any decision affecting the two new
corporations. She designs the clothes manufactured by Liyan
and sold by Lihli of New York and she supervises the pro-
duction of these clothes. She does this because she is, at
present, the person with the most skill, expertise, and artistic
talent. There may come a time when one or more of her chil-
dren will take over some or all of these functions, but that
time has not yet arrived.
On April 2, 1993, the Company wrote to the Union as fol-
lows:
We are writing to notify you that we will be going out
of our business. Please note that all agreements will be
terminated.
Accordingly, as of April 2, 1993, neither the old corpora-
tions nor the new corporations have adhered to the terms of
the collective-bargaining agreement and did not make pay-
ments to the funds as required by the contract. Also, when
on October 26, 1993, the Union requested access to the em-
ployer’s premises to talk to employees, this request was de-
nied.
III. ANALYSIS
The crucial issue in this case is whether Liyan
International/Lihli of New York constitutes an alter ego of
Lihli Fashions/King Kuo. If the new entity, which I find con-
stitutes a single employer,1 is an alter ego of the old, then
the new Company is bound to recognize and bargain with the
Union as the representative of its employees in an appro-
priate unit.
Moreover, if is concluded that it is an alter ego, then the
new entity would be bound to honor the existing contract and
also would be bound, in the absence of good-faith bargain-
ing, to continue the terms and conditions set forth in that
contract even after its expiration (July 30, 1994). Under the
National Labor Relations Act, an employer may not unilater-
ally change the terms of employment as set out by the terms
of a collective-bargaining agreement, even after the contract
expires. The employer is required to maintain the contract’s
terms and conditions, including payments to benefit funds,
(but not the checkoff of union dues), until a new agreement
is reached which modifies or terminates such obligations; or
until after an impasse is reached whereupon a company may
unilaterally implement some or all of its last contract offer;
or until the employer is legally discharged from its obligation
to recognize and bargain with the Union. W. A. Krueger Co.,
299 NLRB 914, 915 (1990); Roman Iron Works, 292 NLRB
1292, 1293 (1989). See also Control Services, 303 NLRB
481, 482, 493 (1991), where the Board held, inter alia, that
the employer’s unilateral change in the terms and conditions
of employment (including its refusal to grant access as re-
quired by the expired contract), constituted a violation of
Section 8(a)(5) of the Act, in the absence of a valid impasse
in negotiations.
In Advance Electric, 268 NLRB 1001, 1002 (1984), the
Board stated that the test for determining alter ego status
was:
The legal principles to be applied in determining
whether two factually separate employers are in fact
alter egos are well settled. Although each case must
turn on its own facts, we generally have found alter
ego status where the two enterprises have ‘‘substan-
tially identical’’ management, business purpose, op-
eration, equipment, customers, and supervision as
well as ownership.
Denzil S. Alkire, 259 NLRB 1323, 1324 (1982). Ac-
cord: NLRB v. Campbell-Harris Electric, 719 F.2d 292
(8th Cir. 1983). Other factors which must be considered
in determining whether an alter ego status is present in
a given case include ‘‘whether the purpose behind the
creation of the alleged alter ego was legitimate or
whether, instead its purpose was to evade responsibil-
ities under the Act.’’ Fugazy Continental Corp., 265
NLRB 1301 (1982). [Footnote omitted.]
In MIS, Inc., 289 NLRB 491 (1988), the Board, citing Ad-
vance Electric stated that: ‘‘No one factor is determinative
of alter ego status, and not all of these indicia need be
present to find that an alter ego relationship exists.’’ See also
RCR Sportswear, 312 NLRB 513 (1994).
In the present case there is substantial commonality of
ownership and control over the old and new corporations.
(De facto, Lihli Hsu is in ultimate control.) They are engaged
in similar businesses with substantially the same customers,
except that the new corporations now are responsible for
marketing Lihli Hsu’s designs instead of having them mar-
keted through Adolpho. The supervisory and employee com-
plement of the old and new companies are substantially the
same and the clothes are manufactured at the same facility
using the same methods and means. I therefore conclude that
Liyan International/Lihli of New York is the alter ego of
Lihli Fashions/King Kuo.
CONCLUSIONS OF LAW
1. By refusing to recognize and bargain with the Union,
Lihli of New York and Liyan International have violated
Section 8(a)(1) and (5) of the Act.
2. By refusing to honor the terms and conditions of the
collective-bargaining agreement between Lihli Fashions Inc.,
and King Kuo and the Union, the Respondents have violated
Section 8(a)(1) and (5) of the Act.
3. By failing to provide a 35-cent-per-hour wage increase
that was due to its employees on August 1, 1993, the Re-
spondents violated Section 8(a)(1) and (5) of the Act.
4. By failing to make payments to the welfare fund and
the pension fund since late April 1993 as required by the
contract, the Respondents have violated Section 8(a)(1) and
(5) of the Act.
166 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
2 If no exceptions are filed as provided by Sec. 102.46 of the
Board’s Rules and Regulations, the findings, conclusions, and rec-
ommended Order shall, as provided in Sec. 102.48 of the Rules, be
adopted by the Board and all objections to them shall be deemed
waived for all purposes.
3 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
National 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.’’
5. By refusing to grant access to the Union’s representa-
tives as required by the collective-bargaining agreement, the
Respondents have violated Section 8(a)(1) and (5) of the Act.
6. The aforesaid unfair labor practices affect commerce
within the meaning of Section 8a(1) and (5) and Section 2(6)
and (7) of the Act.
REMEDY
Having found that the Respondent has engaged in certain
unfair labor practices, I find that it must be ordered to cease
and desist and to take certain affirmative action designed to
effectuate the policies of the Act.
As the employees speak several languages, it is rec-
ommended that the notice be in English, Spanish, and Man-
darin.
I shall recommend that the Respondents make the pension
and welfare funds whole for any contributions that they were
required to make under the terms of the collective-bargaining
agreement. I shall also recommend that the Respondents re-
imburse any employee (or their families), who having suf-
fered an illness or injury, incurred expenses to the extent that
such expenses were not reimbursed by the welfare fund but
would have been reimbursed if payments had been made to
the fund.
In the case of payments to the funds, it is recommended
that such payments be made with interest to be computed in
accordance with the practice set forth in Merryweather Opti-
cal Co., 240 NLRB 1213, 1216 fn. 7 (1979).
On these findings of fact and conclusions of law and on
the entire record, I issue the following recommended2
ORDER
The Respondents, Lihli Fashions Corporations Inc., King
Kuo International Enterprises Inc., Lihli of New York Inc.,
and Liyan International Inc., their officers, agents, succes-
sors, and assigns, shall
1. Cease and desist from
(a) Refusing to recognize and bargain with the Union.
(b) Refusing to honor the terms and conditions of the col-
lective-bargaining agreement with the Union that ran from
August 1, 1991, to July 30, 1994.
(c) Failing to provide a 35-cent-per-hour wage increase
that was due to employees on August 1, 1993, as required
by the terms and conditions of the aforesaid collective-bar-
gaining agreement.
(d) Failing to make payments to the welfare fund and the
pension fund as required by the terms and conditions of the
aforesaid collective-bargaining agreement.
(e) Refusing to grant access to the Union’s representatives
as required by the terms and conditions of the aforesaid col-
lective-bargaining agreement.
(f) In any like or related manner interfering with, restrain-
ing, or coercing employees in the exercise of the rights guar-
anteed them by Section 7 of the Act.
2. Take the following affirmative action necessary to ef-
fectuate the policies of the Act.
(a) On request, bargain with the Union as the exclusive
representative of the employees in the following appropriate
unit concerning terms and conditions of employment and, if
an understanding is reached, embody the understanding in a
signed agreement:
All production, maintenance, packing and shipping em-
ployees excluding pattern makers, guards and super-
visors, as defined in the Act.
(b) Pay into the Union’s pension and welfare funds on be-
half of its unit employees, those contributions it failed to
make from late April 1993, in the manner set forth in the
remedy section of this decision.
(c) Make whole any employees for any losses suffered by
reason of its unlawful failure to pay the wage increase due
on August 1, 1993, and by reason of its discontinuance of
payments to the Union’s welfare funds in the manner set
forth in the remedy section of this decision.
(d) Preserve and, on request, make available to the Board
or its agents for examination and copying, all payroll records,
social security payment records, timecards, personnel records
and reports, and all other records necessary to analyze the
amount of back pay due under the terms of this Order.
(e) Post at its facilities in Long Island City, New York and
Manhattan, New York copies of the attached notice marked
‘‘Appendix.’’3 Copies of the notice, on forms provided by
the Regional Director for Region 29, after being signed by
the Respondents’ authorized representative, shall be posted
by the Respondents immediately 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 Respondents to ensure
that the notices are not altered, defaced, or covered by any
other material.
(f) 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 vio-
lated the National Labor Relations Act and has ordered us
to post and abide by this notice.
Section 7 of the Act gives employees these rights.
To organize
To form, join, or assist any union
To bargain collectively through representatives of
their own choice
To act together for other mutual aid or protection
167LIHLI FASHIONS CORP.
To choose not to engage in any of these protected
concerted activities.
WE WILL NOT refuse to recognize and bargain with Inter-
national Ladies’ Garment Workers Union, Local 89-22-1,
AFL–CIO.
WE WILL NOT refuse to honor the terms and conditions of
our collective-bargaining agreement with the Union that ran
from August 1, 1991, to July 30, 1994.
WE WILL NOT fail to provide the 35-cent-per-hour wage
increase that was due to our employees on August 1, 1993,
as required by the terms and conditions of the aforesaid col-
lective-bargaining agreement.
WE WILL NOT fail to make payments to the Union’s wel-
fare and pension fund as required by the terms and condi-
tions of the aforesaid collective-bargaining agreement.
WE WILL NOT refuse to grant access to our premises to the
Union’s representatives as required by the terms and condi-
tions of the aforesaid collective-bargaining agreement.
WE WILL NOT in any like or related manner interfere with,
restrain, or coerce our employees in the exercise of the rights
guaranteed them by Section 7 of the Act.
WE WILL bargain with the Union on request, as the exclu-
sive representative of our employees in the following appro-
priate unit concerning terms and conditions of employment
and, if an understanding is reached, embody the understand-
ing in a signed agreement:
All production, maintenance, packing and shipping em-
ployees excluding pattern makers, guards and super-
visors, as defined in the Act.
WE WILL pay into the Union’s pension and welfare funds
those contributions we failed to make from late April 1993.
WE WILL make whole any employees for any losses in
earnings and/or benefits suffered by reason of our unlawful
failure to pay the wage increase due on August 1, 1993, and
by reason of our discontinuance of payments to the Union’s
welfare funds.
LIHLI FASHIONS CORPORATION, KING KUO
INC., LIHLI OF NEW YORK INC., AND LIYAN
INTERNATIONAL INC.