Scandia

National Labor Relations Board - Board Decisions

Sep 28, 1967

167 N.L.R.B. 623 (N.L.R.B. 1967)

FOAM RUBBER CITY #2 OF FLORIDA, INC. 623
Foam Rubber City #2 of Florida, Inc. doing business
as Scandia , Employer and Retail Clerks Interna-
tional Association , Local #1625, AFL-CIO, Peti-
tioner . Case 12-RC-2657
September 28, 1967
DECISION ON REVIEW, DIRECTION, AND
CERTIFICATION OF REPRESENTATIVE
By CHAIRMAN MCCULLOCH AND MEMBERS
JENKINS AND ZAGORIA
Pursuant to a Decision and Direction of Election
issued on January 5, 1967, by the Regional
Director for Region 12, an election was conducted
on January 31, 1967, under his direction and super-
vision among the employees in the unit found ap-
propriate. At the conclusion of the election, the
parties were furnished with a tally of ballots which
showed that of approximately nine eligible voters,
eight cast ballots, of which four were for, and three
against, the Petitioner and one was challenged. As
the challenged ballot was sufficient in number to af-
fect the results of the election, the Regional
Director, in accordance with National Labor Rela-
tions Board Rules and Regulations and Statements
of Procedure, Series 8, as amended, conducted an
investigation and, on March 24, 1967, issued and
duly served on the parties his Supplemental Deci-
sion and Direction to open and count challenged
ballot. Thereafter the Petitioner filed a timely
request for review of the Regional Director's Sup-
plemental Decision.
By telegraphic order dated April 24, 1967, the
National Labor Relations Board granted the
request for review. The Employer then filed a brief.
Pursuant to the provisions of Section 3(b) of the
National Labor Relations Act, as amended, the
Board has delegated its powers in connection with
this case to a three-member panel.
The Board has considered the entire record in
this case with respect to the issue under review, and
makes the following findings:
The sole issue herein is the voting eligibility of
Neal Chaykin. Chaykin's father, Adolph Chaykin,
and uncle, David Chaykin, Respectively, are pres-
ident and secretary-treasurer of the Employer.
Each of the latter also owns 50 percent of the Em-
ployer's corporate stock.
The unit found appropriate herein is composed of
all employees at the Employer's six retail stores in
the Miami, Florida, area. Although Neal Chaykin
began his employment on a part-time basis, he has
worked full time since January 1966 in the Em-
ployer's warehouse and a number of its stores. He
has been a salesman since November 1966 and
was, during the eligibility period, the only employee
employed at the Employer's Pompano store. i
Chaykin is neither a supervisor nor a managerial
employee, and enjoys no special privileges.
Upon these facts the Regional Director found
that Neal Chaykin was employed by the corporate
Employer and that he was not excluded from the
collective-bargaining unit under the provisions of
Section 2(3) of the Act as an individual employed
by his parent. He further found that Neal Chaykin
enjoyed no special privileges by virtue of his family
relationship to the Employer's owners and officers
that would exclude him from the unit. Accordingly,
the Regional Director included Neal Chaykin in the
unit and directed that his ballot be opened and
counted. The Regional Director's determination is
in accord with existing Board precedent.'
Petitioner has requested review of the Regional
Director's determination, urging, inter alia,
reconsideration of the Board precedent which the
Regional Director applied. The Petitioner contends
that the Board's policy for the unit placement of the
child of a corporate part owner is inconsistent with
the Board's policy governing the unit placement of
a child of a partner in a copartnership, even though
in a situation such as the present one, the corporate
part owner's status is the practical equivalent of
that of a partner in a copartnership. We find merit
in this contention.
Section 2(3) of the Act provides that the "the
term `employee' . . . shall not include . . . any in-
dividual employed by his parent. . . ." Where an
employer does business as a sole proprietorship, it
is clear that his children are statutorily excluded as
individuals employed by a parent. Where an em-
ployer operates as a copartnership the Board has,
with court approval, excluded the children of a
partner for the same reason.3 Where, however, an
employer does business as a corporation, the
Board, in applying Section 2(3) of the Act, since its
decision in American Steel Buck Corporation, has
not excluded the children of corporate principals
absent a showing of special status,-but has, rather,
included such offspring in the appropriate bargain-
I At the representation hearing the Employer refused to divulge infor-
mation concerning the Pompano store, accordingly the Regional Director
permitted its employees to vote subject to challenge After his postelec-
tion investigation , the Regional Director found that the Pompano store,
which later went out of business, was separately incorporated at the time
of the election under the name of Daisy Decorators , that Adolph and
David Chaykm each owned 35 percent of its stock and that two other in-
dividuals each owned 15 percent The Regional Director also found that
Neal Chaykm was transferred among the various stores at the direction of
the Employer, that the Pompano store was managed, controlled, and
maintained by the Employer, and existed in a single-employer relationship
with it None of these findings are contested Accordingly, we find that
Neal Chaykin was employed by the Employer at all relevant times
2 See e g , American Steel Buck Corporation, 107 NLRB 554,
Giordano Lumber Co , Inc, 133 NLRB 205
3 Robert W Johnson, and Clifford W Johnson, Co-partners, dlbla
Johnson Metal Products Co , 161 NLRB 844, N.L R B. v 0 U Hof-
mann & Sons, 147 F 2d 679 (C A 3), enfg 55 NLRB 683
167 NLRB No. 81
624 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
ing unit on the ground that they are employed by the
corporation and are not, therefore, employees of
their parent in a technical legal sense.4
Application of the latter rule to include the son of
one of two corporate principals, who, together, own
all the corporation's stock in equal amounts, gives
controlling weight to the form in which the em-
ployer operates its business and disregards the un-
derlying realities of business ownership and
management on which the statutory objectives are
predicated.5
In analogous situations, when dealing with the
question of what person or group of persons, natu-
ral or legal, constitutes an employer within the
meaning of Section 2(2) of the Act, the Board has
looked beyond the corporate facade and has found
separately incorporated enterprises which are com-
monly owned and managed to be a single empl-
oyer .6 It has also found that separately owned and
managed corporations are a single employer where
they have agreed to be bound by group rather than
individual action in collective bargaining.' The
Board has likewise held in certain situations that
two independent business entities -a licensor and
a licensee-are joint employers of the licensee's
employees, where they operate under a license
agreement which grants to the licensor significant
control over the licensee' s business and labor poli-
cies.8 In all of these situations the Board has sought
to identify the actual employer of the em-
ployees-the one who possesses actual authority
and concomitant responsibility to determine labor
policy and bargain collectively with the employees'
representative in an appropriate unit.
Applying a similar approach to the present case
and looking beyond the Employer's corporate form
to the fundamental of its existence, it is clear that
the Employer is actually owned and managed by
just two individuals who possess, and are in a posi-
tion to exercise, full bargaining authority on behalf
of the corporation in precisely the same fashion as
if they were copartners. For all practical purposes,
they, as individuals, are the real employers of the
employees. Since one of these entrepreneurs is
Neal Chaykin's father, we conclude in these cir-
cumstances that Neal Chaykin is an "individual em-
ployed by his parent." To hold otherwise and in-
clude Neal Chaykin in the unit on the technical
ground that he is an employee of the corporation
would be not only unrealistic, but also wholly at
odds with the principle we follow in applying Sec-
tion 2(3) of the Act in the comparable copartnership
cases.
But even assuming, arguendo, that Section 2(3)
of the Act is not susceptible to the foregoing in-
terpretation, we would, nevertheless, reach the
same result in determining the appropriate bargain-
ing unit in accordance with Section 9(b) of the Act.
Under that section, we are charged by Congress
with the responsibility to find units appropriate for
collective bargaining that assure to employees the
fullest freedom in exercising the rights guaranteed
by the Act. And in implementing this responsibility
we have traditionally included in bargaining units
those individuals who have a community of interest
with their fellow employees, but we have excluded
individuals whose interests are more closely
identified with those of management.`' Consistent
with this practice we would exclude the children of
the principals of closely held corporations. For it is
obvious that such children, because of their rela-
tionship with a substantial owner of this type of en-
terprise, have interests more closely identified with
management than with their fellow employees.
We shall, therefore, modify the Board's present
policy so as to exclude from bargaining units the
children of individuals who have substantial stock
interests in closely held corporations.10 For the
same reasons noted above, we shall also exclude
the spouse of a substantial stockholder in such a
tcorporation."
As Neal Chaykin's father, the Employer's pre-
sident, owns half of the stock of the corporate Em-
ployer, we shall exclude Neal Chaykin from the col-
' The exceptions to this rule, which are not directly involved in this
case, occur where the individual 's parenf'owns , all, or virtually all, of the
corporate stock , or where the individual demonstrably enjoys a special
status by virtue of his family relationship See Printing Industry of
Delaware , 131 NLRB 1100, 1103, Bridgeton Transit 123 NLRB 1196,
Ameican Steel Buck Corporation, supra
Prior to the American Steel Buck Corporation case and the related deci-
sion in Adam D. Goettl and Gust Goetd, dlbla International Metal
Products Company, 107 NLRB 65, it had been Board policy since the
earliest days of the Wagner Act to exclude immediate and collateral rela-
tives of an employer's owners or officers purely on the ground of their
family relationship See PA Mueller and Sons , Inc, 105 NLRB 552 and
cases cited therein The Board reversed this policy in International Metal
Products Company, supra , and enunciated the present policy that rela-
tives of the principals of an employer will be included in the unit unless
statutorily excluded or unless they enjoy a special status because of their
family relationship Extending this principle in the American Steel Buck
Corporation case, the Board included the son of the corporate employer's
president whom the Board treated the same as any other employee of the
corporation , inasmuch as it did not appear that the son enjoyed any special
status because of his father's position
5 Thus, had the two corporate stockowners elected to organize their
business as a copartnership rather than as a corporation, the Board would
exclude the son of either as an individual employed by his parent See,
e g., Johnson Metal Products Co , supra
6 See Radio & Television Broadcast Technicians Local Union /264,
International Brotherhood of Electrical Workers, AFL-CIO, v
Broadcast Service of Mobile, Inc., 380 U.S 255, and cases cited therein
' Van Eerden Company, 154 NLRB 496, Oregon Labor-Management
Relations Board, 136 N LRB 1207
8 K-Mart Division of S S Kresge Company, 161 NLRB 1127, Frostco
Super Save Stores, Inc , 138 NLRB 125
9 Eastern Camera and Photo Corp , 140 N LRB 569, Ford Motor Com-
pany (Chicago Branch), 66 N LRB 1317
10 International Metal Products, supra , American Steel Buck Corpora-
tion, supra, and cases applying these precedents are hereby overruled to
the extent that they are inconsistent herewith
We respectfully note our disagreement with the United States Court of
Appeals, Sixth Circuit, which has ruled in several cases that the Board has
no discretion to exclude the children of the principals of corporate em-
ployers in the absence of affirmative evidence of special status See
Uyeda v Brooks, 365 F 2d 326 (C A 6) and cases therein cited
11 Section 2(3) also provides that "the term employee shall not in-
clude any individual employed by his spouse 11
FOAM RUBBER CITY #2 OF FLORIDA, INC. 625
lective-bargaining unit found appropriate herein.
Further , we shall sustain the challenge to his ballot
and direct that it remain unopened and uncounted.
With Neal Chaykin's ballot thus rejected, the
Petitioner has received a majority of the valid bal-
lots cast. We shall, accordingly, certify the Peti-
tioner as the representative of the employees in the
unit found appropriate.
DIRECTION
IT IS HEREBY DIRECTED that the ballot of Neal
Chaykin remain unopened and uncounted.
CERTIFICATION OF REPRESENTATIVE
IT IS HEREBY CERTIFIED that Retail Clerks Inter-
national Association, Local #1625, AFL-CIO,
has been designated and selected by a majority of
the employees in the unit found appropriate as their
representative for the purposes of collective bar-
gaining , and that, pursuant to Section 9(a) of the
Act, the said labor organization is the exclusive bar-
gaining agent for all such employees for the pur-
poses of collective bargaining with respect to rates
of pay, wages, hours of employment, and other con-
ditions of employment.