Schmitz Food, Inc.

National Labor Relations Board - Board Decisions

Nov 24, 1993

313 N.L.R.B. 554 (N.L.R.B. 1993)

554
313 NLRB No. 64
DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
1 Riley Aeronautics Corp., 178 NLRB 495, 501 (1969).
2 Paul Schmitz in his personal capacity d/b/a Schmitz Meat, Inc.,
d/b/a Schmitz Food, Inc., d/b/a Schmitz Diversified, Corp., d/b/a
Schmitz Meat Company, and d/b/a Schmitz Meats and Paul Schmitz
and Kurt G. Schmitz Jr., a partnership d/b/a Schmitz Meat Company,
a/k/a Schmitz Provisions Corp. and/or Schmitz Meats are the Parties
in Interest in this proceeding.
Schmitz Meat, Inc. a/k/a Schmitz Food, Inc., a/k/a
Schmitz Meat Company, a sole proprietorship,
and a/k/a Schmitz Meat Company, a partner-
ship, and a/k/a Schmitz Provisions Corp.
and/or Schmitz Meats and Butchers Union,
Local 120 United Food and Commercial Work-
ers International Union, AFL–CIO
Schmitz Diversified Corp. d/b/a Schmitz Meat, Inc.,
a/k/a Schmitz Food Inc., a/k/a Schmitz Meat
Company, a sole proprietorship, and a/k/a
Schmitz Meat Company, a partnership a/k/a
Schmitz Provisions Corp. and/or Schmitz
Meats and Butchers Union, Local 120 United
Food and Commercial Workers International
Union, AFL–CIO
Kurt G. Schmitz Sr. in his personal capacity d/b/a
Schmitz Meat, Inc., d/b/a Schmitz Food, Inc.,
d/b/a Schmitz Diversified, Corp., d/b/a Schmitz
Meat Company, and d/b/a Schmitz Meats and
Butchers Union, Local 120 United Food and
Commercial Workers International Union,
AFL–CIO
Kurt G. Schmitz Jr. in his personal capacity d/b/a
Schmitz Meat, Inc., d/b/a Schmitz Food, Inc.,
d/b/a Schmitz Diversified, Corp., d/b/a Schmitz
Meat Company, and d/b/a Schmitz Meats and
Butchers Union, Local 120 United Food and
Commercial Workers International Union,
AFL–CIO. Cases 32–CA–12688, 32–CA–12780,
and 32–CA–12809
November 26, 1993
DECISION AND ORDER
BY CHAIRMAN STEPHENS AND MEMBERS
DEVANEY AND RAUDABAUGH
On July 21, 1993, Administrative Law Judge Jay R.
Pollack issued the attached decision. Respondents
Schmitz Food, Inc., Kurt G. Schmitz Sr., and Kurt G.
Schmitz Jr. jointly filed exceptions and a supporting
brief, the Charging Party filed an answering brief, and
the above-named excepting Respondents filed a reply
to the Charging Party’s answering brief.
The National Labor Relations Board has considered
the decision and the record in light of the exceptions
and briefs and has decided to affirm the judge’s rul-
ings, findings, and conclusions and to adopt the rec-
ommended Order as modified.
1. Although the judge does not separately rationalize
or discuss it, he nevertheless appears to have rec-
ommended that Kurt G. Schmitz Sr. and Kurt G.
Schmitz Jr. be held personally liable along with
Schmitz Food, Inc. for remedying the instant unfair
labor practices. We find that the record does not war-
rant holding these two individuals personally liable.
It is appropriate to ‘‘pierce the corporate veil’’ and
hold a corporation’s officers or owners personally lia-
ble for violations of the Act when the corporate form
is used to perpetrate fraud, evade existing obligations,
or circumvent a statute.1
Kurt G. Schmitz Sr., as owner and vice president,
and Kurt G. Schmitz Jr., as president, were the two
principals in the newly created employing entity
(Schmitz Food) which succeeded to, and is the alter
ego of, Schmitz Meat, Inc. (Schmitz Meat), a partner-
ship of Kurt Jr. and his brother, Paul.2
Schmitz Food initially (and, we agree with the
judge, unlawfully) refused in late April 1992 to recog-
nize and bargain with the Union and to abide by the
Union’s existing collective-bargaining agreement with
Schmitz Food’s alter ego and predecessor, Schmitz
Meat. About 3 months later, however, Schmitz Food
hired a labor relations consultant who advised the
Schmitzes that Schmitz Food was obligated to recog-
nize and bargain with the Union, and to abide by the
still-current, but soon-to-expire collective-bargaining
agreement between Schmitz Meat and the Union. The
Schmitzes authorized the consultant to represent
Schmitz Food, starting the next day, in negotiations
with the Union over the resolution of outstanding
grievances, current terms and conditions of employ-
ment, and a collective-bargaining agreement to succeed
Schmitz Meat’s contract with the Union.
Although Schmitz Food and the Union reached an
accord by September 11 on the procedure for resolving
outstanding grievances and on the applicability of the
Schmitz Meat-Union collective-bargaining agreement
to Schmitz Food’s work force, a dispute soon arose
over the sequence of satisfaction of conditions and
steps for implementation of that September 11 accord.
The accord was ultimately not implemented and nego-
tiations for a successor collective-bargaining agreement
broke down in late October 1992.
We agree with the judge, for the reasons he sets
forth, that Schmitz Food is the alter ego of Schmitz
Meat, that from the time of Schmitz Food’s com-
mencement of operations it was obligated not only to
recognize and bargain with the Union, but also to
apply the terms of the Union’s collective-bargaining
agreement with Schmitz Meat, and that it violated the
Act in failing to do so. But we do not find that the
record warrants holding the Schmitzes personally liable
for remedying these unfair labor practices.
Thus, applying the principles of Riley Aeronautics,
supra, we find that the record does not establish that
Schmitz Jr. and his brother, Paul, dissolved their
Schmitz Meat partnership as part of a scheme to avoid
555SCHMITZ FOOD
3 It was Paul who instigated the dissolution of the partnership. On
the second day of the hearing, the General Counsel withdrew the
complaint allegations against Paul, and dismissed him as a Respond-
ent. He remains a Party in Interest.
4 178 NLRB at 501.
5 Id.
6 Because the provisions of employee benefit fund agreements are
variable and complex, we leave to the compliance stage the question
whether the Respondent must pay any additional amounts into the
benefit funds in order to satisfy our ‘‘make whole’’ remedy.
Merryweather Optical Co., 240 NLRB 1213, 1216 fn. 7 (1979).
their collective-bargaining obligations.3 More signifi-
cantly, there is no showing that the Schmitzes si-
phoned off corporate or partnership assets, for any pur-
pose, much less for the purpose of, in Riley’s terms,
‘‘rendering insolvent and frustrating a monetary obli-
gation such as backpay.’’4 Finally, there has been no
showing that the Schmitzes integrated or intermingled
their assets and affairs with those of Schmitz Food
such that no distinct corporate lines have been main-
tained.5 Accordingly, in light of all of these consider-
ations, we find that the Schmitzes are not personally
liable for remedying the instant unfair labor practices.
2. In his remedy, the judge incorrectly recommended
that backpay be computed in the manner set forth in
F. W. Woolworth Co., 90 NLRB 289 (1950). We cor-
rect that aspect of the remedy so that the Respondent,
Schmitz Food, Inc., is required to make whole its em-
ployees, with interest, for any losses suffered by reason
of its failure to abide by the 1989–1992 collective-bar-
gaining agreement between the Union and the Re-
spondent’s alter ego, Schmitz Meat, Inc., with backpay
for lost wages to be computed in the manner set forth
in Ogle Protection Service, 183 NLRB 682 (1970),
enfd. 444 F.2d 502 (6th Cir. 1971). The Respondent is
also required to make whole its employees by making
all unpaid fringe benefit fund contribution payments
since April 1992, as provided for by the above-men-
tioned collective-bargaining agreement,6 and by reim-
bursing employees for any expenses ensuing from the
Respondent’s failure to make such contribution pay-
ments, as set forth in Kraft Plumbing & Heating, 252
NLRB 891 fn. 2 (1980), enfd. mem. 661 F.2d 940 (9th
Cir. 1981). All payments to the fringe benefit funds
and the employees shall be made with interest to be
computed in the manner prescribed in New Horizons
for the Retarded, 283 NLRB 1173 (1987).
ORDER
The National Labor Relations Board adopts the rec-
ommended Order of the administrative law judge as
modified below and orders that the Respondent,
Schmitz Food, Inc., San Leandro, California, its offi-
cers, agents, successors, and assigns, shall take the ac-
tion set forth in the Order as modified.
1. Delete the names Kurt G. Schmitz Sr. and Kurt
G. Schmitz Jr.
2. Substitute the attached notice for that of the ad-
ministrative law judge.
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 or-
dered us to post and abide by this notice.
WE WILL NOT refuse to abide by the terms of our
collective-bargaining agreement with Butchers Union,
Local 120 United Food and Commercial Workers
International Union, AFL–CIO.
WE WILL NOT refuse to bargain collectively with the
above-named Union as the exclusive bargaining rep-
resentative of the employees in the following unit:
All full-time and regular part-time jobbing butch-
ers, sausage makers, miscellaneous employees,
drivers, and driver salesmen; excluding office
clerical employees, managerial employees, guards,
and supervisors as defined by the Act.
WE WILL NOT unilaterally change any terms or con-
ditions of employment of employees in the above unit
during the life of any collective-bargaining agreement
with the Union without first reaching agreement with
the Union about such changes.
WE WILL NOT in any like or related manner interfere
with, restrain, or coerce you in the exercise of the
rights guaranteed you by Section 7 of the Act.
WE WILL, on request by the Union, recognize and
bargain with the Union concerning the employees in
the appropriate unit described above.
WE WILL, on request by the Union, rescind all uni-
lateral changes made in the terms of employment in
the wage, fringe benefit, arbitration, and union-security
provisions of the 1989–1992 Master Labor Agreement,
and the extension to October 31, 1992, between us and
the Union.
WE WILL give retroactive effect to the wage, fringe
benefit, arbitration, and union-security provisions set
forth in the collective-bargaining agreement, and WE
WILL make whole the unit employees, with interest, for
any losses suffered by reason of our failure to comply
with these provisions.
WE WILL make all contributions to the health and
welfare and pension funds and pay the prescribed fees
556 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
to administer the funds, as provided by the collective-
bargaining agreement.
SCHMITZ FOOD, INC., D/B/A SCHMITZ
MEAT
George Velastegui, Esq., for the General Counsel.
Stephen G. Chandler, Esq., of San Leandro, California, for
the Respondents.
Andrew J. Kahn, Esq., of San Francisco, California, for the
Charging Party.
Paul Schmitz, of Alamo, California, pro se.
DECISION
STATEMENT OF THE CASE
JAY R. POLLACK, Administrative Law Judge. I heard this
case in trial at Oakland, California, on April 13–16, 1993.
On August 14, 1992, Butchers Union, Local 120, United
Food and Commercial Workers International Union (the
Union) filed a charge in Case 32–CA–12688 alleging that
Schmitz Meat Company committed certain violations of Sec-
tion 8(a)(5) and (1) of the National Labor Relations Act (the
Act). On October 15, the Union amended the charge in Case
32–CA–12688 to include as the named employer, Schmitz
Meat, Inc., Kurt G. Schmitz Sr., and Kurt G. Schmitz Jr.
Also on October 15, the Union filed the charge in Case 32–
CA–12780 alleging that Schmitz Meat, Kurt G. Schmitz Sr.,
Kurt G. Schmitz Jr., and Schmitz Diversified Inc. had com-
mitted violations of Section 8(a)(5), (3), and (1) of the Act.
On November 4, 1992, the Union filed an amended charge
in Case 32–CA–12780 adding Schmitz Meat, Inc. and
Gwyneth Schmitz as named employers. On October 29,
1992, the Union filed the charge in Case 32–CA–12809 al-
leging that Schmitz Meat Company, Schmitz Meat Inc., Kurt
Schmitz Sr., Kurt Schmitz Jr., and Schmitz Diversified vio-
lated Section 8(a)(1) of the Act. On December 17, 1992, the
Acting Regional Director for Region 32 of the National
Labor Relations Board issued a consolidated complaint and
notice of hearing against the above-named employers, ex-
cluding Gwyneth Schmitz (Respondents), alleging that Re-
spondents violated Section 8(a)(5) and (1) of the Act. Also
named as a respondent was Paul Schmitz, individually,
through a partnership with Kurt G. Schmitz Jr., and under
several company names. On March 9, 1993, the Regional Di-
rector issued an amended consolidated complaint against Re-
spondents alleging that Respondents violated Section 8(a)(5)
and (1). Respondents filed a timely answer to the complaint,
denying all wrongdoing. At the hearing, the General Counsel
amended the complaint to drop Paul Schmitz and his compa-
nies as respondents but to retain Paul Schmitz as a party in
interest because the ownership of the business at issue here
is the subject of a lawsuit between Paul Schmitz and Kurt
G. Schmitz Sr.
The parties have been afforded full opportunity to appear,
to introduce relevant evidence, to examine and cross-examine
witnesses, and to file briefs. On the entire record, from my
observation of the demeanor of the witnesses, and having
considered the posthearing briefs of the parties, I make the
following
FINDINGS OF FACT AND CONCLUSIONS
I. JURISDICTION
Since April 21, 1992, Respondents, with a principal place
of business in San Leandro, California, have been engaged
in the business of selling meat and related goods on a whole-
sale basis. During the 12 months prior to April 21, 1992, the
wholesale meat operation purchased goods and materials val-
ued in excess of $50,000 directly from suppliers customers
located outside the State of California. During the 12 months
subsequent to issuance of the complaint, Respondents pur-
chased meat products valued in excess of $50,000 directly
from suppliers located outside the State of California. Ac-
cordingly, I find that Respondents are an employer engaged
in commerce within the meaning of Section 2(2), (6), and (7)
of the Act.
II. THE ALLEGED UNFAIR LABOR PRACTICES
A. Background
The Union has represented employees at the wholesale
meat operation in San Leandro, California, presently operated
by Respondent Schmitz Food, since 1974. From January
1986 until April 21, 1992, the meat business was owned and
operated by a partnership of Paul and Kurt Schmitz Jr.,
brothers and the sons of Kurt Schmitz Sr. The partnership
did business under the names of Schmitz Meat and Schmitz
Meat, Inc. The last agreement between the Union and the
partnership was executed in January 1990 and was to expire
by its terms on September 1, 1992.
On April 21, 1992, Kurt G. Schmitz Sr., the sole share-
holder of Schmitz Diversified, Inc., the landlord of the San
Leandro facility, caused the partnership to be evicted. That
same day, Kurt Jr. and Kurt Sr. returned to the facility and
continued to operate the wholesale meat business. The same
employees were used to perform the same jobs. The same
equipment was used. The names of Schmitz Meat and
Schmitz Meat, Inc., continued to be used. Sales continued to
the same customers and purchases were made from the same
suppliers. In February 1993, Kurt Sr. and Kurt Jr. learned
that Paul had registered with the State as Schmitz Meat, Inc.
and therefore, they changed their business name to Schmitz
Food, Inc.
In September 1992, Michael Lynn, a labor relations con-
sultant for Kurt Sr. and Kurt Jr., signed an agreement to rec-
ognize the collective-bargaining agreement previously agreed
to by the Schmitz Meat partnership and to arbitrate certain
grievances. Kurt Sr. and Kurt Jr. had not made contributions
to the health and welfare trust or the pension trust since the
eviction of Paul Schmitz. Respondents now contend that they
are not bound by either the agreement signed by Paul
Schmitz or that signed by their labor relations consultant.
The General Counsel argues that the wholesale meat busi-
ness of Respondents Kurt Schmitz Sr. and Kurt Schmitz Jr.,
now operating under the name of Schmitz Food, is simply
a continuance of the business operated at that location under
various names. The General Counsel further contends that
Respondents voluntarily recognized and bargained with the
Union leading to an agreement executed by its labor consult-
ant and approved by its two principals. The complaint al-
leges, in the alternative, that Respondents were a successor
employer to Kurt Jr. and Paul Schmitz and were required to
557SCHMITZ FOOD
bargain with the Union before changing terms and conditions
of employment. Under all of these theories, the General
Counsel contends that Respondent fraudulently entered into
a written agreement to arbitrate certain grievances filed by
the Union; failed and refused to arbitrate; failed to pay the
contractual wage and utilized Kurt Jr., as their representative
for collective bargaining but did not give him the authority
to bargain on their behalf.
Respondents do not deny that Respondent Schmitz Food
is a successor employer. Rather Respondents argue that they
are only obligated to recognize and bargain with the Union;
and that they were free to set the initial terms and conditions
of employment. Further Respondents contend that Respond-
ent Schmitz Food is an independent business entity and not
a continuance of the partnership. They further contend that
the labor consultant had no authority to bind Respondents to
a contract but rather needed ratification by Respondent Kurt
Sr.
B. Facts
From 1974 to 1977, Respondent Kurt Sr. operated a
wholesale meat business with his sons, Kurt Jr. and Paul, as
a partnership doing business as Schmitz Meat Company. In
1977, the Company incorporated as Schmitz Meat, Inc. In
October 1984, Paul Schmitz purchased the wholesale meat
business from his father. Although operated as a sole propri-
etorship the business continued to use the names Schmitz
Meat and Schmitz Meat, Inc. The actual corporation, Schmitz
Meat Inc., had been suspended by the secretary of State for
failure to pay franchise taxes. Kurt Schmitz Sr. was the sole
stockholder of the dormant corporation. In January 1986,
Paul formed an equal partnership with his brother Kurt Jr.
They continued to do business under the names of Schmitz
Meat and Schmitz Meat, Inc. During these changes of owner-
ship the business remained the same. The businesses used the
same employer tax number and the same permit from the
Department of Agriculture. The wholesale operation contin-
ued with the same employees and equipment. Sales contin-
ued to the same customers. While Paul and Kurt Jr. were
partners, Kurt Sr. visited the facility four or five times per
year in which Kurt Sr. visited the business on a daily basis
for periods in excess of 2 weeks. On these occasions he par-
ticipated in the management of the operation. The owner of
the building was Schmitz Diversified, Inc., a corporation of
which Kurt Sr. was the only shareholder. Kurt Sr. and his
wife leased the property to Paul and Kurt Jr. Kurt Jr. and
Paul were officers of Schmitz Diversified until 1992. In 1987
both Paul and Kurt Jr. signed the collective-bargaining agree-
ment with the Union. That agreement named Schmitz Meat
Inc. as the employer. In 1990, Paul signed an agreement for
the partnership again naming Schmitz Meat, Inc. as the em-
ployer.
In 1991, the business was experiencing financial difficul-
ties. In April 1991, Kurt Sr. caused the partnership to be
evicted from the San Leandro premises. Kurt Sr. allowed his
sons to return to business at the facility on the condition that
they manage the business in accordance with his wishes. Re-
spondent Kurt Sr. dictated that the partnership cease buying
boxed meat and instead purchase whole beef carcasses and
then butcher them in its own plant. Kurt Sr. supplied the
business with cattle and loaned the business in excess of
$250,000. According to Kurt Sr., his sons ‘‘never put a dime
of money into the business.’’ The partnership owed Kurt Sr.
an amount in excess of the partnership’s assets.
In 1992, Paul notified his brother that he wished to dis-
solve their partnership as of April 1, 1992. The partnership
was in the process of dissolution when Paul was evicted on
April 21, 1992. In between April 1 and 21, Paul and Kurt
Jr. were each separately selling meat from the same location.
Paul operated under the name of Schmitz Provisions and re-
tained a majority of the business’ customers. Kurt Jr. oper-
ated under the names Schmitz Meat and Schmitz Meat, Inc.
Paul had the majority of the business and used a majority of
the employees. Some employees were intermingled. Paul
Schmitz was the sole officer and sole stockholder of Schmitz
Provisions, a California corporation. Prior to April 1,
Schmitz Provisions had performed maintenance services for
Schmitz Meat. The corporation was operated as a Subchapter
S. Corporation and Kurt Jr. and Paul had shared profits and
losses as partners prior to April 1.
As stated earlier, on April 21, Kurt Sr. had the Schmitz
Meat partnership evicted for nonpayment of rent. Kurt Sr.
took over the bank accounts and accounts receivable. After
Respondents took over the business on April 21, the employ-
ees returned to their jobs that same day. There was no
change in the equipment or the operation. Customers were
notified that the business operation would remain the same
but were given a new address for their payments. At all rel-
evant times, including the period from April 1 to 21, the
company name of Schmitz Meats was used with suppliers
and customers. Respondents did not hire an additional em-
ployee until several weeks later. The employees then work-
ing for Paul and Kurt Jr. began working for Kurt Sr. and
Kurt Jr. According to Kurt Sr., he told the employees that
the Company was not a union shop and that they were no
longer permitted to work overtime. He also announced that
he would have his own health benefit plan. I credit Kurt Sr.
that he made such statements to at least one employee but
I am unable to find when and to whom such statements were
made. Kurt Sr. stayed for some time and managed the busi-
ness with Kurt Jr. Thereafter, Kurt Sr. returned to his home
in Mexico and Kurt Jr. managed the business. Kurt Jr. testi-
fied that he was only an employee of the business but admit-
ted that he had used his personal line of credit to borrow
money for the business. Although in this case Respondents
claim that the entity doing business is a corporation, in a col-
lateral action, Kurt Sr. gave an affidavit stating he was doing
business as a sole proprietor.
On May 1, Kurt Jr. notified Tim Hamaan, president of the
Union, that Paul had been evicted and that he and Kurt Sr.
were now operating the business. On July 28, 1992, Kurt Sr.
and Kurt Jr. hired Michael Lynn, a self-employed labor rela-
tions consultant, to represent them in dealing with the Union.
Respondents told Lynn that they believed they were not
bound by the agreement Paul had signed. Lynn advised Re-
spondents that their defense would not hold up and that it
would be better to resolve the matter amicably rather than
waste money on an unsuccessful legal proceeding. Lynn ad-
vised Kurt Sr. and Kurt Jr. to recognize the Union and seek
to arbitrate the grievances that the Union had filed. Kurt Jr.
had scheduled a meeting for July 29 and Lynn attended on
behalf of Respondents. Lynn was informed that Kurt Jr. was
president and Kurt Sr. was vice president of Schmitz Meat,
Inc.
558 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
1 During the alleged hiatus, the partnership was bound by the col-
lective-bargaining agreement, unless it had no employees. On dis-
solution of the partnership, both partners were still bound by the col-
lective-bargaining agreement to the extent they were still an employ-
ing entity. Thus, Kurt Jr. was bound by the collective-bargaining
agreement both before and after the eviction.
2 Although in Burns, supra, the Court found a successorship obli-
gation to bargain based, inter alia, on the fact that the Union was
recently certified, the successorship doctrine is equally applicable
even if the Union had not been recently certified. Fall River Dyeing
Corp. v. NLRB, supra.
Lynn met with two union officials on July 29. Thereafter
he spoke with Respondents Kurt Sr. and Kurt Jr. They jointly
agreed to and approved of Lynn’s strategy of agreeing to the
current contract and resolving the grievances through arbitra-
tion. On September 11, 1992, Lynn signed an agreement on
behalf of Schmitz Meat, Inc., in which Respondents agreed
to accept the industrywide agreement until October 31, 1992,
and to arbitrate the grievances previously filed by the Union.
On October 19, Kurt Jr. told Lynn that Respondents were
going to seek labor counsel elsewhere. At no time was Lynn
told that he did not have authority to negotiate and sign an
agreement on behalf of Respondents.
On October 20, 1992, Kurt Jr. met with the union nego-
tiators in an attempt to negotiate a successor agreement to
the collective-bargaining agreement set to expire on October
31. Hamaan asked whether Kurt Jr. had the authority to ne-
gotiate and sign an agreement. Kurt Jr. answered that he
could not sign or accept any contract without his father’s ap-
proval. Hamaan replied that the Company should call him
‘‘when somebody [could] negotiate on behalf of the com-
pany.’’ The union officials then left the meeting. Although
the Union’s attorney has requested bargaining, the parties
have not met since October 1992. Respondents have not
made fringe benefit payments since April 1992 and appar-
ently have also breached the wages, sick leave, and union-
security provisions of the collective-bargaining agreement.
III. ANALYSIS AND CONCLUSIONS
A. The Successorship Issue
The General Counsel contends that Respondents have op-
erated the wholesale meat business in basically unchanged
form, using the same employees who had previously worked
for the partnership. Respondents admit that a majority of
their employees were previously employed by the partner-
ship. Respondents contend that Kurt Sr. started up a com-
pletely new business in changed form not bound by the ac-
tions of Paul Schmitz or the partnership of Kurt Jr. and Paul.
In NLRB v. Burns Security Services, 406 U.S. 272, 281
(1972), the Supreme Court stated:
[w]here the bargaining unit remains unchanged and a
majority of the employees hired by the new employer
are represented by a recently certified bargaining agent
there is little basis for faulting the Board’s implementa-
tion of the express mandates of Sec. 8(a)(5) and Sec.
9(a) by ordering the employer to bargain with the in-
cumbent union.
The Board has held where a new employer ‘‘uses substan-
tially the same facility and same work force to produce the
same basic products for the same customers in the same geo-
graphic area’’ it will be regarded as a successor. Valley Ni-
trogen Purchasers, 207 NLRB 208 (1973). The Board has
utilized the following criteria:
Whether (1) there has been a substantial continuity of the
same operations; (2) whether the new employer utilizes the
same plant; (3) whether the new employer has the same or
substantially the 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; and (7) whether the new employer
manufactures the same product or offers the same services.
Border Steel Rolling Mills, 204 NLRB 814 (1973).
In the instant case, Respondents meet all the Border Steel
criteria for the finding of successorship. Respondents have
substantially continued the same operations at the same plant.
The same employees were doing the same jobs under the su-
pervisors as they did when the partnership managed the busi-
ness. Respondents were using the same machinery, equip-
ment, and methods of production and manufacturing the
same products as they did prior to the eviction of Paul
Schmitz. The only change in Respondents’ operation was
that Paul was no longer one of the managers.
In Fall River Dyeing Corp. v. NLRB, 482 U.S. 27 (1987),
the Supreme Court upheld a Board finding of successorship
despite a hiatus of 7 months between the predecessor’s de-
mise and the successor’s startup. The Court affirmed the
Board’s approach in determining the successorship question
based on a totality of circumstances. The Court found that
the hiatus was only one factor in determining ‘‘substantial
continuity’’ and relevant only where there are other indicia
of discontinuity. There the Court found all the other factors
suggested ‘‘substantial continuity’’ between the companies
despite the 7-month hiatus. The Court noted that the hiatus
may have been less than 7 months because the predecessor
retained a skeleton crew and was seeking to resurrect the
business or find a buyer. The Court concluded that ‘‘viewed
from the employees’ perspective, therefore, the hiatus may
have been less than seven months.’’
I do not find that the 3-week period between the division
of the Schmitz partnership and the takeover by Kurt Sr. and
Jr. amounts to a hiatus. The partnership had not been for-
mally dissolved. Kurt Jr. was still bound to the collective-
bargaining agreement. At all times Kurt Jr. employed em-
ployees covered by the existing collective-bargaining agree-
ment. The employees continued to work as they had done
prior to the informal division of the partnership. The duration
of the hiatus was so brief that employees noticed little, if
any, change. Further, the incomplete nature of the hiatus,
when viewed from the employees’ perspective, would lead to
the conclusion that little, if any, change occurred. A change
was not noticed until Kurt Sr. evicted the business on April
21 and then directed the employees to return to work. Fur-
ther, there was no break in the continuing relationship be-
tween the Union and the employing entity.1 The division of
the partnership and resumption of the business by Kurt Sr.
and Kurt Jr. all took place during the term of the collective-
bargaining agreement. I find that Schmitz Meat was obli-
gated to recognize and bargain with the Union as of the take-
over on April 21, 1992.2
559SCHMITZ FOOD
3 During the alleged hiatus, the partnership was bound by the col-
lective-bargaining agreement. On dissolution of the partnership, both
partners were still bound by the collective-bargaining agreement to
the extent they were still an employing entity.
4 The partnership was heavily in debt to Kurt Sr. The partnership
had never paid more than half the rent dictated by the lease. Further,
the equipment and trade fixtures utilized by the partnership were
owned by Kurt Sr. Kurt Sr. had supplied cattle for which he had
not been paid and had not received payment on his loans.
Even if the period from April 1 until the April 21 takeover
of the business by Kurt Sr. and Kurt Jr. is considered a hia-
tus, the result here is identical. The duration of the hiatus
was so brief that employees noticed little, if any, change.
Further, the incomplete nature of the hiatus, when viewed
from the employees’ perspective, would lead to the conclu-
sion that little, if any, change occurred. Kurt Schmitz Jr. con-
tinued to employ some employees and shared other employ-
ees with Paul Schmitz. Thus, this was no break in the con-
tinuing relationship between the Union and the employing
entity.3 Thus, Respondents would still be held to be a succes-
sor under Fall River, supra.
B. The Alter Ego Issue
The General Counsel contends that Respondents have op-
erated the wholesale meat business in basically unchanged
form, using the same employees who had previously worked
for the partnership. The General Counsel argues that the
change in ownership was a matter of form and not substance.
Respondents admit that a majority of their employees were
previously employed by the partnership. Respondents con-
tend that their bargaining obligation, if any, should be lim-
ited to recognizing and bargaining with the Union under
Burns, supra.
As found earlier, prior to April 21, 1992, the wholesale
meat business was operated by Kurt Jr. and Paul Schmitz as
a partnership. The partnership did business under the names
Schmitz Meat and Schmitz Meat, Inc. After he evicted Paul
Schmitz, Kurt Schmitz Sr. continued the business with Kurt
Jr. under the name of Schmitz Meat Inc. Kurt Sr. was the
sole stockholder of the suspended corporation. While Kurt
Sr. remained at the facility for the first few weeks after the
eviction, he later returned to Mexico and only visited the fa-
cility four or five times per year, just as he had done prior
to the eviction.
The Board has found alter ego status where the two busi-
ness enterprises have ‘‘substantially identical’’ management,
business purpose, operation, equipment, customers, and su-
pervision, as well as ownership. Denzil S. Alkire, 259 NLRB
1323, 1324 (1982); Advance Electric, 268 NLRB 1001, 1002
(1984). Another factor which must be considered is ‘‘wheth-
er the purpose behind the creation of the alleged alter ego
was legitimate or whether instead, its purpose was to evade
responsibilities under the Act.’’
Applying the foregoing legal principles to the present case,
I conclude that the two companies should be treated as a sin-
gle entity for purposes of this case. Respondents have contin-
ued the same business in unchanged form at the same ad-
dresses. Respondents used the same employees and equip-
ment to perform the same jobs as they did under the partner-
ship. The bookkeeping and office workers were the same for
both companies. Respondents had substantially the same
management and had the same business names and purposes
as the partnership. The purpose of forming Respondents’ al-
leged new business was to continue the same operation
minus Paul Schmitz and to protect Respondent Kurt Sr.’s fi-
nancial investment. Respondents later sought to use the take-
over as a means of avoiding their obligations to the Union
under the Act. Kurt Jr. was a manager of both the
preeviction and posteviction operations. More importantly,
Kurt Sr. directed the operation prior to and after the eviction.
Kurt Sr. owned the building and all the equipment used by
both operations.4 Kurt Sr. took over the business without a
sale of any kind and without any compensation to the alleged
predecessor. Kurt Jr. is president of Schmitz Food and has
used his personal line of credit to borrow funds for the busi-
ness. The Board often treats ownership by other family mem-
bers as ‘‘personal ownership.’’ Bryar Construction Co., 240
NLRB 102, 104 (1979); Gilroy Sheet Metal, 280 NLRB
1075 fn. 2 (1986). Common ownership by any family mem-
ber satisfies the requirement of common ownership. MP
Bldg. Corp., 165 NLRB 829, 831 (1967), enfd. 411 F.2d 567
(5th Cir. 1969); Campbell-Harris Electric, 263 NLRB 1143
(1983), enfd. 719 F.2d 292 (8th Cir. 1983). According to
Kurt Sr. he was the only person with an equity interest in
the business both before and after the eviction.
Respondents utilized the partnership’s equipment and of-
fices. Although the property was leased by Kurt Sr. to both
his sons, only half the rent was paid. Paul was evicted for
failing to pay rent. When Respondents commenced work on
the day of Paul’s eviction, the employees were directed to
continue working as usual. There was no break in service.
The employees were paid by checks under the name Schmitz
Meat, just as they had been prior to the eviction. The totality
of the evidence leads to the conclusion that prior to April 21,
1992, the meat business was an enterprise of the Schmitz
family, or Kurt Schmitz Sr., and that after April 21, the busi-
ness continued in substantially the same form except that
Paul Schmitz had been removed as an officer and manager.
I, therefore, treat the two businesses as a single entity for
purposes of deciding the unfair labor practice issues. Thus,
the business operated by Kurt Sr. and Kurt Jr. was obligated
to bargain in good faith with the Union and to honor the ex-
isting collective-bargaining agreement. Respondents admitted
through their agent Lynn that they were bound to the collec-
tive-bargaining agreement. Thus they agreed to arbitrate
grievances filed pursuant to the contract and to extend the
contract 2 months.
As discussed above, I find that the 3-week period between
the division of the Schmitz partnership and the takeover by
Kurt Sr. and Jr. was not a hiatus. The partnership had not
been formally dissolved. Kurt Jr. was still bound to the col-
lective-bargaining agreement. At all times Kurt Jr. employed
employees covered by the existing collective-bargaining
agreement. The employees continued to work as they had
done prior to the informal division of the partnership. The
duration of the hiatus was so brief that employees noticed lit-
tle, if any, change. Further, the incomplete nature of the hia-
tus, when viewed as from the employees’ perspective, would
lead to the conclusion that little, if any, change occurred. A
change was not noticed until Kurt Sr. evicted the business
on April 21 and then directed the employees to return to
work. Further, there was no break in the continuing relation-
560 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
ship between the Union and the employing entity. The divi-
sion of the partnership and resumption of the business by
Kurt Sr. and Kurt Jr. all took place during the term of the
collective-bargaining agreement. The employees were aware
of the close family relationship and at the lack of an arm’s-
length relationship. I find that Schmitz Meat was bound by
the existing contract when the alleged new company came
into existence on April 21.
As discussed earlier, even if the 3-week period in April
was considered a hiatus it would not aid Respondents’ case.
In El Torito-La Fiesta Restaurants, 295 NLRB 493 (1989),
the Board held that an employer that closes temporarily and
reopens at the same location with substantially the same em-
ployees is bound to honor an existing collective-bargaining
agreement with a union. The Board noted that otherwise em-
ployers could readily escape their collective-bargaining obli-
gations without justification by merely instituting a tem-
porary shutdown of operations. The Board applied its con-
tract bar rule and required the employer to honor its existing
contract after a hiatus of 14 months.
Here, the existing contract was in effect at all relevant
times. Thus, the Board’s contract bar rule would hold Kurt
Jr. and Schmitz Meat to the contact even if the first 3 weeks
of April were considered to be a hiatus. El Torito-La Fiesta
Restaurants, supra. See also Sterling Processing Corp., 291
NLRB 208, 210 (1988). Respondents violated Section 8(a)(5)
of the Act by repudiating the contract midterm and by refus-
ing to honor the existing terms and conditions of employ-
ment of the bargaining unit employees.
Most important, whether viewed as a successor or as an
alter ego, Respondents reaffirmed and agreed to be bound by
the bargaining agreement through Mike Lynn, their labor
consultant. I find no merit in Respondents’ contention that
they were not bound by the agreement signed by Lynn. Lynn
had been hired by Respondents to advise them in labor rela-
tions matters and to negotiate with the Union on their behalf.
Lynn’s testimony that Kurt Sr. and Kurt Jr. had expressly au-
thorized him to agree to reaffirm the contract and arbitrate
outstanding disputes was not contradicted. I summarily dis-
miss Respondents’ claim that Lynn only had the authority to
agree to arbitrate the grievances.
C. The Allegation that Kurt Jr. had no Authority
to Negotiate
Respondents contend that when Kurt Jr. met with the
Union in October 1992 he merely told Hamaan that any
agreement was subject to approval by his father. Respondent
argues that this is no different than the Union bargaining
subject to ratification by its members. The duty to bargain
includes the obligation to appoint a negotiator with real au-
thority to negotiate and carry on meaningful bargaining re-
garding fundamental issues. Wycoff Steel, 303 NLRB 517
(1991); National Amusements, 155 NLRB 1200 (1965).
However, although an employer is not required to be rep-
resented by an individual possessing final authority to enter
into an agreement, this is subject to a limitation that it does
not act to inhibit the progress of negotiations. Carpenters
Local 1780, 244 NLRB 277 (1979); Wycoff Steel, supra. The
degree of authority possessed by the negotiator is a factor
which may be considered in determining good-faith bargain-
ing. Lloyd A. Fry Roofing Co. v. NLRB, 216 F.2d 273 (9th
Cir. 1954).
The evidence shows that Kurt Jr. indicated an inability to
sign an agreement. However, it does not show clearly that
Kurt Jr. stated that he could not negotiate. That point became
blurred by the language of the parties. Hamaan used the au-
thority to negotiate and the authority to sign a contract syn-
onymously. It is not clear whether Kurt Jr. said he could not
negotiate or that he could not sign the final document with-
out his father’s approval. Accordingly I find that this allega-
tion of the complaint must be dismissed.
D. The Unilateral Changes
The Union filed grievances under the collective-bargaining
agreement and sought to compel arbitration. On September
11, Respondents entered into an agreement to arbitrate the
outstanding grievances filed by the Union. On October 20,
Kurt Jr. informed the Union that Respondents could not meet
with the arbitrator on the previously agreed-on date. Kurt Jr.
told Hamaan that he would contact the Union to set a new
date. Respondents did not contact the Union and the Union
filed suit to compel arbitration. Respondents defended the
suit on the ground that there had been no agreement to arbi-
trate. The court ordered Respondents to arbitrate the griev-
ances. Accordingly, the General Counsel argues that Re-
spondents fraudulently entered into the arbitration agreement.
I need not decide whether Respondents had fraudulent intent.
It is clear that Respondents first refused to arbitrate under
their collective-bargaining agreement and later refused to ar-
bitrate pursuant to their agreement negotiated by Lynn. Ac-
cordingly, I find that Respondents unlawfully repudiated the
arbitration provisions of their collective-bargaining agree-
ments with the Union. United Technologies Corp., 310
NLRB 1126 (1993).
As discussed above, Respondents were obligated to honor
the terms and conditions of employment set forth in the ex-
isting labor agreement. Respondent unlawfully discontinued
payments to the union-sponsored health and welfare and pen-
sion trust plans; ceased paying the contractual wages and
sick leave benefits; did not comply with the union-security
clause; and unilaterally refused to comply with the union-se-
curity provision of the contract.
CONCLUSIONS OF LAW
1. Respondents, Kurt Schmitz Sr., Kurt Schmitz Jr., and
Schmitz Food, Inc., d/b/a Schmitz Meats, are each an em-
ployer engaged in commerce within the meaning of Section
2(2), (6), and (7) of the Act.
2. By refusing to bargain with the Union by refusing to
honor and abide by their collective-bargaining agreement
with the Union and by making unilateral changes in the
terms and conditions of employment, Respondents have en-
gaged in unfair labor practices within the meaning of Section
8(a)(5) and (1) of the Act.
3. The above unfair labor practices are unfair labor prac-
tices affecting commerce within the meaning of Section 2(6)
and (7) of the Act.
4. Except as found above, Respondents have not violated
the Act as alleged in the complaint.
THE REMEDY
Having found that Respondents engaged in unfair labor
practices, I shall recommend that they be ordered to cease
561SCHMITZ FOOD
5 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.
6 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.’’
and desist therefrom and that they take certain affirmative ac-
tion to effectuate the policies of the Act.
Having found that Respondents violated Section 8(a)(5)
and (1) of the Act by their unlawful refusal to abide by the
terms and conditions of employment for unit employees con-
tained in the wage, fringe benefit, arbitration, and union-se-
curity provisions of the 1989–1992 jobber-sausage mis-
cellaneous labor agreement, it is recommended that Respond-
ents rescind all unilateral changes made in the terms and
conditions of employment for the unit employees as con-
tained in the provisions; make whole the employees for
losses suffered by reason of Respondents’ failure to honor
the collective-bargaining agreement, with interest; and make
all contributions to the health and welfare and pension funds
which have not been paid and which would have been paid
absent the unlawful discontinuance of such payments. Back-
pay for those losses incurred because of Respondents’ refusal
to abide by the wage provisions of the contract shall be com-
puted in the manner set forth in F. W. Woolworth Co., 90
NLRB 289 (1950), plus interest as computed in New Hori-
zons for the Retarded, 283 NLRB 1173 (1977). See generally
Isis Plumbing Co., 130 NLRB 716 (1962).
On these findings of fact and conclusions of law and on
the entire record, I issue the following recommended5
ORDER
The Respondents, Kurt Schmitz Sr., Kurt Schmitz Jr., and
Schmitz Foods, Inc., d/b/a Schmitz Meats, San Leandro,
California, their officers, agents, successors, and assigns,
shall
1. Cease and desist from
(a) Refusing to abide by the terms of their collective-bar-
gaining agreement with Butchers Union, Local 120, United
Food and Commercial Workers International Union.
(b) Refusing to bargain collectively with the above-named
Union as the exclusive bargaining representative of the em-
ployees in the following appropriate unit:
All full-time and regular part-time jobbing butchers,
sausage makers, miscellaneous employees, drivers, and
driver salesmen; excluding office clerical employees,
managerial employees, guards, and supervisors as de-
fined by the Act.
(c) Unilaterally changing any terms or conditions of em-
ployment of employees in the above unit during the life of
any collective-bargaining agreement with the Union without
first reaching agreement with the Union about such changes.
(d) In any like or related manner interfering with, restrain-
ing, or coercing employees in the exercise of any rights guar-
anteed by Section 7 of the Act.
2. Take the following affirmative action necessary to ef-
fectuate the policies of the Act.
(a) On request by the Union, recognize and bargain with
the Union concerning the employees in the appropriate unit
described above.
(b) On union request, rescind all unilateral changes made
in the terms of employment of the unit employees in the
wage, fringe benefit, arbitration, and union-security provi-
sions of the 1989–1992 Jobbers-Sausage-Miscellaneous
Agreement, and the extension to October 1992, between Re-
spondents and the Union.
(c) Give retroactive effect to the wage, fringe benefit, arbi-
tration, and union-security provisions set forth in the collec-
tive-bargaining agreement, and make whole the unit employ-
ees for losses suffered by reason of their failure to comply
with these provisions, in the manner set forth above in the
remedy section of this decision.
(d) Make all contributions to the health and welfare and
pension funds and pay the prescribed fees to administer the
funds, as provided by the collective-bargaining agreement.
(e) 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 backpay due under the terms of this Order.
(f) Post at their San Leandro, California facilities copies
of the attached notice marked ‘‘Appendix.’’6 Copies of the
notice, on forms provided by the Regional Director for Re-
gion 32, after being signed by the Respondent’s authorized
representative, shall be posted by the Respondent imme-
diately 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 to ensure that the notices are not
altered, defaced, or covered by any other material.
(g) Notify the Regional Director in writing within 20 days
from the date of this Order what steps the Respondent has
taken to comply.