An article on the website Real Estate Weekly entitled “Construction unions going after alter-ego contractors as profits shrink” recently grabbed my attention. The article recounts the familiar tale of a union shop contractor that was forced to pay $6 million for violating its collective bargaining agreement with a Carpenters Local.
The Carpenters accused a New York firm, River Avenue Contracting of creating alter ego companies and using them to hire non-union workers. River Avenue created RNC Industries and Extreme Concrete Corp., but allegedly kept the same employees and address.
Therein lies the problem.
As we have written about before, double breasted operations, even if they share a common owner, are completely legal. The issue that contractors, like River Avenue Contracting, run into in establishing a non-union entity is not common ownership, its common everything else. Common ownership is but one factor in a series of factors the Court will use to determine whether the non-union entity is an “alter ego” of the union firm. But, it is hardly dispositive. More important factors are common employees, common management, common office space, and common equipment.
Unfortunately, for River Avenue Contracting, and many firms like it, they fail to keep the two enterprises truly separate, which is frankly not that difficult. If River Avenue Contracting’s owners, established a new non-union firm, that had a different management team, different non-union member employees, a different location, and bid different types of work (say residential instead of commercial), then the union would have had an uphill battle with its case and it is unlikely River Avenue would have agreed to pay the $6 million amount.