A recent NLRB decision underscores the dangers of improperly operating a double breasted construction firm. In Rdm Concrete & Masonry, LLC, Collective Concrete, Inc., & Remco Concrete, LLC, Alter Egos & A Single Employer & New Jersey Bldg. Laborers Dist. Council, 366 NLRB No. 34 (Mar. 13, 2018), the Board held that the three respondents, RDM, Collective, and Remco were alter egos of each other and were collectively bound by the terms of the collective bargaining agreement with the Laborers Union.
The three charged entities were all owned by members of the same family. Collective Concrete was owned by Ryan Ciullo. In 1999, Ryan started Collective. Collective listed his parents residence as it official place of business. Ryan’s father Mark owned a separate company, D&M Mansonry. When Ryan started Collective, Mark was winding down D&M and would assist Ryan with operating collective. In 2001, Collective signed a Section 8(f) agreement with the Laborers Union. Thereafter, Collective signed three successor 8(f) agreements with the Laborers. As suspected, the agreement covered the terms and conditions of Collective employees performing Laborers Union claimed work.
While covered by those agreements, the Laborers Union filed grievances against Collective. Mark, Ryan’s father, represented Collective at those grievance hearings. In one matter, an action was initiated in federal court to overturn an arbitration award and Mark signed an affidavit in that case.
In 2007, Mark formed RDM a concrete and masonry firm with no union affiliation. When he formed RDM, Mark stopped working for Collective. However, RDM performed the same type of work as Collective and Collective transferred some equipment to RDM. Ryan does not hold an ownership interest in RDM but was employed by RDM. Moreover, RDM and Collective shared back office employees, who happened to be Ryan’s wife and mother. At a certain point, Collective and RDM shared office space. When Collective ran into financial trouble, RDM transferred $1.6 million dollars to it.
Then in 2014, RDM signed an agreement with the Union. Circumstances arose that led to a consent judgment being entered in favor of the Union and against RDM and Collective, jointly and severally.
Soon, RDM’s work slowed down. And, in 2015 Ryan started a new company called Remco, which also performed masonry and concrete work. Ryan testified that he formed Remco to obtain non-union work. In 2016, the Union demanded that Remco recognize it as the bargaining agent for its employees under the collective bargaining agreements with RDM and Collective.
B. The Outcome and Damages.
As expected, the Board found that Collective and RDM were a single employer and Remco was an alter-ego or “disguised continuance” of RDM. The Board applied its long standing rule that the collective-bargaining agreement of an employer applies to its alter ego, as of the date of the alter ego’s first use of bargaining unit employees. E. G. Sprinkler Corp., 268 NLRB 1241, 1241 fn. 1 (1984). The Board further ordered that the entities make the employees whole for any loss of earnings or benefits, plus interest compounded daily. That means that Collective, RDM, and Remco could owe huge sums of money.
C. The Take Aways
- Forming a double breasted operation carries huge risks for those that are not prepared to properly organize and operate the two firms.
- Forming a non-union entity for the purpose of avoiding bargaining obligations will almost always fail.
- Improperly forming a double breasted entities carries with it the potential for huge penalties.