• Nonunionized Shop May Assist in the Establishment of a New Unionized Shop
  • April 15, 2009
  • Law Firm: Hinshaw & Culbertson LLP - Chicago Office
  • The owner of a residential painting business consulted with his longtime friend and owner of a successful nonunionized commercial painting business before he decided to enter the commercial painting market and unionize his workforce. The owner’s new business failed to turn a profit, despite receiving extensive and free clerical support from the friend’s pre-existing commercial painting business. After only two years the new business ceased operation. The union representative for employees at the business sought declaratory relief to establish that the two owners were a single employer and/or alter egos, and thus monetarily liable for operating a dual shop in violation of the collective bargaining agreement in effect at the new business. The United States Court of Appeals for the Ninth Circuit concluded that, under the alter ego doctrine, plaintiff failed to show that the two owners launched the new commercial painting business to escape their collective bargaining obligations. The court held instead that the union’s claim was illogical, as the pre-existing commercial painting business was nonunionized, and thus there were no collective bargaining obligations to be avoided by launching a new unionized commercial painting business. The Ninth Circuit rejected the union’s single employer claim because the union failed to demonstrate that the National Labor Relations Board made the requisite finding that the employees of the unionized and nonunionized companies constituted a single bargaining unit. Although unionized employers must be careful not to establish nonunionized subsidiaries to avoid paying union wages, there is nothing to prevent a nonunionized employer from establishing a unionized subsidiary or separate business.

    S. Cal. Painters & Allied Trades v. Rodin & Co., No. 06-56246 (9th Cir. Mar. 10, 2009)