NLRB Reverses Previous Decision, Finds Respondents in Lederach Electric, Inc. Jointly Liable for over $120,000

In a February 3, 2015 Decision and Order, a three-member National Labor Relations Board (NLRB) panel reversed the prior decision of an administrative law judge, finding that the two respondents in Lederach Electric, Inc. constituted a single employer. The two entities, Lederach Electric, Inc. (LEI) and Morris Road Partners, LLC (MRP), thus share liability for $122,229.06 in backpay awarded to four complainants who were allegedly laid off, in violation of the National Labor Relations Act, in retaliation for union membership and activities.

In determining whether nominally separate entities constitute a single employer, the Board considers four factors: (1) interrelation of operations, (2) common management, (3) centralized control of labor relations, and (4) common ownership or financial control. Not all factors need be present, and no single factor is controlling. In the present case, the Administrative Law Judge who originally decided the case found that factors (2) and (4) weighed in favor of single-employer status, while (1) and (3) did not, and concluded that the two entities were not a single employer. Concerning (2), James and Judy Lederach both participated in managing the operations of the two entities, and concerning (4), they jointly owned 100% of both LEI’s and MRP’s shares. Nevertheless, he concluded, the two entities were not a single employer for purposes of this legal action, because of the other two factors. Concerning factor (1), he concluded that the two entities were not sufficiently interrelated because they “did not share a common business purpose”–LEI was an electrical contractor, while MRP was a management company, and concerning (3) he concluded that the two entities did not share centralized control of labor relations, since MRP never had employees.

The NLRB panel brushed aside these two arguments. First, they found “no merit in the judge’s finding that the absence of a common business purpose is fatal to finding an interrelationship of operations and single-employer status. The Board has found that, notwithstanding the different business purposes between two nominally separate entities, ‘a single employer relationship can be found, particularly where there is evidence of a lack of an arm’s-length relationship between the entities.” In this case, there was clearly not an arm’s-length relationship: the two entities shared a Post Office box, used one another’s equipment. Further, the joint owners of the two entities coordinated their respective financial operations; for example, MRP “forgave” more than $62,000 in rent payments from LEI in order to enable the latter to pay its expenses and employees. Since there was no arm’s-length relationship, the two entities’ different business purposes did not imply that there were not interrelated in the relevant sense.

Second, regarding condition (3), the panel agreed that there was no evidence of centralized control of labor relations. However, in this case the reason for this was that one of the two entities never had any employees, and there is extensive case law supporting the principle that “…where one company does not have employees, it is not appropriate to accord substantial importance to the absence of centralized control of labor relations.”

In the end, the NLRB panel endorsed the prior court’s award of over $122,000 in backpay and damages, and found these two financially distinct entities jointly liable.

If you believe your rights under the National Labor Relations Act have been violated by an employer, please contact The Harman Firm, LLP.