Earlier this year in Sheet Metal Workers’ Int’l Ass’n Local 19 v. Main Line Mech. Inc., the Eastern District of Pennsylvania decided a case that is important to members of the construction industry who own multiple companies. In the aforementioned case, two HVAC firms shared common ownership and a union that had a contract with one of the HVAC firms was trying to piece the corporate veil of the other HVAC firm based upon the common ownership. The court ruled against the union, holding that although the HVAC firms shared common ownership, the corporate veil of the HVAC firm that never entered into a contract with the union could not be pierced because the companies did not share employees and the companies targeted different types of HVAC work. The facts of the case, which I discuss in greater detail below, are quite interesting.
- HVAC Company No. 1 Enters Into Collective Bargaining Agreement With Union
Main Line Mech. Inc. was a Pennsylvania based HVAC firm. Several years after its incorporation, Main Line entered into a collective bargaining agreement with Sheet Metal Contractors Association, which contract contained a number of provisions that required Main Line to perform sheet metal work using only union-represented workers. The contract also forbid Main Line from setting up another business to evade contract obligations. Leonard Santos served as the president of Main Line and was a minority shareholder in the firm while the majority of the stock was owned by his wife.
- HVAC Company No. 2 Does Business Outside of the Union’s Jurisdiction
Santos and his wife also owned another HVAC firm referred to as “Sands.” Sands and Main Line maintained an office at the same location. Santos formed Sands to seek business in Northern New Jersey outside the union’s jurisdiction. Santos and his wife performed work at Sands that was similar to their activities at Main Line, but the court said other than the couple, no one worked for both companies at the same time.
- Separation of the HVAC Businesses
Despite the common ownership, Sand and Main Line kept separate unconnected offices and equipment, along with separate finances and corporate records. Sands competed for public projects in New Jersey requiring payment of prevailing wages, and the court found that the nonunion firm never undertook any contracts within the union’s jurisdiction while Main Line was an active HVAC installation business.
- The Nature of HVAC Company No. 1 Changes
Unfortunately, Main Line lost a job in Pennsylvania and was sued for poor performance. Subsequently, the company gave up HVAC work and limited itself to buying and reselling equipment.
- Union officials spot HVAC Company No. 1’s equipment being used by HVAC Company No. 2
Thereafter, Sands was awarded a contract to do HVAC work in New Jersey where union officials spotted the company using several gang boxes and ladders that were labeled Main Line property. The union filed a grievance against Main Line alleging the company used Sands to perform bargaining unit work, bypassing the union’s contract. The union-management adjustment board sustained the grievance and assessed more than $202,000 against the firm. Thereafter, the union filed a lawsuit under Section 301 of the Labor-Management Relations Act seeking confirmation of the arbitration award. The district judge confirmed the award against Main Line, but rejected the union’s request to hold Sands jointly and several liable as the alter ego of Main Line.
- The Legal Analysis
In rejecting the request to hold HVAC Company No 2 liable for HVAC Company No. 1, the court examined whether the two organizations had substantially identical supervision, business purpose, operations, equipment or customers.
Although Santos ran both companies, the daily operations were handled by supervisors who differed from one company to the other. Moreover, Main Line installed large rooftop heating and cooling units on top of hotels, schools, and other large buildings while Sands installed small HVAC units in multifamily residential complexes. Significantly, apart from Mr. and Mrs. Santos, the companies at no time shared the same employees.
Lessons Learned: Members of the construction industry who operate multiple construction related businesses need to be vigilant in their efforts to separate the entities. Here, it was the presence of the Main Line equipment spotted on a Sands job that raised suspicions. Fortunately, there was evidence that Main Line had formally sold at least some of the equipment to Sands, but it would have been best for Sands to have removed Main Line’s name from the equipment before using it.
This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice. Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.
Unionville-Chadds Ford School District Sued for Age Discrimination
by HDlawblog Posted: Tuesday, 5/28/2013By way of disclaimer, I am a graduate of the Unionville-Chadds Ford School District, which in my biased opinion is an excellent public school. In fact, U.S. News and World Report ranks Unionville High School the 10th best public high school in Pennsylvania and the 507th best public high school in the nation, out of approximately 22,000 schools, which places it roughly in the top 2% of public schools. Yet, despite its prestige the Unionville-Chadds Ford School District was recently sued by one of its employees for alleged discrimination under the Age Discrimination in Employment Act (“ADEA”).
Summarily, a paraprofessional at the school in her late 50s alleged that she was disciplined for reprimanding students while a significantly younger 30 something-year-old employee who similarly reprimanded the same group of students was praised for her actions. Additionally, the employee alleged that the school’s principal (also a 30 something-year-old) made allegedly discriminatory comments about the employee having a “senior moment.”
The outcome of the case remains to be seen, but the school district suffered a loss earlier this month when the Eastern District of Pennsylvania denied its motion to dismiss becaues the court found that the employee plausibly alleged age discrimination. Interestingly, it appears that it was the employee who first used the term “senior moment” when explaining to the principal why she couldn’t remember something. When the principal, in turn, commented on the employee’s self-proclaimed senior moment, the employee complained that the principal’s statements were offensive and that he needed to be careful about commenting about a person’s mental capacity or ability. It’s a lesson how in the employment law context the saying “what’s good for the goose, is good for the gander” does not necessarily ring true. In other words, if an employee blames their age as the reason for their mistake, supervisors should be trained to steer clear of those traps.
Another challenge that the school district faces is overcoming what looks like disparate treatment of employees who disciplined students under allegedly similar circumstances. Here, the senior employee was disciplined for her actions while the 30 something-year-old employee was praised for taking allegedly similar action. If the only distinguishing factor was the age of the employee, this case might not go well for the school district. This is why employers need to administer discipline on a uniform basis.
As a member of the Unionville High School class of 2000, I wish my school district the best of luck in defending this case, but then again, we are talking about a school district where an Indian remains the high school mascot.
This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice. Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.
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