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Aug. 30 — Two Chicago-area construction companies formed by brothers on the same day were effectively a single employer, meaning that the surviving, nonunion contractor is liable for unpaid union benefit fund contributions, a federal judge held ( Chi. Reg’l Council of Carpenters Pension Fund v. TMG Corp. , 2016 BL 281013, N.D. Ill., No. 13 C 8649, 8/29/16 ).
The decision shows that a family relationship between two companies’ owners by itself won’t do much to establish a single-employer relationship. But one company’s control over another’s ability to issue paychecks—found to exist in this case—will.
TMG Corp. was party to a collective bargaining agreement with the Chicago Regional Council of Carpenters, while Gallant Construction Co. wasn’t. Union-affiliated trust funds alleged the two companies had an arrangement in which Gallant used TMG-employed union workers and its own nonunion workers to do CBA-covered work without paying union wages or fringe benefits.
The funds sued the contractors under the Employee Retirement Income Security Act, arguing that there was a single-employer relationship binding Gallant to the CBA.
Judge Matthew F. Kennelly of the U.S. District Court for the Northern District of Illinois Aug. 29 granted summary judgment to the funds on the issue of liability. The two contractors’ operations were interrelated, they shared common management and they handled their labor relations in common, the judge found.
TMG and Gallant “integrated nearly all aspects of their day-to-day operations,” Kennelly said. The companies shared an attorney for filing annual reports, a registered agent, an insurance broker and office space, and they had bank accounts at the same banks and overlapping mail delivery systems, the judge found.
Though TMG and Gallant had no officers in common, they had common management, Kennelly concluded. He found that Gallant’s president played a significant role in hiring TMG employees, had more than a decade of access to the signature stamp of the brother who was TMG’s sole shareholder and officer and frequently used the stamp to endorse paychecks from TMG’s bank account. Meanwhile, Gallant’s controller “effectively steered the ship when it came to TMG’s finances and paperwork,” the judge said.
In terms of the contractors’ labor relations, Kennelly found evidence that after TMG ceased operations, many superintendents it had been paying were then paid by Gallant.
Whether the companies had common ownership was the only factor of the single-employer test weighing against a single-employer finding, Kennelly determined. He said it wasn’t enough that the two owners were brothers to tilt this factor in the funds’ favor.
The funds alternatively argued that TMG was Gallant’s alter ego. Kennelly denied summary judgment to both the funds and companies on this theory, saying there was a factual dispute regarding the “most critical factor” for an alter ego finding in the U.S. Court of Appeals for the Seventh Circuit—an unlawful motive on the contractors’ part. The judge cited testimony by TMG’s owner that he formed his company so he could work with—rather than for—his brother and not so they could avoid union contributions.
McJessy, Ching & Thompson LLC represented the funds. Fuchs & Roselli Ltd. and the Law Office of George Sanders P.C. represented TMG and Gallant.
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Text of the opinion is available at http://www.bloomberglaw.com/public/document/Chi_Regl_Council_of_Carpenters_Pension_Fund_v_TMG_Corp_No_13_C_86.
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