The U.S. District Court for the Eastern District of New York recently issued a judgment in favor of the trustees of a multi-employer welfare and pension fund, holding three companies and their shared owners liable for unpaid fringe benefits. The multi-employer welfare and pension fund was established for covered employees of three local chapters of the International Union of Operating Engineers. All companies that had signed a collective bargaining agreement with the union were obligated to make fringe benefit contributions to the fund for covered employees. Only one of the three defendant companies in this case had actually signed the collective bargaining agreement. However, the three defendant companies were owned and operated by the same two individuals. The trustees were successful in obtaining judgment against all three companies for unpaid contributions dating back to 2005 on the basis that the three companies constituted a “single employer/single unit.” Analyzing the facts and circumstances, the court noted that the companies in this case were “separate companies in name only,” and provided various reasons why the businesses should be treated as a single employer. For example, the companies had “interrelated” operations because they shared employees/staff, equipment, and customers, and they provided the same services for those customers. Additionally, there was “common management” because the two owner-defendants owned and managed all three of the companies. The court then found that the three companies constituted a “single appropriate bargaining unit” on the basis that their employees shared a “community of interests.” Among the reasons the court cited were the companies’ “integrated operations,” the amount of “employee interchange” among the companies, the similarity of working conditions and requirements for the employees, the shared geographical location for worksites, and the shared customer base. In light of all of these circumstances, the court held that all three companies should be treated as a “single employer/single unit,” and as a result held that they were all equally liable for the unpaid contributions. The court then ordered the companies to permit the trustees to audit their books and records to determine the amount of contributions due.

The court additionally ruled that the two owner-defendants were equally liable with the companies for the unpaid contributions, finding that the facts of the case warranted piercing the corporate veil to hold the owners personally liable. The court found that the owners exercised “complete domination” over the companies because of the overwhelming overlap in their control, management, and supervision of all three. Additionally, the court found that the owner-defendants “abused the corporate form to defraud” the trustees. The owners had the ultimate authority with regard to payments to creditors, they planned projects in such a way as to alter the amount of fringe benefit contributions owed to the union fund, and they used money that represented unpaid fringe benefit contributions for their own gain rather than remitting the contributions to the fund. This case demonstrates the serious liability that related companies can face for one company’s failure to properly remit contributions to a multi-employer plan it participates in, and illustrates the type of circumstances that can result in personal liability for company owners. (Duffy v. Modern Waste Services Corp., EDNY. 2011)