In Trafford Distrib. Ctr. v. NLRB, the U.S. Court of Appeals for the 3rd Circuit upheld the decision of the National Labor Relations Board (“NLRB”), finding that a new company was an “alter ego” that was required to honor union contracts even though the former business and the new one did not share an identical business purpose or operations. In this case, Liberty Source W, a unionized business, provided printing and digital services, along with a small warehouse operation. It closed its business due to financial distress. The spouse of Liberty Source W’s owner opened Trafford Distributing six days later. Trafford Distributing’s only business was to store and ship customers’ merchandise.
Trafford had argued it could not be deemed an “alter ego” because its business purpose was not the same as Liberty Source W’s. The NLRB and the Court disagreed on the basis of the companies’ common ownership and customers, along with Trafford’s use of Liberty’s employees, management and equipment. The Court concluded that Board precedent allowed the NLRB to find an “alter ego” relationship even if evidence regarding some factors—such as identical business purpose and operations—was not present, and that a review of NLRB cases “involving partially reconstituted businesses has uncovered cases where alter ego was found to be present despite a significant change in scope of the business.” Finding sufficient links, the Court ordered Trafford to deal with the Federation of Independent Salaried Unions and Communications Workers of America Local 601.