Bruce Wayne. Clark Kent. Sir Percy Blakeney. In addition to being dashing literary figures, each of these men share a common trait – each has an alter ego. Donning a cape, the stoic Bruce Wayne becomes the intrepid Batman. The nerdy, spectacled Clark Kent transforms into the swashbuckling Superman. The foppish, self-obsessed Sir Percy Blakeney saves his countrymen as the daring and confident Scarlet Pimpernel.
The alter ego concept is not confined to the pages of literature.
In the area of employment law, the National Labor Relations Board (“NLRB”) has often applied the alter ego theory to hold that companies so substantially identical — in terms of management, business purpose, operation, equipment, customers, supervision or ownership — are properly treated as interchangeable. Think of it this way: if Bruce Wayne, Clark Kent, or Sir Percy Blakeney make a promise, their respective alter egos have an obligation to recognize it.
The NLRB’s finding of an alter ego relationship is fact-dependent. The main questions, however, are (i) is Company X merely a “disguised continuance” of Company Y and (ii) is there evidence that corporate history reveals a motive to avoid labor laws and obligations? For example, finding an alter ego relationship between a unionized company and a newly formed nonunion company, the NLRB looked to centralized control of labor relations and to “‘substantially identical’ management, business purpose, operation, equipment, customers, supervision and ownership.” ADF, Inc., & Its Alter Ego Adla, LLC & Int’l Bhd. of Teamsters, Local Union No. 251, 355 NLRB 81, 83 (2010) (finding alter ego because inter alia the owner of one company resides with the owner of the other and is the mother of his son).
Still, overlapping ownership in the same line of business may be a necessary condition but is far from a sufficient condition to create an alter ego. For instance, in Express Services, Inc., two freight transportation companies had overlapping management personnel, but the Second Circuit declined to find an alter ego status where (i) the companies had a different customer base and equipment and (ii) the parties were engaged in different, though related, lines of business. New York State Teamsters Conference Pension & Ret. Fund v. Express Services, Inc., 426 F.3d 640, 650 (2d Cir. 2005).
But, the label “alter ego” is not exclusively the province of the NLRB. It is applied under other employment statutes. Matthews v. ALC Partner Inc., 15 WH Cases2d 100 (E.D. Mich. 2008) (chief executive officer found to be alter ego of company, and therefore, personally liable for FLSA and various violations of state law); UAW v. OEM/Erie Westland LLC, 203 F. Supp. 2d 825 (E.D. Mich. 2002) (permitting WARN Act claims against a limited liability company’s member where the member retained control of whether the company would dissolve and did not merely passively refuse to infuse more capital into the company but played a more direct and affirmative role in closing the plant). It is also applied under common law employment claims. Eastern Minerals & Chems. Co. v. Mahan, 225 F.3d 330, 333 n.6 (3d Cir. 2000) (acknowledging an alter ego claim for breach of duty of loyalty against a company’s president and sole shareholder).
There is also an important issue of what the alter ego is NOT. It is, for example, separate and distinct from successorship which arises in either purchasing or replacing via competitive bidding another entity. It is also separate and distinct from joint employment which arises where two or more employers exert significant control over the same employees and, thus, codetermine their terms and conditions of employment. It is also separate from – albeit closely related to – the doctrine of the single employer which arises when separate corporations (typically commonly owned) operate in practice as a unified entity for employment purposes.
A finding of alter ego that, while romantic in the pages of a comic book or in a Baroness’s classic work, may impose unforeseen obligations and liabilities on a company and its individual owners. Plus, maintaining separate identities is far easier in fiction that in reality; employment law is loath to honor the separate corporate identities when the economic realities suggest that those lack substance in the workplace.
The 21st century (like the 18th?) requires more than a corporate charter to be safe:
They seek him here, they seek him there
Those [suing employees] seek him everywhere
Is he in heaven or is he in hell?
That damned elusive Pimpernel.