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Monday, 18 January 2010 13:53 |
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Written By Larry Beebe
Bond Beebe
P: 301.272.6025 E:
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Is an employer’s intent to evade being treated as an alter ego to a contributing employer a required element of proving alter ego status? This question was discussed in a December, 2009 article in the IFEBP’s Benefits and Compensation Legal Legislative Reporter.
The article stated that the “sixth circuit emphasizes that evidence of an intent to evade, when it presents itself, is a relevant factor in determining whether the alter ego doctrine is applicable, along with the well established factors of substantial identity of management, business purpose, operation, equipment, supervision and ownership – but it is not essential to the imposition of alter ego status.” The case is Trustees of the Detroit Carpenters Fringe Benefit Funds v. Industrial Contracting LLC et al., nos. 08-1457 and 08-1994 (6th Cir. Sept. 17, 2009).
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The 6th circuit however stated that while intent to evade is indeed a factor, and if it exists may make the issue more clear, "it is NOT essential to the imposition of alter ego status" They went on to say that "this circuit has not required...a showing of employer intent in order to apply the liberalized alter ego standard because intent can too easily be disguised"
The factors the 6th circuit relied in overturning the district court decision were those we are most used to dealing with. Common ownership/employees/equipment etc.
As you no doubt can gather, this was a tremendously important court decision for Union fringe benefit funds. It again allows fund auditors to pursue obligations to these funds into other entities which signatory contractors set up, intended or not, to circumvent their obligation under their collective bargaining agreements.