A husband and wife who owned two businesses in New Hampshire were indicted in September on charges including mail fraud and false ERISA statements. The charges arose, in part, from the couple’s failure to make benefit fund contributions in connection with one of the two businesses—despite the fact that the business in question was non-union. The federal court in Massachusetts that heard the case found that the non-union business was the “alter ego” of the couple’s other business, which was union-affiliated.
The two businesses had been set up as a “double-breasted” operation, in which unionized employer creates a separate non-union business to perform the same type of work in the same area as it does, generally for the purpose of obtaining work not available to a union-affiliated business. While the court in this case acknowledged that “double-breasted” operations are not “inherently unlawful,” there must be sufficient separation between the two businesses to avoid being deemed “alter ego” companies. The court found that the two businesses at issue in this case operated as a single employer, meaning that both entities, not the just the unionized entity, were bound by the applicable collective bargaining agreements.