Labor Law’s Alter Ego Doctrine: The Role of Employer Motive in Corporate Transformations

This Note examines the differing judicial approaches for reviewing NLRB alter ego findings, and concludes that a fundamental problem with all of the current approaches is the unwarranted consideration of motive in varying degrees. This Note proposes a modified “reasonably foreseeable benefit” standard which does not depend in any degree on the employer’s motive for changing its corporate form. Part I discusses the origin and evolution of the alter ego doctrine, including its genesis in Southport Petroleum, the well-settled Crawford Door factors, and the related “successorship” doctrine. Part II analyzes the conflict among the federal courts of appeals over the role of employer motive and Supreme Court cases in related areas of labor law. This part maintains that the Fourth Circuit’s “reasonably foreseeable benefit” standard provides an excellent foundation for the appropriate standard, and proposes a modified approach in which (1) the Board applies the flexible, seven-factor Crawford Door test; and (2) if it finds that the “new” employer is in reality the same as its predecessor, the Board must then inquire whether the old employer anticipated a “reasonably foreseeable benefit” for any reason. Alter ego status is found only if both prongs of the test are met.

Part III examines the policy considerations attendant to accommodating the tension between legitimate employee expectations and an employer’s freedom to rearrange its business – and to go out of business – as it sees fit. The modified “reasonably foreseeable benefit” standard proposed in Part II properly defines the bounds of both legitimate employee expectations and employer freedom. Predictability and uniformity are achieved in NLRB decisions without an undue sacrifice in the Board’s ability to apply flexibly the Crawford Door factors.