The opinion of the court was delivered by: NEAHER
The Secretary of Labor ("Secretary") brought this action to obtain relief for an elderly employee of defendants whose employment had been terminated in alleged violation of the Age Discrimination in Employment Act of 1967 ("ADEA"), 29 U.S.C. §§ 621-34. After trying the matter without a jury, the court makes the following findings of fact and conclusions of law as required by Rule 52(a), F.R.Civ.P.
On September 1, 1973, Bertie Feitis, a 62-year-old clothing designer, was discharged by defendant Arlene Knitwear, Inc. ("Arlene") after 17-1/2 years with the company. At that time she was only 2-1/2 years away from early retirement and only 3 years away from the normal retirement age and full pension eligibility. She was notified of her discharge by Arlene's president, defendant Larry Stein, who explained that she and Arlene's two other designers had to be let go because the business was going to be liquidated. Stein promised that, when the liquidation took place, Feitis would receive her share of the pension fund, which would be liquidated along with the business.
Stein failed to mention, however, that the other two designers, Vincent Calvo, age 32, and Lucia DeSantis, age 29, were to continue their work under Stein's supervision at Knittin Pretty, Inc. ("Knittin Pretty"), a new company ostensibly formed by his son. Moreover, rather than following through on claimed liquidation plans, Stein negotiated with his two partners to buy out their shares in Arlene and its two companion companies, Swan Sportswear Co., Inc. ("Swan") and 465 Property Corporation. As soon as the buy-out agreement was signed on December 31, 1973, Knittin Pretty folded, Stein's son was installed as president of Swan, Calvo and DeSantis were transferred back to Arlene, and the designs they had created at Knittin Pretty became the new line of clothes for Arlene's coming season.
The net result of this fast shuffle was that the Steins were firmly in control of Arlene and its related companies, Arlene's design studio was staffed by two young designers, and 62-year-old Bertie Feitis was out of both her job and her pension. For the reasons given below, the court has concluded that the termination of Feitis constituted discrimination on the basis of age in violation of the ADEA.
Before discussing the merits in detail, the court must deal with two preliminary matters raised by defendants. First, defendants contend that the ADEA is not applicable because Feitis' employer, Arlene, did not have enough employees to come within the scope of the Act. Second, they argue that the Secretary has not fulfilled a prerequisite to this suit, viz., that he must affirmatively seek to achieve conciliation of the dispute.
The ADEA outlaws age discrimination by an "employer." An employer is defined as "a person engaged in an industry affecting commerce who has twenty or more employees . . . ." 29 U.S.C. § 630(b). The definition of "person" includes "one or more . . . . corporations." 29 U.S.C. § 630(a). It is undisputed that during the relevant period Arlene had fewer than 20 employees, Swan had over 100, and each company was engaged in an industry affecting commerce. The key question, therefore, is whether Arlene and Swan may be considered as a single employer for purposes of the ADEA.
To begin, a brief history of the companies is in order. Swan was incorporated in 1948 and performed manufacturing services for a companion firm known as Dollar Knitwear, Inc. ("Dollar"), which designed and sold women's knitted tops. Larry Stein, Louis Nissenbaum, and Harry Weinstein each owned 1/3 of the shares in both Dollar and Swan. In 1953, in order to avoid the unfortunate connotation of the name "Dollar Knitwear," Stein and his two partners discontinued Dollar and incorporated Arlene in its place. For the next twenty years the three partners retained their equal shares in Arlene and Swan and held the following positions: Stein was president of Arlene, Nissenbaum was president of Swan, and Weinstein was in charge of shipping at Arlene.
At the time of Arlene's incorporation in 1953, Swan occupied half a floor of a four-story building located at 465 Troutman Street in Brooklyn, and Stein, as Arlene's president, occupied a cubicle within that space. Arlene also had a showroom at 1407 Broadway in Manhattan. During the next 20 years the two companies gradually expanded their space in the Troutman Street building. In 1965 or 1966, at a time when Arlene occupied the first floor and Swan the second, Stein and his two partners purchased the building through a corporation they had formed for that purpose, the 465 Property Corporation. As with Arlene and Swan, each partner owned 1/3 of the shares of the new corporation. By 1973 the two companies filled the entire building, as Arlene leased the basement and first floor and Swan the second, third and fourth floors.
With this background in mind, the inner workings of Arlene and Swan must be examined to determine whether they constituted a single employer for purposes of the ADEA. In light of the liberal construction to be accorded a remedial statute such as the ADEA, Dartt v. Shell Oil Co., 539 F.2d 1256, 1259 (10 Cir. 1976), aff'd mem., 434 U.S. 99, 98 S. Ct. 600, 54 L. Ed. 2d 270 (1977), the appropriate standard for determining whether nominally separate corporations are to be considered a single employer is whether they comprise an integrated enterprise. Under this standard, which originally was developed in labor cases, see Radio & Television Broadcast Technicians Local Union 1264 v. Broadcast Service of Mobile, Inc., 380 U.S. 255, 256, 13 L. Ed. 2d 789, 85 S. Ct. 876 (1965), and later was applied to cases concerning Title VII of the Civil Rights Act of 1964, see, e.g., Williams v. New Orleans Steamship Association, 341 F. Supp. 613, 615 (E.D. La. 1972), the controlling criteria are (1) interrelation of operations, (2) common management, (3) centralized control of labor relations, and (4) common ownership or financial control. Radio & Television Broadcast Technicians Local Union 1264 v. Broadcast Service of Mobile, Inc., supra; Baker v. Stuart Broadcasting Co., 560 F.2d 389, 392 (8 Cir. 1977) (a Title VII case).
In the present case the first and fourth criteria are easily met, for Stein and his two partners owned both Arlene and Swan and operated them as an integrated enterprise. The two companies perfectly complemented each other, and their physical proximity facilitated their integration. The work on each garment began when Arlene's designers created designs for knitted tops. After Swan's sewing department made samples of the designs, Arlene's salesmen took the samples and solicited orders from customers. Once customers ordered the garments, Arlene ordered fabric to fill the orders. Then Swan cut the fabric in the pattern of the designs and sewed the fabric together to make the garments. In the final step, Arlene shipped the garments to the customers.
The symbiotic relationship of Arlene and Swan is also apparent from the regular overlapping of work performed by several of their employees. Bernard Weinstein, Swan's production manager, had his desk next to that of Stein and placed Arlene's orders for fabric under Stein's watchful eye. The samples of knitted top designs were sewn together by Swan's employees in the sewing department under the supervision of Arlene's designers, who were located on the same floor as the sewing department. Max Samen, Arlene's production manager, was often on hand in Swan's sewing department to resolve production problems. After the garments were sewn, they were packed and stored in Arlene's stock room by several Swan employees under the supervision of Harry Weinstein, Arlene's shipping manager. Even the recordkeeping of the two companies was integrated, as their bookkeeping staffs were housed in the same office, were supervised by the same head bookkeeper, and made use of the same posting machine.
By 1973 the integration of the operations of Arlene and Swan was virtually complete, as 100% of the cutting and 50-60% of the sewing required by Arlene were performed by Swan, and 95-98% of Swan's business came from Arlene. Generally the sewing done by outside contractors was uncomplicated work, while the more difficult sewing jobs were performed by Swan.
The second criterion, common management, is also satisfied. Although Stein generally controlled the affairs of Arlene and Nissenbaum did the same with respect to Swan, their joint interests led to common management of the two companies in significant ways. For example, Stein and Nissenbaum informally worked together to formulate prices that would be low enough to attract customers for Arlene and yet high enough to cover Swan's production costs. As their accountant testified, they cooperated because "they had the same interest as far as the necessary result, the bottom line." Tr. at V-93. Since they were partners, they also did not bother with such matters as charging each other rent for the offices of one company located on floors leased by the other company.
The family ties among the managers of the two companies further indicate their integration. Harry Weinstein, the shipping manager for Arlene and one of the three owners of the companies, was the brother-in-law of Nissenbaum, the president of Swan and another of the owners. Bernard Weinstein, the son of Harry Weinstein and the nephew of Nissenbaum, was the production manager for Swan and did much of his work under Stein's supervision. Another of Nissenbaum's brothers-in-law, Max Samen, was Arlene's production manager.
Stein's testimony as to the events of mid-1973 sheds additional light on the question of common management:
"In the middle of 1973 the continuation of this business became impossible. The principals had developed a very irreparable rift and there was no question in my mind that this business could not continue.
"The principal course of action here was to dissolve the companies." Tr. at V-156 (emphasis added).
Stein's choice of words in describing Arlene and Swan confirms that the two companies were run as a single business.
As to the third criterion, centralized control of labor relations, the record is less clear. There is no question that most employment decisions were made by the separate heads of the companies. As to the termination of Feitis, however, Stein initially testified at his deposition:
"It was a mutual decision [of the three partners]. It's four years later. It's vague in my mind. We decided to terminate the company and discharge all the designers . . . ." Stein Dep. at 116, PX 48(a).
The next day of the deposition Stein changed his testimony to reflect that he alone made the decision to fire Feitis. Id. at 247. At trial Stein testified as follows:
"When the three shareholders decided without question that this would be the complete termination of the business, we all moved in our separate areas of authority and functions to move towards that end. I being in charge of the designers moved to terminate their employment . . . ." Tr. at II-137.
Although even this testimony illustrates the indirect control the joint ownership had over the employment of all employees of Arlene and Swan, the record does not support a finding of centralized control of labor relations. Nevertheless, even a total lack of evidence of centralized control of labor relations would not bar a finding that Arlene and Swan formed an integrated enterprise, for no one ...