The NLRB issued a decision in Domsey Trading Corp., dated December 30, 2011, holding it was appropriate to pierce the corporate veil to find Domsey's principal owner personally liable for an unfair labor practice judgment against the company. The key litigated issue was whether it was appropriate to pierce the corporate veil where:

In 1999, the NLRB found Domsey had unlawfully failed to timely offer reinstatement to nearly 200 of its employees who had engaged in an unfair labor practice strike. An administrative law judge (ALJ) in the case found Domsey owed over $1 million in backpay and interest to the employees. Domsey appealed.

In January 2002, while the appeal was pending, Domsey sold a piece of property it co-owned with another entity. Domsey's stake in the property was its only significant asset, for which it received over $9 million. Within days of the sale, one of Domsey's principal owners, Arthur Salm, wrote corporate checks to himself and the other principal owner, depleting Domsey's corporate bank account of all profits from the sale. Both owners deposited the funds in their respective personal accounts. Domsey was formally dissolved in 2009.

In 2007, the Board ordered Domsey to pay all backpay amounts, currently estimated to total over $2 million including interest. The NLRB's Acting General Counsel initiated proceedings to hold Salm personally accountable for the judgment against Domsey. The ALJ found:

The counsel for the General Counsel appealed by filing exceptions to the five-member panel (Board) heading the NLRB's judicial functions.

A three-member panel of the Board reviewed the General Counsel's exception. In a two-to-one decision (Member Hayes dissenting), the Board held it was appropriate to pierce the corporate veil and hold Salm personally liable for the judgment against Domsey. Under the White Oak Coal test, the Board pierces the corporate veil where both:

Under the first prong of the test, the Board considers, among seven other factors, the degree to which corporate formalities have been maintained and individual corporate funds, assets and affairs have been commingled.

The Board majority found that Salm made the transfer before Domsey ceased operating on January 31, 2002. Member Hayes, relying on the ALJ's factual findings in this case, found that Domsey had likely ceased operating before the end of 2001 and that the majority based its view solely on Salm's counsel's statement in a pleading rather than the record evidence. The case turned substantially based on these differing factual findings about when Domsey ceased operating.

The Board majority found that although Domsey was historically operated as a separate entity from its principal owners, Salm's single act of transferring Domsey's assets to the owners was sufficient to establish that Salm had commingled Domsey's assets with his own.

Since the property sold was Domsey's major asset, and Salm was aware that by transferring the proceeds of the sale he was leaving Domsey unable to pay its pending backpay liability, the second prong of the White Oak Coal test was also met, even though Salm transferred the assets several years after the ALJ's initial decision imposing liability on Domsey.

The Board majority also held that the post-liquidation transactions by Salm and the other principal owner did not:

Member Hayes dissented, arguing:

Hayes also noted that under the first prong of the White Oak Coal analysis, the degree to which corporate formalities have been maintained and assets commingled should be viewed over a period of time. According to Hayes, the Board has never applied the test to a one-time liquidation and distribution of corporate assets, especially one occurring, as the ALJ found, after the business ceased operating.

Member Hayes also challenged the Board majority considering with the White Oak Coal factors the "valid corporate purpose" and "fair consideration for services" factors, because they come from cases involving a different theory for individual liability, "fraudulent transfer."

In light of this decision, employers should be aware that a single transfer of corporate funds made after a company has arguably been liquidated may create personal liability for the company's owners or shareholders, contrary to the Board's historical practice. The Board majority's decision suggests that this Board may be more likely to pierce the corporate veil in the future under the White Oak Coal test.

Since this case largely turned on a factual dispute about when Domsey ceased operating, employers should ensure that the factual record is clear on this issue. Otherwise, post-liquidation transactions may be the basis for piercing the corporate veil.