The status of a Collective Bargaining Agreement and recognition of your union can get complicated when ownership changes hands or companies decide to move. When this happens, the National Labor Relations Board (NLRB) determines whether the purchasing company is considered a labor successor. There are two criteria used when determining a labor successor:
- If over 50 percent of the new owner’s staff were previously employed by the last owner.
- If there is continuity between the two organizations’ business operations.
The National Labor Relations Board’s (“NLRB” or “Board”) successorship doctrine requires a purchaser of an asset or business to recognize and bargain with the union representing the seller’s employees if the new employer: (i) continues its predecessor’s business in substantially unchanged form and (ii) hires a majority of its employees from the predecessor. GVS Properties, LLC, 362 NLRB No. 194 (Aug. 27, 2015); NLRB v. Burns Int’l Security Servs., 406 U.S. 272 (1972). However, a new employer will not be required to abide by its predecessor’s collective bargaining agreement if it makes clear to the union and employees either before or at time of hiring that it does not intend to be bound by existing agreements. Under these circumstances, new employers may establish initial terms and conditions of employment that differ from existing agreements and then bargain with unions for new ones. See Burns, 406 U.S. 274-275 (1972). (Jones Day, Insights)
The National Labor Relations Board (NLRB) decides what “continuity” means for a successor. The NLRB’s members and their views on unions can change with each presidential administration. You may want to consult with an employment attorney if your workplace might have such a situation. Listed are a few case studies from the NLRB that are relevant to the topic.
- Successors to collective agreements must consult with unions about the terms of employment for new employees.
- The National Labor Relations Board (NLRB) has held that new management may be liable for misleading unionized workers from the previous company about the terms of their new positions or for failing to inform them about changes to work conditions.
- When a company decides to sell itself, it must meet with the union to discuss the effects of the sale upon bargaining unit employees. The union may propose severance pay and continuation of medical coverage as part of its bargaining stance. While there is no obligation to reach an agreement with the union on these points, a company must meet with the union in good faith and bargain over the effects of the sale.
The hiring of the seller’s unionized employees is a key consideration for the buyer. While the buyer need not hire these employees, it must be aware of labor laws prohibiting discrimination against union members. For example, the buyer would violate the National Labor Relations Act if it refused to hire the seller’s employees simply to avoid union recognition. However, if the buyer requires individual applications for employment from all applicants, including those hired from the seller organization, it can defend refusals to hire by demonstrating that objective hiring criteria were applied uniformly to all applicants. For example, if past documented performance problems were grounds for not hiring an employee from any applicant regardless of affiliation with a union, then this defense will likely succeed in court if challenged. (Melanie Webber, Fisher Phillips’ Cleveland )
If the union does not agree with the terms of the buyer’s offer, it must follow the terms of its current collective bargaining agreement with the seller. For example, if an unexpired CBA contains a “no-strike” clause, then the union cannot legally call for a strike against the seller prior to acquisition. Once acquisition occurs and the buyer has not assumed the CBA, however, the union is no longer bound by this clause and can strike or utilize other economic weapons (such as handballing) against the buyer.
A buyer should be aware of the existence of a successor clause in a CBA and plan accordingly. A successor clause is often included in CBAs, which typically state that the CBA will be binding upon any successor. This clause would be applicable if the majority of the buyer’s workforce consists of union members so that the buyer becomes a “successor” to the bargaining obligation.
A successor employer can set its own terms and conditions of employment, but it must bargain on demand with the union concerning permanent terms of employment. Until a total agreement is made, the successor’s initial terms remain in effect. This rule does not apply if the buyer either fails to clearly announce its intent to establish new terms before inviting the seller’s employees to accept employment or if the buyer misleads the seller’s employees into believing they will be retained without change in their wages or conditions of employment. The buyer will forfeit the right to unilaterally initiate new terms and conditions as a practice pointer, if a buyer intends to offer employment on terms different than those mandated by the seller’s union contract, it should never mislead employees into believing that their retention will be without a change in wages or conditions of employment.
A buyer should plan for labor relations issues well in advance of a transaction’s close. The buyer will be in a better position to have a successful relationship with its new unionized workforce if it does so.
