The NLRB Confuses with Ruling on Successorship Doctrine in Cases Where Worker Retention Laws Apply

When one company acquires another company with a unionized workforce, some key questions almost inevitably emerge: will the acquiring company be bound by the acquired company’s collective bargaining obligations and union contracts? Is there an obligation to hire the unionized employees? Can they be fired? Do you have to bargain with their union? All of these issues are front and center in corporate transactions involving the unionized workforce of a target entity.

In New York City, the Displaced Building Service Workers Protection Act (“DBSWPA”) is a worker retention law, and, like many throughout the country, it requires new employers to retain their predecessor’s employees. DBSWPA applies to workers who service – typically clean – buildings in New York City. In GVS Properties, LLC, 362 NLRB No. 194 (Aug. 27, 2015), the NLRB had to analyze how the DBSWPA’s worker retention requirement affects a new employer’s obligations towards the predecessor’s employees.

The U.S. Supreme Court in NLRB v. Burns International Security Services, 406 U.S. 272 (1972) and Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27 (1987) established that a new employer has an obligation to bargain with the union that represented the predecessor’s employees – making the new employer a successor” – if (i) the new employer continues the predecessor’s business in substantially unchanged form; and (ii) the employer has hired a substantial and representative complement of employees, and a majority of its work force consists of the predecessor’s employees. Importantly, the U.S. Supreme Court’s decisions on successorship stresses the voluntary” and conscious” decision-making required by a new employer in order to be a successor.”

A recent NLRB decision appears to gut the requirement that an employer make a voluntary” decision to retain the predecessor’s employees before the employer can be considered a successor. In GVS Properties, LLC, 362 NLRB No. 194 (Aug. 27, 2015), GVS purchased several real estate properties and was forced to retain the employees employed to clean those properties for 90 days under the DBSWPA. During the 90-day retention period, GVS rejected requests by the employees’ union to recognize and bargain with it as the employees’ exclusive collective bargaining representative. At the end of the 90-day period, GVS kept four of the previous eight predecessor employees, and hired four new workers. That meant that the majority of the work force after the 90-day period were not former union employees. Thus, under established NLRB precedent, GVS did not have to recognize the union.

The union took a different view, presumably because at the time of the acquisition – that is, before the end of the 90-day retention period – a majority of retained employees were represented by the union. That was true, of course, but only because GVS was required to do so by the DBSWPA – hardly a voluntary” decision on its part.

The NLRB found that GVS violated Section 8(a)(1) and (5) of the National Labor Relations Act by refusing to bargain with the union. Specifically, the NLRB held that GVS was a successor” with an obligation to bargain with the union because it: (i) made a conscious decision” to purchase and maintain its predecessor’s business in substantially unchanged form and hire employees of the predecessor as a majority of the work force; and (ii) had actual or constructive notice of the retention requirements of the DBSWPA when it made the conscious decision” to purchase the predecessor’s business.

It’s true that GVS consciously” retained the employees to comply with the DBSWPA. It’s not true that GVS’s decision was voluntary” – but that didn’t seem to matter to the NLRB. The GVS decision will likely have far-reaching consequences, as many major cities have statutes similar to New York City’s, including Philadelphia, Washington D.C., Providence, San Francisco and Los Angeles.

Employers should consult with counsel on exactly how to navigate that bargaining process when such worker retention laws exist.