By Richard H. Wessels, Esq.
Question: We are selling a facility where some of the
employees are covered by a union contract. What are our obligations to the
union?
Answer:
We really would have to sit down to carefully go over details. The best
we can do here is cover general principles only. Perhaps more than any other
area of labor law, slight changes in the fact pattern could dramatically change
the legal consequences and thus the strategy to be used.
In
today's rapidly changing business environment, close attention must be paid to
labor relations implications. We are seeing any number of scenarios wherein one
employer replaces another. Typically this can be the result of a merger,
acquisition, sale of assets, third party outsourcing, etc.
Here
are the fundamental principles.
1.
Obligations of the predecessor
employer. The
issues here would involve whether or not "decision bargaining" is
required and also the issues of "effects bargaining." The particular
facts of the situation are exceedingly important. For example, is the change
occurring during the collective bargaining agreement or after contract
expiration? Specific contract language could have substantial impact.
"Decision bargaining" is often necessary, especially if labor costs
are a factor. "Effects bargaining" involves such issues as severance
pay, etc. and is almost always required. Keep in mind that only
"bargaining" is required, not agreement.
2.
Effect of "successors and
assigns" clauses.
Despite the frequently clear wording of successorship clauses, the case law is
that such clauses do not bind a successor employer. The simple reason is that
there is no privity of contract. However, a successorship clause could have
impact on the duties of the predecessor employer. For example, there have been
cases based on specific contract language wherein a union has successfully
enjoined sales or transfers of a business. Further, today’s pro-union NLRB has
been over-turning earlier case law, so we need to be careful.
3.
Is the new employer a
"successor at law?"
There are several variations on this theme. Of course, if the transaction is a
stock deal, the new employer merely steps into the shoes of the predecessor
employer and would inherit the contract. If it is another form of transaction,
however, the general principle is that a successor inherits not the contract
but only the obligation to "bargain in good faith." The Board and the
reviewing courts have focused on the following inquiries in determining whether
there is a successorship:
·
Continuity
of the workforce
·
Continuity
of identity of the business enterprise
·
Continuity
of the appropriate bargaining unit.
By
far, the most important factor is continuity of the workforce. Must reading
for anyone developing a strategy of this type is the U.S. Supreme Court's decision
in Fall River Dyeing & Finishing
Corp. v. NLRB, 482 US 27 (1987).
4.
A successor can set initial terms and conditions. The general rule is that if there
is a successorship (usually majority status is the key issue here), the new
employer can set initial terms and conditions. There are exceptions to this
such as the "perfectly clear" principle, but in the majority of
situations, it is appropriate for the successor to set initial terms and
conditions. In other words, it would not be bound by the precise terms of the
underlying collective bargaining agreement. If there is a successorship, the
company's obligation after setting initial terms and conditions would be to
"bargain in good faith" with the union in an effort to reach a
collective bargaining agreement.
5.
Practical
considerations. In
a high percentage of the situations, where the new employer is continuing the
enterprise with essentially the same workforce, that new employer will find it
in its best interest to continue the relationship in an uninterrupted manner.
Sometimes this will involve no more than assuming the existing agreement. Often
an employer will engage in discussions with the union to negotiate changes.
Many times this occurs prior to the completion of the transaction and, on
occasion, this has been a condition upon which the entire transaction is based.
It has been our experience that a new employer that is willing to continue
uninterrupted the relationship with the union will find it relatively easy to
achieve a new agreement with the union which might well contain substantial
changes from the prior agreement.
Again,
keep in mind that this commentary covers general principles only. Slight
changes in the fact pattern could substantially change the recommended
strategy.
Readers are invited to submit their labor law questions for possible use in this column. Just email your questions to Dick Wessels at riwessels@wesselssherman.com. Your identity (and your company's identity) will not be revealed if your question is selected by Dick Wessels for this column.
"Ask Your Labor Lawyer" is our very popular column written by Dick Wessels who is Founder and Senior Shareholder of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. Dick handles a wide variety of labor and employment law cases. His primary focus is dealing with labor unions, either on behalf of union-free companies or where unions already have representation rights. Dick has handled cases involving nearly all international unions for companies throughout the United States.
