Timing and the number of former employees hired into a successor company is critical to determining whether a successor company must live under the strict confines of an existing collective bargaining agreement or have the opportunity to negotiate a union contract specific to the successor company.
Under labor law, a successor employer is generally free to hire whomever it wishes if it does not do so solely to avoid a bargaining obligation with the union representing its predecessor’s employees. While this sounds simple, in practice there are several hoops a successor must jump through in order to hire whomever it wishes.
For example, when the predecessor’s bargaining unit employees constitute more than half of the successor’s employees in the same bargaining unit positions, the successor is obligated to bargain with the union. So it is critical that successor employers have a game plan in place before making hiring decisions (or promises), because hiring (or promising to hire) too many employees may prohibit the successor employer from negotiating its own terms and conditions of employment.
If the successor makes it clear before hiring employees that it intends on re-negotiating the collective bargaining agreement, it may set its own initial terms and conditions of employment. However, any changes the successor makes after hiring those employees in the bargaining unit and after the union demands bargaining must be bargained to agreement or impasse prior to implementation.
Based on a recent advice memorandum from the NLRB (Horizon Coach Lines) it appears that a successor employer can lawfully implement changes to employee health and welfare benefits even after hiring a substantial group of the predecessor’s employees, so long as the changes are made before the union demands to bargain.
In Horizon Coach Lines, the NLRB Division of Advice opined that it seemed that enrollment forms given to employees after the union demanded bargaining did not explicitly describe some of the terms of the insurance plans. This means that the successor employer can begin operations without explicitly laying out all the new terms and conditions of employment, at least with regard to benefit plans. If it makes clear that the employees will operate under new terms, describes those new terms, and any additional terms subsequently conveyed to employees are consistent with those described by the successor prior to hire.
In a nutshell, lawyers are involved in mergers and acquisitions (M&A) – you know, when one company buys another company. Labor lawyers should be involved in the M&A process from the beginning so that all of the rights and options of the successor company remain in place after the purchase is complete.
Matt Austin is a Columbus, Ohio lawyer who owns Austin Legal, LLC, a boutique law firm with offices in central and northeast Ohio that limits its representation to employers dealing with labor, employment, and OSHA matters. Austin Legal’s Concierge Legal Services program is relied upon by companies to remain compliant and competitive. If you have employees, you need Concierge Legal Services. You can call Matt at (614) 285-5342 or email him at Austin@LaborEmploymentOSHA.com.