Another Established Labor Rule Bites the Dust

The law of whether successor employers violate the National Labor Relations Act when they do not hire a majority of the predecessor’s employees and do not recognize and bargain with the predecessor’s union has taken a turn for the worse. The law used to allow successor companies to forgo bargaining with the predecessor’s union if the successor could prove that bargaining would be futile; successor companies no longer have that luxury.

Pressroom Cleaners took over a Hartford, Connecticut janitorial service contract from Capitol Cleaning. Capitol Cleaning had a collective bargaining agreement with the Service Employees Union International (SEIU). Although Pressroom performed the same business at the same location, it refused to hire a majority of Capitol employees because of their union affiliation. This is a textbook example of an unlawful discriminatory act. However, then-current law permitted Pressroom to prove that it would never have agreed to the terms of the Capitol’s collective bargaining agreement. If successful, Pressroom’s penalty for not hiring a majority of Capitol’s employees and not recognizing the union would have been rather lenient. Unfortunately, the penalty is now much stiffer.

Succinctly, the Board now holds that “when a successor employer has violated Section 8(a)(5) and (1) by unilaterally changing the predecessor’s terms and conditions of employment, the make-whole remedy will include restoration of the predecessor’s terms and conditions until the parties bargain in good faith to agreement or impasse. An employer may no longer attempt to prove what the terms and conditions would have been if it had complied with its obligation to bargain.”

Successor employers are no longer able to escape liability from paying compensation under the predecessor’s monetary terms from the time it takes over a business until it bargains to an agreement or impasse with the union. Since NLRB litigation can take years, the back pay owed by a successor could be substantial. In fact, Pressroom currently faces 3 years of liability. Companies that are considering acquiring the assets of a unionized company must consult with labor counsel to ensure it does not violate any of the successorship rules.