NLRB Says a Corporate Seller’s Conduct Can Prevent a Buyer from Setting Initial Terms of Employment

August 9, 2016 / , ,

The law surrounding a purchaser’s obligations to the seller’s union is complex. When structured accordingly, purchasers can set initial terms of employment while bargaining a new collective bargaining agreement. Until now, only the purchaser could bind itself to additional obligations to the seller’s union. Now, though, the seller can obligate the purchaser to inherit the seller’s union and seller’s collective bargaining agreement unbeknownst to the purchaser.

The National Labor Relations Board relied on the parties’ Purchase and Sale Agreement stating that the employees would be offered “(i) a base salary or wages no less favorable than those provided immediately prior to the Closing Date and (ii) other employee benefits, variable pay, incentive or bonus opportunities…substantially comparable in the aggregate” to those provided by the seller. The Board also focused on the seller’s communications, rather than the buyer’s, with the employees. For example:

  • On November 7, an email from seller’s president was delivered via hard copy to the employees stating, “We anticipate approximately 2,000 [Seller Company’s] employees will transfer to the new business.”
  • On November 8 an employee Q&A was posted on the intranet and the bulletin board stating, “Under the terms of the agreement, for at least 18 months following closing, the newly independent company is required to provide to each transferred employee, base salary and wages that are no less favorable than those provided prior to closing; and other employee benefits that are substantially comparable in the aggregate to compensation and benefits [currently enjoyed].

The Board’s reliance on these communications completely disregarded the buyer’s later statements, which made it clear that any continued employment would be under new and different terms and conditions. The purchaser’s statements included the following:

  • On February 16, the purchaser met with the union business agent and provided a draft copy of an offer letter to be distributed to the employees. The letter stated, “We think you should know that [Purchaser] has not agreed to assume any of [Seller’s] collective bargaining agreements. We have chosen not to adopt, as initial terms and conditions of employment, any of the provisions contained in any current or expired collective bargaining agreement…”
  • On February 17, the purchaser mailed the offer letters to the employees along with a document called “You New Benefits at a Glance,” which detailed the changes to the employee’s health insurance, life insurance, and retirement benefits should they accept the offer.

In relying so heavily on the seller’s statements, the NLRB blurred the identity of the speaker and the time at which the buyer’s responsibility for communication kicks in. It held that the seller’s statements to the employees may be imputed to the purchaser for purposes of the “perfectly clear successor” analysis, a stark departure from the Board’s previous requirement. Now, the purchaser’s obligation to notify the union of a change in terms and conditions may be triggered simultaneously with the seller’s effects bargaining obligation.

In the meantime, potential successors contemplating purchases from unionized sellers should:

  1. Carefully review purchase agreements for any language that could trigger a perfectly clear successor obligation under the Board’s new standard including obligations to provide similar or comparable wages and benefits to the seller’s employees.
  2. Negotiate strict limitations on the seller’s ability to communicate the terms of the deal to its employees or the ramifications of the deal on their continued employment.
  3. Recognize that although the seller has an effects bargaining obligation, the purchaser may want to consider insisting that any communications by the seller to the employees be coupled with affirmations that any continued employment with the buyer will be under different terms and conditions of employment.
  4. Potentially require that a decision on the initial terms and conditions of employment be made prior to execution of a purchase agreement including the terms of any communications regarding those initial terms.

Matt Austin is a lawyer based in the Columbus, Ohio office of Roetzel & Andress, LPA who limits his practice to representing employers dealing with labor, employment, and OSHA matters. You can call Matt at (614) 723-2010 or email him at maustin@ralaw.com.