Court Orders Disputed Successor Employer to Bargain with Union

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A California federal district court granted temporary injunctive relief, requiring the purchaser of a bankrupt hospital to temporarily recognize and bargain with the union that represented nurses employed by the hospital’s seller, pending the outcome of a National Labor Relations Board (“NLRB”) hearing.  

After a bankruptcy court granted the seller’s motion to reject the collective bargaining agreement it had with the California Nurses Association (“CNA”), the purchaser, Avanti Health System, LLC (“Avanti”), recruited and hired employees from the hospital.  

Under the National Labor Relations Act (“Act”), a successor employer has a duty to bargain when there is a “substantial continuity of identity in the business enterprise.”  Generally, “substantial continuity” is established when the new employer conducts essentially the same business as the former employer and hires a majority of its workforce from the union represented bargaining unit of the predecessor employer. 

Avanti refused to bargain with the CNA, maintaining that it was not a successor employer because it did not hire a majority of its nurses from the bargaining unit of the predecessor’s represented nurses. CNA then filed an unfair labor practice charge with the NLRB.  

The NLRB Regional Director conducted an investigation and issued a complaint, alleging that Avanti had indeed hired a majority of its workforce from the predecessor’s represented bargaining unit, and therefore has a duty to bargain with the union.  

One might wonder how a dispute could arise over a simple arithmetic calculation like the majority issue here.  In this case there are two reasons.  First, Avanti maintains that some of its hires are supervisors, and that could affect the majority calculation since supervisors are not “employees” within the meaning of the Act. 

Second, disputes about majority calculation frequently depend on when the “snapshot” of the new employer’s workforce is taken.  Board law dictates that the relevant time is when the new employer has hired a representative compliment of employees.  Here, the parties dispute when a representative compliment was achieved.  Obviously, differences on that issue can lead to disputes about the majority calculation. 

In addition to filing a complaint before the NLRB, the regional director filed a petition for an injunction under section 10(j) of the Act with the United States District Court for the Central District of California, seeking an interim order requiring Avanti to bargain with CNA pending disposition of the unfair labor practice complaint by the NLRB. 

In applying the Supreme Court’s standard, the district court granted the regional director’s petition because, according to the court, the regional director had established: 

  • a likelihood of success on the merits;
  • a likelihood of irreparable harm in the absence of preliminary relief;
  • the balance of equities tipped in the regional director’s favor; and
  • an injunction was in the public interest.   

In determining the likelihood of success on the merits, the court had to consider conflicting evidence as to whether Avanti really employed a majority of the seller’s nurses.  The court noted its intent to give “considerable deference” to the Board on such a petition.  In doing so, the court deferred to the regional director’s methodology in determining whether CNA nurses established a majority of the hospital’s current nursing staff.  

The court also reasoned that withdrawal of representation before the final decision could result in irreparable harm, while the hardships respondents claimed as a result of injunctive relief were minimal because it was “not compelled to do anything except bargain in good faith.”  

This situation presented by this case is not unusual.  Frequently employers who acquire assets where the seller's employees were represented by a union are subject to successorship claims.  But employers should take note of the court’s willingness to defer to the Regional Director's determinations on such issues as majority status and representative compliment of employees, as well as the NLRB's willingness to seek and the court's willingness to grant an injunction, requiring an employer to engage in collective bargaining as part of an interim remedy, even when the employer disputes its successor status. 

Published In: Administrative Agency Updates, Civil Remedies Updates, General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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