NLRB will focus on injunctions in successor cases: for potential buyers, 6 questions about their labor obligations

In another move to increase its relevancy and efficacy in the workplace, the National Labor Relations Board has indicated that it intends to focus on seeking injunctions in successor cases. 

Section 10(j) of the National Labor Relations Act authorizes the Board, upon issuance of a complaint, to seek a temporary injunction in US district court to stop unfair labor practices while the case is being litigated.  According to the Board, “[t]hese temporary injunctions are needed to protect the process of collective bargaining and employee rights under the Act, and to ensure that Board decisions will be meaningful.” 

In recent years, the Board has focused its attention on obtaining such injunctions for violations that occur during the period after a union’s certification, when parties are or should be bargaining for an initial collective bargaining agreement.  These violations include the traditional “nip in the bud” unfair labor practices, such as threats, coercive interrogations, surveillance of protected activities, improper grant of benefits and unlawful employee discipline, including discriminatory discharges.  According to the Board, in fiscal years 2012 and 2013 it sought and obtained bargaining orders in 16 of 19 first-contract bargaining cases, and relief in 80 percent of cases involving discharges during an organizing campaign.

Building on this success, in late April 2014, Richard F. Griffin, Jr., the Board’s General Counsel indicated that he has a “particular interest” in seeking injunctive relief in “cases involving a successor’s refusal to bargain and, more importantly, successor refusal-to-hire cases.”  He has instructed each Region to submit all such cases to the Board’s Injunction Litigation Branch.  These cases include those in which a successor employer refuses to recognize and bargain with an incumbent union and also a successor employer’s discriminatory refusal to hire its predecessor’s employees.  

While the Board always has had the authority to seek 10(j) injunctions in these cases, its renewed focus on them is noteworthy given the increase in transactional activity we have seen in 2014 and its success in first-contract cases.  Where the Board’s injunction efforts are successful, relief may include an order that the successor recognize and bargain with the incumbent union, rescind any unilateral changes made to the employees’ terms and conditions of employment and hire its predecessor’s employees.  In addition, where the existing collective bargaining agreement contains a successors-and-assigns clause, the clause may be enforced against the seller by an injunction precluding the sale of the business to any entity unwilling to adopt the agreement or by an action for damages. 

Therefore, it is imperative that, before closing, potential buyers assess what their labor obligations (if any) are.  For instance:

  • Is the seller’s workforce, or any part of it, represented by a union?
  • Is the buyer obligated to recognize and bargain with the union(s) representing the seller’s employees?
  • Is a collective bargaining agreement in place?  If so, is the buyer compelled to assume the seller’s collective bargaining agreement? 
  • Can the buyer set initial terms and conditions of employment? 
  • Has the buyer, through words or actions, forfeited its right to set initial terms and conditions of employment?
  • Is there any evidence or indication of threatened or pending organizing activity, petition(s) for recognition or labor strikes?

The answers to all of these inquiries are highly fact-specific and may affect a potential buyer’s strategy, risk assessment, terms of any purchase and sale agreement and even the decision to buy.

The Board’s General Counsel’s recent instruction to the Regions indicates that the Board now may pay increased attention to and more often seek injunctions in successor refusal-to-bargain and refusal-to-hire cases. But, notably, there are circumstances in which such conduct is perfectly lawful.  For example, absent a successors-and-assigns clause in a collective bargaining agreement, a buyer may have no obligation to bargain with the union representing its predecessor’s employees if the predecessor’s employees do not represent a majority of the buyer’s employees in an appropriate unit.  The same is true when the buyer makes changes in the predecessor’s business so that the identity of the enterprise does not remain substantially intact; in other words, employees who have been retained will understandably view their job situations as essentially altered by the sale.  In addition, a buyer may refuse to hire its predecessor’s employees for legitimate business reasons, rather than to evade a bargaining obligation or some other unlawful purpose.

Topics:  Injunctions, NLRA, NLRB, Successor Liability, Successors

Published In: Civil Remedies Updates, Labor & Employment Updates, Mergers & Acquisitions 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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