United States: Successor General Counsel Robb Signals Potential Successorship Retrenchment

Seyfarth Synopsis: On Friday, December 1, 2017, newly appointed NLRB General Counsel Peter Robb issued a memo containing a broad overview of his initial agenda as General Counsel. It previews many anticipated developments during the Trump Administration. Our blog is exploring a different aspect of the memo each day during the first three weeks of December. Click here and here to find prior posts.

Last week's issuance of General Counsel Memo 18-02 gives companies hope that the Obama Board's controversial successorship precedents may be reversed.  General Counsel Robb directed that successorship cases involving the following decisions be submitted to Advice for review: GVS Properties, LLC, 362 NLRB No. 194 (2015); Nexeo Solutions, LLC, 364 NLRB No. 44 (2016); Creative Vision Resources LLC, 364 NLRB No. 91(2016).  Each case merits reconsideration.

Successorship:  Whether an asset buyer has a duty to bargain depends on whether (1) a majority of the buyer's workforce consists of the former employees of the seller, (2) the buyer's "operational structure and practices differed from those of" the seller, and (3) the unit would no longer be an appropriate one. NLRB v. Burns Int'l Sec. Servs, Inc., 406 U.S. 272 (1972).  Even if the buyer is a Burns successor that must recognize and bargain with the union, it is free to set initial terms and conditions of employment unless it is a "perfectly clear" successor:  "[T]here will be instances in which it is perfectly clear that the new employer plans to retain all of the employees in the unit and in which it will be appropriate to have him initially consult with the employees' bargaining representative before he fixes terms." Id.

GVS Properties:   In GVS Properties, an asset buyer required by a local law to retain the predecessor's workforce for a certain initial time period was found to be a Burns successor even though it had no choice in whom to hire.  Dissenting Board Member Johnson argued that, based on Fall River Dyeing v. NLRB, 482 U.S. 27, 40-41 (1987), a buyer can become a successor only if it does so voluntarily, i.e., if it makes a "conscious decision" to hire a majority of the predecessor's employees. When a worker retention statute applies, the Burns test could thus only be applied upon the expiration of the state mandated employment period, after the employer could freely choose whether and how many of the predecessor employees to retain.

The Board majority disagreed, claiming that GVS made its "conscious" decision to have a majority of its workforce consist of predecessor employees when it acquired assets in a locale subject to the retention law. The majority analogized to prior cases where the Board found successorship to apply when buyers were required to retain the predecessor's employees as part of the purchase agreement, or when employees were hired on a probationary basis.

Member Johnson warned that the Board's decision likely would nullify local worker retention statutes, for the courts would find them preempted by the NLRA given that states and local governments effectively could use such laws to force purchasing employers to recognize unions. Indeed, in Rhode Island Hospitality Ass'n v. City of Providence, 667 F.3d 17 (1st Cir. 2011), the court rejected preemption claims on the assumption that, under Burns, a successor employer could not be forced to recognize the union during a statutory retention period.

Nexio Solutions and Creative Vision Resources:  The other two decisions expanded the when a buyer was a "perfectly clear" successor bound by the predecessor's contract.  In Nexio Solutions, the Board found perfectly clear successorship — not because of what the buyer did or said — but because the seller initially promised employees that they would be hired by the buyer under basically the same terms and conditions of employment.  Traditionally, for perfectly clear successorship to trigger the buyer must either mislead employees into believing there would be no changes or fail to clearly announce an intent to set new terms prior to inviting former employees to accept employment. The Board imputed seller's statements to the buyer, and disregarded the buyer's statements at the time employees were offered positions that conditioned employment on different terms and conditions of employment.

Dissenting Member (now Chair) Miscimarra rejected the majority's claims that the buyer must be held to the seller's statements since the sale agreement provided for buyer review of communications, that it somehow should have repudiated the statements, or that seller was acting as the buyer's agent.  He also rejected claims that the sale agreement somehow made the buyer a perfectly clear successor since it provided both that employees would be offered positions and that employment terms would be substantially comparable in the aggregate.  Miscimarra decried the decision as ungrounded in the law of agency and counter to the policies underlying Burns and Spruce Up.

In Creative Vision Resources, the Board found perfectly clear successorship where:  the understanding was anyone who submitted an application would be offered a position; only a minority of employees provided applications were advised at the time that there would be different employment terms; all of the personnel, who were then independent contractors, received W-4 withholding forms with their applications; and on the morning operations were to begin employees were advised of the new terms, causing several to not to accept employment.  The Board determined that the successor had expressed an intention to retain the employees, and became a perfectly clear successor by not concurrently revealing its intention to establishing new employment terms when issuing applications.  Advising employees the first morning they showed up to work was insufficient since the successor had already expressed its intent to retain the predecessor's employees.

Dissenting Member (Chair) Miscimarra argued the successor had effectively communicated its intent to set new terms on or before employees were invited to accept employment (which he considered under the facts of this case to be the morning operations started) because: a number of employees had been told in advance; the W-4 withholding forms clearly portended different employment conditions; and before work actually started such that employees could accept employment all were told of the changes.  Miscimarra criticized the majority for applying the law in "an excessively rigid and formalistic manner that does not do justice to the unique facts of this case," reminded them that the exception must remain a narrow one, and noted that the burden of proof was on the General Counsel, not the employer.  Miscimarra also argued that an employer could not be considered to be a perfectly clear successor unless and until the union demanded recognition.

Whether/when a buyer subject to a retention statute is to be considered to be a successor, and the conditions under which are buyer might be a perfectly clear successor are critical issues companies need certainty on when acquiring businesses.  While a reversal of these three precedents would benefit employers, they are still the law.  Companies not wishing to become test cases for the Trump Board should carefully follow current successorship precedents when acquiring businesses–and hope the Board gets its test cases soon.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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