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September 4, 2015

NLRB Clarifies Successorship Doctrine for New Employers

On August 27, 2015, the same day as the landmark Browning-Ferris decision (see our alert at http://www.putneylaw.com/cu_083115.html), the National Labor Relations Board (the “Board”) issued another split decision in GVS Properties, LLC, 362 NLRB No. 124, addressing whether a purchaser becomes a successor employer with an obligation to recognize and bargain with the union when it is required by a local worker retention law to hire the predecessor employer’s employees for a mandatory retention period. As a result of this decision, prospective purchasers in localities with worker retention statutes may be forced to recognize the predecessor employees’ union if requested even if only a minority of the workforce post-retention period ultimately consists of predecessor employees.

GVS Properties, LLC (“GVS”) acquired several real estate properties in New York City and decided to self-manage the properties, eliminating the need for service and maintenance work that had previously been contracted out to a unionized contractor. Under the New York City Displaced Building Service Workers Protection Act (“DBSWPA”), GVS was required to retain the unionized maintenance employees for a 90-day transition employment period. GVS and the union stipulated that GVS hired the employees pursuant to the DBSWPA.

During the 90-day retention period, the union requested recognition and bargaining. GVS refused, asserting that the request was premature because it would not employ a substantial and representative complement of employees until after the expiration of the 90-day retention period. In fact, at the end of the retention period, GVS discharged three unit employees and hired four new employees. The union did not challenge these actions, but filed an unfair labor practice charge based on the refusal to recognize and bargain.

The Board upheld the ALJ’s findings that GVS violated Section 8(a)(5) and (1) of the National Labor Relations Act (the “Act”) by failing and refusing to bargain with the union. The Board rejected GVS’s defenses that: (1) it was not a successor because it had not voluntarily chosen to hire these employees, but rather was compelled to do so by the DBSWPA; and (2) the successorship determination could not be made until after expiration of the 90-day transition period. Citing the Supreme Court’s decisions in NLRB v. Burns International Security Services, 406 U.S. 272 (1972), and Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27 (1987), the Board held that a new employer that makes “a conscious decision” to maintain its predecessor’s business in substantially unchanged form and hire employees of the predecessor as a majority of its work force, is a successor with an obligation to bargain with the union that represented those employees when they were employed by the predecessor. Applying this principle, the Board held that despite the fact that GVS was required by local law to retain the predecessor’s employees, it had nevertheless made the requisite “conscious” decision by purchasing the properties and taking over the predecessor’s business with actual or constructive knowledge of the retention requirements of the DBSWPA.

The Board emphasized that it has long held that the successorship determination is not affected by the temporary or probationary status of the predecessor’s workforce.

The dissent argued that the majority’s ruling conflates a purchasing employer’s decision to purchase a business with the decision to compose its workforce. The dissent further argued that by allowing DBSWPA to influence the question of successorship a matter of exclusive Federal labor law not only “paves the way for these statutes to run headlong into the Supremacy Clause of the Constitution,” but could effectively nullify such statutes on preemption grounds. The majority suggested that a purchasing employer subject to a worker retention statute could avoid “perfectly clear” successor status by announcing new terms and conditions of employment prior to or simultaneously with the expression of intent to retain their predecessors’ employees. As this issue was not before the Board, the majority’s comments are dicta.

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If you have any questions regarding this important decision by the Board, please do not hesitate to contact us.