Does the Union Come with the Company You Buy?

Savvy businesses have known for years that they can buy the assets of a company whose employees are represented by a union, but as long as a majority of the employees they hire to operate those assets are not employees of the seller, they can avoid bargaining with that union. While that is still the general rule, a decision of the National Labor Relations Board has put an obstacle in the way of that strategy by creating a new presumption concerning a purchaser's hiring practices.

In Planned Building Services, 347 NLRB No. 64, July 31, 2006, the Board clarified and set forth the analytical framework it will use in deciding whether an employer that purchases the assets of another employer whose employees were represented by a union ("Successor") unlawfully refused to hire employees of the seller ("Predecessor").

In Planned Building Services, the Successor had not hired its Predecessor's employees, but instead transferred employees from other of its locations to those of its Predecessor. The Successor then offered to consider the Predecessor's employees for hire at the Successor's other locations. It was apparently undisputed that the Successor was aware of the law regarding successorship, and specifically sought to avoid a bargaining obligation with the union that represented the Predecessor's employees.

The Board decided that a "refusal to hire the Predecessor's employees" case is more like a discharge case than a hiring case. The Board noted that the Predecessor's employees presumptively meet the successor's qualifications for hire because a Successor's business is generally a continuation of its predecessor's business. The Board stated that it will presume that the Successor needs to hire employees and that the Predecessor's employees are qualified. If the Successor does not hire the Predecessor's employees, and if the Successor was motivated by a desire to avoid dealing with the union, the Board will now require the Successor to prove that it would not have hired the Predecessor's employees even if it was not motivated by a desire to avoid the union.

In Planned Building Services, the Board held that since the Successor's unfair labor practice of unlawfully refusing to hire the Predecessor's employees had prevented the parties from bargaining, the Successor was obligated to bargain with the union, and was not privileged to set its own terms and conditions at the outset when it took over—in other words, the Successor not only got the union, it also got stuck with the terms of the Predecessor's collective bargaining agreement until it negotiated a new one.

Planned Building Services was a unanimous (5-0) decision by the Board (a very rare item indeed). Businesses need to be aware of it as they consider purchase of the assets of union-represented companies.

Michael Boldt is a partner in Ice Miller’s Labor Practice Group. His primary area of practice is on the management side, including responding to union organizational drives, collective bargaining, arbitration, employee discipline, construction labor law, and equal employment opportunity law.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice.  The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.