When is an Employer a “Successor Employer” or a “Perfectly Clear Successor Employer”?

When an employer purchases another company or facility with a workforce covered by a collective bargaining agreement, it should pay careful attention to whether it is either a “successor employer” or a “perfectly clear successor employer” under the National Labor Relations Act (NLRA).  Here’s what employers need to know about these two different statuses:

Successor Employers:  A “successor employer” is a new employer that continues its predecessor’s business in substantially unchanged form and hires employees of the predecessor as a majority of its workforce.  An employer who qualifies as a successor employer has an obligation to bargain with the union that represented the employees while they were employed by the predecessor.  Because it is not usually evident whether the union will retain majority status in the new workforce, however, the duty to bargain with the union does not normally arise until after the successor establishes the initial terms and conditions of employment.  This means that a new employer who is merely a “successor employer” typically has an opportunity to change the terms and conditions of employment before the duty to bargain with the union arises.

Perfectly Clear Successor Employers:  If it is “perfectly clear” that a new employer will retain all of the employees of the bargaining unit, the obligation to bargain with the union may arise before the new employer sets the initial terms and conditions of employment.  A new employer is deemed to be a “perfectly clear successor employer” if it has either: (i) actively or, by tacit inference, misled employees into believing they would all be retained without change in their wages, hours, or conditions of employment; or (ii) failed to clearly announce its intent to establish a new set of conditions of employment prior to inviting former employees to accept employment.  Thus, to avoid becoming a perfectly clear successor employer, the new employer must clearly announce its intent to establish a new set of conditions prior to, or simultaneously with, its expression of intent to retain the predecessor’s employees.

The National Labor Relations Board (NLRB) discussed these two concepts in detail in its recent decision in Nexeo Solutions, LLC, 364 NLRB No. 44 (July 18, 2016).  In Nexeo Solutions, LLC, the NLRB held that the new employer was a “perfectly clear successor employer” because it informed the predecessor’s bargaining unit employees that they would be transferred to the new business, and then, a day later, advised them that they would be retained with equivalent salaries and benefits comparable to those provided by the predecessor.  The new employer did not announce an intent to change the terms and conditions of employment until three months after these initial communications were made.  Because of the initial communications, the NLRB reasoned that the union’s majority status in the new work force was “essentially guaranteed,” and the new employer was a perfectly clear successor who had a duty to bargain before imposing new conditions of employment.

Takeaway:  To avoid becoming a “perfectly clear successor employer,” an employer involved in an acquisition should clearly announce its intent to establish a new set of terms and conditions of employment for the acquired workforce prior to, or simultaneously with, its expression of intent to retain the predecessor’s employees.

About Michael Miller

Michael is a Chambers-rated attorney in Briggs and Morgan's Employment, Benefits, and Labor group and is head of the firm’s Employment Law Counseling and Compliance practice group. He has 25 years experience counseling employers to prevent unwanted litigation and advises companies of ongoing changes in federal, state and local employment law. Michael advises employers in all areas of employment law including discipline and discharge, leaves of absence, wage and hour compliance, non-compete and confidentiality agreements, affirmative action plans, background checking, and drug/alcohol testing. For Michael's full bio, click here.

Posted on July 25, 2016, in Unions and Labor Law and tagged . Bookmark the permalink. Comments Off on When is an Employer a “Successor Employer” or a “Perfectly Clear Successor Employer”?.

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