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Davis Brown Employment and Labor Law Blog

Bargaining Obligations when Acquiring a Unionized Business - August 15, 2019

When a business acquires the assets of a unionized facility there are very few options for continuing operations of the business with the same employees without assuming the obligation to bargain with the union.

Once the acquiring entity hires a majority (50% plus 1) of its employees from the prior employer, the obligation to bargain with the union that represented the employees at the prior employer attaches to the acquiring employer. 

This does not mean the acquiring employer must assume the prior employer’s collective bargaining agreement, it just assumes the obligation to bargain with the Union.   That is true even if the acquiring employer commits unfair labor practices prior to setting the terms of employment.

In Ridgewood Health Care Center, the NLRB reversed several lines of cases that held that an acquiring employer that commits unfair labor practices may not set initial terms and is bound to the terms of the collective bargaining agreement until a new agreement is negotiated. The buyer in Ridgewood told the employees that they would not be represented by a Union and it refused to hire four employees because of their union ties.  While the NLRB ordered that the four employees be hired, it said that the economic realities of buying a failing business dictate that the employer should be able to set the initial terms of employment even if it does commit an unfair labor practice.

Important Bargaining Considerations

There are two important considerations when setting the initial terms.  

  1. Once the initial terms are set, the acquiring employer may not change any of the terms unless there is an agreement with the union to change the terms.  Any unilateral change in an initial term would result in an unfair labor practice. 
    For example, if an employer sets the initial terms with employees paying $100/mo. for family health coverage and $35/mo. for single coverage, those terms may not be changed unless there is an agreement with the union to make the change. 
  2. If there are prior terms of employment that are not changed by the initial terms, the NLRB will assume that the prior terms still apply. 
    For example, if an employer does not have an attendance policy as a part of the initial terms of employment and the prior employer did have a policy, the prior employer’s policy will remain in effect until a new one is negotiated.  This makes setting initial terms very significant to the acquiring employer.

Assuming the Bargaining Agreement

An acquiring employer should be very hesitant to assume the collective bargaining agreement and associated bargaining and employment history. When the collective bargaining agreement is assumed, the past practices, prior and pending grievances as well as “side agreements” will bind the acquiring employer.

As a general proposition, the acquiring employer would have to assume the same exact benefits (not necessarily the same carriers) as the prior employer. It would assume the same work rules unless work rules were not bargained by the contract. Prior to assuming this relationship, it is important to understand:

  • All pending grievances.  For example, if there is a pending termination, the employee could be brought back to work with back pay which would be the obligation of the acquiring employer.
  • All past practices not in the agreement.  For example, if there is an unwritten practice of allowing people to trade shifts, the acquiring employer would assume that practice.
  • All work rules.  This includes any attendance policy, shop rules, or other everyday practices of the prior employer.
  • All benefits, including vacation, holidays, and the precise terms of benefit plans.  The Union will expect there to be NO changes in terms of the benefits.
  • Pension plan obligations. This could be a significant obligation. If the union is a part of an underfunded multiemployer plan that liability could fall on the acquiring employer for up to five years after the obligation is over. It could also be a problem if this is a specifically defined benefit plan unique to this facility that is underfunded.

What if the acquiring employer hires an all-new workforce and ignores the union?  This strategy may sound like a good idea, but it is not.  The prior union will certainly file unfair labor practice charges against the acquiring employer and if it is found that qualified employees were not hired because of their union affiliation, the NLRB could enter an order forcing the acquiring employer to hire those employees that it refused to hire and pay them back pay.

Bottom Line

When any business acquires the assets of a unionized employer, it should review and understand the collective bargaining agreement and then establish a comprehensive plan to hire a workforce and set the initial terms of employment before the acquisition is finalized. 

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