Last month, the National Labor Relations Board issued two more significant decisions reminding employers – unionized and non-unionized alike – that they may indirectly be subject to the National Labor Relations Act in ways previously unrealized. They did so by making it more difficult for employers using contracted staff or buying the assets of unionized employers to avoid either an obligation to bargain with unions representing the staffing company or predecessor’s employees, or even being locked into the terms unions may have had with those employers upon buying the assets of another employer.

USERS OF STAFFING AGENCIES BEWARE

The first of these cases is Miller & Anderson, 364 NLRB No. 39 (July 11, 2016). In this case, the Board’s greatly expanded its new concept of joint-employer liability under the NLRA arising when work is being done by a contractor while the contracting party retains limited control over the contractor’s workforce, as announced last year in its landmark decision in Browning-Ferris Industries, 362 NLRB No. 189 (August 27, 2015). Miller & Anderson addressed a slightly different scenario, that being when an employer operates a project or facility using its own employees and employees of a staffing company. The case involved a construction company using skilled trades employees (i.e., sheet metal workers) provided by staffing service.

The staffing company scenario is not a new issue for the NLRB. Its last major holding on this issue, though, was in 2004 (Oakwood Care Center, 343 NLRB 659 (2004)) in which the Board held that an employer could not be deemed a joint employer with a staffing agency, and thereby include the employees of both employers into one bargaining unit, unless both employers agreed to the combination of their respective employees into one bargaining unit. In Oakwood, the Board reversed a short-lived decision to the contrary. M.B. Sturgis, Inc. (2000). By issuing its decision in Miller & Anderson, the Board has swung the pendulum far to the other side and reversed decades of precedent providing stability and predictability in a company’s use of staffing company employees.

Under the new rule, unions seeking to organize regular employees of “user” companies (i.e., those using temporary employees employed by staffing companies) and regular employees of “supplier” companies (i.e., staffing companies) no longer need the consent of both employers to organize both sets of employees into one bargaining unit with both employers. Unions can pursue such combined units if two conditions are met: 1) the user employer is a “joint employer” of the temporary workers, a standard which is much easier to satisfy since the Browning-Ferris decision; and 2) the user’s employees and the temporary workers share a “community of interest,” such as common supervision, hours, working conditions and training. If a union is successful in organizing such a unit, both employers will have to go to the bargaining table to work on one contract for the combined unit.

Impact – Consequently, user employers are now more vulnerable to being unionized if their employees work alongside supplier employees. The reverse is also true in that supplier employers could be forced to bargain with unionized user employees. Particularly since Browning-Ferris and its low threshold for establishing a “joint employment” relationship, both user and supplier employers should carefully review the scope of control one employer may have over the other’s employees, both in the service contract and any collective bargaining agreement either employer may have with respect to its own employees. Further, in addition to any bargaining obligation which may be created by these relationships, user employers may also be deemed jointly liable for any unfair labor practices incurred by their supplier employers.

ASSET BUYERS BEWARE

The second landmark decision, Nexeo Solutions, LLC, 364 NLRB No. 44 (July 18, 2016), involves the issue of who sets the initial terms and conditions of employment when an employer buys the assets of another company and employs most of the seller’s employees who worked under a collective bargaining agreement with the seller. Under prior precedent, it was commonly understood that a buyer was free to unilaterally set the initial terms and conditions of employment in an asset purchase unless it was “perfectly clear” that the buyer was to employ a majority of the seller’s employees under terms and conditions substantially similar to those provided by the seller.

This precedent dates back to two decisions issued in the early 1970s, one by the U.S. Supreme Court in Burns Security Service, 406 U.S. 272 (1972), and the other by the NLRB, Spruce UP, 209 NLRB 194 (1974).

  • Under Burns Security, it was held that when a buyer continues the seller’s business in a substantially unchanged form with a majority of the employees being formerly employed by the seller under a collective bargaining agreement, the buyer assumes a duty to bargain with the union of the seller’s employees, but it does not assume the obligations under the seller’s union contracts unless is expressly agrees to do so. Thus, the Court held, employers could set the initial terms of employment because it is not known until the buyer completes its hiring process that the operation will continue with a majority of the seller’s unionized employees. The Court noted, though, that “there will be instances in which it is perfectly clear that the new employer intends to retain all of the employees in the unit,” and in those instances, a buyer/successor is required to “initially consult with the employees’ bargaining representative before he fixes terms.”
  • Applying Burns Security two years later, the Board held in Spruce UP that if a seller announces its new terms of employment simultaneously with its invitation to the seller’s worker to accept employment with the buyer, the buyer is not a “perfectly clear” employer of the majority since it is possible that many of the seller’s employees will reject the opportunity to work for the buyer under those terms. In that case, the Board concluded, the buyer had no duty to bargain over the setting of the initial terms of employment.

In Nexeo, the Board seems to have blurred when an employer may be deemed a “perfectly clear” successor. Nexeo’s purchase agreement committed it to offer all of the seller’s workforce jobs prior to the Closing Date, and that each employee so hired was to receive “a base salary or wages not less favorable than those provided immediately prior to the Closing Date,” and benefits and bonus plans were to be “substantially comparable in the aggregate as those provided by [the seller].” This basic information was shared with the seller’s employees by the seller. A few months later, the buyer sent offer letters to the seller’s employees stating that it would not assume the union contract, that the employees would participate in a 401(k) plan and not the union plan, and that their health insurance coverage would also be different than that available by the seller.

The Board reversed the holding of an Administrative Law Judge who found that the totality of the messages was that the buyer was setting new employment terms for the employees. Instead, the Board held that terms of the purchase agreement and the seller’s communications to its employees established that the seller was a “perfectly clear” successor with an obligation to bargain with the seller employees’ union before setting or changing the initial terms of employment.

Impact – As a result of Nexeo, buyers wishing to avoid being deemed a “perfectly clear” successor should be even more careful in handling the transition of workforces when the seller’s workforce is unionized. Language should be clear at every step feasible that the initial terms will be set by the buyer, they will be different from what the seller may have provided, and communications regarding terms by the seller should be restricted or banned.

CONCLUSION

These cases highlight the initiatives of the current NLRB to expand the breadth of the NLRA and to better enable unions to unionize workplaces. Employers – even non-unionized employers – should regularly review their policies and practices to determine if new NLRB developments have made those which were thought to be legal for years are, according to the current NLRB, illegal. Also, employers engaged in contracting out services, using staff from staffing agencies, or buying the assets of unionized companies, must now – more than even just a few months ago – proceed with extreme caution and an eye towards trying to keeping the workforces separate or retaining the ability to unilaterally set initial terms of employment upon a business purchase.