On August 27, 2015, in the case GVS Properties, LLC, Case No. 29-CA-077359, the National Labor Relations Board (the "Board") addressed the proper application of the Board's successorship doctrine in circumstances where a new employer is required to retain its predecessor's employees for a specific period of time, pursuant to a state or local worker retention statute. When addressing this issue, the Board also had to resolve whether the appropriate time to determine successorship status, in these circumstances, is when the new employer assumes control over the business and hires the predecessor's employees pursuant to the retention statute, or after the mandatory retention period ends.
GVS Properties, LLC ("GVS") purchased several real estate properties in New York City and decided to self-manage the properties, which eliminated the need for the unionized employees who performed those services. GVS sent letters to these employees advising that the terms and conditions of employment contained within the prior collective bargaining agreement were "revoked and nullified." Nonetheless, as the City's Displaced Building Service Workers Protection Act ("DBSWPA") required GVS to retain its predecessor's employees for at least 90 days, GVS hired seven of its predecessor's eight employees to perform the same jobs under the same working conditions, and advised that the employees would continue to be employed on a trial basis for 90 days, after which time GVS would determine its staffing needs.
During the 90-day transition period, the union which represented the employees and negotiated the prior collective bargaining agreement (the "Union") requested that GVS recognize and bargain with it as the exclusive collective bargaining representative of the employees. GVS refused and asserted that the request was premature because it would not employ a substantial and representative complement of employees until after expiration of the 90-day transition period mandated by the DBSWPA, when it would then determine whether the employees would be offered permanent employment. At the end of the transition period, GVS kept four of the previous eight workers and hired four new workers.
A complaint was filed against GVS, and the Administrative Law Judge below found 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. When rendering its decision, the Administrative Law Judge found that under 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), a new employer that continues its predecessor's business in substantially unchanged form and hires the predecessor's employees 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 employer.
THE BOARD'S RULING
In a 3-2 decision, the Board affirmed the Administrative Law Judge's ruling that the appropriate time to determine successorship status in these circumstances is when the new employer assumes control over the predecessor's business and hires the new employees, not at the expiration of the transition period required by a state or local worker retention statute.
The Board rejected GVS's argument that (i) it was not a successor because it did not voluntarily choose to hire the employees, but was forced to do so by the DBSWPA, and (ii) a successorship determination should not be made until after the 90 day DBSWPA-mandated transition period ended.
Relying on Burns and Fall River, the Board held that GVS was a "successor" with an obligation to bargain with the Union because (i) GVS made a "conscious decision" to purchase and maintain its predecessor's business in substantially unchanged form and hire employees of the predecessor as a majority of the work force, and (ii) GVS had actual or constructive notice of the retention requirements of the DBSWPA when it made the "conscious decision" to purchase the predecessor's business.
Thus, the NLRB found that GVS violated the Act when it refused to recognize and bargain with the Union.
GVS Properties, LLC, reaffirms the Board's longstanding rule that an employer's successorship determination is not impacted by the temporary status of its newly acquired workforce. This decision also clarifies, and perhaps extends, the rule, by holding that worker retention statutes do not provide a basis to delay bargaining. Importantly, this case also calls into question whether there is a distinction under the Act between a decision to purchase a business and a decision to compose a work force when a local worker retention statute is applicable. The bottom line is that employers and their attorneys should be aware of this determination that successorship status will not delay or diminish the rights of workers to bargain collectively, even during the phase of temporary retention.