The National Labor Relations Board's recent decision in Lily Transportation Corp., 363 NLRB No. 15, highlights the potential impact of a finding that a follow-on service provider is a "successor" to a prior provider.

The employer in this case is a trucking company that contracted to provide freight services to an automotive parts distribution center in Massachusetts.  The prior transportation provider for the distribution center had gone bankrupt and ceased providing services in October 2013.  A local of the International Association of Machinists had represented the former service provider's drivers.  In early November 2013, the employer began providing the same services to the distribution center.  In late November, the union demanded that the employer recognize it as the exclusive bargaining representative of the employer's drivers.  The employer refused.  In December 2013, a majority of the employer's drivers submitted signed statements to the employer indicating they did not wish to be represented by the union.

The union filed an unfair labor practice charge with the Board, alleging that the employer was a successor employer and was obligated to recognize and bargain with the union, notwithstanding the employees' statements that they did not want to be represented.  The Board agreed, explaining that there was a substantial continuity of operations between the prior business and the employer.  Further, a majority of the drivers at the Massachusetts distribution center had previously worked for the now-bankrupt predecessor employer and had been represented by the union.  The Board explained that under its 2011 decision in UGL-UNICCO Service Co., this rendered the employer a successor to the prior service provider.  As a successor, the employer was obligated to recognize the union on demand, and bargain with it in good faith, for a reasonable period of time.  During this "reasonable period," neither the employer nor its employees had the right to challenge the union's status as the exclusive representative of the employees.  Further, the employer was prohibited from withdrawing recognition from the union based on proof that its employees no longer supported or wished to be represented by the union.  As a successor, the Board explained, the employer was obligated to recognize and begin bargaining with the union upon demand, and the drivers' later statement that they did not want to be represented by the union was completely irrelevant.  The successor bar trumped the drivers' right to decide whether they wished to be represented by the union.

The specific length of time during which a successor is obligated to recognize and bargain with a predecessor's union varies from a minimum of six months to up to one year, depending on whether the successor has continued the terms of employment that were in effect under the predecessor or has instead implemented new terms of employment.  The concept that a union cannot be removed during this period is known as the "successor bar."  If the parties are able to reach agreement on terms for a new collective bargaining agreement, a similar concept known as the "contract bar" will prevent the employer and/or its employees from challenging the union's status for the length of the agreement, up to a maximum of three years.  Taken together, the successor bar and the contract bar may mean that a successor employer and its employees cannot challenge a union's representative status for up to four years following the initiation of a new business operation, where a prior business was unionized.

Where, as here, an employer replaces a prior unionized service provider and hires a portion of its workforce from among the prior employer's employees, or where a buyer purchases the assets of a defunct business and continues the operation with a workforce that consists in part of hold-over employees, the successor bar may come into play.  Employers that are considering stepping into these sorts of situations should consider the potential impact of the successor bar and any corresponding bargaining obligation when assessing the potential costs of a new venture.  As always, it is important to consult with experienced labor counsel regarding the specific circumstances involved in each situation.