As the economy improves, companies are becoming more active in the merger and acquisition space. I can personally attest that the M&A lawyers in my firm are busy. With all the other areas of concern to focus on, deal lawyers and business managers oftentimes forget to include labor attorneys on deals involving unionized companies. To be sure, some know the law cold and don’t need my involvement. For others, I ask: Did you know the law changed in Q4 last year?
The old law, Planned Building Services (PBS), held that a successor could reduce its liability for unlawfully failing to hire former employees by proving that it would have bargained in good faith to an agreement or impasse with the union on less generous monetary terms than what existed under the predecessor’s contract. This effectively reduced any potential back pay award that an employer might owe for unlawfully failing to hire a majority of the predecessor’s employees.
The new law, Pressman Cleaners, requires employers to: 1) recognize and bargain with the union; 2) restore the “status quo” by putting in place the employment terms of its predecessor until it bargains to an agreement or impasse with the union; and 3) pay the former employees back pay and benefits under the monetary terms of the predecessor’s contract until such time as a new agreement or impasse was reached by the parties.
One of the major differences between PBS and Pressman Cleaners is the harsh monetary penalty imposed under Pressman Cleaners for non-compliance. The 2006 Board in PBS specifically held that 1) it did not have authority to issue punitive remedies; 2) it could not impose substantive contract terms on parties; and 3) it could not require a successor employer to adopt the contract terms set forth in its predecessor’s contract. According to the 2014Pressman Cleaners Board, PBS was “based upon a misunderstanding of the NLRB’s traditional remedy in successorship avoidance cases, inconsistent with other Board precedent, and flawed as a matter of policy.” Harsh words from the current NLRB.
While Pressman Cleaners is, on its own, a bad case for companies, I believe it is the precursor for the Board to overruleSpruce Up, which only requires successor employers to bargain with a union before setting the initial terms and conditions of employment under very limited and narrow circumstances. It also reconfirms the current Board’s commitment to finding a new “perfectly clear successor test” to entrap any successor that commits to hire a majority of the predecessor’s workforce early in the process of taking over the predecessor’s operations.