Source: https://www.legalcrystal.com/case/103503/howard-johnson-co-inc-vs-hotel-employees
Timestamp: 2018-02-21 10:50:01
Document Index: 286675658

Matched Legal Cases: ['§ 301', '§ 301', '§ 301', '§ 301', '§ 301', '§ 301', '§ 301', '§ 301', '§ 8', '§ 158', '§ 301', '§ 301']

Howard Johnson Co Inc Vs Hotel Employees - Citation 103503 - Court Judgment | LegalCrystal
Howard Johnson Co., Inc. Vs. Hotel Employees - Court Judgment
LegalCrystal Citation legalcrystal.com/103503
Case Number 417 U.S. 249
Appellant Howard Johnson Co., Inc.
howard johnson co., inc. v. hotel employees - 417 u.s. 249 (1974) u.s. supreme court howard johnson co., inc. v. hotel employees, 417 u.s. 249 (1974) howard johnson co., inc. v. detroit local joint executive board, hotel & restaurant employees & bartenders international union, afl-cio no. 73-631 argued march 19-20, 1974 decided june 3, 1974 417 u.s. 249 certiorari to the united states court of appeals for the sixth circuit syllabus petitioner purchased the assets of a restaurant and motor lodge under an agreement whereby the sellers, who had been operating the enterprises under franchises from petitioner, retained the real property and leased it to petitioner, and petitioner expressly did not assume any.....
Howard Johnson Co., Inc. v. Hotel Employees - 417 U.S. 249 (1974)
U.S. Supreme Court Howard Johnson Co., Inc. v. Hotel Employees, 417 U.S. 249 (1974)
Held: Petitioner was not required to arbitrate with the union in the circumstances of this case, since there was plainly no substantial continuity of identity in the workforce hired by petitioner with that of the sellers, and no express or implied assumption of the agreement to arbitrate. John Wiley & Sons v. Livingston, 376 U. S. 543 , distinguished. Petitioner had the right not to hire any of the sellers' employees, if it so desired, NLRB v. Burns Security Services, 406 U. S. 272 , and this right cannot be circumvented by the union's asserting its claims in a § 301 suit to compel arbitration, rather than in an unfair labor practice context. Pp. 417 U. S. 253 -265.
MARSHALL, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, STEWART, WHITE, BLACKMUN, POWELL, and REHNQUIST, JJ., joined. DOUGLAS, J., filed a dissenting opinion, post, p. 417 U. S. 265 .
Inc., and the Belleville Restaurant Co., a corporation wholly owned by P. L. Grissom & Son -- had operated a Howard Johnson's Motor Lodge and an adjacent Howard Johnson's Restaurant in Belleville, Michigan, under franchise agreements with the petitioner. Employees at both the restaurant and motor lodge were represented by the respondent Hotel & Restaurant Employees & Bartenders International Union. [ Footnote 1 ] The Grissoms had entered into separate collective bargaining agreements with the Union covering employees at the two establishments. Both agreements contained dispute settlement procedures leading ultimately to arbitration. Both agreements also provided that they would be binding upon the employer's "successors, assigns, purchasers, lessees or transferees."
Id. at 376 U. S. 548 . Mr. Justice Harlan, writing for the Court, emphasized "the central role of arbitration in effectuating national labor policy" and preventing industrial strife, and the need to afford some protection to the interests of the employees during a change of corporate ownership. Id. at 376 U. S. 549 .
-- was a " fundamental premise'" of the federal labor laws id. at 406 U. S. 287 , quoting H. K. Porter Co. v. NLRB,
397 U. S. 99 , 397 U. S. 108 (1970), and that it was therefore improper to hold Burns to the substantive terms of a collective bargaining agreement which it had neither expressly nor impliedly assumed. Burns also stressed that holding a new employer bound by the substantive terms of the preexisting collective bargaining agreement might inhibit the free transfer of capital, and that new employers must be free to make substantial changes in the operation of the enterprise. 406 U.S. at 406 U. S. 287 -288.
The courts below held that Wiley, rather than Burns, was controlling here on the ground that Burns involved an NLRB order holding the employer bound by the substantive terms of the collective bargaining agreement, whereas this case, like Wiley, involved a § 301 suit to compel arbitration. Although this distinction was, in fact, suggested by the Court's opinion in Burns, see id. at 406 U. S. 285 -286, we do not believe that the fundamental policies outlined in Burns can be so lightly disregarded. In Textile Workers v. Lincoln Mills, 353 U. S. 448 (1957), this Court held that § 301 of the Labor Management Relations Act authorized the federal courts to develop a federal common law regarding enforcement of collective bargaining agreements. But Lincoln Mills did not envision any freewheeling inquiry into what the federal courts might find to be the most desirable rule, irrespective of congressional pronouncements. Rather, Lincoln Mills makes clear that this federal common law must be "fashion[ed] from the policy of our national labor laws." Id. at 353 U. S. 456 . MR. JUSTICE DOUGLAS described the process of analysis to be employed:
Id. at 353 U. S. 457 . It would be plainly inconsistent with this view to say that the basic policies found controlling in an unfair labor practice context may be disregarded by the courts in a suit under § 301, and thus to permit the rights enjoyed by the new employer in a successorship context to depend upon the forum in which the union presses its claims. [ Footnote 2 ] Clearly the reasoning of Burns must be taken into account here.
We find it unnecessary, however, to decide in the circumstances of this case whether there is any irreconcilable conflict between Wiley and Burns. We believe that, even on its own terms, Wiley does not support the decision of the courts below. The Court in Burns recognized that its decision "turn[ed] to a great extent on the precise facts involved here." 406 U.S. at 406 U. S. 274 . The same observation could have been made in Wiley, as indeed it could be made in this case. In our development of the federal common law under § 301, we must necessarily proceed cautiously, in the traditional case-by-case approach of the common law. Particularly in light of the difficulty of the successorship question, the myriad factual circumstances and legal contexts in which it can arise, and the absence of congressional guidance as to its resolution, emphasis on the facts of each case as it arises is especially appropriate. The Court was obviously well aware of this in Wiley, as its guarded, almost tentative statement of its holding amply demonstrates.
becomes apparent that the decision below is an unwarranted extension of Wiley beyond any factual context it may have contemplated. Although it is true that both Wiley and this case involve § 301 suits to compel arbitration, the similarity ends there. Wiley involved a merger, as a result of which the initial employing entity completely disappeared. In contrast, this case involves only a sale of some assets, and the initial employers remain in existence as viable corporate entities, with substantial revenues from the lease of the motor lodge and restaurant to Howard Johnson. Although we have recognized that ordinarily there is no basis for distinguishing among mergers, consolidations, or purchases of assets in the analysis of successorship problems, see Golden State Bottling Co. v. NLRB, 414 U. S. 168 , 414 U. S. 182 -183, n. 5 (1973), we think these distinctions are relevant here for two reasons. First, the merger in Wiley was conducted "against a background of state law that embodied the general rule that, in merger situations the surviving corporation is liable for the obligations of the disappearing corporation," Burns, 406 U.S. at 406 U. S. 286 , which suggests that holding Wiley bound to arbitrate under its predecessor's collective bargaining agreement may have been fairly within the reasonable expectations of the parties. Second, the disappearance of the original employing entity in the Wiley merger meant that, unless the union were afforded some remedy against Wiley, it would have no means to enforce the obligations voluntarily undertaken by the merged corporation, to the extent that those obligations vested prior to the merger or to the extent that its promises were intended to survive a change of ownership. Here, in contrast, because the Grissom corporations continue as viable entities with substantial retained assets, the Union does have a realistic remedy to enforce their contractual obligations. Indeed, the Grissoms
have agreed to arbitrate the extent of their liability to the Union and their former employees; presumably this arbitration will explore the question whether the Grissoms breached the successorship provisions of their collective bargaining agreements, and what the remedy for this breach might be. [ Footnote 3 ]
Interscience Encyclopedia, Inc., 55 Lab.Arb. 210, 218 (1970). [ Footnote 4 ]
The claims which the union sought to compel Wiley to arbitrate were thus the claims of Wiley's employees as to the benefits thy were entitled to receive in connection with their employment. It was on this basis that the Court in Wiley found that there was the "substantial continuity of identity in the business enterprise," 376 U.S. at 376 U. S. 551 , which it held necessary before the successor employer could be compelled to arbitrate.
Here, however, Howard Johnson decided to select and hire its own independent workforce to commence its operation of the restaurant and motor lodge. [ Footnote 5 ] It therefore
hired only nine of the 53 former Grissom employees, and none of the Grissom supervisors. The primary purpose of the Union in seeking arbitration here with Howard Johnson is not to protect the rights of Howard Johnson's employees; rather, the Union primarily seeks arbitration on behalf of the former Grissom employees who were not hired by Howard Johnson. It is the Union's position that Howard Johnson was bound by the preexisting collective bargaining agreement to employ all of these former Grissom employees, except those who could be dismissed in accordance with the "just cause" provision or laid off in accordance with the seniority provision. It is manifest from the Union's efforts to obtain injunctive relief requiring the Company to hire all of these employees that this is the heart of the controversy here. Indeed, at oral argument, the Union conceded that it would be making the same argument here if Howard Johnson had not hired any of the former Grissom employees, [ Footnote 6 ] and that what was most important
to the Union was the prospect that the arbitrator might order the Company to hire all of these employees. [ Footnote 7 ]
406 U.S. at 406 U. S. 287 -288. We rejected the Board's position in part because
Id. at 417 U. S. 288 . Clearly, Burns establishes that Howard Johnson had the right not to hire any of the former Grissom employees, if it so desired. [ Footnote 8 ] The Union's effort to circumvent this holding by asserting its claims in a § 301 suit to compel arbitration, rather than in an unfair labor practice context cannot be permitted.
We do not believe that Wiley requires a successor employer to arbitrate in the circumstances of this case. [ Footnote 9 ]
The Court there held that arbitration could not be compelled unless there was "substantial continuity of identity in the business enterprise" before and after a change of ownership, for otherwise the duty to arbitrate would be "something imposed from without, not reasonably to be found in the particular bargaining agreement and the acts of the parties involved." 376 U.S. at 376 U. S. 551 . This continuity of identity in the business enterprise necessarily includes, we think, a substantial continuity in the identity of the workforce across the change in ownership. The Wiley Court seemingly recognized this, as it found the requisite continuity present there in reliance on the "wholesale transfer" of Interscience employees to Wiley. Ibid. This view is reflected in the emphasis most of the lower courts have placed on whether the successor employer hires a majority of the predecessor's employees in determining the legal obligations of the successor
in § 301 suits under Wiley. [ Footnote 10 ] This interpretation of Wiley is consistent also with the Court's concern with affording protection to those employees who are, in fact, retained in "[t]he transition from one corporate organization to another" from sudden changes in the terms and conditions of their employment, and with its belief that industrial strife would be avoided if these employees' claims were resolved by arbitration, rather than by " the relative strength . . . of the contending forces.'" Id. at 376 U. S. 549 , quoting United Steelworkers v. Warrior & Gulf Navigation Co., 363 U. S. 574 , 363 U. S. 580 (1960). At the same time, it recognizes that the employees of the terminating employer have no legal right to continued employment with the new employer, and avoids the difficulties inherent in the Union's position in this case. This holding is compelled, in our view, if the protection afforded employee interests in a change of ownership by Wiley is to be reconciled with the new employer's right to operate the enterprise with his own independent labor force.
It is important to emphasize that this is not a case where the successor corporation is the "alter ego" of the predecessor, where it is "merely a disguised continuance of the old employer." Southport Petroleum Co. v. NLRB, 315 U. S. 100 , 315 U. S. 106 (1942). Such cases involve a mere technical change in the structure or identity of the employing entity, frequently to avoid the effect of the labor laws, without any substantial change in its ownership or management. In these circumstances, the courts have had little difficulty holding that the successor is in reality the same employer, and is subject to all the legal and contractual obligations of the predecessor. See Southport Petroleum Co. v. NLRB, supra; NLRB v. Herman Bros. Pet Supply, 325 F.2d 68 (CA6 1963); NLRB v. Ozark Hardwood Co., 282 F.2d 1 (CA8 1960); NLRB v. Lewis, 246 F.2d 886 (CA9 1957).
See Crotona Service Corp., 200 N.L.R.B. 738 (1972). Of course, it is an unfair labor practice for an employer to discriminate in hiring or retention of employees on the basis of union membership or activity under § 8(a)(3) of the National Labor Relations Act, 29 U.S.C. § 158(a)(3). Thus, a new owner could not refuse to hire the employees of his predecessor solely because they were union members or to avoid having to recognize the union. See NLRB v. Burns International Security Services, 406 U. S. 272 , 406 U. S. 280 -281, n. 5 (1972); K.B. & J. Young's Super Markets v. NLRB, 377 F.2d 463 (CA9), cert. denied, 389 U.S. 841 (1967); Tri-State Maintenance Corp. v. NLRB, 132 U.S.App.D.C. 368, 408 F.2d 171 (1968). There is no suggestion in this case that Howard Johnson in any way discriminated in its hiring against the former Grissom employees because of their union membership, activity, or representation.
The Court of Appeals stated that "[t]he first question we must face is whether Howard Johnson is a successor employer," 482 F.2d at 492, and, finding that it was, that the next question was whether a successor is required to arbitrate under the collective bargaining agreement of its predecessor, id. at 494, which the court found was resolved by Wiley. We do not believe that this artificial division between these questions is a helpful or appropriate way to approach these problems. The question whether Howard Johnson is a "successor" is simply not meaningful in the abstract. Howard Johnson is of course a successor employer in the sense that it succeeded to operation of a restaurant and motor lodge formerly operated by the Grissoms. But the real question in each of these "successorship" cases is, on the particular facts, what are the legal obligations of the new employer to the employees of the former owner or their representative? The answer to this inquiry requires analysis of the interests of the new employer and the employees and of the policies of the labor laws in light of the facts of each case and the particular legal obligation which is at issue, whether it be the duty to recognize and bargain with the union, the duty to remedy unfair labor practices, the duty to arbitrate, etc. There is, and can be, no single definition of "successor" which is applicable in every legal context. A new employer, in other words, may be a successor for some purposes and not for others. See Golden State Bottling Co. v. NLRB, 414 U. S. 168 , 414 U. S. 181 (1973); International Assn. of Machinists v. NLRB, 134 U.S.App.D.C. 239, 244, 414 F.2d 1135, 1140 (1969) (Leventhal, J., concurring); Goldberg, The Labor Law Obligations of a Successor Employer, 63 Nw.U.L.Rev. 735 (1969); Comment, Contractual Successorship: The Impact of Burns, 40 U.Chi.L.Rev. 617, 619 n. 10 (1973).
The petitioner, Howard Johnson, in 1959 and 1960, entered into franchise agreements with P. L. Grissom, p. L. Grissom & Son, Charles T. Grissom, Ben Bibb, and the Belleville Restaurant Company (hereinafter collectively the Grissoms) under which the franchise operated a Howard Johnson Restaurant and Motor Lodge. In 1968, the Grissoms entered into collective bargaining agreements with the respondent Union affecting both their restaurant and motel employees. On June 16, 1972, the Grissoms sold the business to Howard Johnson, the transfer of management to take place on July 24, 1972. On June 28, Howard Johnson notified the Grissoms that it would not recognize or assume their labor agreements, and on July 9, 1972, the Grissoms gave notice to their employees that they would be terminated at midnight, July 23. Howard Johnson began interviewing prospective employees in early July, and, when it took over the operation on July 24, it retained only nine of the Grissoms' employees; at least 40 were permanently replaced. The Union brought this action under § 301 of the Labor Management Relations Act, and the District Court issued an order compelling petitioner to arbitrate. The Court of Appeals affirmed, but today this Court reverses, holding that Howard Johnson was not a successor employer. I believe that the principles of successorship laid down in John Wiley & Sons v. Livingston, 376 U. S. 543 , and NLRB v. Burns International Security Services, 406 U. S. 272 , require affirmance, and thus I dissent.
Wiley, supra, at 376 U. S. 551 . But that was not the case in Wiley:
Id. at 376 U. S. 550 .
It must follow a fortiori that it is also not the case here. T he contract between the Grissoms and the Union explicitly provided that successors of the Grissoms would be bound, [ Footnote 2/1 ] and certainly there can be no question that
there was a substantial continuity -- indeed identity -- of the business operation under Howard Johnson, the successor employer. Under its franchise agreement, Howard Johnson had substantial control over the Grissoms' operation of the business; [ Footnote 2/2 ] it was no stranger to the enterprise it took over. The business continued without interruption at the same location, offering the same products and services to the same public, under the same name and in the same manner, with almost the same number of employees. The only change was Howard Johnson's replacement of the Union members with new personnel, but, as the court below pointed out, petitioner's reliance upon that fact is sheer "bootstrap":
376 U.S. at 376 U. S. 549 .
original employer, Wackenhut, had a contract with Lockheed to provide security services, and at the expiration of that contract, Lockheed took bid on providing the service, and hired Burns to replace Wackenhut. Wackenhut employees had been represented by the union, but Burns, which hired 27 of the 42 Wackenhut guards, refused to bargain with the union or honor the collective bargaining agreement signed by Wackenhut. We affirmed the NLRB's order requiring Burns to bargain with the union, but concluded that Burns was not bound by the substantive provisions of the collective bargaining agreement between the union and Wackenhut. In distinguishing Wiley, we pointed out in Burns that, unlike Wiley, it did not involve a § 301 suit to compel arbitration, and thus was without the support of the national policy favoring arbitration. Burns, supra, at 406 U. S. 286 . Moreover, in Burns,