Opinion ID: 732444
Heading Depth: 2
Heading Rank: 2

Heading: Successorship Principles of Federal Labor Law

Text: 27 This case presents a problem that occurs with some frequency: the determination of whether a new employer, upon acquiring the business of another employer, incurs the obligation to consult with the union that represented the employees of that predecessor employer.
28 It is a fundamental principle of federal labor law that a new employer is generally free to decide upon the initial terms and conditions of employment for its employees. NLRB v. Burns Int'l Sec. Servs., Inc., 406 U.S. 272, 287-88, 294, 92 S.Ct. 1571, 1582, 32 L.Ed.2d 61 (1972); United States Can Co. v. NLRB, 984 F.2d 864, 869 (7th Cir.1993). However, a new employer must recognize and bargain with the union representing the predecessor's employees if the new employer is a successor employer to the predecessor. There are threshold requirements to becoming such a successor employer. When substantial continuity of operations and of workforce are found, the duty to bargain with the union is triggered. See Fall River, 482 U.S. at 41, 107 S.Ct. at 2234 (If the new employer makes a conscious decision to maintain generally the same business and to hire a majority of its employees from the predecessor, then the bargaining obligation of § 8(a)(5) is activated.); United States Can, 984 F.2d at 869 (An employer that hires a majority of the old labor force must bargain with any union that represents the workers.). Under the first of these two criteria, there must be substantial continuity between the enterprises of the successor's and the predecessor's business. Fall River, 482 U.S. at 43, 107 S.Ct. at 2236; Burns, 406 U.S. at 280-81, 92 S.Ct. at 1578-79; U.S. Marine Corp., 944 F.2d at 1315. This continuity is measured by whether the new employer has acquired substantial assets of the predecessor and continued, without interruption or substantial change, the predecessor's business operations. Golden State Bottling Co. v. NLRB, 414 U.S. 168, 184, 94 S.Ct. 414, 425, 38 L.Ed.2d 388 (1973). There is no dispute between the parties in this case that Canteen qualifies as a successor to Service America in this regard; it is continuing to provide food services to the same customers at the Medical College, without a hiatus in service, in the same capacity and without significant change. 29 The second factor requires that a sufficient number--a majority or more--of the new employer's workforce be comprised of the predecessor's employees. Fall River, 482 U.S. at 46, 107 S.Ct. at 2237; Burns, 406 U.S. at 278-79, 92 S.Ct. at 1577-78; U.S. Marine Corp., 944 F.2d at 1315. A successor, therefore, is a new employer that continues essentially the same business operations using a majority of the old employer's workers. This requirement for a successor employer contains a special corollary principle first enunciated in Burns and often referred to as the perfectly clear exception: 30 Although a successor employer is ordinarily free to set initial terms on which it will hire the employees of a predecessor, there will be instances in which it is perfectly clear that the new employer plans to retain all of the employees in the unit and in which it will be appropriate to have him initially consult with the employees' bargaining representative before he fixes terms. 31 Burns, 406 U.S. at 294-95, 92 S.Ct. at 1585-86. The Court thus established that a successor would be required to bargain with the union before setting its initial terms of hiring when it was clear that it intended to hire a majority of the predecessor's workforce. 32 In the aftermath of Burns, the Board and the courts of appeals have interpreted the scope and meaning of the perfectly clear exception. The Board's interpretation of the Burns exception in Spruce Up Corp., 209 NLRB 194, 1974 WL 4741 (1974), enforced without opinion, 529 F.2d 516 (4th Cir.1975), significantly limited the applicability of the perfectly clear caveat to specific conduct by the new employer: 33 We believe the caveat in Burns, therefore, should be restricted to circumstances in which the new employer has either actively, or by tacit inference, misled employees into believing they would all be retained without change in their wages, hours, or conditions of employment, or at least to circumstances where the new employer ... has failed to clearly announce its intent to establish a new set of conditions prior to inviting former employees to accept employment. 34 Spruce Up, 209 NLRB at 195. 35 In the case before us, a divided Board debated within the opinions of its various members the validity of the precise formulation described in Spruce Up as a basis for invoking the perfectly clear exception. As Chairman Gould pointed out in his separate concurring opinion, it appears that a majority of the Board--the dissenting members and Chairman Gould--was unwilling to endorse this formulation as faithful to the mandate of Burns. The majority did not believe that Burns really required that the Board undertake an inquiry into whether the workers were misled by the misrepresentation of the new employer with respect to the terms of employment. 36 Whatever the merits of the various justifications offered for the shift in position with respect to Spruce Up, the matter is not directly relevant to our disposition of this case. Although placing a significant and perhaps fatal cloud over the continued viability of the specific Spruce Up criterion, a majority of the Board--the plurality and Chairman Gould--made clear that the basic Burns mandate must still be observed: A new employer must consult with the union when it is clear that the employer intends to hire the employees of its predecessor as the initial workforce. As we shall discuss in the following paragraphs, we believe that the Board was on solid ground in concluding that, under Burns, Canteen had an obligation to consult with the Union that represented the workers that it had decided to hire.