Opinion ID: 187377
Heading Depth: 2
Heading Rank: 1

Heading: Perfectly Clear Successor Status

Text: In Burns, the Supreme Court explained that, although successor employers may be bound to recognize and bargain with the union, except in rare circumstances they are not bound by the substantive provisions of a collective-bargaining contract negotiated by their predecessors but not agreed to or assumed by them. Id. at 284, 92 S.Ct. 1571. The rare exception is for instances in which it is perfectly clear that the new employer plans to retain all of the employees in the [bargaining] unit. Id. at 294-95, 92 S.Ct. 1571. That is, a successor employer is ordinarily free to set initial terms on which it will hire the employees of a predecessor, but a so-called perfectly clear successor must bargain with the employees' representative before it changes any terms to which its predecessor had agreed. Id. The perfectly clear exception is and must remain a narrow one because it conflicts with the congressional policy manifest in the Act ... to enable the parties to negotiate for any protection either deems appropriate, but to allow the balance of bargaining advantage to be set by economic power realities. Id. at 288, 92 S.Ct. 1571. In the Board's leading case on the perfectly clear exception, Spruce Up Corp., 209 N.L.R.B. 194 (1974), enf'd per curiam 529 F.2d 516 (4th Cir.1975), which came fast on the heels of Burns itself, the Board recognized the importance of the employer's right to set the initial terms and conditions of employment and the correlative narrowness of the perfectly clear exception. The employer there had expressed a general willingness to hire his predecessor's employees, but also announced he was going to change their commission rates. The employer thereby made it clear from the outset that he intended to set his own initial terms, and that whether or not he would in fact retain the incumbent [employees] would depend upon their willingness to accept those terms. 209 N.L.R.B. at 195. For that reason, it could not be said the employer plan[ned] to retain all the employees in the unit and the Board held the perfectly clear exception did not apply. Id. The Board explained: the caveat in Burns ... 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. Id. Thus, at bottom the perfectly clear exception is intended to prevent an employer from inducing possibly adverse reliance upon the part of employees it misled or lulled into not looking for other work. The Board adhered to its original understanding of Burns as recently as Ridgewell's, Inc., 334 N.L.R.B. 37 (2001), enf'd 38 Fed.Appx. 29 (D.C.Cir.2002). In that case, the successor employer announced it would retain the incumbent employees but only as independent contractors. The Board found they continued to work as employees within the meaning of the Act rather than as independent contractors. 334 N.L.R.B. at 37. Nevertheless, the employer's announcement, although legally erroneous, was sufficient to avoid the perfectly clear exception because it portended employment under different terms and conditions and thereby put the employees on notice that a new set of employment conditions would be in effect. Id. In the present case the ALJ found S & F informed the Candlewood applicants that they would be employed only in a temporary or probationary status for 90 days, which should have signaled to the applicants that terms and conditions of employment with [S & F] were not going to be identical with those of its predecessor. 351 N.L.R.B. at 1001. As in Ridgewell's, the employer's announcement portended employment under different indeed, significantly differentterms and conditions. Therefore, the ALJ held S & F did not violate the Act by setting the initial terms and conditions of employment. The Board, however, reversed the ALJ and applied the perfectly clear exception because it found S & F had failed to announce its intent to establish new terms and conditions before it invited the former Candlewood employees to accept employment. That finding is unsupported by substantial evidence. On the undisputed facts of this case, no employee could have failed to understand that significant changes were afoot. The cover letter attached to each job application foretold significant operational changes, identified various pre-employment checks and tests to be passed, and explained that any employment offered would be both temporary and at will. The Board discounted the cover letter on the ground that it lacked any mention of intended changes to employees' terms and conditions of employment. Id. at 981. Yet under Candlewood's collective-bargaining agreements with the Union, as any employee would know, each employee with 90 days on the job had vested seniority rights and could not be terminated except for cause, which the Union could contest through the negotiated grievance and arbitration procedure. By announcing that any employment with S & F would be at will, therefore, S & F was announcing a very significant change in the terms and conditions of employment both for those who had been employed by Candlewood for 90 days or more and for those who expected to be. In addition, by requiring its new employees to agree to its own alternative dispute resolution policy, S & F made it clear the grievance mechanism the Union had negotiated with Candlewood would not be available. The Board not only muffed its reading of the record; it also misread Burns to require more from the successor employer than a portent of employment under different terms and conditions. Recall that the perfectly clear exception applies only to cases in which the successor employer has led the predecessor's employees to believe their employment status would continue unchanged after accepting employment with the successor. Here, as we have seen, the employees had every indication from S & F's job applications, interviews, and letters offering employmentthat S & F intended to institute new terms of employment. Under a proper reading of Burns and Ridgewell's, therefore, S & F cannot be considered a perfectly clear successor. The Board attempts to distinguish Ridgewell's as follows: An announcement that workers will be hired as `independent contractors' necessarily signals an intent to establish a new set of [employment] conditions, because it signals an intent to divest the predecessor's employees of `employee' status altogether. Id. at 981 n. 28 (internal citation and quotation marks omitted). That is obviously true but irrelevant: A successor need not signal an intent to divest the predecessor's employees of their status as statutory employees in order to signal its intent, as did S & F here, to establish new terms and conditions of employment under which some of the predecessor's employees may be hired. The Board quibbles over when the employees may have received the June 30 offers of temporary employment, suggesting that some employees may have received their letters after S & F took over operations on July 1. The anachronism, if it occurred, changes nothing, however. First, as we have seen, the June 30 letter was not the only indication S & F provided to the Candlewood employees that the terms and conditions of their employment would change. Furthermore, because that letter was the very instrument by which the Company invited employees to accept employment with S & F, it was necessarily received prior to inviting former employees to accept employment. Spruce Up Corp., 209 N.L.R.B. at 195. That some employees may have received the letter immediately after the Company took over the operation rather than immediately before cannot make the crucial difference under Burns unless the employees were misled into expecting the terms of employment to continue wholly without change. [] Nevertheless, the Board concluded there is no evidence that [S & F], prior to the takeover, informed Candlewood employees that those who were retained would be working under different core terms and conditions of employment. 351 N.L.R.B. at 981. We see two errors of law in this restatement of the perfectly clear standard. First, the focus upon core terms and conditions misstates the rule, which is that the successor employer must simply convey its intention to set its own terms and conditions rather than adopt those of the previous employer. Granting that a trivial change in employment conditions may not suffice, there is no requirement in Burns or Spruce Up that the intended change(s) involve core terms. Whatever that term may mean, however, it surely includes instituting at-will employment and eliminating the negotiated grievance and arbitration procedure. Second, the Board's holding achieves precisely what Burns and Spruce Up sought to avoid. In those cases the Supreme Court and the Board respectively started from the presumption that a successor employer may set its own terms and conditions of employment and reserved the perfectly clear exception for cases in which employees had been misled into believing their terms and conditions would continue unchanged. See Burns, 406 U.S. at 294-95, 92 S.Ct. 1571; Spruce Up, 209 N.L.R.B. at 19. In this case, the Board presumed the predecessor's terms and conditions must remain in effect unless the successor employer specifically announces it will change core terms and conditions. Thus does the exception in Burns swallow the rule in Burns. Under the proper standard, S & F clearly comes within the protection of the rule rather than the straightjacket of the exception: It was never perfectly clear that the new employer plan[ned] to retain all of the employees in the unit, Burns, 406 U.S. at 294-95, 92 S.Ct. 1571, let alone that it did so with no notice that they would be expected to work under new and different terms, Spruce Up, 209 N.L.R.B. at 195 n. 7. On the contrary, the Company announced it would retain only those who met certain preemployment tests and stated its intent to set new initial terms and conditions of employment.