Pursuing ULP against Bankrupt Casino and Jai Alai Center for Announcing Asset Purchaser’s Intended Unilateral Changes Would not Effectuate Purposes of NLRA: NLRB General Counsel's Office | Practical Law

Pursuing ULP against Bankrupt Casino and Jai Alai Center for Announcing Asset Purchaser’s Intended Unilateral Changes Would not Effectuate Purposes of NLRA: NLRB General Counsel's Office | Practical Law

The Office of the General Counsel of the National Labor Relations Board (NLRB) released an advice memorandum concluding that an employer that sold its assets in a bankruptcy court "free and clear" sale did not violate Section 8(a)(5) of the National Labor Relations Act (NLRA) when it announced its successor/purchaser's plans to alter terms and conditions of employment months after the employer would cease operating.

Pursuing ULP against Bankrupt Casino and Jai Alai Center for Announcing Asset Purchaser’s Intended Unilateral Changes Would not Effectuate Purposes of NLRA: NLRB General Counsel's Office

by Practical Law Labor & Employment
Published on 10 Feb 2015 • USA (National/Federal)
The Office of the General Counsel of the National Labor Relations Board (NLRB) released an advice memorandum concluding that an employer that sold its assets in a bankruptcy court "free and clear" sale did not violate Section 8(a)(5) of the National Labor Relations Act (NLRA) when it announced its successor/purchaser's plans to alter terms and conditions of employment months after the employer would cease operating.
On January 30, 2015, the Division of Advice at the NLRB's Office of the General Counsel released an advice memorandum dated December 2, 2014, recommending that an NLRB regional office dismiss an unfair labor practice (ULP) charge against Florida Gaming Centers, Inc. (FGC). The Division of Advice found that FGC did not violate Section 8(a)(5) of the NLRA when it announced its successor/purchaser's intended change to employment terms and conditions because the unilateral change would not occur until after the employer ceased operating. In addition, merely announcing an intended unilateral change was not equivalent to implementing that change, which would arguably violate Section 8(a)(5) of the NLRA.
FGC ran a casino and jai alai facility where it employed 36 jai alai players. FGC and a local union of the United Autoworkers (UAW) had a collective bargaining agreement (CBA) covering those jai alai players that was set to expire at the end of 2014. FGC had a past practice of reimbursing foreign jai alai players for their airfare to their home countries where they would spend the summer break period and renew their visas.
In 2012, FGC faced foreclosure after defaulting on a $100 million loan. In late 2012, FGC and the holder of that loan reached an agreement whereby an affiliate of the creditor was appointed as a receiver while FGC continued to operate its business.
In August 2013, FGC filed a voluntary bankruptcy petition. In November 2013, FGC filed a motion in the bankruptcy court to sell substantially all of its assets "free and clear" of liability. At the end of 2013, the bankruptcy court authorized an auction of FGC's assets.
In March 2014, an entity affiliated with the holder of the loan and receiver, Fronton Holdings, Inc. filed a proposed asset purchase agreement with the bankruptcy court to purchase FGC's assets in a "free and clear" sale, which the court approved.
In April 2014, the bankruptcy court entered an order providing that:
  • Fronton was purchasing FGC's assets free and clear.
  • The sale would close on April 30.
  • Fronton would begin operations on May 1.
  • Fronton would assume the CBA and the individual players' contracts.
On April 9, on behalf of Fronton, FGC announced that there would be changes, including an end to the policy of reimbursing foreign players for airfare when they travel to their home countries.
The UAW filed ULP charges:
  • Against FGC, alleging that FGC's announcement was a unilateral change to the past practice of the parties.
  • Against FGC and Fronton (FGC's successor), alleging that they had violated the NLRA by unilaterally changing the past practice of reimbursing the players for their airfare when renewing their visas.
In the summer of 2014, Fronton (after taking over for FGC), did not reimburse the twelve foreign players for their airfare when they traveled home to renew their visas.
Eventually, Fronton and the UAW:
  • Privately settled the UAW's ULP charge against Fronton. As part of the settlement, the UAW also withdrew a creditor claim against FGC.
  • Negotiated a new three-year CBA.
The Division of Advice:
  • Instructed Region 12 of the NLRB to dismiss the ULP charge against FGC.
  • Concluded that FGC did not violate the NLRA by announcing Fronton's intended new policy concerning foreign players' airfare reimbursement because:
    • the mere announcement of an intent to implement a unilateral change is not equivalent to unlawfully implementing a unilateral change (see Howard Elec. & Mechanical, 293 N.L.R.B. 472, 475 (1989) (discussing the triggering of limitations periods for ULPs under the NLRA)).
    • Fronton, not FGC, was the employer that implemented the change to the past practice (no longer reimbursing foreign players' airfare);
    • FGC's announcement was at the direction of Fronton, so the intention to make the unilateral change, however unlawful, was that of Fronton, against which the UAW no longer maintained a ULP charge.
  • Noted that litigating a ULP and filing a creditor claim against FGC in bankruptcy court would not effectuate the NLRA's purposes, since:
    • the UAW withdrew its ULP charge against Fronton, the party that actually implemented the unilateral change to past practices;
    • FGC was no longer operating and had sold its assets "free and clear" to satisfy its debts;
    • the UAW withdrew its bankruptcy proceeding against FGC, its only method of receiving a monetary remedy against FGC.

Practical Implications

Advice memoranda are not binding precedent on the panel (Board) heading the judicial functions of the NLRB. However, this advice memorandum provides guidance to employers about how the General Counsel's office will evaluate pursuing ULP litigation (and related actions to secure prospective remedies in bankruptcy courts) against bankrupt employers.
The memorandum also highlights the different lens through which the General Counsel's office may view an announcement of versus the implementation of allegedly unlawful unilateral changes. The Division of Advice cited Section 10(b) limitations period precedent to support its decision not to prosecute a ULP charge against the predecessor bankrupt employer that merely announced its successor/purchaser's unilateral change.