NLRB Overturns Precedent Permitting Successors to Limit ULP Liability; Predecessor’s Unaffordable Terms Must Continue Until Agreement or Impasse

Practical Law Legal Update 5-584-3007 (Approx. 9 pages)

NLRB Overturns Precedent Permitting Successors to Limit ULP Liability; Predecessor’s Unaffordable Terms Must Continue Until Agreement or Impasse

by Practical Law Labor & Employment

Background

Pressroom Cleaners (Pressroom) successfully bid for a janitorial service contract held by Capitol Cleaning (Capitol). Pressroom conducted the same business at the same location as had Capitol. Pressroom refused to hire six unionized Capitol employees. Had they been hired, the former Capitol employees would have constituted the majority of Pressroom's unit employees. The union filed a charge with the NLRB, and a complaint was issued. The ALJ found that:

Pressroom violated Section 8(a)(3) and (1) by refusing to hire the six Capitol employees.
Absent discriminatory hiring, Pressman would have been a statutory successor to Capitol.
Pressroom violated 8(a)(5) by refusing to bargain with the union and unilaterally imposing new terms and conditions of employment on its new employees.

The ALJ ordered backpay at Capitol's rates and restoration of Capitol's employment terms and conditions as the status quo until the parties negotiated to impasse or reached a new collective bargaining agreement (CBA). Relying on Planned Building Services, the ALJ's proposed remedy provided that Pressroom could in compliance limit its liability by showing that even if it had not committed ULPs, it would have reached an impasse and not agreed to the status quo economic terms carried over from the union's CBA with Capitol (347 N.L.R.B. 670 (2006)).

The union and Pressroom each filed exceptions and briefs with the Board regarding the ALJ's findings.

Outcome

The five member panel of the Board (Chairman Pearce and Members Hirozawa, Schiffer, Johnson and Miscimarra) unanimously affirmed the hearing officer's conclusions that Pressroom:

Violated Section 8(a)(3) of the NLRA by refusing to hire the six Capitol employees.
Was a statutory successor to Capitol.
Violated 8(a)(5) of the NLRA by failing to recognize and bargain with the union concerning the terms and conditions of employment of its new employees.

A three-member Board majority (Chairman Pearce and Members Hirozawa and Schiffer):

Held that when a successor employer violates Section 8(a)(5) of the NLRA by unilaterally changing the terms and conditions of employment of the new hires:
- backpay should be paid at the predecessor's rate until the parties bargain in good faith and reach an agreement or impasse (in agreement with the ALJ's finding); and
- Pressroom should not be permitted to limit its liability by proving in compliance that even if it had not committed ULPs, it would not have agreed to the economic terms equivalent to the status quo carried over from the CBA between the union and Capitol.
Overruled the Board's decision in Planned Building Services.

The Board majority noted that:

Under Section 10(c) of the NLRA, the Board's remedial orders should restore the situation, as much as possible, to what it would have been if not for the ULPs (29 U.S.C. § 160(c)).
In a case where a successor discriminatorily refuses to hire predecessor employees to avoid successor bargaining obligations and unilaterally establishes employment terms and conditions for new hires, the monetary remedy should continue at the predecessor's rate for some period of time.
Before Planned Building Services the Board:
- in State Distributing, had found that monetary remedies should continue at the predecessor's rate until the parties reached an agreement or an impasse (282 N.L.R.B. 1048, 1049 (1987)); and
- had rejected the suggestion that backpay should continue at the predecessor's rate for "a reasonable time of bargaining," noting that if bargaining had occurred, a compromise on different terms from the predecessor's rate or the unilaterally imposed rate might have been reached.
In Planned Building Services, the Board held that a successor employer should have an opportunity in compliance to limit its liability by presenting evidence that even if it had not committed ULPs, it would have reached an impasse and not agreed to the union's contract provisions with the predecessor and that the employer could establish:
- the date on which the parties would have reached an agreement and terms that would have been reached; or
- the date on which the parties would have reached a good-faith impasse and the employer would have applied its monetary proposals.
The Board's rationale in Planned Building Services was based on:
- its citation of several courts of appeals' decisions finding that the traditional remedy was punitive by requiring an employer to comply with the predecessor's terms for more than "a reasonable bargaining period"; and
- the argument that it is not impossible to determine what two parties would have agreed to, since the Board found in Armco (in applying the law of the case remanded from the Sixth Circuit) that a successor employer proved it would not have agreed to the predecessor's economic CBA terms (298 N.L.R.B. 416 (1990)).

The Board overruled the Planned Building Services decision, finding that:

The Board's traditional approach is not punitive and is within its remedial authority because:
- although in a matter where the employer violates its NLRA obligations, lawful bargaining will likely not start until the Board issues its Order, the employer should bear the burden of a delay which resulted from its own unlawful conduct;
- despite the dissent's contention, the Board is not ordering substantive contract terms in violation of Section 8(d) (29 U.S.C. § 158(d)), but ordering the parties to maintain the status quo until they negotiate in good faith and reach agreement or impasse; and
- the successor will pay backpay at the predecessor's rate only until an agreement or impasse is reached through bargaining.
The rationale of Planned Building Services is flawed because:
- Armco (which the Board relied on in Planned Building Services), did not provide a rational basis for changing the law, as it represented the Board's findings constrained by the law ordered on remand by the Sixth Circuit;
- in Planned Building Services, the Board failed to address the inconsistency of its holding with other refusal-to-bargain cases, in which the Board resisted making speculative determinations about what would have occurred had there been lawful bargaining;
- Planned Building Services prolongs litigation by complicating the compliance phase; and
- Planned Building Services discourages meaningful bargaining and provides an incentive for employers to push for quick impasses so they could claim in compliance that they also would have reached impasse quickly had they initially bargained lawfully.

In compliance with its usual practice, the Board will apply Pressroom Cleaners retroactively to all pending cases that are not in compliance stage.

Members Miscimarra and Johnson, in partial dissent, argued that Planned Building Services should not be overruled, because:

Planned Building Services sets a reasonable remedial standard that balances resolving uncertainty against a party that violates the NLRA with the following legal principles that limit the remedial authority of the Board:
- the Board's remedies cannot be punitive or exceed the make-whole relief which the NLRA authorizes (29 U.S.C. § 160(c));
- the Board may not impose substantive contract terms on which the parties have not agreed (29 U.S.C. § 158(d) and H.K. Porter Co. v. NLRB, 397 U.S. 99 (1970)); and
- the Board may not require successor employers to adopt terms set in the CBA of the predecessor and the successor employer has the right to unilaterally establish its initial employment terms without bargaining (NLRB v. Burns Security Servs., 406 U.S. 272 (1972)).
Planned Building Services was a balanced solution unanimously endorsed by a five-member Board panel.
In Planned Building Services, the Board recognized that punitive remedies are beyond the Board's authority, but did not:
- shorten the duration of the backpay period in successorship cases; or
- remove the burden of uncertainty from the party that violated the NLRA.

Member Miscimarra noted that he thought that Love's Barbecue Restaurant No. 62 (245 N.L.R.B. 78 (1979)), which is at the center of this case and provides that successor employers that refuse to hire predecessors' employees to avoid successor bargaining obligations forfeit rights to set initial terms for their employees was wrongly decided because it conflicts with Burns. Member Johnson expressed no opinion about Love's Barbecue because no party asked the Board to reconsider its holding.

Practical Implications

In this case, the Board majority held that where a successor discriminatorily refuses to hire predecessor employees and unilaterally establishes terms and conditions of employment, backpay should be paid at the predecessor's rate until an agreement or impasse is reached. The Board overruled Planned Building Services and returns to the State Distributing remedial approach, which:

Does not permit an NLRA-violating successor employer to limit their liability by showing that absent its ULPs, it would have reached an impasse and not agreed to the union's contract provisions with the predecessor.
Has been criticized by at least the US Court of Appeals for the District of Columbia and Ninth Circuits (Kallman v. NLRB, 640 F.2d 1094 (9th Cir. 1981) and Capitol Cleaning Contractors, 147 F.3d 999, 1008 (D.C. Cir. 1998)).

Employers should expect this case to be part of a wave of Board decisions aimed at tamping down on successor employer refusal-to-hire and refusal to bargain ULPs, areas of focus for the current NLRB General Counsel (NLRB Gen. Counsel Mem. 14-03, Affirmation of 10(j) Program, at *2 (Apr. 30, 2014)).

NLRB Overturns Precedent Permitting Successors to Limit ULP Liability; Predecessor’s Unaffordable Terms Must Continue Until Agreement or Impasse | Practical Law