Failure to Bargain about Effects of Facility Closing Precludes Employer from Withdrawing Recognition of Union: NLRB

Practical Law Legal Update 7-517-1559 (Approx. 5 pages)

Failure to Bargain about Effects of Facility Closing Precludes Employer from Withdrawing Recognition of Union: NLRB

by PLC Labor & Employment

Key Litigated Issues

The NLRB issued a decision in Dodge of Naperville, Inc., dated January 3, 2012, holding that an automobile dealership violated the NLRA when, as part of an operations merger, it transferred employees to a new worksite, failed to bargain about the effects of the merger on unionized employees and ceased to recognize their union. The key issues in the case were whether:

The employer's otherwise lawful withdrawal of recognition from the union was nullified because of its failure to engage in "effects bargaining."
"Effects bargaining" includes negotiations about the terms and conditions of employment for transferred employees at a new facility.

Background

Dodge of Naperville operated a dealership located in Naperville, Illinois, where it employed six mechanics who were represented by a union. The employer recognized the union and entered into a collective bargaining agreement with the employees which expired in July 2009. The employer also operated a dealership in Lisle, Illinois, where it employed approximately 14 mechanics who were not represented by a union.

In June 2009, the company closed the Naperville facility when Chrysler cancelled its franchise as part of Chrysler Motors' bankruptcy. The employer informed the Naperville employees that they could apply to work at the Lisle dealership. However, it informed the employees that the Lisle facility would be a nonunion shop and that there would be no union benefits.

The Naperville mechanics were formally offered employment at the Lisle facility on June 26, 2009. That day, the company withdrew recognition from the union asserting that the union had lost its majority status due to the merger. It claimed that the former unionized Naperville mechanics were completely integrated with the larger group of nonunion Lisle mechanics and the union no longer represented the majority of mechanic employees sharing a community of interest.

The employer did not give the union an opportunity to bargain about the effects of the Naperville facility closing on the unionized employees, as the NLRB generally requires (see Transmarine Navigation Corp., 170 N.L.R.B. 389 (1968)).

An NLRB administrative law judge (ALJ) found that the employer violated the NLRA by:

Refusing to bargain with the union over the effects of the relocation.
Failing to continue the terms and conditions of the collective bargaining agreements.
Repudiating the agreement.
Withdrawing recognition from the union.

The ALJ was convinced that the lengthy bargaining history between the employer and the union did not, in the absence of compelling circumstances, permit the company to withdraw recognition from the union.

The employer appealed the decision by filing exceptions to the five-member panel (Board) heading the NLRB's judicial functions.

Outcome

A three-member panel of the Board reviewed the employer's exceptions. In a two-to-one decision (Member Hayes dissenting) the Board majority affirmed the ALJ's conclusions based on different reasoning.

The Board majority observed that compelling circumstances may permit an employer to withdraw recognition from a union after the employees represented by the union are consolidated into a nonunion workforce and lose a distinct identity from a larger group of employees. These circumstances include, as was true here, that the union employees no longer had a distinct identity from other employees because, as a result of a merger, they shared:

Supervision.
Terms and conditions of employment.
Uniforms.
Work assignments.
Skill sets.
Training.
Job functions.

However, the Board majority dismissed these circumstances, finding that they existed only because the employer unlawfully failed to bargain about the effects of the Naperville closing, including the terms and conditions of employment for unionized employees if they were hired and worked at the Lisle facility. The Board majority reasoned that to consider the circumstances created by the employer's unlawful and unilateral acts in judging whether the unit retains its distinct identity would reward the employer for its unlawful conduct.

The Board majority found that in the absence of effects bargaining, it was impossible to determine what employment terms and conditions the Naperville employees would have gained after the relocation. Accordingly, the Board ordered the employer to continue recognizing the union that represented the former Naperville mechanics and to engage in bargaining with respect to their wages, hours and other terms and conditions of employment even when they were at the Lisle facility.

In dissent, Member Hayes wrote that the employer had properly withdrawn recognition from the union due to changed circumstances, namely the full integration of the Naperville bargaining unit into a larger nonunion workforce caused the unit to lose its individual identity.

Member Hayes agreed that the employer must bargain over the effects of the closure of the Naperville facility and the merger of its operations into the Lisle facility on the Naperville bargaining unit, but asserted that the proper subjects of any bargaining process should not include terms and conditions of employment at the new facility.

Member Hayes also asserted that regardless of how the merged workforce came to exist at Lisle, the Board lacked authority to require the employer to honor the terms of a collective bargaining agreement, or continue to bargain about the employment terms and conditions for relocated Naperville mechanics, an inappropriate fractured bargaining unit.

Practical Implications

Employers should recognize that they may have obligations to bargain over the effects of major business decisions, including plant closures and relocations, with the union that represents employees affected by those business changes. In light of the Board's decision in Dodge of Naperville, Inc., effects bargaining is of greater import than before. Employers should understand that if they fail to engage in effects bargaining, the Board may:

Nullify an otherwise lawful withdrawal of recognition from the union.
Require continuation of previous collectively bargained terms and conditions of employment for unionized employees despite substantial changes in business operations.
Require continued recognition of a union for collective bargaining about employment terms and conditions, to be applied to a fractured or otherwise inappropriate bargaining unit.

Failure to Bargain about Effects of Facility Closing Precludes Employer from Withdrawing Recognition of Union: NLRB | Practical Law