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Labor Relations News Update October 13, 2014

Today’s Labor Updates:

Summary of NLRB Decisions for Week of October 6 – 10, 2014

Power Struggles – The Rise of Labor Unrest in China

7 Labor and Employee Benefits Issues in Transactions


Summary of NLRB Decisions for Week of October 6 – 10, 2014

The Summary of NLRB Decisions is provided for informational purposes only and is not intended to substitute for the opinions of the NLRB.  Inquiries should be directed to the Office of Public Affairs at (link sends e-mail) or 202‑273‑1991.

Summarized Board Decisions

AT Wall Company  (01-UC-081085; 361 NLRB No. 62)  Warwick, RI, October 6, 2014.

In a Decision on Review, the Board reversed the Acting Regional Director and dismissed the petition for unit clarification.  The Board concluded that the employees in the new classifications established by the Employer after it acquired the operations of another company, did not perform the same basic functions as the employees in the existing bargaining unit, and therefore the unit should not be clarified to include them.  The Board also found that, because the employees in the new classifications had retained their separate group identity from the bargaining unit employees and did not share an overwhelming community of interest with them, they should not accreted into the unit.  Petitioner— New England Joint Board, UFCW/RWDSU.  Members Hirozawa, Johnson, and Schiffer participated.


Unpublished Board Decisions in Representation and Unfair Labor Practice Cases

R Cases

FedEx Freight, Inc.  (04-RC-133959)  Delanco, NJ, October 8, 2014.  The Board denied the Employer’s Request for Review as not raising substantial issues regarding whether the Regional Director erred in directing an election in a unit consisting of the City and Road Drivers employed at the Employer’s Cinnaminson Terminal. Member Johnson agreed that the unit is appropriate, but would rely on the Board’s traditional community of interest analysis and he not express a view on the correctness of Specialty Healthcare and Rehabilitation Center of Mobile, 357 NLRB No. 83 (2011)(subsequent history omitted).  Petitioner— International Brotherhood of Teamsters Local 107.  Chairman Pearce and Members Johnson and Schiffer participated.

Paragon Systems, Inc.  (05-RC-125014)  Washington, DC, October 8, 2014.  No exceptions having been filed to the Regional Director’s overruling of objections to a mail-ballot election held between April 30 and May 14, 2014, the Board certified that a majority of the ballots had been cast for Petitioner National Union of Protective Services Associations (NUPSA) and that it is the exclusive collective-bargaining representative of the employees in the appropriate bargaining unit.  Other Union involved—International Union, Security, Police and Fire Professionals of America (SPFPA).

Bradken, Inc.  (19-RD-112390)  Chehalis, WA, October 10, 2014.  A Board panel majority consisting of Chairman Pearce and Member Hirozawa granted the Union’s Request for Review of the Regional Director’s Decision and Direction of Election.  The majority found that the Request for Review raised substantial issues warranting review.  In dissent, Member Miscimarra would have denied review because, in his view, the Regional Director correctly applied precedent to reinstate the decertification petition and direct an election.  See TruServ Corp., 349 NLRB 227 (2007).  The Board found it unnecessary to rule on the Petitioner’s request for an extension of time, nunc pro tunc, to file an opposition to the Union’s request for review because the Petitioner is entitled under Section 102.67(g) of the Board’s Rules and Regulations to file a brief on review.  Petitioner—an individual.  Union involved—International Association of Machinists and Aerospace Workers, District W24, AFL-CIO.  Chairman Pearce and Members Miscimarra and Hirozawa participated.

C Cases

OSF Healthcare System d/b/a St. Francis Hospital  (30-CA-105167)  Escanaba, MI, October 6, 2014.  The Board remanded the case to the Regional Director for further appropriate action.


Appellate Court Decisions

Gestamp South Carolina, LLC, Board Case No. 11-CA-022595 (reported at 357 NLRB No. 130) (4th Cir. decided October 8, 2014)

In this case involving a fledging organizing campaign at a BMW auto parts plant in Union, South Carolina, the court upheld the validity of Member Becker’s recess appointment, enforced the Board’s finding of a coercive threat, but held that the findings of two unlawful discharges and a suspension were not supported by substantial evidence.

The administrative law judge applied Wright Line to find that the employer violated Section 8(a)(3) and (1) by suspending and discharging the employee organizer who initially contacted the United Steelworkers, and by discharging a second employee who was a member of the organizing committee.  The findings were based on the protected activities, timing, and animus, as well as knowledge imputed to the employer by statements the two employees made to managers.  The judge rejected the employer’s argument that knowledge should not be imputed without evidence that the decisionmakers themselves knew of the employees’ union activities.  The judge stated that, even if that were the case, knowledge could be established by reasonable inference, and here it was reasonable to infer that other employees reported their activities to management based on the highly charged atmosphere and widespread sentiments voiced at the plant.  The judge also found that a supervisor had coercively threatened an employee with discharge for his union activities, but dismissed an allegation of unlawful interrogation.  On review, the Board (Chairman Pearce and Members Becker and Hayes; Hayes concurring in part) short-form adopted the judge’s recommended decision.

In 2013, the Fourth Circuit granted the employer’s petition for review, but did so solely on its conclusion that Member Becker’s recess appointment was unconstitutional, citing NLRB v. Enterprise Leasing Co. Southeast, 722 F.3d 609 (4th Cir. 2013), and NLRB v. New Vista Nursing and Rehabilitation, 719 F.3d 203 (3d Cir. 2013).  The Board filed a petition for rehearing, which was denied.  In March 2014, while Noel Canning was pending before the Supreme Court, the Board filed a petition for writ of certiorari.  On July 1, the Supreme Court granted the petition, vacated the judgment, and remanded the case to the Fourth Circuit for further consideration in light of NLRB v. Noel Canning, 134 S. Ct. 2550 (June 26, 2014).

On remand, the Fourth Circuit ordered the parties to file supplemental briefs addressing the effect of Noel Canning.  In its resulting decision, it concluded that Board Member Becker was validly appointed to the Board when it issued the order in this case.  The Fourth Circuit noted that the Supreme Court in Noel Canningrecognized that there were “petitions [pending] from decisions in other cases involving challenges to the appointment of Board Member Craig Becker,” as well as “similar challenges . . . pending in the Courts of Appeals.”  The Supreme Court, the Fourth Circuit noted, thus “believed it was important to answer all three questions presented in the case,” including the proper “calculation of the length of a ‘recess,’” and concluded that a recess of more than 3 days but less than 10 days would be presumptively too short to fall within the Recess Appointments Clause.  On that basis, the Fourth Circuit explained that “[i]n contrast to the recess appointments of the Board members at issue in Noel Canning . . . which took place over a three-day recess in January 2012, the recess appointment of Board Member Becker took place over a two-week recess in March 2010.”  As additional support, the Court cited the similar holding of Teamsters Local Union No. 455 v. NLRB, 765 F.3d 1198 (2014) (10th Cir. Aug. 27, 2014) (holding that because Board Member Becker “was appointed during an intra-session recess exceeding two weeks . . . , there seems little reason to [now] doubt the validity of [his] appointment.”).

On the merits, the Fourth Circuit agreed with the employer’s argument that “because the [judge] did not find that the official who made the challenged employment decisions knew of the employees’ union activity, the [Board] erred in concluding that the General Counsel established a prima facie case” under Wright Line.  Specifically, the Court stated that the General Counsel was “incorrect to the extent he suggests that supervisors’ knowledge of an employees’ union activity is automatically imputed to the employer,” citing Firestone Tire & Rubber Co. v. NLRB, 539 F.2d 1335, 1339 (4th Cir. 1976) (refusing to impute supervisors’ knowledge of employees’ union activities to decisionmaker).  Finally, rejecting the employer’s challenges to the judge’s credibility determinations, the Court held that the Board’s finding of a coercive threat was supported by substantial evidence.

The Court’s opinion may be found here (link is external).


Administrative Law Judge Decisions

First Transit, Inc.  (28-CA-107463; JD(SF)-50-14)  Mesa and Tempe, AZ.  Administrative Law Judge Jeffrey D. Wedekind issued his decision on October 9, 2014.  Charges filed by Amalgamated Transit Union (ATU) Local No. 1433, AFL-CIO. image004

Labor & Employment Practice

Power Struggles – The Rise of Labor Unrest in China

October 15, 2014

This article first appeared in an edited format in Volume 12 Issue 5 of Asian-Mena Counsel 2014.

Employee protests and labor unrest are on the rise in China in all senses—overall occurrences, frequency, geographical spread, number of employees involved, and media coverage. Such unrest can take a variety of forms, including strikes, lock-outs, production slowdowns, legal actions, and media campaigns. Foreign companies in particular are increasingly faced with a diverse range of such situations and a workforce that is more willing and determined to collectively assert their labor rights.

For more details, view the briefing ►


7 Labor and Employee Benefits Issues in Transactions

Scott Faust and Ira Golub, Corporate Counsel

October 15, 2014

Labor and employee benefits can have a material impact on a corporate transaction. Developing a comprehensive strategy is essential to maximize opportunity and minimize risk, particularly when the transaction involves a unionized workforce. Here are seven key issues that often come up in labor-intensive unionized transactions.

1. Successor Collective Bargaining Obligations

In transactions involving a unionized workforce, stock purchasers generally step into existing union relationships and agreements. By comparison, asset purchasers generally are not obligated to assume the seller’s collective bargaining agreement (CBA), but asset purchasers that are considered a “successor employer” under the National Labor Relations Act (NLRA) must recognize and bargain with the union representing the post-acquisition workforce.

A purchaser becomes a successor employer under the NLRA when it hires enough of the seller’s union-represented employees to comprise a majority of the post-acquisition workforce and maintains sufficient continuity in the business enterprise. Factors relevant to determining sufficient continuity in the enterprise include maintaining substantially the same or similar jobs, working conditions, supervisors, products, services, equipment and production methods. Purchasers may not avoid successor employer status simply by refusing to hire the seller’s unionized employees. A buyer found to have unlawfully refused to hire based on the union status of seller’s employees may be ordered to reinstate the affected employees with backpay, restore the pre-acquisition terms and conditions of employment, and recognize and bargain with the union. The general counsel of the National Labor Relations Board (NLRB) has identified so-called successor avoidance cases as an area of particular interest for pursuing injunctive relief.

In some cases, the seller’s CBA may include “successorship” provisions. So-called “passive” successorship provisions, such as those that merely include successors and assigns in the definition of the parties to the agreement, generally do not obligate a buyer to assume the seller’s CBA. Some contracts, however, include “active” successorship provisions that, for example, bind the seller to require a purchaser to assume the existing CBA or to negotiate a new CBA as a condition of closing. Such provisions are enforceable by injunction and/or a claim for damages.

2. Initial Post-Closing Terms and Conditions of Employment

Even when there is no obligation to assume the seller’s CBA, a buyer found to be a successor employer will have a duty to bargain with the union, and during the course of negotiations it generally must maintain the existing terms and conditions of employment until it either (i) reaches agreement on a new CBA, or (ii) reaches a lawful impasse and unilaterally implements changes. Buyers seeking to avoid maintenance of the seller’s terms and conditions of employment during bargaining have a limited opportunity to change them by conditioning their offer of employment to seller’s employees upon the employees’ acceptance of new terms and conditions. Buyers who do not assume seller’s CBA should be aware that, in the absence of a valid CBA, the employees may strike lawfully in furtherance of their bargaining objectives.

3. Union Efforts to Influence M&A Transactions

Sophisticated unions have used a variety of tactics, including active successorship provisions and provisions affording them a right of first refusal in connection with any sale, to influence transactions. In addition, unions have threatened strikes or other workplace disruptions, and they have waged corporate campaigns—especially when they oppose a prospective purchaser or merger partner.

In this environment, a comprehensive understanding of the present state of labor relations and of the union’s perspective on the proposed transaction is critical. Depending on the circumstances, it may make sense for the buyer to initiate discussions with the incumbent union as part of the transaction planning process. Buyers should consult with counsel, however, before initiating discussions with the union representing the seller’s employees. Moreover, sellers generally have an obligation to bargain with the union over effects of the transaction on the employees, and in some cases over the sale or merger decision itself.

4. Successor Exposure to Predecessor Employment Claims

Even in an asset sale where the buyer expressly does not assume liability for pending NLRB charges or civil employment claims, a buyer that maintains substantial continuity of the seller’s operations and workforce, and who has actual or constructive knowledge of the pending claims, may be liable for such claims after closing. Buyers may not necessarily escape responsibility for predecessor claims by failing to perform due diligence.

Some courts have imposed successor liability on parties who failed to conduct due diligence that would have revealed pending claims. Accordingly, merely excluding these potential liabilities may not be sufficient. Depending upon the magnitude of the predecessor claims in the context of the overall transaction, asset buyers may want to negotiate an escrow, indemnity or price adjustment to manage their exposure to potential successor liability.

5. Benefit Plan Liabilities

Transactions involving a unionized workforce often involve multiemployer plans, single employer defined benefit pension plans and retiree health plans, any of which may expose purchasers to material liabilities. In stock sales, buyers ordinarily assume existing benefit obligations. In asset sales, buyers have more flexibility in assuming benefit obligations, but careful drafting of the purchase agreement is critical. Where the purchase agreement does not address a liability (for example, delinquent contributions to a multiemployer plan), an asset buyer ultimately may be responsible if it was aware of the liability and maintains sufficient continuity of seller’s operations.

6. Identifying Potential Exposure

Buyers must develop a complete understanding of the current and historical benefit arrangements that apply to seller’s current and former employees and of each entity in the seller’s “controlled group.” A controlled group generally includes corporations and trades or businesses under common control (generally at least 80 percent ownership). Based on recent and evolving case law, certain investment funds traditionally thought to be excluded when analyzing controlled group liability may be considered to be “trades or businesses.”

Controlled group members are jointly and severally liable for certain benefit plan liabilities that can have a material financial impact on buyers, including failures to properly fund a defined benefit plan, multiemployer plan withdrawal liability (i.e., the amount assessed when an employer ceases or declines its contributions to the plan), and Pension Benefit Guaranty Corporation (PBGC) premiums.

7. Managing Benefit Liability Exposure

With single employer defined benefit plans and retiree health plans, a buyer must determine the exposure related to existing and future benefit accruals, the plan’s funded status, if applicable, and buyer’s ability to reduce or eliminate the benefits. Changes to retiree health benefits become difficult where seller has failed to clearly and consistently communicate its rights to amend or terminate the benefit at any time. With multiemployer plans, a withdrawal liability estimate provides the most critical information regarding potential exposure (recognizing that these liabilities can change materially each year). If that estimate is unavailable, an actuary can estimate potential withdrawal liability using the seller’s contribution history and the plan’s funded status.

Once understood, liabilities may be mitigated through a reduction in purchase price, indemnification and careful drafting of the purchase agreement. Special attention must be given to multiemployer plans in an asset sale because, unless the transaction is structured to satisfy certain requirements under ERISA (including assumption of seller’s prior contribution schedule and posting of a bond), the transaction will trigger withdrawal liability under a multiemployer plan.

Scott Faust is co-head of Proskauer Rose’s strategic corporate planning group and a Boston-based partner in the management-side law firm’s labor and employment department. Ira Golub is co-head of the strategic corporate planning group and a New York-based partner in Proskauer’s employee benefits, executive compensation and ERISA litigation practice center. The authors thank senior counsel Lisa Herrnson (benefits, New York) and associates Mary Bresnan (benefits, Los Angeles) and Vanessa Gilbreth (labor, Boston) for their assistance with this article.

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