§11.5 Obligations in the Purchase and Sale of a Business (successorship)

LibraryLabor and Employment Law: Private Sector (OSBar) (2011 Ed.)
§11.5 OBLIGATIONS IN THE PURCHASE AND SALE OF A BUSINESS (SUCCESSORSHIP)

§11.5-1 Sale of Stock

A sale of corporate stock, by itself, does not give the corporation the right to renegotiate existing labor agreements or to refuse to bargain in good faith with the union. Topinka's Country House, Inc., 235 NLRB 72, 74-75 (1978), enforced, 624 F2d 770 (6th Cir 1980). However, when a transaction is a stock purchase in form but resembles an asset purchase in substance, the National Labor Relations Board and the court may apply traditional successorship principles in deciding the dispute, while considering the stock nature of the sale to be a relevant, but not determinative, factor. Spencer Foods, Inc., 268 NLRB 1483 (1984), enforced in part, 768 F2d 1463 (DC Cir 1985).

Although the Supreme Court has stated that the purchaser's "acquisition of the predecessor's assets may be evidence of substantial continuity in business operations . . . , it has never held that transfer of assets is either a necessary or a sufficient condition for that finding." Waterbury Hotel Mgmt., LLC v. NLRB, 314 F3d 645, 654 (DC Cir 2003) (citing Golden State Bottling Co. v. NLRB, 414 US 168, 184, 94 S Ct 414, 38 L Ed2d 388 (1973)) ("the acquisition of substantial assets is not a prerequisite for successorship").

See §§11.5-2 to 11.5-2(b) regarding the obligations of the purchaser and the seller on the sale of assets.

§11.5-2 Sale of Assets

§11.5-2(a) Purchaser's Obligations in the Sale of Assets

When the assets of a unionized business are sold or transferred, the successor employer (i.e., the purchaser) is generally obligated to recognize the union representing its predecessor's employees, and to bargain in good faith with that union, if (1) there is a substantial continuity in the nature of the business and (2) the predecessor's former employees constitute a majority of the successor's workforce. Howard Johnson Co. v. Detroit Local Joint Executive Board, 417 US 249, 263, 94 S Ct 2236, 41 L Ed2d 46 (1974). The incumbent union in a successorship situation is entitled only to a rebuttable presumption of continuing majority status among the purchaser's employees, and the National Labor Relations Board (NLRB) will process a valid decertification petition in such situations. MV Transp., 337 NLRB 770 (2002).

A successor employer cannot avoid its bargaining duty by antiunion discrimination in its hiring decisions, that is, if "information regarding union membership, leadership, or activities...

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