Vol. 9, No. 1, Pg. 21. Buying, Selling or Closing a Business: A summary of Labor and Employment Issues.

• Author: By William H. Floyd III and Lisa R. Claxton

South Carolina Lawyer

1997.

Vol. 9, No. 1, Pg. 21.

Buying, Selling or Closing a Business: A summary of Labor and Employment Issues

21Buying, Selling or Closing a Business: A SUMMARY OF LABOR AND EMPLOYMENT ISSUESBy William H. Floyd III and Lisa R. ClaxtonSouth Carolina businesses are bought, sold or closed almost every day. Virtually every transaction triggers important employer/employee issues. Ignoring or not recognizing these issues can expose buyers and sellers to expensive liability.

22For example:

* Does the buyer have to bargain with the union representing the seller's employees? * Is the buyer responsible for a discrimination lawsuit filed against the seller? * If closing the business is the only option, are the employees entitled to any notice before the closing?

Whether representing the buyer or the seller, lawyers should address these types of labor and employment issues during presale planning or negotiations. BUYING A BUSINESS

Merely purchasing a business does not automatically make a buyer liable for a seller's past actions. In the labor and employment law context, buyer liability is triggered by the successorship doctrine. If the buyer becomes the successor to the seller, the buyer could inherit significant legal and financial obligations for which the unknowing buyer may not have bargained. A buyer may also realize too late that it has affirmative duties owed to its new work force.

Labor Relations. The successorship doctrine is particularly important when buying or selling a business with a unionized work force. To determine if a buyer of a unionized business is a successor, the National Labor Relations Board (NLRB)-the federal agency charged with administering federal labor law-typically focuses on whether there is a continuity of the business resulting from a buyer acquiring substantial assets of a seller and continuing, without interruption or substantial change, a seller's business.

In the labor and employment law context, buyer liability is triggered by the successorship doctrine.

In determining whether continuity exists, several factors may be considered: whether the buyer hired a majority of the seller's employees; whether the businesses are essentially the same; whether the employees are doing the same jobs in the same working conditions under the same supervisors; whether there has been a significant hiatus in operations; and whether there has been an essential change in the business that would have affected employee attitudes.

Once a buyer becomes a successor employer, the National Labor Relations Act (NLRA), the primary federal labor relations statute, requires the buyer to bargain collectively with union representatives, satisfy other collective bargaining obligations and remedy the seller's unfair labor practices (ULP).

The duty to bargain collectively with the union representing the seller's employees arises when the sale of a business leaves it largely intact. In that situation, the NLRA normally requires the buyer, as the new successor employer, to recognize the union already representing the seller's employees and bargain over the essential terms and conditions of employment.

Despite the overall duty to bargain, however, the successor may have several options. Before bargaining with the union, a successor generally has the right to establish the initial terms and conditions of employment. When bargaining with the union, a successor may usually assume the entire collective bargaining agreement without any changes or try to modify some terms through negotiations.

Even if a successor does not adopt the seller's collective bargaining agreement with the union, the sale of a business may not automatically terminate all rights of the employees covered by the agreement. When a business is sold, prior arbitration awards may remain enforceable. Similarly, a prior order from...