- posted: Mar. 02, 2016
- Uncategorized,  Business,  Succession,  Mergers & Acquisitions
A large employer recently made headlines when it was found to be in violation of labor laws for its attempts to avoid its successorship obligations. When an employer takes over a project from another company, labor laws require that the employer keep the previous employees working on the project and pay them the wages they were previously receiving. Employers who fail to do this, either willfully or ignorantly, will likely find themselves facing an investigation by the National Labor Relations Board. There is more to taking over a contract than being the lowest bidder, and it is important that both employers and employees understand labor laws as they apply to successor companies.
What is a “Successor” Under the Law?
The NLRB is responsible for enforcing the successorship doctrine, which requires employers who take over a project or company from another employer to retain the employees of the prior company and keep their pre-existing collective bargaining rights intact. The doctrine also obligates the new owner to recognize and work with the union representing the prior company’s employees. This latter provision requires two factors:
- That the business being conducted at the company remains “substantially continuous;” and
- The majority of the new employer’s bargaining unit employees were employees of the predecessor company.
If an employer violates the successorship doctrine, it can face potential losses of production due to a lengthy federal investigation and monetary damages. The investigation will include interviews with employees, including managers, discovery of relevant evidence and possibly onsite visits by NLRB agents. In addition to any production losses incurred by responding to a complaint, if the employer is found to have violated the law it may be liable to pay the employee any damages that they suffered because of the employer’s actions. The remedies available to an employee include reinstatement and backpay for the time they were out of work. In addition, the NLRB may order an employer to post notices in visible locations explaining applicable labor laws and the employer’s promise to not violate them.
Through a recent decision by a three-member panel of Administrative Law Judges, the NLRB found that an employer’s attempts to avoid the attachment of the “successive employer” label were unsuccessful. The employer undercut other bidders for a project with Ford Motor Company by refusing to hire the existing employees, who were represented by the Teamsters labor union and informing Ford that its employees would primarily be represented by another union. After being awarded the contract by Ford, the employer refused to hire Teamsters and then guided its new temporary workforce to union representation with its preferred (and cheaper) labor union. The employer was ordered to pay backpay to all previous employers on the project, despite only a portion of the employees being named in the suit.
If you are an employee or an employer seeking to know the rights and responsibilities under the NLRB’s successorship doctrine, call the law office of Garcia & Gurney. Our attorneys are skilled in all areas of labor and employment law and have experience protecting the rights of clients on both sides. We can provide you advice and represent you, depending on your situation.