When a company purchases another company that has a unionized workforce, there are various rules developed by the National Labor Relations Board to decide the status of the union following the purchase. Generally, the purchaser is not obligated to adopt the Union contract, and it can set whatever rates and benefits it wants for any employees it hires.
The purchaser, however, may be obligated to recognize and bargain for a new contract with the union if certain conditions are met. The obligation to recognize the seller’s union and bargain arises if and when the purchaser employs a majority of the former unionized employees in the new operation. In other words, if the business continues to operate or is reopened with 20 employees, and 11 of them are former employees of the seller, the obligation to bargain is created.
In hiring employees for the successor operation, it is an unfair labor practice (and therefore against the law) for the purchaser not to hire the Seller’s former employees primarily because of their union affiliation. So, a purchaser cannot avoid the union by consciously excluding former employees from consideration in the new operation. Circumstantial evidence (for example, no former employees were hired) in these cases is important.
The purchaser can, however, put into place a procedure for staffing the new operation that could result in no bargaining obligation if (a) it can show that the procedure is justified by good business judgment and (b) the NLRB cannot show that the procedure is a pretext to avoid hiring former unionized employees. The best procedure is one that results in the most qualified workforce, regardless of the old unionized workforce.
There are, of course, other scenarios that might have to be addressed, such as merging the purchased company into the buyer’s operations. For example, if the buyer has 50 employees represented by the Teamsters Union and merges the purchased operation with 10 employees represented by the Steelworkers Union into that workforce, all 60 would likely be represented by the Teamsters. If those 50 employees had no union, the merged operation would remain so.
In 2011, the NLRB – controlled by appointees of President Obama — decided that if a unionized business was purchased and the employer became obligated to bargain with the union, the employees could not attempt to decertify or get rid of the union for a “reasonable period of time” to allow negotiations to run their course. UGL-UNICCO Service Co., 357 NLRB 801 (2011). In other circumstances, the NLRB prohibits employees from decertifying or getting rid of a union to preserve labor peace and foster collective bargaining. If there is a collective bargaining agreement in place, for example, petitions to decertify the union are generally barred until near the end of the contract term (90 to 60 days before expiration) and then barred for the last 60 days of the contract.
The current NLRB – controlled by appointees of President Trump – has decided to revisit the question of whether employees can decertify a union if their employer is purchased and the new owners become obligated to bargain with the Union. That case is American Water MSG. A decision is expected next year.