New England Biz Law Update
The D.C. U.S. Circuit Court of Appeals has struck down an NLRB rule requiring certain successor employers to recognize and bargain with an existing union for up to one year, even when the union may no longer have the support of most employees.
In a 2-1 decision, the court held that the “successor bar” conflicts with the National Labor Relations Act’s protections for employee choice and majority representation. The ruling is important for employers acquiring unionized businesses, but its impact may extend to other rules created by the National Labor Relations Board.
Hospital challenges the union’s support
The case began after Hospital Menonita de Guayama acquired another hospital in Puerto Rico in 2017. The hospital initially recognized the union representing five groups of employees.
It later received evidence that the majority of employees no longer wanted the union to represent them. In one group, all employees reportedly rejected the union. The hospital then withdrew recognition and stopped bargaining.
The NLRB found that the hospital had committed an unfair labor practice. Under the successor bar, neither the employer nor the employees could challenge the union’s status during the initial bargaining period following a change in ownership.
A D.C. Circuit panel upheld the NLRB’s decision. The U.S. Supreme Court later vacated that ruling and directed the appeals court to reconsider the case following its decision in Loper Bright Enterprises v. Raimondo.
Court takes a fresh look at the NLRB’s authority
In Loper Bright, the Supreme Court overturned the Chevron doctrine, which had generally required courts to defer to a federal agency’s reasonable interpretation of an unclear law. Courts must now decide for themselves whether an agency’s action is authorized by Congress.
Using that approach, the D.C. Circuit concluded that the NLRB did not have the authority to create an automatic successor bar.
The court said a union can serve as the exclusive bargaining representative only if it has the support of most employees. Federal law blocks another union election for one year after a valid election, but it does not create the same one-year restriction simply because a business changes owners.
The court also rejected the NLRB’s argument that the rule was needed to provide stability in collective bargaining relationships. According to the majority, the Board’s policy goals could not override the employee rights and majority-support requirements written into the law.
The dissenting judge disagreed. He argued that the NLRA gives the Board broad authority to develop national labor policy and that this authority remained in place after Loper Bright.
Removes the automatic rule
The decision does not eliminate all bargaining obligations for successor employers. A buyer that continues operating a unionized business and retains much of its workforce may still be required to recognize and bargain with the existing union.
The ruling instead removes the automatic rule that prevented an employer, employees, or another union from presenting evidence that the incumbent union had lost majority support.
Employers should not assume they can immediately withdraw recognition after acquiring a unionized business. Questions about whether an employer is a legal successor, whether a union has lost majority support, and when recognition may be withdrawn remain highly fact specific.
The broader impact could be significant. Employers facing NLRB orders can often seek review in the D.C. Circuit, regardless of where the underlying dispute occurred. That may allow more employers to challenge other Board-created rules by arguing that the NLRA does not authorize them.
The law is not fully settled. The 1st Circuit previously upheld the successor bar, and the NLRB could ask the full D.C. Circuit or the Supreme Court to review this decision.
