Insights for the Labor Relations Professional


Acquiring Unionized Operations: Recent GC Memorandum Adds to the Minefield

By Nelson Cary

Mergers and acquisitions involving unionized companies present a number of potential labor law challenges for the buyer.  Primarily, these challenges arise from the well-established rules applicable to "successor" employers.  A "successor" is a company that purchases the stock or, in certain cases, the assets of a unionized company.  If the buyer is a successor employer under the NLRA, then it has an obligation to recognize and bargain with the union.  If the buyer discriminatorily refuses to hire the employees of the seller, because those employees are represented by a union, the buyer could also be liable for unfair labor practices, even if it is not a "successor" under the NLRA.

Recently, the NLRB’s GC has raised the stakes in this area yet again.  In a recently released memorandum (pdf) from the GC, the GC indicated his intent to further expand what is known as a Section 10(j) injunction to cases involving a successor employer’s refusal to bargain or a buyer’s refusal to hire employees of the seller.  Section 10(j) authorizes the NLRB to file a lawsuit in federal court to obtain injunctive relief while the unfair labor practice complaint is pending.  A prior post on this blog discussed the 10(j) injunction and an earlier memorandum about it. The GC’s most recent memorandum reaffirms the enforcement priorities explained in the earlier memorandum, and also announces an extension of them to cases involving successor employers.  

The GC’s action means that a buyer of a unionized business could face federal court litigation if it should have recognized and bargained with the union representing employees of the seller but did not. Likewise, the buyer could face a federal court injunction if it discriminatorily fails or refuses to hire employees of the seller. The GC’s memorandum is an important reminder that those involved in the acquisition of unionized operations are well-advised to seek out qualified labor law counsel at the earliest possible time in the negotiation of the purchase agreement or similar instrument. 

Tags: acquisition, asset purchase, asset


Insights for the Labor Relations Professional