Labor & Employment Law Daily School bus company, a ‘perfectly clear’ successor, failed to given union chance to bargain over initial terms
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Thursday, September 5, 2019

School bus company, a ‘perfectly clear’ successor, failed to given union chance to bargain over initial terms

By Ronald Miller, J.D.

To avoid “perfectly clear” successor status, a new employer must clearly announce its intent to establish a new set of conditions prior to, or simultaneously with, its expression of intent to retain the predecessor’s employees.

A school bus transportation company was a “perfectly clear” successor employer, and violated the NLRA by changing the terms and conditions of employment without bargaining with the union that represented its employees, ruled the D.C. Circuit. The appeals court agreed with the NLRB that the employer became a “perfectly clear” successor, with an obligation to bargain over initial terms, on the date when it first expressed an intent to retain the predecessor’s employees without clearly announcing an intent to establish different initial terms of employment. Judge Silberman filed a separate opinion concurring in part and dissenting in part (First Student, Inc., a Division of First Group America v. NLRB, September 3, 2019, Rogers, J.).

Until 2012, the Saginaw School District directly employed drivers and assistants to perform school bus transportation services. The employees were represented by a union, and the most recent collective bargaining agreement was effective through August 31, 2012. For the 2012-2013 school year, the school district requested proposals for subcontracting bus transportation services. First Student’s bid was selected, and thereafter, it began negotiating a transportation services contract with the school district.

Hiring unit employees. While contact negotiations were ongoing, the school district arranged for First Student to discuss the impending transition in management with the union employees. On March 2, 2012, approximately 40 of the 55 unit employees met with First Student officials. The employees were told that once the contract was approved, First Student would offer employment to current employees who submitted an application and met the employer’s hiring criteria, including a background check, physical examination, drug screen, and training. These requirements were consistent with the school district’s hiring criteria and the general eligibility requirements for bus drivers in the industry.

In response to a question, a First Student official stated that the employer typically hired 80 to 90 percent of an existing workforce when it assumed operations. He further stated that if it hired 51 percent of the employees, it would recognize the union and negotiate a new contract. When asked about guaranteed hours for employees, the representative responded that the employer would use the school district’s routing system, and would not be able to provide information regarding hours until the routes were established.

Ultimately, the school district and employer reached an agreement on the service contract in early May. At a public meeting, the employer reiterated that it would hire current employees who applied and met the hiring criteria, employees would receive the same rate of pay, and it would recognize the union if it hired 51 percent of the current unit members.

Changes in initial terms. On May 17, the day after the school district approved the contract, First Student met with nearly all the unit employees. It distributed a memo inviting them to apply for employment. However, the memo set forth several terms and conditions of employment that differed from those in the school district CBA under which they had worked. The memo set forth fewer guaranteed hours and provided a different method for paying employees for participation in training.

Refusal to bargain. On May 18, the union contacted First Student requesting to bargain over the terms of a new labor agreement. First Student responded that it did not know whether it would hire enough unit employees to trigger its obligation to recognize and bargain with the union. After conducting interviews and background checks, First Student made offers of employment to 42 of the approximately 55 unit employees. When First Student began operations on August 27, it had hired 41 unit employees. That same day, First Student announced an employee attendance policy that differed from the CBA.

Despite the union’s renewed request to bargain, First Student did not come to the bargaining table. The union filed charges with the NLRB alleging First Student violated Section 8(a)(5) and (1) of the NLRA by refusing to recognize and bargain and by failing to negotiate over initial terms and conditions of employment even though it was a “perfectly clear” successor.

Employer challenge. The Board concluded that First Student became a “perfectly clear” successor with an obligation to bargain over initial terms on March 2, when it first expressed an intent to retain the predecessor’s employees without clearly announcing an intent to establish different initial terms of employment.

First Student petitioned for review of the Board’s finding that it was a “perfectly clear” successor employer and violated the NLRA by changing the terms and conditions of employment without bargaining with the union. First Student contended that the Board applied the wrong legal standard, departed without justification from its precedent, and made factual findings regarding notice of the new terms and conditions of employment that were not supported by substantial evidence.

“Perfectly clear” successor doctrine. The “perfectly clear” successor doctrine has its origins in the Supreme Court decision in NLRB v. Burns International Security Services, Inc. In Burns, the Supreme Court upheld the NLRB’s determination that, as a successor employer, the employer had an obligation to recognize and bargain with the incumbent union. However, the High Court made clear that the employer’s obligation to bargain with the union “did not mature” until it had hired a full complement of employees; only then did it become evident that the union “represented a majority of employees in the union.”

Since Burns, the Board has refined the nature and scope of the “perfectly clear” successor doctrine. If a new employer “expresses an intent to retain the predecessor’s employees,” then it becomes a “perfectly clear” successor unless the new employer “clearly announces its intent to establish a new set of conditions prior to, or simultaneously with, its expression of intent” to retain the employees. The Board has explicitly rejected the view that an employer can avoid becoming a “perfectly clear” successor by announcing new terms prior to “the extension of unconditional offers of hire to the predecessor employees.”

Intent to retain employees. The NLRB asserted that to avoid “perfectly clear” successor status, a new employer must clearly announce its intent to establish a new set of conditions prior to, or simultaneously with, its expression of intent to retain the predecessor’s employees. However, First Student argued that this position conflicted with the Board’s ruling in Spruce Up Corp. It asserted that Spruce Up presumes that a successor employer retains the right to fundamentally impose terms and conditions of employment, and permits a finding of “perfectly clear” successorship only where “the presumption is overcome by evidence the successor, by word or deed, misled the predecessor’s employees.”

However, the D.C. Circuit found that the Board’s articulation of the “perfectly clear” test did not conflict with Spruce Up. Spruce Up concluded only that a new employer may avoid becoming a “perfectly clear” successor by “clearly announcing its intent” to unilaterally impose new terms of employment. The appeals court recognized that the Board’s position was consistent with the rationale behind the “perfectly clear” successor doctrine: “incumbent employees may be lulled into ‘a false sense of security” by an employer’s ‘announcement of job availability’ even if they ‘are not affirmatively led to believe that existing terms will continue.’”

Attachment of successor status. First Student also contended that the Board departed from its own precedent regarding the earliest point at which “perfectly clear” successor status can attach. The Board found that First Student became a “perfectly clear” successor when it initially “expressed its intent to retain employees on March 2.” First Student interpreted Spruce Up not to allow “perfectly clear” successor status to attach “prior to [the successor’s] inviting former employees to accept employment.” Thus, it argued that it avoided becoming a “perfectly clear” successor by announcing new terms when it distributed employment applications to unit employees at the May 17 meeting.

Here, First Student overread the relevant portion of Spruce Up, the appeals court explained. In Spruce Up, the Board had no occasion to specify when “perfectly clear” successor status can attach. Subsequently, “the Board settled on the position that a successor becomes ‘bound . . . to bargain about initial terms’ upon expressing its ‘intent to hire all of the predecessor’s employees’ without concurrently announcing new terms.” The Board explained that this prevents a new employer from misleading incumbent employees between an initial expression of intent to retain them and a formal offer that they apply for or accept employment.

Next, First Student contended that it was legal error for the Board to find that it became a “perfectly clear” successor before it had finalized its transportation services contract with the school district. However, under Board precedent, a pre-contract expression of intent to rehire incumbent employees can trigger “perfectly clear” successorship, explained the appeals court. Thus, First Student failed to show that the Board’s decision rested on a legally erroneous interpretation of the “perfectly clear” successor doctrine.

Accordingly, the employer’s petition for review was denied and the Board’s cross-petition for enforcement was granted.

Dissent. Judge Silberman, dissenting in part, found it “crucial to note that the only factor the Supreme Court relied on to distinguish a so-called ‘perfectly clear successor’ from an ordinary successor was the employer’s plan to hire all of the bargaining unit employees, presumably as a group.” However, in this case, both the ALJ and the Board found that First Student anticipated hiring only a majority of the employees, not that it planned to hire all of the bargaining unit employees. Further, he argued that it was clear the employer intended to make individual hiring decisions rather than plan to hire all bargaining unit employees as a group, as the Supreme Court contemplated.

Thus, in Silberman’s view, this case disclosed a “rather disturbing effort on the part of the Board to substantially nullify a right given to employers, under a Supreme Court opinion, by vastly expanding a narrow exception to that right.”

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