Asset buyers, beware. If the seller has unionized employees and you intend to hire some or all of those employees and operate the assets as a non-unionized employer, be careful not to become a random successor. Even in situations where the buyer is a successor of work, the buyer generally has the right not to adopt the ABC that exists between the predecessor and the syndicate. Instead, the buyer can establish other initial terms and conditions of employment and then negotiate a new cost-benefit analysis with the syndicate. This can be important because, as explained in more detail below, the collective agreement is the contract that governs the terms and conditions of employment of employees in the bargaining unit. Companies will want to create the cost-benefit analysis that applies specifically to their activities and operations, not those of its predecessor. When buying assets from a unionized employer, beware of buyers. Don`t become a random successor. If the buyer is a successor, in most cases it is advisable to negotiate a new collective agreement instead of accepting the seller`s contract.

It is much easier to negotiate a new collective agreement at the time of purchase than to try to amend an existing collective agreement in future negotiations. The buyer should assess whether the non-economic provisions of the existing contract have a negative impact on the buyer`s operation. One of the main differences in managing a unionized entity is that the company often has less flexibility in a number of areas. For example, in a non-unionized environment, the company has a wide margin of appreciation in hiring, promoting and firing employees. However, in the case of union facilitation, hiring decisions may be restricted by the recall rights of previously dismissed employees or by the requirement to first offer the position to an existing employee in the collective bargaining unit. If a buyer intends to challenge the application of the seller`s collective agreement, how they hire the new employees could be important. A buyer`s relationship with the syndicate is governed by whether the buyer is a “perfectly clear” or “not perfectly clear” successor to the seller`s unionized business. This means that the acquiring company is not able to change the terms and conditions of employment of workers covered by the existing collective agreement during the term of the contract without the consent of the union. In addition, the National Labour Relations Board has determined that it is a violation of applicable labour laws for employers to exert economic pressure to force a union to resume negotiations in the middle of the contract. In an asset transaction, the buyer is required to recognize and negotiate with the predecessor`s syndicate whether the buyer is considered a work successor.

In general, a company is considered a successor to the job if: (1) the majority of the company`s workforce was previously employed by the predecessor and (2) there is significant continuity of business activity between the two companies. Regardless of the nature of the transaction, when reviewing existing collective agreements, the purchaser should pay attention to any obligation to contribute to a multi-employer pension plan. It is common for multi-employer pension plans to be underfunded, and if a contributing employer stops contributing to the multi-employer pension plan, the employer may be considered a withdrawal liability. Withdrawal liability will be discussed in a future article, but it will be mentioned here to alert potential buyers of a union company that withdrawal liability may be a factor in evaluating potential acquisitions. Acquisitions can be structured either as an asset purchase or as a share purchase. A share purchase is a transfer of ownership of the business unit, and the entity continues to own the same assets and debts. An asset purchase is an acquisition of individual assets and the assumption of agreed liabilities. The seller may or may not continue its activities after the sale of some or all of its assets.

One of the determinants of a buyer`s obligation to recognize the seller`s syndicate as the employee representative in collective bargaining matters is the extent to which the buyer has hired the seller`s employees and continues to operate the business as a seller. Is there significant business continuity in the new business? If the buyer does not hire or a small minority of the seller`s employees, there could be an argument that the buyer is not obliged to recognize the association because the buyer is not a successor to the seller. A number of factors are considered in determining whether a buyer is a successor in an asset acquisition, including: If the buyer does not acquire the employees as part of the transaction or if previously unionized workers are merged with a larger group, there can be no ongoing obligations between the buyer and the syndicate. Decisions about whether the buyer intends to recognize the union as a collective bargaining representative or to refuse to allow the union to represent the seller`s employees should be made early in the planning process so that the buyer does not inadvertently say or do things that could require the buyer to recognize a union as the collective bargaining representative of the new employer. or be required to abide by the terms of the seller`s collective agreement. Like a recent decision of the D.C. The Circuit Court of Appeal reminds us that the terms of the Asset Purchase Agreement (APA) and all communications with the seller`s employees – both the buyer and the seller – must be carefully managed. Otherwise, the buyer could inadvertently become a “perfectly clear successor” that is required: if a company has never operated an institution with a unionized workforce, it may not fully recognize the marked differences in day-to-day operations in terms of interactions with bargaining unit employees. If a seller of assets has unionized employees and the buyer wishes to hire some or all of them and operate the assets, the buyer has three basic options under the National Labour Relations Act: It is important to note that the buyer may lose its right to set terms other than those contained in the predecessor`s ABC if the buyer is considered a perfectly clear successor. The buyer can be considered a perfectly clear successor if he deceives the employees of the predecessor into believing that they will be retained or hired after the acquisition without changing their salary, hours of work or terms of employment. As the D.C. circuit recently reminded us, an asset buyer may inadvertently become a “perfectly clear successor.” In First Student, Inc.c.

NLRB, 935 F.3d 604 (D.C. Cir. In 2019), the court stated that a buyer of wealth can become a “perfectly clear successor” simply by expressing a desire to make offers to most or all of the seller`s unionized employees – unless the buyer simultaneously makes it clear to those employees (1) that he will not comply with the seller`s CBA and (2) that all job offers on the new employment relationship conditions created. by the buyer. To avoid this error, the buyer must specify these two points in his very first communication with the seller`s employees. Thus, if the buyer has to reduce costs and change the operation and management of the purchased business to make the purchase worthwhile, the buyer must structure the transaction as much as possible to improve an outcome that does not require the buyer to recognize the syndicate at all, or at least gives the buyer the right to: negotiate a brand new collective agreement. Whether the buyer is obliged to negotiate with the collective bargaining representative of the seller`s employees in the event of an acquisition of assets depends on the circumstances. If, in a purchase of assets, the buyer intends to employ all of the seller`s employees, including management, it is likely that the buyer will be required to negotiate with the syndicate representing the seller`s employees.

The buyer is not necessarily obliged to adopt the seller`s already existing collective agreement, but is most likely obliged to negotiate a new collective agreement with the seller`s collective bargaining representative. Before a company decides to buy a union company, it is advisable to check all the collective agreements that the seller has signed. .