NLRB v. Burns International Security Services/Concurrence-dissent Rehnquist

by William Rehnquist

[p296] MR. JUSTICE REHNQUIST, with whom THE CHIEF JUSTICE, MR. JUSTICE BRENNAN, and MR. JUSTICE POWELL join, concurring in No. 71-123 and dissenting in No. 71-198.

Although the Court studiously avoids using the term "successorship" in concluding that Burns did have a statutory obligation to bargain with the union, it affirms the conclusions of the Board and the Court of Appeals to that effect which were based entirely on the successorship doctrine. Because I believe that the Board and the Court of Appeals stretched that concept beyond the limits of its proper application, I would enforce neither the Board's bargaining order nor its order imposing upon Burns the terms of the contract between the union and Wackenhut. I therefore concur in No. 71-123 and dissent in No. 71-198.

The National Labor Relations Act imposes upon an employer the obligation "to... bargain collectively with the representatives of his employees..." 29 U.S.C. § 185 (a)(5). It also defines those representatives, in § 159 (a), as "[r]epresentatives designated or selected for the purposes of collective bargaining by the majority of the employees in a unit appropriate for such purposes..." The union must establish its status as a majority representative either by one of the methods discussed in NLRB v. Gissel Packing Co., 395 U.S. 575 (1969), or because its certification as a representative of the employees of another employer binds Burns as a "successor."

[p297] The Court concludes that because the trial examiner and the Board found the Lockheed facility to be an appropriate bargaining unit for Burns' employees, and because Burns hired a majority of Wackenhut's previous employees who had worked at that facility, Burns should have bargained with the union, even though the union never made any showing to Burns of majority representation. There is more than one difficulty with this analysis.

First, it is by no means mathematically demonstrable that the union was the choice of a majority of the 42 employees with which Burns began the performance of its contract with Lockheed. True, 27 of the 42 had been represented by the union when they were employees of Wackenhut, but there is nothing in the record before us to indicate that all 27 of these employees chose the union as their bargaining agent even at the time of negotiations with Wackenhut. There is obviously no evidence whatever that the remaining 15 employees of Burns, who had never been employed by Wackenhut, had ever expressed their views one way or the other about the union as a bargaining representative. It may be that, if asked, all would have designated the union. But they were never asked. Instead, the trial examiner concluded that because Burns was a "successor" employer to Wackenhut, it was obligated by that fact alone to bargain with the union.

The second problem with the Court's reasoning is that it relies on the Board's approval of the Lockheed plant as an appropriate unit to support its conclusion that Burns must bargain with the union. While it is true, as the Court notes, that the trial examiner and the Board found the Lockheed facility to be an appropriate bargaining unit for Burns' employees, it is equally true that the trial examiner's finding to this effect was clearly dependent upon the previous stipulation between [p298] Wackenhut and the union.^[1] One of the reasons asserted by Burns for declining to recognize the union was its belief that the single Lockheed facility was not an appropriate bargaining unit. This was more than a colorable claim. Unlike Wackenhut, Burns had never bargained with a union consisting of its employees in a single job location. One of the reasons for this difference was that Burns made a practice of transferring employees from one job to another, on a temporary or permanent basis. Both Burns and Wackenhut had numerous security guard jobsites in Southern California; for administrative purposes, Wackenhut treated each jobsite as a separate unit, while Burns treated large numbers of them together.

The Court says in effect that the Burns employees at Lockheed were found by the Board to be an appropriate unit; that Burns has not expressly preserved that point for review here; and that Burns is therefore obligated to bargain with the previously certified union. But the major premise leading to this conclusion, the determination of the appropriate unit, was itself established by the Board and sustained by the Court of Appeals solely under the doctrine of successorship. Burns is neither required to expressly challenge the designation of the bargaining unit, nor to prevail in such a challenge in order to demonstrate the error in the bargaining order. Burns has expressly challenged the determination that underlay both the determination [p299] as to bargaining unit and the bargaining order—the finding of successorship.

Thus, in a situation where there was no evidence at the time as to the preference of a majority of the employees at the Lockheed facility as to a bargaining agent, and there was no independent finding that the employees at that facility were an appropriate unit as to Burns, the Board nonetheless imposed the duty to bargain. This result is sustainable, if at all, only on the theory that Burns as a "successor" to Wackenhut.^[2] The imposition of successorship in this case is unusual because the successor instead of purchasing business or asserts from or merging with Wackenhut was in direct competition with Wackenhut for the Lockheed contract. I believe that a careful analysis of the admittedly imprecise concept of successorship indicates that important rights of both the employee and the employer to independently order their own affairs are sacrificed needlessly by the application of that doctrine to this case.

It has been aptly observed that the doctrine of "successor" employer in the field of labor law is "shrouded in somewhat impressionist approaches."^[3] In John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (1964), we employed a form of the "successor" doctrine to impose upon an employer an obligation to arbitrate disputes under an arbitration clause in an agreement entered into between a predecessor employer and the bargaining representative of the latter's employees. The doctrine has been applied by the Board and by the courts of [p300] appeals to impose upon the successor employer a duty to bargain with representatives of the employees of his predecessor, NLRB v. Auto Ventshade, Inc., 276 F. 2d 303, 304 (CA5 1960); Makela Welding, Inc. v. NLRB, 387 F. 2d 40, 46 (CA6 1967), to support a finding of unfair labor practices from a course of conduct engaged in by both the predecessor and the successor, NLRB v. Blair Quarries, Inc., 152 F. 2d 25 (CA4 1945), and to require the successor to remedy unfair labor practices committed by a predecessor employer, United States Pipe and Foundry Co. v. NLRB, 298 F. 2d 544 (CA5 1968). The consequences of the application of the "successor" doctrine in each of these cases has been that the "successor" employer has been subjected to certain burdens or obligations to which a similarly situated employer who is not a "successor" would not be subject.

The various decisions that have applied the successor doctrine exhibit more than one train of reasoning in support of its application. There is authority for the proposition that it rests in part at least upon the need for continuity in industrial labor relations, and the concomitant avoidance of industrial strife that presumably follows from such continuity. NLRB v. Colten, 105 F. 2d 179 (CA6 1939); Tom-A-Hawk Transit, Inc. v. NLRB, 419 F. 2d 1025 (CA7 1969). On examination, however, this proposition may more accurately be described as a statement of the result of a finding of successorship, rather than a reason for making that finding.

Other cases have stated the guiding principle to be whether the "employing industry" remains essentially the same after the change in ownership. NLRB v. Tempest Shirt Mfg. Co., 285 F. 2d 1 (CA5 1960); NLRB v. Alamo White Truck Service, Inc., 273 F. 2d 238 (CA5 1959). Under this approach a variety of facts relating to the "employing industry" have been examined to see whether a sufficient number remain unchanged to warrant the imposition of successorship. While it cannot be [p301] doubted that a determination as to successorship will vary with different fact situations, some general concept of the reason for the successorship doctrine is essential in order to determine the importance of the various factual combinations and permutations that may or may not call for its application.

This Court's opinion in Wiley makes it clear that one of the bases for a finding of successorship is the need to grant some protection to employees from a sudden transformation of their employer's business that results in the substitution of a new legal entity, not bound by the collective-bargaining contract under contract law, as the employer, but leaves intact significant elements of the employer's business. The Court said there:

"The objectives of national labor policy, reflected in established principles of federal law, require that the rightful prerogative of owners independently to rearrange their businesses and even eliminate themselves as employers be balanced by some protection to the employees from a sudden change in the employment relationship. The transition from one corporate organization to another will in most cases be eased and industrial strife avoided if employees' claims continue to be resolved by arbitration rather than by 'the relative strength... of the contending forces'..." 376 U.S., at 549.

But other language in Wiley makes it clear that the considerations favoring the continuity of existing bargaining relationships are not without their limits:

"We do not hold that in every case in which the ownership or corporate structure of an enterprise is changed the duty to arbitrate survives. As indicated above, there may be cases in which the lack of any substantial continuity of identity in the business enterprise before and after a change would [p302] make a duty to arbitrate something imposed from without, not reasonably to be found in the particular bargaining agreement and the acts of the parties involved. 376 U.S., at 551.

The conflicting implications in these portions of the opinion in Wiley suggest that employees are indeed entitled to a measure of protection against change in the employing entity where the new employer continues to make use of tangible or intangible assets used in carrying on the business of the first employer. They also make clear that the successorship doctrine, carried to its ultimate limits, runs counter to other equally well-established principles of labor law. Industrial peace is an important goal of the Labor Management Relations Act. But Congress has time and again refused to sacrifice free collective bargaining between representatives of the employees and the employer for a system of compulsory arbitration.^[4] As the Court said in NLRB v. Insurance Agents, 361 U.S. 477, 488 (1960):

"The mainstream of cases before the Board and in the courts reviewing its orders, under the provisions fixing the duty to bargain collectively, is concerned [p303] with insuring that the parties approach the bargaining table with this attitude [good faith]. But apart from this essential standard of conduct, Congress intended that the parties should have wide latitude in their negotiations, unrestricted by any governmental power to regulate the substantive solution of their differences."

And this Court has recently held that the Board itself may not compel one of the parties in the collective-bargaining process to agree to any particular proposal of the other. H.K. Porter Co. v. NLRB, 397 U.S. 99 (1970). Conceivably the imposition of a system of compulsory arbitration, or the granting of authority to the Board to insist that the parties at some point agree on particular terms of a potential contract, would lessen the risk of industrial strife. But Congress has plainly been unwilling to purchase industrial peace at the price of substantial curtailment of free collective bargaining by the freely chosen representatives of the employees with their employer.

There is also a natural tension between the constraints imposed on employers by the Labor Management Relations Act, and the right of those employers in competition with one another "independently to rearrange their businesses and even eliminate themselves as employers." Wiley, 376 U.S., at 549. An employer's ability to compete in his market is affected, of course, by the terms of whatever collective-bargaining agreement he negotiates with the representative of his employees. Aside from the direct influence on price brought about by the terms of a collective-bargaining agreement, the collective-bargaining process itself presents a certain cost factor that may affect competition between employers in the market.^[5] The national commitment to collective [p304] bargaining embodied in the Labor Management Relations Act either requires or permits many of these constraints. But quite reasonable expectations of the employees in a particular collective-bargaining unit may be disappointed by a voluntary change in the condition of the employer that is quite incapable of being remedied by any rational application of the successorship doctrine. An employer is free to cease doing business, even though he chooses to do so wholly because of anti-union animus. Textile Workers v. Darlington Mfg. Co., 380 U.S. 263 (1965). An employer may adamantly refuse, at the expiration of the period covered by a collective-bargaining agreement, to again consent to a particular term of the agreement that the employees regarded as significant. NLRB v. American National Insurance Co., 343 U.S. 395 (1952). These examples of permissible employer conduct for which the Labor Management Relations Act provides no remedy, notwithstanding that the conduct results in the disappointment of legitimate expectations of employees, suggest that the successorship principle, like every other principle of law, has limits beyond which it may not be expanded.

Wiley, supra, speaks in terms of a change in the "ownership or corporate structure of an enterprise" as bringing into play the obligation of the successor employer to perform an obligation voluntarily undertaken by the predecessor employer. But while the principle enunciated in Wiley is by no means limited to the corporate merger situation present there, it cannot logically be extended to a mere naked shifting of a group of employees from one employer to another without totally disregarding the basis for the doctrine. The notion of a change in the [p305] "ownership or corporate structure of an enterprise" connotes at the very least that there is continuity in the enterprise, as well as change; and that that continuity be at least in part on the employer's side of the equation, rather than only on that of the employees. If we deal with the legitimate expectations of employees that the employer who agreed to the collective-bargaining contract perform it, we can require another employing entity to perform the contract only when he has succeeded to some of the tangible or intangible assets by the use of which the employees might have expected the first employer to have performed his contract with them.

Phrased another way, the doctrine of successorship in the federal common law of labor relations accords to employees the same general protection against transfer of assets by an entity against which they have a claim as is accorded by other legal doctrines to nonlabor-related claimants against the same entity. Nonlabor-related claimants in such transfer situations may be protected not only by assumption agreements resulting from the self-interest of the contracting parties participating in a merger or sale of assets but also by state laws imposing upon the successor corporation of any merger the obligations of the merged corporation (see, e.g., § 90 of N.Y. Stock Corp. Law (1951), cited in Wiley, supra), and by bulk sales acts found in numerous States.^[6] These latter are designed to give the nonlabor-related creditor of the predecessor entity some claim, either as a matter of contract right against the successor, or as a matter of property right to charge the assets that pass from the predecessor to the successor. The implication of Wiley is that the federal common law of labor relations accords the same general type and degree of protection to employees claiming under a collective-bargaining contract.

[p306] Cases from the courts of appeals have found successorship, consistently with these principles, where the new employer purchases a part or all of the assets of the predecessor employer, NLRB v. Interstate 65 Corp., 453 F. 2d 269 (CA6 1971); where the entire business is purchased by the new employer, NLRB v. McFarland, 306 F. 2d 219 (CA10 1962); and where there is merely a change in the ownership interest in a partnership that operates the employing entity, NLRB v. Colten, 105 F. 2d 179 (CA6 1939). Other courts of appeals have, equally consistently with these principles, refused to find successorship where there have been no contractual dealings between the two employers, and all that has taken place is a shift in employees. Tri State Maintenance Corp. v. NLRB, 132 U.S. App. D.C. 368, 408 F. 2d 171 (1968); International Assn. of Machinists v. NLRB, 134 U.S. App. D.C. 239, 414 F. 2d 1135 (1969).^[7]

The rigid imposition of a prior-existing labor relations environment on a new employer whose only connection with the old employer is the hiring of some of the latter's employees and the performance of some of the work which was previously performed by the latter, might well tend to produce industrial peace of a sort. But industrial peace in such a case would be produced at a sacrifice of the determination by the Board of the appropriateness of bargaining agents and of the wishes of the majority of the employees which the Act was designed to preserve. These latter principles caution us against extending successorship, under the banner of [p307] industrial peace, step by step to a point where the only connection between the two employing entities is a naked transfer of employees. Justice Holmes in Hudson Water Co. v. McCarter, 209 U.S. 349, 355 (1908), summarized the general problem this way:

"All rights tend to declare themselves absolute to their logical extreme. Yet all in fact are limited by the neighborhood of principles of policy which are other than those on which the particular right is founded, and which become strong enough to hold their own when a certain point is reached."

Burns acquired not a single asset, tangible or intangible, by negotiation or transfer from Wackenhut. It succeeded to the contractual rights and duties of the plant protection service contract with Lockheed, not by reason of Wackenhut's assignment or contract, but over Wackenhut's vigorous opposition. I think the only permissible conclusion is that Burns is not a successor to Wackenhut. Following its decision in this case, the Board concluded in Lincoln Private Police, 189 N.L.R.B. No. 103 (1971), that an employer of guards was not a successor, saying:

"Respondent, moreover, has operated as an entirely new and independent business enterprise. It obtained its own operating capital, purchased new uniforms, vehicles, and equipment, and occupied different premises than Industrial. Additionally, there is no indication that there has been any carry-over of supervisory personnel from Industrial to Respondent." 189 N.L.R.B., at —.

See also Tri State Maintenance Corp. v. NLRB, supra.

To conclude that Burns was a successor to Wackenhut in this situation, with its attendant consequences under the Board's order imposing a duty to bargain with the [p308] bargaining representative of Wackenhut's employees, would import unwarranted rigidity into labor-management relations. The fortunes of competing employers inevitably ebb and flow, and an employer who has currently gained production orders at the expense of another may well wish to hire employees away from that other. There is no reason to think that the best interests of the employees, the employers, and ultimately of the free market are not served by such movement. Yet inherent in the expanded doctrine of successorship that the Board urges in this case is the notion that somehow the "labor relations environment" comes with the new employees if the new employer has but obtained orders or business that previously belonged to the old employer. The fact that the employees in the instant case continued to perform their work at the same situs, while not irrelevant to analysis, cannot be deemed controlling. For the rigidity that would follow from the Board's application of successorship to this case would not only affect competition between Wackenhut and Burns, but would also affect Lockheed's operations. In effect, it would be saddled, as against its competitors, with the disadvantageous consequences of a collective-bargaining contract unduly favorable to Wackenhut's employees, even though Lockheed's contract with Wackenhut was set to expire at a given time. By the same token, it would be benefited, at the expense of its competitors, as a result of a "sweetheart" contract negotiated between Wackenhut and its employees. From the viewpoint of the recipient of the services, dissatisfaction with the labor relations environment may stimulate a desire for change of contractors. E.g., Tri State Maintenance Corp. v. NLRB, supra, 76 Lab. Rel. Rep. 230 (1971). Where the relation between the first employer and the second is as attenuated [p309] as it is here, and the reasonable expectations of the employees equally attenuated, the application of the successorship doctrine is not authorized by the Labor Management Relations Act.

This is not to say that Burns would be unilaterally free to mesh into its previously recognized Los Angeles County bargaining unit a group of employees such as were involved here who already have designated a collective-bargaining representative in their previous employment. Burns' actions in this regard would be subject to the commands of the Labor Management Relations Act, and to the regulation of the Board under proper application of governing principles. The situation resulting from the addition of a new element of the component work force of an employer has been dealt with by the Board in numerous cases, and various factors are weighed in order to determine whether the new workforce component should be itself a separate bargaining unit, or whether the employees in this component shall be "accreted" to the bargaining unit already in existence. See, e.g., NLRB v. Food Employers Council, Inc., 399 F. 2d 501 (CA9 1968); Northwest Galvanizing Co., 168 N.L.R.B. 26 (1967). Had the Board made the appropriate factual inquiry and determinations required by the Act, such inquiry might have justified the conclusion that Burns was obligated to recognize and bargain with the union as a representative of its employees at the Lockheed facility.

But the Board, instead of applying this type of analysis to the union's complaints here, concluded that because Burns was a "successor" it was absolutely bound to the mold that had been fashioned by Wackenhut and its employees at Lockheed. Burns was thereby precluded from challenging the designation of Lockheed as an appropriate bargaining unit for a year after the original certification. 61 Stat. 144, 29 U.S.C. § 159 (c)(3).

[p310] I am unwilling to follow the Board this far down the successorship road, since I believe to do so would substantially undercut the principle of free choice of bargaining representatives by the employees and designation of the appropriate bargaining unit by the Board that are guaranteed by the Act.

Notes

1. "While a broader unit might have been appropriate, I find a unit of guards limited to a single facility as an appropriate unit. Here, the certification was pursuant to a consent election agreement." Trial Examiner's decision, App. 22.

   "Trial Examiner: I am not concerned with whether or not there was a hearing. The Regional Director approved of the consent election and stipulation, and the election having taken place, I would find that the Regional Director's action was properly conducted in due course..." Proceedings before the NLRB, App. 68.

2. The Court's emphasis, ante, at 275-276, on the Board's determination that Burns committed unfair practices by aiding the AFG cannot be taken as any support for the bargaining order. It merely supports the cease-and-desist order directing Burns to stop such practices, which has not been challenged here by Burns.
3. International Assn. of Machinists v. NLRB, 134 U.S. App. D.C. 239, 243, 414 F. 2d 1135, 1139 (1969) (Leventhal, J., concurring).
4. "Except in isolated instances... Congress and the Supreme Court have refused to compel, or even to allow, that form of governmental compulsion of economic decisions which has come to be called 'compulsory arbitration.'" Jones, Compulsion and the Consensual in Labor Arbitration, 51 Va. L. Rev. 369 (1965).

   "In dealing with the problem of the direct settlement of labor disputes the committee has considered a great variety of the proposals ranging from compulsory arbitration, the establishment of fact-finding boards, creation of an over-all mediation tribunal, and the imposition of specified waiting periods.... [W]e do not feel warranted in recommending that any such plans become permanent legislation." S. Rep. No. 105, 80th Cong., lst Sess., 13 (1947). See also the speech by Senator Taft, during debate on the Taft-Hartley Act, 93 Cong. Rec. 3835-3836, cited in Bus Employees v. Wisconsin Board, 340 U.S. 383, 395 n. 21 (1951).

5. The General Accounting Office has recognized that bidders for a cost-plus-fee subcontract to NASA, who dealt with different unions, could be evaluated by NASA on the basis of varying costs that collective bargaining itself might generate. 76 Lab. Rel. Rep. 230 (1971).
6. Uniform Commercial Code §§ 6-101 to 6-111.
7. A finding of successorship has been upheld, on the other hand, by one court of appeals where there were no contractual dealings between the two employers, and the successor employer merely replaced the predecessor as a successful bidder for a transit franchise. Tom-A-Hawk Transit, Inc. v. NLRB, 419 F. 2d 1025 (CA7 1969).