(LABOR) Court Blocks Threatened Union Strike Over Sale of Food Distributor to Non-Union Buyer

GMCS Editorial: The following blog post is an excellent post on the process of an asset sale of an organization where a collective bargaining relationship exists and where a successor clause does not exist.  In some cases, a pure sale of the assets of an organization overrides the power of an existing successor clause in the agreement, but doesn’t always excuse the original owners from their signatory obligations.  That is, it does not transfer any obligations onto the purchaser with respect to recognition of any existing labor agreements in place , but the original owner may be obligated to bargain the “effects” of the sale with the existing bargaining unit’s union.  In the case below, the asset purchase agreement is clear in stating that all employees of the organization are to be terminated prior to the sale.  Should that not be the case, a simple show of cards by the existing workforce would most likely present a scenario where the new owner would ultimately have to recognize the previous bargaining unit.

Court Blocks Threatened Union Strike Over Sale of Food Distributor to Non-Union Buyer

A unionized Western New York food distributor may proceed with plans to sell its operations to a non-union purchaser without threat of a strike by its current workforce, a federal district court in Buffalo has held. Will Poultry, Inc. v. Teamsters Local 264, No. 13-CV-1135 (W.D.N.Y. Dec. 23, 2013).

The court granted Will Poultry, Inc., the largest locally-owned, full-time beef, pork, poultry, seafood, kosher and international food distributor in Western New York, a preliminary injunction barring Teamsters Local 264 from pulling the company’s approximately 60 unionized employees off the job, and jeopardizing the sale of the company by its 86-year-old owner, Donald Will, to a potential buyer who intends to keep the business in Buffalo and retain some of its employees. It took the company three years to find the prospective purchaser and enter into an asset purchase agreement.

The asset purchase agreement called upon Will Poultry to terminate all its employees prior to closing and provided that the purchaser would not have to recognize Local 264 or assume Will Poultry’s collective bargaining agreement (CBA) with Local 264. There was no provision in the CBA requiring the company to assure that a purchaser would recognize the union, assume the agreement or retain the represented employees. (Some or all of these provisions typically are contained in a CBA clause often referred to as a “successors and assigns” clause.) The company gave Worker Adjustment and Retraining Notification Act (WARN) notices under federal and state law and offered to negotiate with the union over the effects of the sale. The union, however, insisted on amending the CBA to include a broad successors and assigns clause and threatened a strike if Will Poultry did not accede.

The union also filed a grievance over the WARN notices, claiming the impending worker dismissals violated the CBA’s layoff provision. The CBA provided that “all grievances and disputes arising out of the CBA” would be resolved by a mandatory grievance and arbitration procedure, but it lacked a no-strike clause. Yet another provision stated, in part, that if either party desired changes in the CBA, the parties would begin talks promptly “and that pending the results of negotiation, neither party shall change conditions existing under this Contract.”

Fearful that a union strike would kill the sale and cause irreparable injury to its good will and business, Will Poultry sought judicial relief and the court agreed to grant it. While such relief generally is unavailable in labor disputes, the court observed that in Boys Market, Inc. v. Retail Clerk’s Union, Local 770, 398 U.S. 235 (1970), the Supreme Court had made an exception where a case “arises out of grievance that is the subject of compulsory arbitration” and other “equitable” requirements are met. This was such a case, the district court concluded. The CBA’s mandatory grievance-arbitration clause gave rise to an implied undertaking by the union not to strike. Furthermore, the court decided, the underlying dispute over the WARN notices was subject to the mandatory grievance arbitration procedure. Thus, the case could qualify for injunction.

The court also rejected a Teamsters argument that the parties’ disagreement over the union’s demand for a successors and assigns clause — an issue not covered by the grievance/arbitration clause, and therefore not subject to the Boys Market exception — as misplaced. Here, the CBA specified procedures for negotiating changes. Thus, this issue, too, would be subject to the agreement’s arbitration procedures, and a threatened job action over the negotiations could be enjoined.

Finally, noting particularly that “the loss of business, business reputation and customer goodwill due to work stoppages constitutes irreparable harm,” and might cause the sale to collapse, the court found Will Poultry satisfied the “equitable” requirements for an injunction. Therefore, the court ordered that the union be barred from striking.

“Successors and assigns” clauses of the type sought by the union sometimes are incorporated in collective bargaining agreements, but their presence or absence can make a significant difference when a company seeks to sell its assets to a prospective purchaser.

If you have any questions about this case or other workplace developments, please contact Philip B. Rosen, RosenP@jacksonlewis.com, Roger S. Kaplan, KaplanR@jacksonlewis.com, or the Jackson Lewis attorney with whom you regularly work.

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