Displaced Building Service Workers Protection Act Development: Federal Judge Holds That Any Successorship Analysis Must Be Performed After The Statutory Employee Retention Period

Employers taking over unionized work covered by a statute mandating temporary retention of the existing workers may have assumed that they automatically have to recognize the existing union. In New York City, and possibly in other jurisdictions with similar laws, this assumption may no longer be correct.

In 2002, Mayor Bloomberg signed the New York City Displaced Building Service Workers Protection Act ("DBSWPA") into law. The DBSWPA requires successor building owners, managers, and contractors to offer employment to the pre-existing employees for a 90-day period. During this time, employees only can be terminated for cause or if the successor employer "determines that fewer building service employees are required to perform building services." N.Y.C. Admin. Code § 22-505.1 Chicago, Philadelphia, San Francisco, Los Angeles, and Washington D.C. have all enacted similar laws that require the retention of employees for a set period of time. These laws attempt to dovetail with the successorship analysis utilized under the National Labor Relations Act ("NLRA" or the "Act") whereby an asset purchaser that is a "successor" employer generally must assume the seller's obligation to recognize and bargain with the union representing the seller's employees. A "successor" under the NLRA is defined as an entity that takes over a preexisting operation from one employer and continues substantially the same business where a majority of the workforce going forward consists of employees of the former entity. Typically, where an asset purchaser is continuing the business of the seller, the hiring of a majority of the seller's employees would cause an asset purchaser to be deemed a successor required to bargain with the existing union representing the employees.

The validity of these laws essentially mandating that certain asset purchasers become successors under the NLRA have come under attack before. A similar Providence, Rhode Island statute was challenged in the First Circuit, where the circuit court affirmed a district court's finding that an employer cannot be held to be a successor under the NLRA as a result of mere compliance with a statutory displaced workers statute. See Rhode Island Hospitality Association v. City of Providence, 775 F.Supp.2d 416 (D.R.I. 2011), aff'd, 667 F.3d 17 (1st Cir. 2011) (holding that since the NLRA's successorship analysis is based on the conscious decision of the new employer to retain workers, the disputed displaced...