The opinion
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 1, 2019 Decided September 3, 2019
No. 18-1091
FIRST STUDENT, INC., A DIVISION OF FIRST GROUP AMERICA,
PETITIONER
v.
NATIONAL LABOR RELATIONS BOARD,
RESPONDENT
UNITED STEEL, PAPER AND FORESTRY, RUBBER,
MANUFACTURING, ENERGY, ALLIED INDUSTRIAL & SERVICE
WORKERS INTERNATIONAL UNION, AFL-CIO/CLC, LOCAL
9036,
INTERVENOR
Consolidated with 18-1153
On Petition for Review and Cross-Application
for Enforcement of an Order of
the National Labor Relations Board
David A. Kadela argued the cause for petitioner, First
Student, Inc. With him on the briefs was Erik Hult.
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Angelo I. Amador, Robert S. Seigel, Howard M. Bloom,
Michael T. Mortensen, and Collin O’Connor Udell were on the
brief for amicus curiae Restaurant Law Center in support of
petitioner/cross-respondent.
David Casserly, Attorney, National Labor Relations
Board, argued the cause for respondent, National Labor
Relations Board. With him on the brief were Peter B. Robb,
General Counsel, John W. Kyle, Deputy General Counsel,
David Habenstreit, Assistant General Counsel, and Kira
Dellinger Vol, Supervisory Attorney.
Maneesh Sharma argued the cause for intervenor Union.
With him on the brief was Amanda M. Fisher.
Before: ROGERS and WILKINS, Circuit Judges, and
SILBERMAN, Senior Circuit Judge.
Opinion for the Court by Circuit Judge ROGERS.
Opinion concurring in part and dissenting in part filed by
Senior Circuit Judge SILBERMAN.
ROGERS, Circuit Judge: This case involves a successor
employer and application of the “perfectly clear” successor
doctrine stemming from NLRB v. Burns International Security
Services, Inc., 406 U.S. 272 (1972). First Student, Inc. is the
largest provider of school transportation services in North
America. Its bid to provide transportation services for Saginaw
Public School District was first selected in October 2011, but
the School District decided not to proceed because the
academic year had already begun. First Student’s bid was
again selected in February 2012 and contract negotiations
began. A few weeks later, First Student representatives met
with School District transportation employees who were
3
covered by a collective bargaining agreement and stated it
would offer employment to existing employees, and expressed
the desire to retain as many of them as possible. First Student
now petitions for review of a Decision and Order of the
National Labor Relations Board finding it was a “perfectly
clear” successor employer and violated the National Labor
Relations Act by changing the terms and conditions on which
it would hire the incumbent employees without bargaining with
their union. First Student contends 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 that are not supported by substantial
evidence. The Board has cross petitioned for enforcement of
its Order. We deny First Student’s petition and grant
enforcement of the Board’s Order in full.
I.
Congress enacted the National Labor Relations Act to
“redress the perceived imbalance of economic power between
labor and management . . . by conferring certain affirmative
rights on employees and by placing certain enumerated
restrictions on the activities of employers.” Am. Ship Bldg. Co.
v. NLRB, 380 U.S. 300, 316 (1965). Section 7 of the Act
provides that employees have certain rights, including the right
“to bargain collectively through representatives of their own
choosing.” 29 U.S.C. § 157. Section 8(a)(1) provides that it
“shall be an unfair labor practice for an employer to interfere
with, restrain, or coerce employees in the exercise of” their
Section 7 rights. Id. § 158(a)(1). Similarly, Section 8(a)(5)
makes it “an unfair labor practice for an employer to refuse to
bargain collectively with the representatives of his employees.”
Id. § 158(a)(5). Consequently, an employer violates Section
8(a)(1) and (5) of the Act if it changes terms and conditions of
employment unilaterally, i.e., without giving employees an
4
opportunity to bargain collectively through their union. Enter.
Leasing Co. v. NLRB, 831 F.3d 534, 546 (D.C. Cir. 2016)
(citing NLRB v. Katz, 369 U.S. 736, 743 (1962)).
The “perfectly clear” successor doctrine has its origins in
the Supreme Court’s decision in NLRB v. Burns International
Security Services, Inc., 406 U.S. 272 (1972). Burns concerned
unionized security guards employed by the Wackenhut
Corporation, which provided security for a Lockheed Aircraft
Service facility from 1962 to 1967. Id. at 274. In April 1967,
the guards’ union entered into a three-year collective
bargaining agreement with Wackenhut. Id. at 275. Shortly
thereafter Lockheed decided not to renew its security contract
with Wackenhut and awarded a new contract to Burns
International Security Services. Id. Burns hired 27 of the
guards formerly employed by Wackenhut and brought in 15
other guards to work at the facility. Id. The incumbent union
“demanded that Burns recognize it as the bargaining
representative of Burns’ [guards] at Lockheed and that Burns
honor the collective-bargaining agreement between it and
Wackenhut,” but Burns refused to do either. Id. at 275–76.
The Board agreed with the union. Burns was a “successor
employer” to Wackenhut because the business of providing
security for Lockheed “remained essentially the same despite
the change in ownership.” William J. Burns Int’l Detective
Agency, Inc., 182 NLRB 348, 349 (1970). The incumbent
union retained its position as representative of the security
guards at the Lockheed facility because, the Board reasoned,
the incumbent guards made up a majority of Burns’ workforce
and there was no reason to believe the change in management
would affect the guards’ selection of the union. Id. at 349–50;
see 29 U.S.C. § 159(a).
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The Supreme Court upheld the Board’s determination that
Burns, as a successor employer, had an obligation to recognize
and bargain with the incumbent union. Burns, 406 U.S. at 277–
81; see Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S.
27, 43–44, 46–47 (1987). Given that obligation, Burns’ failure
to recognize and bargain with the union violated Section
8(a)(1) and (5) of the Act. Burns, 406 U.S. at 281. But, the
Court made clear, Burns’ 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
“represent[ed] a majority of the employees in the unit.” Id. at
295. Because Burns had no duty to bargain with the union until
it finished hiring, it was “free to set initial terms on which it
[would] hire the employees of [its] predecessor.” Id. at 294–
95. Critically for present purposes, the Court acknowledged
that there are situations in which prior to hiring “it is perfectly
clear that the new employer plans to retain all of the
[predecessor’s] employees.” Id. Under those circumstances,
the Court stated it is “appropriate to have [the successor]
initially consult with the employees’ bargaining representative
before he fixes terms.” Id. at 295.
The Board first interpreted the Supreme Court’s statement
about “perfectly clear” successorship in Spruce Up Corp., 209
NLRB 194 (1974), enforced, 529 F.2d 516 (4th Cir. 1975).
Spruce Up Corporation employed a unionized workforce in 19
barbershops on a military base. Id. at 194. In early 1970, the
base decided not to renew its contract with Spruce Up and
awarded a new contract to Cicero Fowler. Id. When the
incumbent union “learned that Fowler was the lowest bidder
and likely to take over the operation of the Spruce Up barber
shops, it requested Fowler to recognize and bargain with it.”
Id. Fowler told the union that he would have no duty to bargain
until he began operations, that he intended to pay different rates
of commission than Spruce Up had paid, and that he hoped to
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hire all incumbent barbers who were willing to work. Id. A
few days before Fowler took over the barbershops, he sent
letters to the incumbents inviting them to work for him on the
basis of the new rates. Id.
The Board found that Fowler was not a “perfectly clear”
successor to Spruce Up because he “made it clear from the
outset that he intended to set his own initial terms, and that
whether or not he would in fact retain the incumbent barbers
would depend upon their willingness to accept those terms.”
Id. at 195 (emphasis added). The Board reasoned that Fowler’s
announcement of new terms created uncertainty about whether
incumbents would elect to retain their jobs after the change in
management. Id. As a result, it was not “perfectly clear” that
Fowler “plan[ned] to retain all of” Spruce Up’s former
employees. Id. (quoting Burns, 406 U.S. at 294–95). Spruce
Up thus restricted the “perfectly clear” successor doctrine “to
circumstances in which the new employer has either actively
or, by tacit inference, misled employees into believing they
would all be retained without change in their wages, hours, or
conditions of employment,” or “has failed to clearly announce
its intent to establish a new set of conditions prior to inviting
former employees to accept employment.” Id.
Since then, the Board has refined the nature and scope of
the “perfectly clear” successor doctrine. For one thing, the
Board has long held that “perfectly clear” successor status may
attach not only where a new employer “plans to retain all the
[incumbent] employees” but also where it plans to hire “a lesser
number but still enough to make it evident that the union’s
majority status will continue.” Spitzer Akron, Inc., 219 NLRB
20, 22 (1975) (first quoting Burns, 406 U.S. at 295),
enforced, 540 F.2d 841 (6th Cir. 1976); see, e.g., Nexeo
Solutions, LLC, 364 NLRB No. 44, slip op. at 5 n.19 (July 18,
2016). First Student does not contest this.
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In addition, a host of post-Spruce Up decisions clarify that
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 announce[s] its
intent to establish a new set of conditions prior to, or
simultaneously with, its expression of intent” to retain the
employees. Nexeo, 364 NLRB No. 44, slip op. at 6; see, e.g.,
Creative Vision Res., LLC, 364 NLRB No. 91, slip op. at 2–3
(August 26, 2016), enforced, 882 F.3d 510 (5th Cir. 2018);
Fremont Ford Sales, Inc., 289 NLRB 1290, 1296–97 (1988);
Starco Farmers Mkt., 237 NLRB 373, 373–74 (1978). An
employer that fails to make such an announcement “forfeit[s]
the right to set initial terms” of employment. Fremont Ford,
289 NLRB at 1296; see Dupont Dow Elastomers LLC, 332
NLRB 1071, 1074 (2000), enforced, 296 F.3d 495 (6th Cir.
2002). 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.” Canteen Co., 317
NLRB 1052, 1053 (1995), enforced sub nom. Canteen Corp. v.
NLRB, 103 F.3d 1355 (7th Cir. 1997); see Elf Atochem N. Am.,
Inc., 339 NLRB 796, 796, 807–08 (2003); Roman Catholic
Diocese of Brooklyn, 222 NLRB 1052, 1055 (1976),
enforcement denied in relevant part sub nom. Nazareth Reg’l
High Sch. v. NLRB, 549 F.2d 873 (2d Cir. 1977). Instead, the
Board has concluded that an employer can become a “perfectly
clear” successor before it begins its hiring process. See, e.g.,
Paragon Sys., Inc., 364 NLRB No. 75, slip op. at 2 (Aug. 26,
2016); E G & G Fla., Inc., 279 NLRB 444, 452 (1986) (citing
CME, Inc., 225 NLRB 514 (1976)). For example, the Board
concluded in CME, Inc. that an employer became a “perfectly
clear” successor by expressing an unqualified intent to retain
all incumbents when it had not yet offered them jobs or even
distributed employment applications. 225 NLRB at 514.
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This court has affirmed the Board’s interpretation of the
“perfectly clear” successor doctrine. See Int’l Ass’n of
Machinists & Aerospace Workers, AFL-CIO v. NLRB, 595
F.2d 664, 672–676 (D.C. Cir. 1978). In Machinists, the court
observed that the doctrine protects “a successor employer’s
freedom to alter — even remake — the acquired enterprise” by
unilaterally imposing new terms of employment. Id. at 673. At
the same time, the doctrine affords incumbent employees “an
important measure of protection” by ensuring that “they are
apprised promptly of impending reductions in wages or
benefits” over which the union will have no opportunity to
bargain. Id. at 674. More recently, the court reaffirmed that
the doctrine “prevent[s] an employer from inducing possibly
adverse reliance upon the part of employees it misled or lulled
into not looking for other work.” S & F Mkt. St. Healthcare
LLC v. NLRB, 570 F.3d 354, 359 (D.C. Cir. 2009).
Our sister circuits have also affirmed the Board’s
interpretation, acknowledging that “when it is clear that the
new employer intends to hire the employees of the predecessor,
those employees will place significant reliance on that situation
and forego other employment opportunities.” Canteen Corp.
v. NLRB, 103 F.3d 1355, 1364 (7th Cir. 1997) (citing
Machinists); see Creative Vision, 882 F.3d 510, 518–19, 525–
26 (5th Cir. 2018) (citing Machinists); Dupont Dow, 296 F.3d
495, 501–06 (6th Cir. 2002). These courts accept the Board’s
view that “perfectly clear” successor status may attach when a
new employer expresses an intent to retain incumbents even if
this precedes the formal hiring process. See Creative Vision,
882 F.3d at 518–19; Dupont Dow, 296 F.3d at 502; Canteen
Corp, 103 F.3d at 1363–64. Of the circuits to address the issue,
only one — in a pre-Machinists decision — has taken the more
restrictive view that “perfectly clear” successorship cannot
attach “solely on the basis of an expression of intention to
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rehire [the] predecessor’s employees.” See Nazareth Reg’l
High Sch. v. NLRB, 549 F.2d 873, 881–82 (2d Cir. 1977).
II.
Through 2011, Saginaw Public School District directly
employed approximately 55 bus drivers and other
transportation employees. These employees (hereinafter “unit
employees”) were jointly represented by the United Steel
Workers International Union and Local 8410 (collectively “the
Union”). The most recent collective bargaining agreement
(“CBA”) between the Saginaw Board of Education and the
Union covered the period of August 27, 2010 through August
31, 2012. The Board of Education voted in October 2011 to
accept First Student’s services but the School District’s
Superintendent decided not to proceed for that academic year;
in November the School District informed First Student that it
planned to open a new bidding process in 2012. It did, and
First Student submitted a new bid on February 3, 2012. The
School District again selected First Student as the winning
bidder, and the parties began negotiating a transportation
services contract.
While contract negotiations were ongoing, the School
District arranged for First Student officials to discuss the
impending transition in management with the unit employees.
On March 2, 2012, approximately 40 of the 55 unit employees
attended a meeting with Douglas Meek, First Student’s area
general manager, and Daniel Kinsley, its development
manager. Meek told the employees that once the contract was
approved, First Student would offer employment to current
employees who submitted an application and met its hiring
criteria, which included a background check, physical
examination, and drug screening, criteria that the Board found
were similar to the School District’s hiring criteria and
10
common throughout the bus transportation industry. In
responding to employees’ questions, Meek testified that he told
the employees that First Student “wanted to hire as many
individuals as possible,” that it would recognize the Union if it
hired “51 percent of the existing workforce,” and that it
“typically” hires “80 to 90 percent of the existing workforce.”
Hr’g Tr. 420 (July 25, 2013). With respect to how many hours
of work employees would be guaranteed, Meek stated that First
Student “would know more about that” once it established bus
routes for the coming year, which it would do “using the
[School] District’s routing system.” Id. at 421. Meek also said
matters such as paid time off, vacation pay, and sick pay would
be “subject to negotiations.” Id. at 421–22; see id. at 460 (July
26, 2013).
The School District and First Student reached agreement
on a five-year transportation services contract in early May
2012. On May 16, the Board of Education held a public
meeting to consider whether to approve the contract. In
response to Board questions, Kinsley stated that First Student
would hire unit employees if they met its hiring criteria, that it
“intended to maintain their current wages,” and that if 51
percent or more of the incumbents were hired it would
recognize the Union. Id. at 463–64, 480. The Board of
Education voted to approve the contract. Later that day,
Kinsley spoke with a Union representative and several unit
employees, repeating that First Student’s goal was to hire all
unit employees who met the hiring criteria, that it would
“recognize the Union if [it] hired 51 percent or more” of them,
and that “their wages would be maintained.” Id. at 466, 483.
By its terms, the contract was a binding agreement as of May
16. The School Superintendent signed it on May 24 and First
Student signed it on June 1.
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On May 17, the day after the Board of Education approved
the contract and it took effect, First Student officials met with
nearly all the unit employees. The officials distributed a
memorandum inviting them to apply for employment. The
terms and conditions of employment set forth in the
memorandum deviated from the CBA in important respects.
For example, the memorandum stated that First Student would
maintain incumbent employees’ current hourly rate of pay for
transportation duties but reduce the rate of pay for “non-student
transportation duties,” such as “attending training, employee or
school meetings, clerical work, bus washing, etc.” Also,
significantly, it guaranteed fewer hours of work than the CBA.
Incumbent employees were instructed to submit employment
applications no later than May 23 in order to retain their
seniority and current wages.
On May 18, the Union contacted First Student requesting
to bargain over the terms of a new labor agreement, using the
existing CBA as a starting point. First Student responded that
it did not know whether it would hire enough of the unit
employees to trigger its obligation to recognize and bargain
with the Union. The Union agreed to follow up in July, when
First Student would be further along in its hiring process.
During July and August, the Union’s repeated attempts to
schedule bargaining with First Student produced no response.
Meanwhile, First Student began hiring employees. After
conducting interviews and background checks, it made offers
of employment to 42 of the approximately 55 unit employees.
Two offer letters were issued on June 27, a third on July 11,
and the remainder on August 1. By August 17, 2012, First
Student had hired 38 employees, 36 of whom had formerly
worked for the School District. When First Student began its
operations for the 2012–2013 academic year on August 27, it
had hired 51 employees, 41 of whom were unit employees.
12
That same day, First Student announced an employee
attendance policy that differed from the policy in the Union’s
prior CBA with the School District. In late August, the Union
renewed its request to bargain, but First Student still did not
come to the bargaining table.
On September 21, the Steel Workers Union (acting
through another Local) filed charges with the Board’s Regional
Office alleging that First Student had violated Section 8(a)(1)
and (5) of the Act by “refus[ing] to recognize and bargain with”
the Union and by failing to negotiate “over initial terms and
conditions of employment” even though it was a “perfectly
clear” successor to the School District. On September 25, First
Student offered to schedule collective bargaining negotiations
in November. The Union responded that it would agree to wait
until November provided First Student would abide by the
terms of the prior CBA in the meantime. First Student replied
that it had no obligation to abide by the CBA and offered to
begin negotiations in October if the Union would drop the
pending unfair-labor-practice charges. Although the Union did
not drop the charges, the parties began collective bargaining
negotiations on October 17, 2012.
On April 30, 2013, the Acting General Counsel issued a
complaint alleging that First Student had engaged in unfair
labor practices in violation of Section 8(a)(1) and (5) of the Act.
An administrative law judge (“ALJ”) held an evidentiary
hearing on July 24–26, 2013. The ALJ found that First Student
was a successor to the School District but not a “perfectly
clear” successor because it had announced new terms of
employment when it distributed employment applications to
unit employees on May 17. First Student, Inc., No. 07–CA–
092212, slip op. at 24, 2013 WL 6576819 (N.L.R.B. Div. of
Judges Dec. 13, 2013) (“ALJ Decision”). The ALJ also found
that Meek’s statements on March 2 sufficed to notify
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employees that First Student planned to implement new
working conditions. Id. at 22–23. The ALJ further found that
First Student “had an obligation to recognize and bargain with
the Union as of August 17,” id. at 27, by which time it had
“hired a substantial and representative complement of its
employees,” a majority of whom had previously worked for the
School District, id. at 18 (citing Fall River, 482 U.S. at 52–53).
Because of that obligation, the ALJ found that First Student
violated Sections 8(a)(1) and (5) of the Act by “delaying
bargaining from August 17, 2012, to October 17, 2012” and by
“unilaterally implementing attendance policies on August 27,
2012, and September 4, 2012.” Id. at 31; see id. at 27–29. Both
parties filed exceptions.
The Board affirmed the violations of the Act found by the
ALJ and also found, contrary to the ALJ (and over a dissent),
that First Student was a “perfectly clear” successor to the
School District as of March 2, 2012, and that First Student
violated Section 8(a)(1) and (5) by failing to provide the Union
with notice and an opportunity to bargain before imposing
initial terms and conditions of employment for unit employees.
First Student, Inc., 366 NLRB No. 13, slip op. at 1 (Feb. 6,
2018) (“Decision”). Quoting its precedent, the Board stated
that “perfectly clear” successor status attaches “when a
successor expresses an intent to retain the predecessor’s
employees without making it clear that employment will be
conditioned on acceptance of new terms.” Id. at 3 (quoting
Nexeo, 364 NLRB No. 44, slip op. at 6). The Board found:
From the very beginning of the transition process,
well before the formal hiring process began, [First
Student] clearly and consistently communicated its
intent to retain the School District’s unit employees.
At the March 2 meeting, [First Student] stated that it
would offer employment to all existing employees
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who completed applications and met its hiring criteria
which, the record establishes, are consistent with the
School District’s criteria and industry-wide standards.
[First Student] underscored this intent by informing
the employees that it typically hired ‘80 to 90 percent’
of an existing workforce when taking over
transportation duties from another employer. [First
Student] also stated that it planned to recognize the
employees’ existing union representative, so long as
‘51 percent’ of the existing workforce was hired by
[First Student]. Thereafter, in comments during and
following the May 16 Board of Education meeting,
[First Student] reaffirmed its intention to retain the
unit employees and further stated that it would be
maintaining their existing wages.
Id. (footnote omitted).
The Board also found that First Student had not “‘clearly
announc[ed] its intent to establish a new set of conditions’ prior
to or simultaneously with its March 2 expression of intent to
retain the unit employees.” Id. (alteration in original) (quoting
Spruce Up, 209 NLRB at 195). Meek’s statement at the March
2 meeting that applicants would have to pass First Student’s
hiring criteria gave the unit employees “no reason to doubt that
they would be hired” because they “had all been hired under
similar industry standards by the School District.” Id. at 3 n.8.
And the ALJ had “misinterpreted the import of” Meek’s
statement that “matters such as paid time off, vacation pay, and
sick pay ‘would be subject to negotiations,’” taking it to mean
that First Student ‘“would not be adopting the School District’s
[CBA] and that new working conditions would be
implemented.’” Id. at 3 (quoting ALJ Decision at 23). The
ALJ’s reasoning was “based on an incorrect premise,” the
Board concluded, because a statement that employment terms
15
will be “subject to negotiations” is not inconsistent with
“perfectly clear” successor status. Id. It is merely “a statement
of law”; a “perfectly clear” successor is obligated “only to
maintain the status quo . . . until it bargains to agreement or
impasse with the representative union.” Id. Thus, Meek’s
statement did not notify the unit employees of First Student’s
plan to change terms without negotiating. See id. Nor, the
Board found, did Meek’s statement about guaranteed hours and
routes provide sufficient notice. Id. at 4. First Student had
made no “affirmative statement that terms of employment
[would] be changed,” instead stating that it “did not have
information regarding routes at that time.” Id.
In addition, the Board found that the ALJ had “misapplied
well-established precedent in finding [First Student]’s
subsequent announcement of new initial terms and conditions
of employment on May 17 was a timely exercise of the Burns
successor’s right to unilaterally establish initial terms and
conditions of employment.” Id. Under longstanding Board
precedent, an employer that has become a “perfectly clear”
successor cannot vitiate that status by subsequently announcing
its intent to unilaterally impose initial terms, even if the
announcement is “made before formal offers of employment
are extended, or before the successor commences operations.”
Id. (citing Creative Vision, 364 NLRB No. 91, slip op. at 3 &
n.10 (collecting cases)).
Because First Student became a “perfectly clear”
successor on March 2, the Board found that it violated Section
8(a)(1) and (5) by unilaterally changing terms and conditions
of employment on and after May 17. Id. at 5. The Board found,
alternatively, that First Student “became a ‘perfectly clear’
successor on May 16, when it reiterated its previously
expressed intent to retain the predecessor’s employees without
simultaneously clearly announcing an intent to establish
16
different initial terms of employment.” Id. at 5 n.13. The
Board also unanimously found that First Student violated
Section 8(a)(1) and (5) by “conditioning bargaining on the
Union’s withdrawal of an unfair labor practice charge.” Id. at
5. By Order, the Board directed First Student to cease and
desist from failing and refusing to bargain in good faith with
the Union and to take certain affirmative actions, including
making no changes to wages, hours, or other terms of
employment without notifying the Union and allowing it to
bargain; rescinding changes it had made; making the unit
employees whole, with interest and compensation for adverse
tax consequences if necessary; and posting a notice describing
its statutory violations and employees’ rights for 60 days in
conspicuous places. See id. at 5–6.
Then-Chairman Kaplan partially dissented, taking the
position that “perfectly clear” successor status does not attach
“when ‘a successor expresses an intent to retain the
predecessor’s employees’” but rather when it issues formal
offers of employment. Id. at 7 (quoting Nexeo, 364 NLRB No.
44, slip op. at 6). He acknowledged that his position was
contrary to at least three Board decisions. See id. (citing
Creative Vision, 364 NLRB No. 91; Nexeo, 364 NLRB No. 44;
Canteen Co., 317 NLRB 1052).
The Board majority offered three responses: First, the
dissent’s “more restrictive interpretation” of the “perfectly
clear” successor doctrine “is inconsistent with the express
language of the Supreme Court in Burns.” Id. at 4. In Canteen
Co., 317 NLRB at 1053, the Board pointed out that Burns did
not limit “perfectly clear” successorship “to such a late point in
the transition from one employer to another; instead, the status
attaches, the Supreme Court stated, when it is evident “that the
new employer plans to retain all of the [incumbent]
employees,” 406 U.S. at 294–95. Second, the dissent’s
17
position “does not take into account the significant reliance
employees may place on statements of intent to hire, to the
exclusion of other employment opportunities.” Id. By
contrast, the Board explained, its practice of “[h]olding a
successor to its initial statements of intent, even when those
statements are made before formal offers of employment are
extended or the transfer of ownership or operations is complete,
prevents prospective employers from inducing such reliance,
only later to reveal that the employees’ terms of employment
will be changed.” Id. at 4 & n.12 (citing S & F Mkt. St., 570
F.3d at 359; Machinists, 595 F.2d at 674–75). Third, the
Board’s interpretation in its precedent “serves the important
statutory policy of fostering industrial peace in what the
Supreme Court has recognized may be an unsettling transition
period for unions and employees alike.” Id. at 4 (citing Fall
River, 482 U.S. at 39–40).
First Student petitions for review of the Board’s Decision
and Order. The Board cross petitions for enforcement of its
Order.
III.
First Student contends that the Board’s Decision must be
vacated because it misstated the legal standard for “perfectly
clear” successorship, deviating without justification from
Board and court precedent. None of First Student’s arguments
that the Board erred as a matter of law is persuasive. In
addition, First Student contends there is not substantial
evidence to support the Board’s finding that Meek’s statements
of March 2 provided insufficient notice to unit employees of
First Student’s intent to unilaterally impose new terms. That
too is unpersuasive. First Student does not challenge the
Board’s findings of its other violations of the Act, and the
Board is therefore entitled to summary enforcement of those
18
portions of its Order, see, e.g., Carpenters & Millwrights,
Local Union 2471 v. NLRB, 481 F.3d 804, 808 (D.C. Cir.
2007).
The Supreme Court has repeatedly recognized that the
National Labor Relations Board “has the primary responsibility
for developing and applying national labor policy,” NLRB v.
Curtin Matheson Sci., Inc., 494 U.S. 775, 786 (1990), and
consequently its interpretations of the Act are “entitled to
considerable deference” by the courts and must be upheld if
“reasonably defensible,” Sure-Tan, Inc. v. NLRB, 467 U.S.
883, 891 (1984); see NLRB v. Ky. River Cmty. Care, Inc., 532
U.S. 706, 711–12 (2001); NLRB v. Town & Country Elec., Inc.,
516 U.S. 85, 89–90 (1995). This court similarly “yield[s]
deference” to the Board’s interpretation of the “perfectly clear”
successor doctrine emanating from Burns. Machinists, 595
F.2d at 672–73 & n.41. Congress, in turn, has determined that
the Board’s findings of fact “shall be conclusive” “if supported
by substantial evidence on the record considered as a whole.”
29 U.S.C. § 160(e). It also has required that all objections first
be presented to the Board, otherwise the court lacks jurisdiction
to consider them. Id. § 160(e)–(f).
A.
The Board stated: “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.” Decision at 3 (quoting Nexeo, 364 NLRB No. 44,
slip op. at 6). First Student views this as “a reengineered test”
that “fundamentally alter[s]” and “conflicts with” Spruce Up.
Pet’r’s Br. 23–25. According to First Student, Spruce Up
presumes that a successor retains the right to unilaterally
impose terms and conditions of employment, and permits a
finding of “perfectly clear” successorship only where “the
19
presumption [is] overcome by evidence that [the] successor, by
word or deed, misled the predecessor’s employees.” Id. at 24.
First Student maintains that under this standard, Meek’s
statements to the unit employees at the March 2 meeting were
not sufficiently misleading to trigger “perfectly clear”
successorship. Id. at 30.
The Board’s articulation of the “perfectly clear” test in
Nexeo does not conflict with Spruce Up as First Student
suggests. In Spruce Up, 209 NLRB at 195, the Board expressly
declined to “delineat[e] . . . the precise parameters” of the
“perfectly clear” successor doctrine. It concluded only that a
new employer may avoid becoming a “perfectly clear”
successor by “clearly announc[ing] its intent” to unilaterally
impose new terms of employment. Id. A wealth of subsequent
Board decisions summarize and clarify that a new employer
must “clearly announce” such an intent in order to preserve its
right to unilaterally impose new terms of employment. See,
e.g., Nexeo, 364 NLRB No. 44, slip op. at 5–6. This
clarification is consistent with Spruce Up’s statement that
“perfectly clear” successorship may occur where a new
employer “has either actively, or by tacit inference, misled
employees.” 209 NLRB at 195 (emphasis added); see, e.g.,
Dupont Dow, 332 NLRB at 1073–75. As this court has
recognized, it is also 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 be
continued.” Machinists, 595 F.2d at 674–75; see Creative
Vision, 882 F.3d at 518–19, 525–26; Dupont Dow, 296 F.3d at
501–02, 506; Canteen Corp., 103 F.3d at 1364.
First Student also contends the Board departed from its
own precedent regarding the earliest point at which “perfectly
20
clear” successor status can attach. See Pet’r’s Br. 24–25. The
Board found that First Student became a “perfectly clear”
successor when it initially “expressed its intent to retain
employees on March 2.” Decision at 3. First Student interprets
Spruce Up not to allow “perfectly clear” successor status to
attach “prior to [the successor’s] inviting former employees to
accept employment.” Pet’r’s Br. 25 (alteration in original)
(quoting Spruce Up, 209 NLRB at 195). It maintains,
therefore, 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. See id. at 30–31.
First Student overreads the relevant portion of Spruce Up.
There, the Board had no occasion to specify when “perfectly
clear” successor status can attach because Fowler announced
his intent to unilaterally implement new commission rates
when he first “expressed a general willingness to hire” the
incumbent barbers. Spruce Up, 209 NLRB at 194–195.
Subsequently confronted with the issue, 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. Canteen Co., 317 NLRB at 1053–54; see, e.g.,
Creative Vision, 364 NLRB No. 91, slip op. at 3; Fremont
Ford, 289 NLRB at 1296–97; Starco Farmers Mkt., 237 NLRB
at 374–75. As the Board has explained and three of our sister
circuits have affirmed, 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. See Creative Vision, 882 F.3d at 518–20;
Dupont Dow, 296 F.3d at 502–06 & n.1; Canteen Corp., 103
F.3d at 1363–64.
21
First Student further contends 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. See Pet’r’s Br. 18–23; Reply Br. 3–9. It
suggests its circumstance “is not materially different” from
four Board decisions “in which a prospective successor’s pre-
contract communications were not found to trigger perfectly
clear successor status.” Pet’r’s Br. 20. But in all four cases,
the Board had no occasion to resolve whether the status can be
triggered by pre-contract statements because it found
“perfectly clear” successor status based on post-contract
statements. See Morris Healthcare & Rehab. Ctr., Inc., 348
NLRB 1360, 1360 & n.2, 1362–64, 1367 (2006); Hilton’s
Envtl., Inc., 320 NLRB 437, 437–38 (1995); Fremont Ford,
289 NLRB at 1296–97; Spitzer Akron, Inc., 219 NLRB at 22–
23 (1975). Other Board precedent indicates that a pre-contract
expression of intent to rehire incumbent employees can trigger
“perfectly clear” successorship. In Elf Atochem, 339 NLRB at
798–800, for example, an incoming employer expressed its
intent to retain incumbents after signing a “nonbinding letter of
intent” to acquire the predecessor company. The Board held
that the employer became a “perfectly clear” successor at that
time, id. at 796, even though the parties had only announced “a
planned sale,” not a contract, and the acquisition was not
finalized until several weeks later, id. at 798, 800. The Sixth
Circuit in Spitzer Akron, 540 F.2d at 843–45, was similarly
satisfied that the employer became a “perfectly clear”
successor while it was still negotiating the terms on which it
would purchase the predecessor business.
Not only is the Board’s finding that First Student was a
“perfectly clear” successor consistent with Board precedent, it
also rests on a reasonable interpretation of the “perfectly clear”
successor doctrine. To begin, the Board’s interpretation is
consistent with the Supreme Court’s understanding that the
22
doctrine applies where “it is perfectly clear that the new
employer plans to retain all the employees in the unit.” Burns,
406 U.S. at 294–95 (emphasis added). Nothing in Burns
prevents the doctrine from applying where, as here, an
employer’s bid to provide transportation services has been
selected and while it is working out the details of a final
contract it informs incumbent employees that it plans to retain
them.
The Board’s interpretation also furthers the purpose of the
“perfectly clear” successor doctrine, which is to protect
incumbent employees from being “lulled into a false sense of
security” when a new employer expresses interest in retaining
them. Machinists, 595 F.2d at 674–75 & n.49; see S & F Mkt.
St., 570 F.3d at 359. “Holding a successor to its initial
statements of intent, even when those statements are made
before . . . the transfer of ownership or operations is complete,
prevents prospective employers from inducing [employee]
reliance, only later to reveal that employees’ terms of
employment will be changed.” Decision at 4. Here, First
Student induced such reliance from March 2 through May 16.
See id. at 3–5 & nn.8, 13. Had unit employees learned of the
impending wage and guaranteed-hour reductions at the March
2 meeting, they might have sought other employment or even
urged the Board of Education to reject the proposed contract
with First Student. But First Student did not announce the
impending changes to the terms and conditions of employment
under the Union’s former CBA until after the Board of
Education had approved the contract; to the contrary, First
Student had publicly declared that it “intended to maintain the
wages for the current work force.” Hr’g Tr. 466, 480 (Kinsley).
Not until May 17 — six days before First Student’s application
deadline for unit employees desiring to keep their wage rates
and seniority — did First Student inform employees that it
intended to decrease their wages and guaranteed hours. Under
23
the circumstances, the Board could reasonably conclude that
First Student had engaged in the sort of misleading conduct that
the “perfectly clear” successor doctrine is meant to prevent.
Neither does the Decision unduly burden a successor
employer’s right to unilaterally set the initial terms on which it
will hire incumbent employees, as First Student and amicus
suggest, see Pet’r’s Br. 22, 25; Amicus Br. of Restaurant Law
Ctr. 11–15. The Supreme Court has observed that a new
employer controls whether it will be obligated to recognize an
incumbent union at all. See Fall River, 482 U.S. at 40–41. The
employer incurs that obligation only if it “makes a conscious
decision to maintain generally the same business and to hire a
majority of its employees from the predecessor.” Id. at 41. The
Board’s interpretation allows a likely successor that has not yet
finalized its contract to acquire an existing business — First
Student’s situation as of March 1 — to control whether it will
retain its right to unilaterally set initial terms of employment.
See Dupont Dow, 296 F.3d at 503; Canteen Corp., 103 F.3d at
1364–65. First Student could have declined to meet with the
unit employees on March 2 or told them that it planned to
exercise the right to set initial terms and conditions of
employment. Nor has the Board’s interpretation deprived an
incoming employer of the flexibility to adjust its formal offer
to potential employees based on the outcome of its own
services contract negotiations. The employer need not specify
the new terms during its initial communication with
employees. Rather, the employer need only convey its intent
to make unilateral changes; it can determine the details later.
See Banknote Corp. of Am., 315 NLRB 1041, 1043 (1994),
enforced, 84 F.3d 637 (2d Cir. 1996). The Board’s approach,
leaving the successor employer in control, has reasonably
balanced employers’ rights against employees’ reliance
interests. See Dupont Dow, 296 F.3d at 505–06 n.1;
Machinists, 595 F.2d at 674–75.
24
In sum, First Student fails to show that the Board’s
Decision rests on a legally erroneous interpretation of the
“perfectly clear” successor doctrine.
A few words about the dissent. Heeding the Supreme
Court’s frequent admonition that “balancing competing
interests to effectuate national labor policy . . . is a delicate
responsibility committed primarily to the Board,” this court has
held that the Board’s interpretations of the “perfectly clear”
successor doctrine are entitled to considerable deference.
Machinists, 595 F.2d at 672–73 & n.41 (citing NLRB v. Local
Union No. 103, Int’l Ass’n of Bridge, Structural & Ornamental
Iron Workers, AFL-CIO, 434 U.S. 335, 350 (1978)). Such
deference is appropriate, this court reasoned, because Burns
provides “minimal guidance” about the doctrine and fleshing
out its details squarely implicates the Board’s area of expertise.
Id. at 673 n.41. The dissent’s suggestion that in Machinists the
court was “actually deferring to the Board’s evidentiary
finding,” Dis. Op. 3, is clearly in error. The court’s opinion
speaks clearly for itself, expressly stating it “yield[s] deference
to the Board’s construction” of Burns, which the court
concluded “reasonably implements the considerations reflected
in Burns considered as a whole,” describing itself as
“constrained” to accept the Board’s interpretation because it
was not “unreasonable.” Machinists, 595 F.2d at 672–73 &
n.41, 675–76. That is the law of the circuit absent en banc
review. See LaShawn A. v. Barry, 87 F.3d 1389, 1395 (D.C.
Cir. 2006).
Further, this court is without jurisdiction to consider any
“objection that has not been urged before the Board.” 29
U.S.C. § 160(e); see id. § 160(f). First Student has never
challenged the Board’s longstanding position that a “perfectly
clear” successor need not plan to hire all incumbent employees,
25
but rather to hire “enough to make it evident that the union’s
majority status will continue” after the change in management,
Spitzer Akron, 219 NLRB at 22. Our dissenting colleague
acknowledges that First Student “expressly waived” any such
challenge, yet despite the jurisdictional bar engages in a
lengthy discussion of his views. Dis. Op. at 1–5. Neither has
First Student argued that the Board’s approach could lead a
new employer to violate Section 8(a)(2) of the Act; its briefs
do not even mention that provision. Our dissenting colleague
raises the issue himself, volunteering that First Student would
have violated Section 8(a)(2) if it had begun negotiating with
the Union on March 2. See Dis. Op. 8–9. This is not the
appropriate occasion for the court to address these arguments
by our dissenting colleague, for, contrary to the congressional
design, the Board has had no opportunity to do so in the first
instance.
Coming to an issue that First Student did preserve, the
dissent argues that First Student could not have been obligated
to bargain with the Union as of March 2 because “it was still in
negotiations.” Dis. Op. 8 see id. at 8–9. But our dissenting
colleague glosses over the distinction between an employer’s
duty to “bargain with the employees’ representatives before it
changes any terms to which its predecessor had agreed,” S & F
Mkt. St., 570 F.3d at 358; see Burns, 406 U.S. at 295, and a
duty to immediately begin bargaining. Here, the Board
concluded that First Student had only “an obligation to bargain
over initial terms,” Decision at 5 (emphasis added), as of
March 2; that is, First Student “forfeited the right to set initial
terms” as of that date, Fremont Ford, 289 NLRB at 1296. The
Board acknowledges in its brief to the court that First Student
could have waited to begin bargaining until it had finalized its
contract with the School District or even until it had hired a
substantial and representative complement of its workforce, so
long as it maintained the status quo in the meantime. Resp’t’s
26
Br. 36. The dissent’s approach would permit an incoming
employer to mislead employees about its intentions until it
finalizes its acquisition of the predecessor. The Board has
reasonably prevented such misleading conduct by allowing
“perfectly clear” successorship to attach when an incoming
employer “expresses an intent to retain the predecessor’s
employees,” even if it has not yet finalized the acquisition. See,
e.g., Nexeo, 364 NLRB No. 44, slip op. at 6.
Our dissenting colleague “can’t imagine” that unit
employees could have been disadvantaged by First Student’s
false promise to maintain their wages because it came just one
day before First Student announced it would unilaterally reduce
their wages. Dis. Op. 8. Record evidence indicated the critical
nature of, and the Board of Education’s reliance, on First
Student’s misrepresentations when voting to approve the
transportation services contract on May 16, 2012, as did the
Union representative and unit employees in attendance at its
public meeting. The Assistant Superintendent of the School
District pointed out that “the focus of the [Board of Education]
meeting was ensuring that the employees received the same
rate of pay and . . . comparable benefits because that was the
concern of the Board [of Education] and of the superintendent.”
Hr’g Tr. 386 (July 25, 2013) (Dr. Kelley Peatross). Given the
evidence that employees were disadvantaged by First Student’s
misrepresentations at the May 16 meeting, the Board could
reasonably conclude that even if First Student had not become
a “perfectly clear” successor on March 2, it would have become
one on May 16. Decision at 5 n.13. And like the employer in
Canteen Co., 317 NLRB at 1052–53, First Student could not
vitiate its “perfectly clear” successor status by announcing new
terms the following day.
27
B.
Alternatively, First Student contends that Meek’s
statements at the March 2 meeting gave unit employees
adequate notice of its intent to impose new terms of
employment because the Board’s contrary finding is not
supported by substantial evidence. Pet’r’s Br. 28–29; Reply
Br. 13–17. In assessing the adequacy of a successor
employer’s statements about whether and on what terms it will
retain incumbent employees, the court will not reverse the
Board’s factual findings, in view of the Board’s expertise,
unless “the record is ‘so compelling that no reasonable fact
finder could fail’ to find to the contrary.” Bally’s Park Place,
Inc. v. NLRB, 646 F.3d 929, 935 (D.C. Cir. 2011) (quoting
United Steelworkers of Am. v. NLRB, 983 F.2d 240, 244 (D.C.
Cir. 1993)). That is not the situation here, for the Board’s
dismantling of the ALJ’s findings supports its finding that First
Student did not “clearly announce its intent to establish a new
set of conditions,” Spruce Up, 209 NLRB at 195.
To avoid becoming a “perfectly clear” successor, First
Student had to “convey its intention to set its own terms and
conditions rather than adopt those of the previous employer.”
S & F Mkt. St., 570 F.3d at 361; see, e.g., Ridgewell’s, Inc., 334
NLRB at 37–38. First Student contends that it conveyed such
an intention at the March 2 meeting. See Pet’r’s Br. 29. It
considers the “most important[]” evidence to be Meek’s
statement that “certain matters about which employees asked,
including paid time off, vacation pay and sick pay, would be
‘subject to negotiation[].’” Reply Br. 15 (quoting Hr’g Tr.
421–22); see Pet’r’s Br. 4. It also points to Meek’s statement
that the company “did not know how many hours would be
guaranteed to employees but that it would know more once
routes were established.” Pet’r’s Br. 4 (quoting ALJ Decision
at 22).
28
The Board found Meek’s declaration that certain matters
would be “subject to negotiations” did not notify unit
employees that First Student planned to unilaterally change
their terms of employment. See Decision at 3 & n.9 (citing
Road & Rail, 348 NLRB 1160). It explained that the statement
“contain[ed] no mention or reservation of the right to act
unilaterally.” Road & Rail, 348 NLRB at 1162. Instead, the
Board concluded, First Student’s expressions of intent to
negotiate with the Union suggested that it would not make
changes unilaterally. See id. Neither was Meek’s statement
about guaranteed hours “an affirmative statement that terms
and conditions [would] be changed,” Decision at 4, especially
since it was accompanied by assurances that First Student
would continue to use the District’s routing system, see Hr’g
Tr. 421.
First Student views its case as indistinguishable from
Banknote Corp., 315 NLRB 1041, and Marriot Management
Services, Inc., 318 NLRB 144 (1995). Pet’r’s Br. 28–29; Reply
Br. 16–17 & n.7. In Banknote, the incoming employer sent
incumbent employees a letter stating that it intended “to
attempt to hire its initial workforce from among” their ranks
but had not agreed to recognize the incumbent union or be
bound by the existing CBA. 315 NLRB at 1047. The Board
found this statement to provide adequate notice of new terms
and conditions. Id. at 1043. In Marriott, the incoming
employer was even more explicit, stating that it “would not
adopt the extant collective-bargaining agreement” and “that the
health and welfare package and the pension plans would have
to be changed.” 318 NLRB at 144. The Board concluded,
understandably, that Meek’s remarks on March 2 were far less
clear than the statements in Banknote and Marriott. Instead of
announcing that First Student would unilaterally impose new
terms and conditions, they suggested “that the status quo
[might] change as a result of negotiations, but not in advance
29
of them.” Decision at 3. Therefore, the Board did not
impermissibly depart from precedent by finding that First
Student failed to clearly announce on March 2 its intention to
impose new terms and conditions of employment.
First Student’s attempt to analogize its case to S & F
Market Street, 570 F.3d 354, where the court reversed a
“perfectly clear” successor finding on substantial-evidence
grounds, see Pet’r’s Br. 25–28, fares no better. In that case, the
incoming employer concluded that it would need to “replace
the staff” but could not do so all at once. S & F Market Street,
570 F.3d at 356. It therefore distributed job applications
informing incumbents that it “intend[ed] to implement
significant operational changes,” that any employment would
be temporary and at will, and that it could “change benefits,
policies and conditions at any time.” Id.; see id. at 360. Given
these statements, the court observed that when the employer
expressed interest in retaining the employees “no employee
could have failed to understand that significant changes were
afoot.” Id. Nothing of the kind can be said here, because First
Student repeatedly stated its intent to retain the unit employees
and publicly promised to maintain their wages but then
unilaterally imposed new terms, including wage reductions, the
day after the Board of Education approved its transportation
services contract with the School District.
The dissent reaches its contrary factual finding, see Dis.
Op. 5–7, by applying the wrong legal standard. The dissent
claims that “the basic question” is First Student’s “intention,”
i.e., “whether or not it planned to maintain the municipality’s
compensation package.” Id. at 6. But the relevant question is
not one of subjective intention; rather, it is the objective
question whether First Student gave the employees sufficiently
clear notice that it was going to unilaterally change terms and
conditions of employment. See S & F Mkt. St. at 360;
30
Machinists, 595 F.2d at 674–75; Creative Vision, 364 NLRB
No. 91, slip op. at 5; Dupont Dow, 332 NLRB at 1074–75. The
inquiry is conducted “from the perspective of employees,” Fall
River, 482 U.S. at 43–44, because the “perfectly clear”
successor doctrine protects employees from being “misled or
lulled into not looking for other work,” S & F Mkt. St., 570 F.3d
at 359. Further, the dissent fails to conform its analysis to the
court’s deferential standard of review of Board findings. It
mischaracterizes the ALJ’s finding that First Student did not
mislead employees as a “judgment on credibility,” Dis. Op. 7,
and ignores substantial evidence supporting the Board’s factual
finding that First Student’s statements were not “sufficiently
clear to put [unit employees] on notice that there would be
[significant] changes in the initial terms and conditions of their
employment.” Decision at 4.
Moreover, our dissenting colleague’s attempt to ignore the
Board’s factual findings, and the attendant limited nature of the
court’s scope of review, e.g., Dis. Op. 2,6,7,10, is ultimately to
no avail. The dissent concedes that if the second employer had
stated that it planned to hire all of the predecessor’s bargaining
unit employees (and that would be majority of its workforce),
employees would be entitled to assume that their wages and
working conditions would remain unchanged. Dis. Op. 5. The
Board found that First Student had stated it planned to hire the
bargaining unit employees, who had previously met standard
criteria First Student identified, and a majority of its employees
were the predecessor’s bargaining unit employees. Because
there is substantial evidence in the record considered as a whole
to support the Board’s findings, its findings are “conclusive.”
29 U.S.C. § 160(e).
Accordingly, we deny First Student’s petition for review
and grant the Board’s cross-petition for enforcement of its
Order in full.
SILBERMAN, Senior Circuit Judge, concurring in part and
dissenting in part: Before I discuss the parties’ positions, it is
necessary to explain the governing law because, in my view, the
Board has essentially ignored it. The important cases are NLRB
v. Burns International Security Services, Inc., 406 U.S. 272
(1972), Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S.
27, 43 (1987) and International Ladies’ Garment Workers’
Union v. NLRB (Altmann), 366 U.S. 731 (1961), and two
opinions of our Court, International Ass’n of Machinists &
Aerospace Workers v. NLRB, 595 F.2d 664 (D.C. Cir. 1978),
and S & F Market Street Healthcare LLC v. NLRB, 570 F.3d 354
(D.C. Cir. 2009). Burns established that if an employer takes
over another business organized by a union and a majority of its
new work force constituted employees who were previously part
of the predecessor’s bargaining unit, and are performing
essentially the same work, the new employer becomes a
“successor,” with an obligation to bargain with the union. The
determination as to whether the second employer has hired a
majority of its employees from the previous bargaining unit is
determined when the secondary employer has reached its normal
operation and has hired a “substantial and representative
complement.” See Fall River, 482 U.S.
However, in a nod to a dynamic economy, the Court
modified the Katz Doctrine – whereby an employer cannot
unilaterally introduce changes in wages, hours, and working
conditions, see NLRB v. Katz, 369 U.S. 736, 743 (1962) – to
permit a successor to put into effect its own working conditions
package. Of course, it would still have an obligation to bargain
with the union, but the status quo from which bargaining would
proceed would be the employer’s package.
The Court, however, set forth what we described as a
“narrow” exception to this employer right. See Machinists, 595
F.2d at 673. Normally, the new employer would not be a
successor until it actually hired a majority of bargaining unit
employees, but the Court recognized that sometimes it is
2
“perfectly clear that the new employer plans to retain all of the
employees in the unit” (and that the previous employees will
constitute a majority), in which case it is obliged to consult
(bargain) with the union before making changes. Burns, 406
U.S. at 294-95. (In other words, Katz would apply.)
It is 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.1 In
our case, both the ALJ and the Board found Petitioner
anticipated hiring only a majority of employees, not that it
planned to hire all of the bargaining unit employees. In a
meeting on March 2, Petitioner’s representative emphasized
applicants would have to pass its hiring criteria, and that in past
cases where Petitioner had taken over in a conversion, between
80 and 90 percent of the existing work force was hired. Still,
Petitioner’s representative warned that it would only bargain
with the union if it hired a majority of the bargaining unit
employees.
The majority observes that the hiring criteria used by the
former employer (the School District) was essentially the same,
so it would be expected that the employees would qualify, but
that ignores a new organization’s possibly different application
of criteria, such as driving tests. It is clear to me that the
Petitioner intended to make individual decisions rather than
planned to hire all the bargaining unit employees as a group –
which is what the Supreme Court contemplated. Indeed, only
41 out of 55 were actually hired. The ALJ determined that
under Fall River, it was not until August 17 that Petitioner
became an ordinary successor.
1
Of course, even if a successor plans to hire all the bargaining
unit employees, one or more might drop off.
3
The Board implicitly recognized this hole in its case by
arguing before us that the Burns test for a “perfectly clear
successor” could be satisfied if an employer planned to hire most
of the bargaining unit employees (apparently some number
between a majority and all). Resp’t’s Br. 21. But that just flies
in the face of the Supreme Court’s language and represents a
regulatory agency’s rebellion. Indeed, in both Machinists, 595
F.2d at 673, and S & F Market Street, 570 F.3d at 358-59, we
reiterated the requirement that the perfectly clear successor is
one that plans to hire all the bargaining unit employees of the
predecessor.
The majority reasons that in Machinists, we determined that
we were obliged to defer to the Board’s interpretation of the
perfectly clear successor concept. A careful analysis of the
opinion reveals that the Court did not actually defer to the
Board’s interpretation of the term “perfectly clear successor,”
but rather to what indications would be relevant in determining
whether or not an employer planned to hire all of the incumbent
bargaining unit employees.2 We affirmed the Board’s
determination that Boeing, the successor employer, was not a
“perfectly clear successor” because it had announced before
taking over that it would pay lower wages and benefits. The
Board reasoned – which we thought logical – that the employer
who announced that it would pay lower wages and benefits was
not planning to retain all of the bargaining unit employees. We
recognized, Machinists, 595 F.2d at 673 n.41, that deferring to
a Board’s interpretation of a Supreme Court opinion was not
equivalent to the level of deference we give an agency’s
interpretation of a statute, but we noted that the Board’s
2
As a part-time law school professor, I am struck by the impact
of the decline of the Socratic method and the reliance on computers –
which pick up stray comments in opinions – leading to the atrophy of
legal analysis.
4
reasoning was consistent with the spirit and purpose of the
Supreme Court’s short definition of a perfectly clear successor.
So we were actually deferring to the Board’s evidentiary finding
that the employer did not meet the Supreme Court’s test.
Of course, if the second employer were to, in accordance
with Burns, indicate that it planned to hire all of the
predecessor’s bargaining unit employees (and that would be a
majority of its workforce), employees would be entitled to
assume that their wages and working conditions would remain
unchanged. And if the successor were to institute new wages
and working conditions upon the transition, the Board’s concern
with misleading employees would be legitimate.3
To be sure, this is not the first case in which the Board has
asserted its “less than all” position, see, e.g., Spitzer Akron, Inc.,
219 NLRB 20, 22 (1975), enforced, 540 F.2d 841 (6th Cir.
1976), but I believe the Board is clearly wrong as a matter of
law. Unfortunately for Petitioner, it forfeited – even expressly
waived at oral argument – a challenge to the Board’s
transformation of the word all to a much lesser number.
Therefore, I agree with the majority concerning the failure of
Petitioner to preserve this argument. I have, nonetheless, written
about this troubling Board effort to frustrate the Supreme Court
and our Court’s interpretation of a perfectly clear successor for
the benefit of a subsequent case. I would not ordinarily discuss
a matter not raised, but it is impossible to understand what the
Board has done without realizing how convoluted has been its
abandonment of the Supreme Court’s test.
In that regard, I believe the Board’s further expansion of its
perfectly clear successor doctrine is also illegal. The Board, as
3
The majority’s accusation that my position is indifferent to the
misrepresentation of employees is inaccurate. Maj. Op. 26.
5
in this case, now asserts that a successor – who expects to hire
some number more than a majority – is a perfectly clear
successor unless it makes clear that it intends to alter the
bargaining unit’s compensation or working conditions.
Otherwise, in the Board’s view, employees could be “misled,”
thinking the status quo would be maintained and thereby
encouraged to remain. The Board, as should be apparent, has
taken the logic of Machinists and reversed it. Whereas
Machinists approved the Board concluding that a successor who
proposed a diminution of compensation or working conditions
could not be thought to hire all of the bargaining unit
employees. Now the Board – having ignored the “all”
requirement – concludes that a successor who plans to hire some
number more than a majority is a perfectly clear successor if it
does not affirmatively state that it plans to change the
compensation package.
If the Board had properly applied Burns, Machinists, and S
& F Market Street limiting the perfectly clear successor to a
successor who planned to hire all of the bargaining unit
employees, this would have been totally inapposite. Let me
explain. If the record showed that a successor planned to hire all
of the predecessor’s bargaining unit employees as a group and
nothing more about its plans, it would be assumed, legitimately,
that a planned seamless transition is contemplated in which
compensation and benefits would be maintained (which is what
the Supreme Court obviously envisioned). It would only be if
the successor announced an intention to lower the wages and
benefits that one could conclude, as was true in Machinists, that
the employer did not plan to hire all of the bargaining unit
employees. Once the Board illegally expanded the concept to
include an employer who plans to hire most of the bargaining
unit employees — only those who qualify – then it further
expanded the perfectly clear successor doctrine by determining
that the successor employer was stuck with a perfectly clear
6
successor restraint unless it affirmatively stated that it intended
to change wages and working conditions.
Petitioner did object to the Board’s imposition of the burden
on the successor, who wished to avoid perfectly clear successor
status, to affirmatively state that it planned to change the
employment conditions. It argued that the Board’s requirement
goes far beyond any concern with misleading employees and is,
therefore, arbitrary and capricious.4 I agree, but as I have
explained, the Board’s concern would be irrelevant – at least
with regard to the definition of a perfectly clear successor – if
the Board had legitimately applied Burns.
***
Still, even assuming the Board’s convoluted interpretation
of Burns was legitimate and Petitioner was obliged to signal that
it wished to make changes in working conditions in order to
avoid being classified as a perfectly clear successor, I think the
Board’s determination that Petitioner did not disclose that it
planned a change lacked substantial evidence. Petitioner gave
every indication that should it take over, working conditions
could change. Besides indicating that it wouldn’t even have an
obligation to bargain unless it hired 51 percent of the employees,
in response to questions, it said that working hours would be
determined by the school district’s routing system and that
employment conditions, like paid time off, vacation pay, and
sick pay, would be subject to negotiations – which certainly
indicates that Petitioner did not intend to commit to the same
conditions. The majority determines that First Student’s
statement that certain matters – terms and conditions of
employment – would be subject to negotiations with the union
4
For instance, I do not understand how it could be said that an
employer who was silent about his plans misled employees.
7
indicates that it did not intend to put in those terms initially. But
that conclusion misunderstands labor law. Even if a successor
employer is allowed under Burns to put in place terms and
conditions unilaterally, it would be obliged to bargain with the
union; it just means it can bargain from its own base. The
sufficiency of these statements is particularly clear given the
context in which they were made. The transition from a public
to private employer would put any reasonable employee on
notice that economic “changes were afoot.” S & F Market
Street, 570 F.3d at 360. Why else would the municipality make
the change?
I am emboldened in my view that the Board’s factual
conclusions lack substantial evidence because the basic question
is the employer’s intention – whether or not it planned to
maintain the municipality’s compensation package. We should
bear in mind that the ALJ – whose judgment on credibility
issues must be weighed heavily by the Court of Appeals, see
Universal Camera Corp. v. NLRB, 340 U.S. 474, 496-97 (1951)
– concluded that Petitioner did not mislead employees and gave
fair indication that working conditions would not necessarily be
continued under its auspices. The majority thinks that the ALJ’s
determination, as to what plans Petitioner had, is not as
important as how its views were understood by employees,
relying on Fall River. But Fall River is a case dealing with a
much more complicated question as to whether a new company
is a successor, not a perfectly clear successor. It involves a
range of issues and the Supreme Court did conclude that how
the employees, who leave one company and end up at a second,
see their status is very important in determining whether the
second company is a successor, but at no time did the Supreme
Court ever suggest that Fall River, in any way, modified Burns,
or its narrow exception. The perfectly clear successor test relies
entirely on the successor’s plans, not the employee’s views.
8
Still, even if the employee’s view of the Petitioner’s plans
are determinative, the Board’s hypothesis that Petitioner’s plans
were not “sufficiently clear to put [the employees] on notice that
there would be changes in the initial terms and conditions of
their employment” – even given the Board’s expertise – is
arbitrary and capricious. See First Student, Inc., 366 NLRB No.
13, slip op. at 4 (Feb. 6, 2018). I can’t imagine that any
employee was misled into believing that existing terms and
conditions were sacrosanct. The Board is simply putting an
unreasonable burden on a successor inconsistent with the
Supreme Court’s clear objective.
***
That brings me to the most important issue that Petitioner
did preserve. It argued that it was a legal error for the Board to
conclude that it was a perfectly clear successor as of March 2.
I agree. At that point, Petitioner was not even an employer – it
was still in negotiations. To be sure, if in March Petitioner had
unequivocally stated that it planned to hire all of the bargaining
unit employees, it would be legitimate to determine that it was
a perfectly clear successor when it did complete the transition.
Yet the Board determined that it had, as of March 2, a
bargaining obligation with the union. In my view, that is
ridiculous. That was four months before the ALJ, in accordance
with the Fall River standard. determined that Petitioner was an
ordinary successor.
Indeed, if at that stage it had entered into negotiations with
the union, it would have violated Section 8(a)(2).5 See Altmann,
366 U.S. at 737-40 (concluding employer violated the Act by
5
To the extent the Board has endorsed a contrary view in Road &
Rail Services, Inc., 348 NLRB No. 77 (Nov. 30, 2006), its reading, to
which we owe no deference, is incorrect.
9
recognizing union that claimed, but did not demonstrate, that it
represented a majority – notwithstanding employer’s good
faith); see also Majestic Weaving Co., 147 NLRB 859, 860-61
(1964) (holding that employer violated the Act when it
negotiated agreement with union contingent upon union gaining
majority support), amended by, 149 NLRB No. 135 (Dec. 9,
1964), enforcement denied, 355 F.2d 854 (2d Cir. 1966). The
majority implies that my reference to Altmann is a new
argument, but relying on a Supreme Court case that supports
Petitioner’s argument is never a new argument. See Amax Land
Co. v. Quarterman, 181 F.3d 1356, 1363 (D.C. Cir. 1999). And
since Petitioner made the contention that it could not become a
perfectly clear successor as of March 2, it is quite permissible to
draw attention to a case illustrating why that argument is sound.
It is black letter labor law that a bargaining obligation
includes the requirement to bargain over a union’s proposal,
including one to change the status quo. Yet simply by
recognizing and bargaining with the union, First Student would
be in violation of Section 8(a)(2) because it would be telling
employees who was their bargaining representative before the
employees have chosen. In other words, to simply recognize a
union as the bargaining agent – without the necessary showing
of employee support – is a violation of Section 8(a)(2) – whether
or not a new agreement is reached.
The majority suggests, based on statements of the Board’s
counsel (who did not object that 8(a)(2) was a legitimate
consideration), that the March 2 bargaining obligation was not
really a bargaining obligation in which an employer must
respond to a union’s proposal, but that is simply inconsistent
with the Board decision. See First Student, 366 NLRB No. 13,
slip op. at 5 (finding “that the General Counsel has met his
burden of proving that the Respondent became a ‘perfectly
clear’ successor, with an obligation to bargain over initial terms,
10
on March 2”); see also id. at 4 n.13 (concluding that “there is no
impediment to holding that the Respondent’s bargaining
obligation attached on March 2”). And that it was only some
months later that First Student was determined to have delayed
bargaining in violation of the Act, which the majority
emphasizes, is absolutely irrelevant as to its legal status on
March 2. The majority acknowledges that First Student had an
obligation, but it was only an obligation to bargain over initial
terms, but that is exactly what the Supreme Court has held to be
illegal without a showing of majority status. The Board’s
counsel’s suggestion that Petitioner could have waited to bargain
until it had hired a substantial and representative complement of
its workforce is a post hoc explanation and inconsistent with the
Board’s opinion.
The Board seems to have recognized that it was on thin ice
relying on March 2 because it suggested an alternative date that
Petitioner became a perfectly clear successor. That date was
May 16 – only the day before Petitioner announced its actual
working conditions package. Even if the Board’s theory that a
company becomes a perfectly clear successor if it plans to hire
most, rather than all, and moreover, does not affirmatively state
that the employment conditions will be significantly different
were correct, relying on May 16 statements, is arbitrary and
capricious (unreasonable). After all, the Board’s theory is such
statements are necessary so that employees are not misled to
their detriment, and it is pure fantasy to imagine that anyone
would be disadvantaged by a statement on May 16 that was
different from the actual terms and conditions announced on
May 17.
The majority suggests that even if employees were not
misled on May 16, only one day before Petitioner invited
applications, nevertheless the Board of Education, with whom
Petitioner was contracting, relied on Petitioner’s statements on
11
May 16. But what that has to do with disadvantaging the
employees, or even the price of tea, is beyond me. The
majority’s creative suggestion is not part of the Board’s
decision, nor could it be. It has nothing to do with the
employer’s labor relations or the National Labor Relations Act.
* * *
This case discloses 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.