In a recent decision, Everport Terminal Services, Inc. v. National Labor Relations Board, the United States Court of Appeals for the District of Columbia Circuit granted petitions for review and vacated the National Labor Relations Board’s (NLRB) ruling that an employer had committed an unfair labor practice by favoring one mechanics’ union over another.
Everport Terminal Services, Inc. (Everport) operates the Ben Nutter Terminal in Oakland, California. For years, the Terminal had been managed by another company and mechanics were represented by the International Association of Machinists (IAM).
In 2015, Everport decided to manage the Terminal itself and to hire a new workforce.
Everport prioritized applicants from the International Longshore and Warehouse Union (ILWU) because Everport is a member of the Pacific Maritime Association (PMA), which is a party to a collective bargaining agreement with the ILWU.
The IAM complained to the NLRB, alleging that Everport was a legal successor to the prior management company and, accordingly, had a duty to bargain with the IAM. The NLRB found that Everport had unlawfully discriminated against mechanics based on their IAM affiliation and that Everport violated its statutory obligation to recognize and bargain with the IAM. The NLRB also concluded that Everport prematurely recognized the ILWU as the representative of the Terminal’s mechanics. Importantly, the NLRB explicitly refused to consider Everport’s reading of the ILWU Agreement, dismissing it as a “red herring”.
On judicial review, the District of Columbia Circuit held that the NLRB did not reasonably explain its finding that Everport was a successor with a legal duty to bargain with the IAM. Firstly, the Court disagreed with the finding that the IAM was the appropriate bargaining unit because the NLRB did not address the ILWU Agreement, which was crucial in determining whether Everport had compelling circumstances sufficient to overcome the history of collective bargaining. The Court similarly rejected the NLRB’s conclusion that Everport’s hiring process discriminated against mechanics based on their IAM affiliation because, in light of the ILWU Agreement, Everport may have had a valid business reason for prioritizing ILWU-represented job applicants.
The Court also disagreed with the NLRB’s finding that Everport prematurely recognized the ILWU as its mechanics’ representative. It explained that Everport was in a unique bargaining landscape because, as a member of the PMA, Everport was required to recognize the ILWU as their employees’ bargaining representative. And it held that the NLRB’s decision was arbitrary because it failed to acknowledge or explain how participation in multiemployer bargaining associations, such as the PMA, affects the application of the premature recognition test.
As the Court observed, if the NLRB’s application of that test were to stand, then every employer who joined the PMA, and thus recognized the ILWU as the representative of its longshoremen, would be committing an unfair labor practice from the moment of joining the PMA. The Court found that this would not make sense, noting that “it is not feasible to operate a West Coast port without joining the PMA” and “a port operator could not lawfully join the PMA before hiring its workforce and it could not hire a workforce before joining the PMA”. Finding that the NLRB neither acknowledged nor explained this dilemma, the Court determined that the NLRB’s decision appeared to be arbitrary and capricious.
Finally, the Court held that there was no sound no basis for the NLRB’s finding that Everport had unlawfully imposed the terms of the ILWU contract on the Terminal’s mechanics.
Finding that the NLRB’s approach was arbitrary, the Court granted the petitions for review and vacated the NLRB’s order.
Although the National Labor Relations Act does state that it is an unfair labor practice for an employer to “refuse to bargain collectively with his employees”, this case reminds that the new owner of a business generally has no duty to recognize its predecessor’s union unless the successor employer continues to do substantially the same kind of work, the existing bargaining unit remains appropriate and the majority of the successor’s employee were employed by the predecessor employer.
The case also shows the importance of factual context to outcomes in labor relations litigation. In any given case, employers should consult with knowledgeable counsel.
Thanks to Josh Proud who assisted with the preparation of this article.