United States Court of Appeals, District of Columbia Circuit
FIRST STUDENT, INC., A DIVISION OF FIRST GROUP AMERICA, PETITIONER
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
April 1, 2019
Petition for Review and Cross-Application for Enforcement of
an Order of the National Labor Relations Board
A. Kadela argued the cause for petitioner, First Student,
Inc. With him on the briefs was Erik Hult.
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
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,
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.
ROGERS, CIRCUIT JUDGE
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 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.
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
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
"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.
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).
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.
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 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.
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."
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.
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.
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).
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 rehire [the]
predecessor's employees." See Nazareth Reg'l
High Sch. v. NLRB, 549 F.2d 873, 881-82 (2d Cir. 1977).
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.
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 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).
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.
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.
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.
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. 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.
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.
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 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 ...